G.R. No.

L-23072

November 29, 1968

SIMEON B. MIGUEL, ET AL., plaintiffs-appellants,

vs.
FLORENDO CATALINO, defendant-appellee.
Bienvenido L. Garcia for plaintiffs-appellants.
Moises P. Cating for defendant-appellee.
REYES, J.B.L., J.:
Direct appeal from the judgment in Civil Case No. 1090 of the Court of First Instance of Baguio, dismissing the
plaintiffs' complaint for recovery of possession of a parcel of land, registered under Act 496, in the name of one
Bacaquio,1 a long-deceased illiterate non-Christian resident of Mountain Province, and declaring the defendant to be
the true owner thereof.
On January 22, 1962, appellants Simeon, Emilia and Marcelina Miguel, and appellant Grace Ventura brought suit in the
Court below against Florendo Catalino for the recovery of the land above-described, plaintiffs claiming to be the
children and heirs of the original registered owner, and averred that defendant, without their knowledge or consent,
had unlawfully taken possession of the land, gathered its produce and unlawfully excluded plaintiffs therefrom.
Defendant answered pleading ownership and adverse possession for 30 years, and counterclaimed for attorney's fees.
After trial the Court dismissed the complaint, declared defendant to be the rightful owner, and ordered the Register of
Deeds to issue a transfer certificate in lieu of the original. Plaintiffs appealed directly to this Court, assailing the trial
Court's findings of fact and law.
As found by the trial Court, the land in dispute is situated in the Barrio of San Pascual, Municipality of Tuba, Benguet,
Mountain Province and contains an area of 39,446 square meters, more or less. It is covered by Original Certificate of
Title No. 31, which was issued on 28 December 1927 in the name of Bacaquio (or Bakakew), a widower. No
encumbrance or sale has ever been annotated in the certificate of title.
The plaintiff-appellant Grace Ventura2 is the only child of Bacaquio by his first wife, Debsay, and the other plaintiffsappellants, Simeon, Emilia and Marcelina, all surnamed "Miguel", are his children by his third wife, Cosamang. He
begot no issue with his second wife, Dobaney. The three successive wives have all died.
Bacaquio, who died in 1943, acquired the land when his second wife died and sold it to Catalino Agyapao, father of the
defendant Florendo Catalino, for P300.00 in 1928. Of the purchase price P100.00 was paid and receipted for when the
land was surveyed, but the receipt was lost; the balance was paid after the certificate of title was issued. No formal
deed of sale was executed, but since the sale in 1928, or for more than 30 years, vendee Catalino Agyapao and his
son, defendant-appellee Florendo Catalino, had been in possession of the land, in the concept of owner, paying the
taxes thereon and introducing improvements.
On 1 February 1949, Grace Ventura, by herself alone, "sold" (as per her Transferor's Affidavit, Exhibit "6") anew the
same land for P300.00 to defendant Florendo Catalino.
In 1961, Catalino Agyapao in turn sold the land to his son, the defendant Florendo Catalino.
This being a direct appeal from the trial court, where the value of the property involved does not exceed P200,000.00,
only the issues of law are reviewable by the Supreme Court, the findings of fact of the court a quobeing deemed
conceded by the appellant (Jacinto v. Jacinto, 105 Phil. 1218; Del Castillo v. Guerro, L-11994, 25 July 1960; Abuyo, et al.
v. De Suazo, L-21202, 29 Oct. 1966; 18 SCRA 600, 601). We are thus constrained to discard appellant's second and
third assignments of error.
In their first assignment, appellants assail the admission in evidence over the objection of the appellant of Exhibit "3".
This exhibit is a decision in favor of the defendant-appellee against herein plaintiff-appellant Grace Ventura, by the
council of Barrio of San Pascual, Tuba, Benguet, in its Administrative Case No. 4, for the settlement of ownership and
possession of the land. The decision is ultra vires because barrio councils, which are not courts, have no judicial
powers (Sec. 1, Art. VIII, Constitution; see Sec. 12, Rep. Act 2370, otherwise known as the Barrio Charter). Therefore,
as contended by appellants, the exhibit is not admissible in a judicial proceeding as evidence for ascertaining the truth
respecting the fact of ownership and possession (Sec. 1, Rule 128, Rules of Court).
Appellants are likewise correct in claiming that the sale of the land in 1928 by Bacaquio to Catalino Agyapao,
defendant's father, is null and void ab initio, for lack of executive approval (Mangayao et al. vs. Lasud, et al., L-19252,
29 May 1964). However, it is not the provisions of the Public Land Act (particularly Section 118 of Act 2874 and Section
120 of Commonwealth Act 141) that nullify the transaction, for the reason that there is no finding, and the contending
parties have not shown, that the land titled in the name of Bacaquio was acquired from the public domain (Palad vs.
Saito, 55 Phil. 831). The laws applicable to the said sale are: Section 145(b) of the Administrative Code of Mindanao
and Sulu, providing that no conveyance or encumbrance of real property shall be made in that department by any nonchristian inhabitant of the same, unless, among other requirements, the deed shall bear indorsed upon it the approval
of the provincial governor or his representative duly authorized in writing for the purpose; Section 146 of the same
Code, declaring that every contract or agreement made in violation of Section 145 "shall be null and void"; and Act
2798, as amended by Act 2913, extending the application of the above provisions to Mountain Province and Nueva
Vizcaya.

Since the 1928 sale is technically invalid, Bacaquio remained, in law, the owner of the land until his death in 1943,
when his title passed on, by the law on succession, to his heirs, the plaintiffs-appellants.
Notwithstanding the errors aforementioned in the appealed decision, we are of the opinion that the judgment in favor
of defendant-appellee Florendo Catalino must be sustained. For despite the invalidity of his sale to Catalino Agyapao,
father of defendant-appellee, the vendor Bacaquio suffered the latter to enter, possess and enjoy the land in question
without protest, from 1928 to 1943, when the seller died; and the appellants, in turn, while succeeding the deceased,
also remained inactive, without taking any step to reivindicate the lot from 1944 to 1962, when the present suit was
commenced in court. Even granting appellants' proposition that no prescription lies against their father's recorded
title, their passivity and inaction for more than 34 years (1928-1962) justifies the defendant-appellee in setting up the
equitable defense of laches in his own behalf. As a result, the action of plaintiffs-appellants must be considered barred
and the Court below correctly so held. Courts can not look with favor at parties who, by their silence, delay and
inaction, knowingly induce another to spend time, effort and expense in cultivating the land, paying taxes and making
improvements thereon for 30 long years, only to spring from ambush and claim title when the possessor's efforts and
the rise of land values offer an opportunity to make easy profit at his expense. In Mejia de Lucas vs. Gamponia, 100
Phil. 277, 281, this Court laid down a rule that is here squarely applicable:
Upon a careful consideration of the facts and circumstances, we are constrained to find, however, that while no
legal defense to the action lies, an equitable one lies in favor of the defendant and that is, the equitable
defense of laches. We hold that the defense of prescription or adverse possession in derogation of the title of
the registered owner Domingo Mejia does not lie, but that of the equitable defense of laches. Otherwise stated,
we hold that while defendant may not be considered as having acquired title by virtue of his and his
predecessors' long continued possession for 37 years, the original owner's right to recover back the possession
of the property and title thereto from the defendant has, by the long period of 37 years and by patentee's
inaction and neglect, been converted into a stale demand.
As in the Gamponia case, the four elements of laches are present in the case at bar, namely: (a) conduct on the part of
the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made and for which
the complaint seeks a remedy; (b) delay in asserting the complainant's rights, the complainant having had knowledge
or notice, of the defendant's conduct and having been afforded an opportunity to institute a suit; (c) lack of knowledge
or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (d)
injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be
barred. In the case at bar, Bacaquio sold the land in 1928 but the sale is void for lack of the governor's approval. The
vendor, and also his heirs after him, could have instituted an action to annul the sale from that time, since they knew
of the invalidity of the sale, which is a matter of law; they did not have to wait for 34 years to institute suit. The
defendant was made to feel secure in the belief that no action would be filed against him by such passivity, and also
because he "bought" again the land in 1949 from Grace Ventura who alone tried to question his ownership; so that the
defendant will be plainly prejudiced in the event the present action is not held to be barred.
The difference between prescription and laches was elaborated in Nielsen & Co., Inc. vs. Lepanto Consolidated Mining
Co., L-21601, 17 December 1966, 18 SCRA p. 1040, as follows:
Appellee is correct in its contention that the defense of laches applies independently of prescription. Laches is
different from the statute of limitations. Prescription is concerned with the fact of delay, whereas laches is
concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity
of permitting a claim to be enforced, this inequity being founded on some change in the condition of the
property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity, whereas
prescription applies at law. Prescription is based on fixed time laches is not, (30 C.J.S., p. 522.See
also Pomeroy's Equity Jurisprudence, Vol. 2, 5th ed., p. 177) (18 SCRA 1053).
With reference to appellant Grace Ventura, it is well to remark that her situation is even worse than that of her co-heirs
and co-plaintiffs, in view of her executing an affidavit of transfer (Exh. 6) attesting under oath to her having sold the
land in controversy to herein defendant-appellee, and the lower Court's finding that in 1949 she was paid P300.00 for
it, because she, "being a smart woman of enterprise, threatened to cause trouble if the defendant failed to give her
P300.00 more, because her stand (of being the owner of the land) was buttressed by the fact that Original Certificate
of Title No. 31 is still in the name of her father, Bacaquio" (Decision, Record on Appeal, p. 24). This sale, that was in
fact a quitclaim, may not be contested as needing executive approval; for it has not been shown that Grace Ventura is
a non-christian inhabitant like her father, an essential fact that cannot be assumed (Sale de Porkan vs. Yatco, 70 Phil.
161, 175).
Since the plaintiffs-appellants are barred from recovery, their divestiture of all the elements of ownership in the land is
complete; and the Court a quo was justified in ordering that Bacaquio's original certificate be cancelled, and a new
transfer certificate in the name of Florendo Catalino be issued in lieu thereof by the Register of Deeds.
FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with costs against the plaintiffs-appellants.

G.R. No. 133317 June 29, 1999

ANTONIO R. AGRA, CAYETANO FERRERIA, NAPOLEON M. GAMO and VICENTE O. NOVALES, petitioners,
vs.
PHILIPPINE NATIONAL BANK, respondent.
PANGANIBAN, J.:
Laches is a recourse in equity. Equity, however, is applied only in the absence, never in contravention, of statutory law.
Thus, laches cannot, as a rule, abate a collection suit filed within the prescriptive period mandated by the Civil Code.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the November 26, 1997
Decision of the Court of Appeals, 1 which disposed as follows:
IN VIEW OF THE FOREGOING, the decision of the lower court is hereby AFFIRMED, with the modification
that the award of attorney's fees is hereby DELETED and the twelve percent (12%) interest on the
P2,500,000.00 the defendant-appellants are to pay PNB should start from August 30, 1976, the date
when the complaint was filed. 2
The decreral portion of the aforementioned trial court ruling reads:
WHEREFORE, in view of the foregoing, in the interest of justice, judgment is rendered in favor of the
plaintiff ordering all the sureties jointly and severally, to pay PNB as follows:
a) the amount of P2,500,000.00 plus twelve per centum (12%) accrued
interest from August 1, 1976;
b) ten percent (10%) of the total amount due as attorney's fees and
cost of the suit.
SO ORDERED.
Also assailed by petitioners is the April 2, 1998 Resolution of the Court of Appeals, which denied their Motion for
Reconsideration. 3
The Facts
The facts are summarized by the Court of Appeals (CA) in this wise: 4
On August 30, 1976, an action for collection of a sum of money was filed by the Philippine National
Bank (PNB, for brevity) against Fil-Eastern Wood Industries, Inc. (Fil-Eastern, for short) in its capacity as
principal debtor and against Cayetano Ferreria, Pedro Atienza, Vicente O. Novales, Antonio R. Agra, and
Napoleon M. Gamo in their capacity as sureties.
In its complaint, plaintiff PNB alleged that on July 17, 1967 Fil-Eastern was granted a loan in the
amount of [t]wo [m]illion [f]ive [h]undred [t]housand [p]esos (P2,500,000.00) with interest at twelve
percent (12%) per annum. Drawings from said demand loan were made on different dates as
evidenced by several promissory notes and were credited to the account of Fil-Eastern. To secure the
payment of the said loan Fil-Eastern as principal and sureties Ferreria, Atienza, Novales, Agra, and
Gamo executed a Surety Agreement whereby the sureties, jointly and severally with the principal,
guaranteed and warranted to PNB, its successors or assigns, prompt payment of subject obligation
including notes, drafts, bills of exchange, overdrafts and other obligations of every kind, on which FilEastern was indebted or may thereafter become indebted to PNB. It was further alleged that as of May
31, 1976 the total indebtedness of Fil-Eastern and its sureties on subject loan amounted to [f]ive
[m]illion [t]wo [h]undred [n]inety-[s]even [t]housand, [n]ine [h]undred [s]eventy-[s]ix [p]esos and
[s]eventeen [c]entavos (P5,297,976.17), excluding attorney's fees. Notwithstanding repeated
demands, the defendants refused and failed to pay their loans.
The defendants (herein sureties) filed separate answers (pp. 49, 68, 205, 208 and 231). Collating
these, We drew the following: All of them claimed that they only signed the Surety Agreement with the
understanding that the same was a mere formality required of the officers of the corporation. They did
not in any way or manner receive a single cent from the proceeds of said loan and/or derive any profit
therefrom. Neither did they receive any consideration valuable or otherwise, from defendant FilEastern. They further claim that the loan in question was negotiated and approved under highly
irregular, anomalous and suspicious circumstances to the point that the Surety Agreement executed
thereafter is invalid, null and void and from the beginning due to a defect in the consent of the
defendants and that their liabilities under the Surety Agreement, if any, has been extinguished by
novation. The cause of action of the complainant is barred by laches and estoppel in that the plaintiff
with full knowledge of the deteriorating financial condition of Fil-Eastern did not take steps to collect
from said defendant corporation while still solvent. They also maintained that if anyone is liable for the
payment of said loan, it is Felipe Ysmael, Jr. and not them or it is only Fil-Eastern and the controlling
officers who profited and made use of the proceeds of the loan. Defendant Agra likewise said that he
was made to sign the Surety Agreement and he did it because of the moral influence and pressure

exerted upon him by Felipe Ysmael, Jr. (their employer at the time of signing), thereby arousing strong
fears of losing a much needed employment to support his family should he refuse to sign as Surety.
In the order of the trial court dated October 30, 1978, defendant Fil-Eastern was declared in default for
its failure to answer the complaint within the reglementary period and the case was scheduled for pretrial conference. The individual defendants with the court's approval thereafter filed an amended thirdparty complaint against Felipe Ysmael, Jr.
The amended third-party complaint alleged that at the time of execution of the alleged Surety
Agreement subject matter of the principal complaint, third-party plaintiffs were but employees of
Ysmael Steel Manufacturing Co., owned by third-party-defendant. Third party plaintiffs were in no
financial position to act as sureties to a P2.5 million loan. They became incorporators of original
defendant Fil-Eastern because of fear of losing their employment brought about by the tremendous
pressure and moral influence exerted upon them by their employer-third-party-defendant. They signed
the Surety Agreement upon the order of the third-party-defendant. In signing the said document, the
third-party-plaintiffs were assured by the third-party-defendant that they had nothing to fear and worry
about because the latter will assume all liabilities as well as profits therefrom and that the loan subject
of the Surety Agreement was with the prior approval and blessing of a high government official. They
were likewise assured that the surety agreement was but a formality and that because of such
pressure, influence as well as assurances, third-party-plaintiffs signed the Surety Agreement.
Third-party-defendant Felipe Ysmael, Jr. in his answer alleged that the Surety Agreement was freely
and voluntarily signed and executed by third-party-plaintiffs without any intimidation, undue, improper
or fraudulent representations. Further, granting arguendo that the consent of third-party plaintiffs in
signing said Surety Agreement was vitiated with intimidation, undue influence or fraudulent
representation on the part of third-party-defendant, said Surety Agreement is only voidable and
therefore binding unless annulled by a proper action in court. The third-party-plaintiffs did not file the
proper court action for the annulment of said agreement. They are now barred from filing an action for
annulment of said agreement, the prescriptive period therefor being only four (4) years from the time
the defect of the consent had ceased, and from the discovery of the all[e]ged fraud. In addition, thirdparty plaintiffs had ratified said agreement which they signed in July 1967 by signing their names on
and execution of several promissory thereafter.
At the pre-trial conference held on March 21, 1980, the parties failed to agree on a possible amicable
settlement hence the case was set for trial on the merits. On July 5, 1984, during the pendency of the
trial, third-party defendant Felipe Ysmael, Jr. died. He was substituted by his legal heirs Patrick Ysmael
and Jeanne Ysmael as third-party defendants. Defendant Pedro Atienza died on January 4, 1987. It
appearing that he has no legal heirs, the case against him dismissed.
After trial, the regional trial court (RTC) ruled against herein petitioners. On appeal, the CA modified the RTC ruling by
deleting the award of attorney's fees. Hence, this recourse to this Court.
Ruling of the Court of Appeals
In ruling that petitioners were liable under the surety agreement, the Court of Appeals rejected their defense of laches.
It held that "the lapse of seven years and eight months from December 31, 1968 until the judicial demand on August
30, 1976 cannot be considered as unreasonable delay which would necessitate the application of laches. The action
filed by the plaintiff has not yet prescribed. It is well within the ten-year prescriptive period provided for by law wherein
actions based on written contracts can be instituted." 5
The Court of Appeals also noted that the "prescriptive period did not begin to run from December 31, 1968 as [herein
petitioners] presupposed. It was only from the time of the judicial demand on August 30, 1976 that the cause of action
accrued. Thus, [private respondent] was well within the prescriptive period of ten years when it instituted the case in
court." The Court of Appeals further ruled that "placing the blame on [PNB] for its failure to immediately pounce upon
its debtors the moment the loan matured is grossly unfair for . . . demand upon the sureties to pay is not necessary."
The appellate court also held that petitioners proved only the first of the following four essential elements of laches:
"(1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation of which complaint
in made and for which the complainant seeks a remedy; (2) delay in asserting the complainant's rights, the
complainant having had knowledge or notice of the defendant's conduct and having been afforded an opportunity to
institute a suit, (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the
right on which he bares his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held barred."
Issues
In their Memorandum, petitioners raise the following issues: 6
1. WHETHER OR NOT THE CLAIM OF THE PNB AGAINST THE PETITIONERS IS ALREADY BARRED BY THE
EQUITABLE DEFENSE OF LACHES?
2. WHETHER OR NOT THE RESPECTIVE CONJUGAL PARTNERSHIPS OF THE PETITIONERS COULD BE
HELD LIABLE FOR ANY LIABILITY OF THE PETITIONERS UNDER THE SURETY AGREEMENT IN FAVOR OF
THE PNB?

Under the first issue, petitioners submit four other questions:

1-a WHETHER OR NOT THE EQUITABLE DEFENSE OF LACHES APPLIES INDEPENDENTLY OF
PRESCRIPTION?
1-b WHETHER OR NOT THE CAUSE OF ACTION OF THE PNB AGAINST THE PETITIONERS ACCRUED ONLY
FROM THE TIME OF THE JUDICIAL DEMAND ON AUGUST 30, 1976?
1-c WHETHER OR NOT THE FOUR (4) WELL-SETTLED ELEMENTS OF LACHES ARE PRESENT IN THIS
CASE?
1-d WHETHER OR NOT THE RULING IN THE CASE OF PHILIPPINE NATIONAL BANK VS. COURT OF
APPEALS, 217 SCRA 347, IS APPLICABLE IN THIS INSTANT CASE?
In the main, the issue is whether petitioners may raise the defense of laches in order to avoid their liability under the
surety agreement. Preliminarily, we shall also take up the question of petitioners' liability as sureties.
The Court's Ruling
The appeal is not meritorious.
Preliminary Matter:
Liability of Petitioners as Sureties
The present controversy began when the Philippine National Bank (PNB) sought to enforce the Surety Agreement. The
pertinent provisions of said Agreement are as follows:
WHEREAS, FIL-EASTERN WOOD INDUSTRIES, INC. herein referred to as the Principal, has obtained
and/or desires to obtain certain credits, loans, overdrafts, discounts, etc., from the Creditor, for all of
which the Creditor requires security; and the Surety, on account of valuable consideration received
from the Principal, has agreed and undertake to assist the principal by becoming such Surety.
NOW THEREFORE, for the purpose above mentioned, the Surety, jointly and severally with the
Principal, hereby guarantees and warrants to the Creditor, its successors or assigns, the prompt
payment at maturity of all the notes, drafts, bills of exchange, overdrafts and other obligations of every
kind, on which the Principal may now be indebted or may hereafter become indebted to the Creditor,
but the liability of the Surety shall not at any time exceed the sum of TWO MILLION FIVE HUNDRED
THOUSAND ONLY (P2,500.00.00), Philippine Currency, plus the interest thereon at the rate of (%) per
cent annum, and the cost and expenses of the Creditor incurred in connection with the granting of the
credits, loans, overdrafts, etc., covered by this surety agreement, including those for the custody,
maintenance and preservation of the securities given therefor and also for the collection thereof.
Both the Principal and the Surety shall be considered in default when they fail to pay the obligation
upon maturity with or without demand and in such case the Surety agrees to pay to the creditor, its
[successor] or assigns, all outstanding obligations of the Principal, whether due or not due and whether
held by the Creditor as principal or agent, and it is agreed that a certified statement by the Creditor as
to the amount due from the Principal shall be accepted as correct by the Surety without question.
The Surety expressly waives all rights to demand for payment and notice of non-payment and protest,
and agrees that the securities of every kind, that are now and may hereafter be left with the Creditor,
its successors, indorsees or assigns, as collateral to any evidence of debt or obligations or upon which
a lien may exist thereon may be withdrawn or surrendered at any time, and the time of payment
thereof extended, without notice to, or consent by the Surety; and that the liability on this guaranty
shall be solidary, direct and immediate and not contingent upon the pursuit by the Creditor, its
successors, indorsees or assigns, of whatever remedies it or they have against the Principal or the
securities or liens it or they may possess and the Surety will at any time, whether due or not due, pay
to the Creditor with or without demand upon the Principal, any obligation or indebtedness of the
Principal not in excess of the amount abovementioned.
This instrument is intended to be a complete and perfect indemnity to the Creditor to the extent above
stated, for any indebtedness or liability of any kind owing by the Principal to the Creditor from time to
time, and to be valid and continuous without further notice to the Surety, and may be revoked by the
Surety at any time, but only after forty-eight hours notice in writing to the Creditor, and such
revocation shall not operate to relieve the Surety from responsibility for obligations incurred by the
Principal prior to the termination of such period. (Emphasis supplied.)
It must be stressed that petitioners, as sureties, bound themselves solidarily for the obligation of Fil-Eastern to PNB.
Petitioners admit that they signed the Surety Agreement, but they challenge their liability thereon on the ground that
they were allegedly coerced by their employer into signing the deed. The argument is too late at best.
As pointed out by the Court of Appeals, petitioners failed to challenge their consent to the Agreement within the
prescriptive period. Article 1391 of the Civil Code provides that the action to annul a contract vitiated by intimidation,
violence or undue influence shall be filed within four years from the cessation of such defects. In this case, Petitioners
Agra, Gamo and Novales resigned from Fil-Eastern in 1967, 1968 and 1969, respectively. It was only in 1976, when PNB
sought to enforce the contract, that they alleged a defect in their consent. By their inaction, their alleged cause of

action based on vitiated consent had precribed. There was no question that petitioners, in their capacity as sureties,
were answerable for the obligations of Fil-Eastern to PNB.
We shall now go to the main issue of this case: Whether petitioners may invoke the defense of laches, considering that
PNB's claim had not yet prescribed.
Main Issue: Laches
Petitioners admit that PNB's claim, though filed more than seven years from the maturity of the obligation, fell within
the ten-year prescriptive period. They argue, however, that the cause was already barred by laches, which is defined
as "the failure or neglect for an unreasonable or unexplained length of time to do that which by exercising due
diligence, could or should have been done earlier warranting a presumption that he has abandoned his right or
declined to assert it." 7 In arguing that the appellate court erred in rejecting the defense of laches, petitioners cite four
reasons: (1) the defense of laches applies independently of prescription; (2) the cause of action against petitioners
accrued from the maturity of the obligation, not from the time of judicial demand; (3) the four well-settled elements of
laches were duly proven; and (4) PNB v. CA applies in the instant case. As will be shown below, all these arguments are
devoid of merit.
Application of Laches
Assailing the CA ruling that laches was inapplicable because the claim was brought within the ten-year prescriptive
period, petitioners stress that the defense of laches differs from and is applied independently of prescription. In
support, they cite, among others, Nielson & Co., Inc. v. Lepanto Consolidated Mining Co., 8 in which the Supreme Court
ruled:
[T]he defense of laches applies independently of prescription. Laches is different from the statute of
limitations. Prescription is concerned with the fact of delay, whereas laches is concerned with the
effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting
a claim to be enforced, this inequity being founded on some change in the condition of the property or
the relation of the parties. Prescription is statutory; laches is not. Laches applies in equity; whereas
prescription applies at law. Prescription is based on fixed time, laches is not.
True, prescription is different from laches, but petitioners' reliance on Nielson is misplaced. As held in the aforecited
case, laches is principally a question of equity. Necessarily, "there is no absolute rule as to what constitutes laches or
staleness of demand; each case is to be determined according to its particular circumstances. The question of laches is
addressed to the sound discretion of the court and since laches is an equitable doctrine, its application is controlled by
equitable considerations." 9 Petitioners, however, failed to show that the collection suit against herein sureties was
inequitable. Remedies in equity address only situations tainted with inequity, not those expressly governed by
statutes. Indeed, the petitioners failed to prove the presence of all the four established requisites of laches, viz:
(1) conduct on the part of the defendant or one under whom he claims, giving rise to the situation of
which complaint is made and for which the complainant seeks a remedy;
(2) delay in asserting the complainant's right, the complainant having had knowledge or notice of
defendant's conduct and having been afforded an opportunity to institute a suit;
(3) lack of knowledge or notice on the part of the defendant that the complainant would assert the
right on which he bases his claim; and
(4) injury or prejudice to the defendant in the event relief accorded to the complainant, or the suit is
not held barred. 10
That the first element exists is undisputed. Neither Fil-Eastern nor the sureties, herein petitioners, paid the obligation
under the Surety Agreement.
The second element cannot be deemed to exist. Although the collection suit was filed more than seven years after the
obligation of the sureties became due, the lapse was within the prescriptive period for filing an action. In this light, we
find immaterial petitioners' insistence that the cause of action accrued on December 31, 1968, when the obligation
became due, and not on August 30, 1976, when the judicial demand was made. In either case, both submissions fell
within the ten-year prescriptive period. In any event, "the fact of delay, standing alone, is insufficient to constitute
laches." 11
Petitioners insist that the delay of seven years was unreasonable and unexplained, because demand was not
necessary. Again we point that, unless reasons of inequitable proportions are adduced, a delay within the prescriptive
period is sanctioned by law and is not considered to be a delay that would bar relief. In Chavez v. Bonto-Perez, 12 the
Court reiterated an earlier holding, viz:
Laches is a doctrine in equity while prescription is based on law. Our courts are basically courts of law
and not courts of equity. Thus, laches cannot be invoked to resist the enforcement of an existing legal
right. We have ruled in Arsenal v. Intermediate Appellate Court . . . that it is a long standing principle
that equity follows the law. Courts exercising equity jurisdiction are bound by rules of law and have no
arbitrary discretion to disregard them. In Zabat, Jr. v. Court of Appeals . . ., this Court was more
emphatic in upholding the rules of procedure. We said therein:

As for equity, which has been aptly described as "justice outside legality," this is
applied only in the absence of, and never against, statutory law or, as in this case,
judicial rules of procedure. Aequetas nunquam contravenit legis. This pertinent positive
rules being present here, they should preempt and prevail over all abstract arguments
based only on equity.
Thus, where the claim was filed within the three-year statutory period, recovery therefore cannot be
barred by laches.
Petitioners also failed to prove the third element of laches. It is absurd to maintain that petitioners did not know that
PNB would assert its right under the Surety Agreement. It is unnatural, if not unheard of, for banks to condone debts
without adequate recompense in some other form. Petitioners have not given us reason why they assumed that PNB
would not enforce the Agreement against them.
Finally, petitioners maintain that the fourth element is present because they would suffer damage or injury as a result
of PNB's claim. This is the crux of the controversy. In addition to the payment of the amount stipulated in the
Agreement, other equitable grounds were enumerated by petitioners, viz:
1. Petitioners acted as sureties under pressure from Felipe "Baby" Ysmael, Jr., the headman of the
Ysmael Group of Companies where the petitioners were all employed in various executive positions.
2. Petitioners did not receive a single centavo in consideration of their acting as sureties.
3. The surety agreement was not really a requisite for the grant of the loan to FIL-EASTERN because
the first release on the loan was made on July 17, 1967, or even before the Surety Agreement was
executed by petitioners on July 21, 1967.
4. Petitioners were assured that the Surety Agreement was merely a formality, and they had reason to
believe that assurance because the loan was principally secured by an assignment of 15% of the
proceeds of the sale of logs of FIL-EASTERN to Iwai & Co., Ltd., and such assignment was clearly stated
in PNB Board Resolution No. 407. In fact, while it was expressly stated in all of the eight (8) promissory
notes covering the releases of the loan that the said loan was secured by 15% of the contract of sale
with Iwai & Co., Ltd., only three (3) promissory notes stated that the loan was also secured by the
"joint and several signatures of the officers of the corporation". It is to be noted that no mention was
even made of the joint and several signatures of petitioners as sureties. In other words, the principal
security was the assignment of 15% of the contract for the sale of logs to Iwai & Co., Ltd.
5. For reasons not explained by PNB, PNB did not collect the 15% of the proceeds of the sale of the
logs to Iwai & Co., Ltd., and such failure resulted in the non-collection of the P2,500,000.00 demand
loan, or at least a portion of it.
6. For reasons likewise unexplained by PNB, PNB did not make any demand upon petitioners to pay the
unpaid loan of FIL-EASTERN until after FIL-EASTERN had become bankrupt, and PNB was aware of this
fact because it foreclosed the chattel mortgages on the other loans of FIL-EASTERN which were
secured by said chattel mortgages. 13 (Emphasis found in the original.)
These circumstances do not justify the application of laches. Rather, they disclose petitioners' failure to understand the
language and the nature of the Surety Arrangement. They cannot now argue that the Surety Agreement was merely a
formality, secondary to the assignment of 15 percent of the proceeds of the sale of Fil-Eastern's logs to Iwai and Co.,
Ltd. Neither can they rely on PNB's failure to collect the assigned share in the sale of the logs or to make a demand on
petitioners until after Fil-Eastern had become bankrupt. The Court stresses that the obligation of a surety is direct,
primary and absolute. Thus, the Court has held:
[A]lthough the contract of a surety is in essence secondary only to a valid principal obligation, his
liability to the creditor or promisee of the principal is said to be direct, primary, and absolute; in other
words, he is directly and equally bound with the principal. The surety therefore becomes liable for the
debt or duty of another although he possesses no direct or personal interest over the obligations nor
does he receive any benefit therefrom. 14
When petitioners signed as sureties, they expressly and unequivocally agreed to the stipulation that "the liability on
this guaranty shall be solidary, direct and immediate and not contingent upon the pursuit by the creditor, its
successors, indorsees or assigns, of whatever remedies it or they have against the principal or the securities or liens it
or they may possess."
If they had mistaken the import of the Surety Agreement, they could have easily asked for its revocation. The
Agreement stipulates that it "may be revoked by the Surety at any time, but only after forty-eight hours notice in
writing to the Creditor, and such revocation shall not operate to relieve the Surety from responsibility for obligations
incurred by the Principal prior to the terrmnation of such period." This they did not do.
Equally unavailing is petitioners' allegation that the Surety Agreement was not a requisite for the grant of the loan.
Even if their assertion is true, the fact remains that they signed the contract and voluntarily bound themselves to be
solidarily liable for the loan amounting to P2,500,000.

The other "equitable" circumstances above enumerated fail to support petitioners' cause. As earlier stated, petitioners
are already barred from questioning the voluntariness of their consent. Furthermore, this Court has categorically ruled
that a surety is liable for the debt of another, although he or she received no benefit therefrom. 15
Clearly, aside from the fact that the collection suit was filed only after the lapse of seven years from the date the
obligation became due and demandable, petitioners failed to adduce any showing of inequity. Hence, the rules on
equity cannot protect them.
Applicability of PNB v. CA
Petitioners allege that the CA committed grave error in failing to apply PNB v. Court of Appeals, 16 which they insist to
be analogous to the present case. The facts in said case are as follows:
Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation engaged in providing goods
and services to shipping companies. Since 1966, it has acted as a manning or crewing agent for
several foreign firms, one of which is Star Kist foods, Inc., USA (Star Kist). As part of their agreement,
Mata makes advances for the crew's basic personal needs. Subsequently, Mata sends monthly billings
to its foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic transfer
through banks for credit to the latter's account.
Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC) of Los Angeles
which had an agency arrangement with Philippine National Bank (PNB), transmitted a cable message
to the International Department of PNB to pay the amount of US$14,000 to Mata by crediting the
latter's account with the Insular Bank of Asia and America (IBAA), per order of Star Kist. Upon receipt of
this cabled message on February 24, 1975, PNB's International Department noticed an error and sent a
service message to SEPAC Bank. The latter replied with the instructions that the amount of US$14,000
should only be for US$1,400.
On the basis of the cable message dated February 24, 1975, Cashier's Check No. 269522 in the
amount of US$1,400 (P9,772.96) representing reimbursement from Star Kist, was issued by the Star
Kist for the account of Mata on February 25, 1975 through the Insular Bank of Asia and America (IBAA).
However, fourteen days after or on March 11, 1975, PNB effected another payment through Cashier's
Check No. 270271 in the amount of US$14,000 (P97,878.60) purporting to be another transmittal of
reimbursement from Star Kist, private respondent's foreign principal.
Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of US$14,000
(P97,878.60) after it discovered its error in effecting the second payment.
On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against Mata arguing
that based on a constructive trust under Article 1456 of the Civil Code, it has a right to recover the said
amount it erroneously credited to respondent Mata. 17
On the ground of laches, the Court decided against the claim of PNB, stating that:
[i]t is amazing that it took petitioner almost seven years before it discovered that it had erroneously
paid private respondent. Petitioner would attribute its mistake to the heavy volume of international
transactions handled by the Cable and Remittance Division of the International Department of PNB.
Such specious reasoning is not persuasive. It is unbelievable for a bank, and a government bank at
that, which regularly publishes its balanced financial statements annually or more frequently, by the
quarter, to notice its error only seven years later. As a universal bank with worldwide operations, PNB
cannot afford to commit such costly mistakes. Moreover, as between parties where negligence is
imputable to one and not to the other, the former must perforce bear the consequences of its neglect.
Hence, petitioner should bear the cost of its own negligence.
Petitioners maintain that the delay in PNB v. CA was even shorter than that in the present case. If the bank in the
aforesaid case was negligent in not discovering the overpayment, herein petitioners assert that the negligence was
even more culpable in the present case. They add that, given the standard practice of banks to flag delinquent
accounts, the inaction for almost seven years of herein respondent bank was gross and inexcusable.
We are not persuaded. There are no absolute rules in the application of equity, and each case must be examined in the
light of its peculiar facts. In PNB v. CA, there was a mistake, an inexcusable one, on the part of petitioner bank in
making an overpayment and repeating the same error fourteen days later. If the bank could not immediately discover
the mistake despite all its agents and employees, the beneficiary of the amount could not be expected to do so. It is,
thus, inequitable to allow PNB to collect the amount, after such a long delay, from the beneficiary who had assumed,
after all those years, that the amount really belonged to it.
In the present case, there is no showing of any mistake or any inequity. The fact alone that seven years had lapsed
before PNB filed the collection suit does not mean that it discovered the obligation of the sureties only then. There was
a Surety Arrangement, and the law says that the said contract can be enforced by action within ten years. The bank
and the sureties all knew that the action to enforce the contract did not have to be filed immediately. In other words,
the bank committed no mistake or inequitable conduct that needed correction, and the sureties had no misconception
about their liabilities under the contract.
Clearly, petitioners have no recourse in equity, because they failed to show any inequity on the part of PNB.

Additional Issue:
Liability of Conjugal Assets
In their Memorandum, petitioners belatedly ask the Court to rule that, in case of a court ruling adverse to them, the
conjugal properties would not be liable for the husbands' debts that did not redound to the benefit of the conjugal
partnership. 8
This issue cannot be allowed, for it is being raised for the first time only in petitioners' Memorandum. Issues,
arguments, theories and causes of action not raised below may no longer be posed on appeal. 19 Furthermore,
petitioners are asking the Court to issue a ruling on a hypothetical situation. In effect, they are asking the Court to
render an advisory opinion, a task which is beyond its constitutional mandate.
WHEREFORE, the petition is hereby DENIED and the assailed Decision of the Court of Appeals is AFFIRMED. Costs
against petitioners.
SO ORDERED.

G.R. No. 167995

September 11, 2009

JULITA V. IMUAN, RODOLFO VELASQUEZ, ARTURO VELASQUEZ, ARCADIO VELASQUEZ, BETTY VELASQUEZ,
ROSA V. PETUYA, FELICIDAD VELASQUEZ, RAYMUNDO IMUAN, GERARDO IMUAN, JR., and ANDONG
VELASQUEZ, Petitioners,
vs.
JUANITO CERENO, FEBELINDA G. CERENO, GEMMA C. GABARDA, LEDESMA G. CERENO, BLECERIA C. SULA
and SALLY G. CERENO, Respondents.
DECISION
PERALTA, J.:
Before us is a petition for review on certiorari which seeks to set aside the Decision 1 dated August 24, 2004 of the
Court of Appeals (CA) in CA-G.R. CV No. 69446, which reversed the Decision of the Regional Trial Court (RTC), Branch
41, Dagupan City, in Civil Case No. 99-02910-D. Also assailed is the CA Resolution 2 dated April 29, 2005 denying
petitioners' motion for reconsideration.
The facts are as follows:
During his lifetime, Pablo de Guzman (Pablo) contracted two marriages. His first marriage was with Teodora Soriano
(Teodora), with whom he had three children, namely, Alfredo de Guzman (Alfredo), Cristita G. Velasquez (Cristita), and
Inday G. Soriano (Inday). His second marriage was in 1919 with Juana Velasquez (Juana), with whom he also had three
children, namely: Nena De Guzman (Nena), Teodora de Guzman (Teodora), and Soledad G. Cereno (Soledad). All these
children are now dead.
Petitioners are Pablo's grandchildren by his first marriage, while respondent Juanito Cereno (Juanito) is Soledad's
husband and the other respondents are their children.
On July 15, 1936, Pablo died intestate leaving two parcels of land, to wit: (1) a parcel of coconut land located at Salaan
Mangaldan, Pangasinan, containing an area of nine hundred eighty-six (986) square meters, more or less, declared
under Tax Declaration No. 8032; and (2) a parcel of cornland located at (Inlambo) Palua, Mangaldan, Pangasinan,
containing an area of three thousand three hundred thirty-four (3,334) square meters, more or less, declared under Tax
Declaration No. 5155.
After Pablo's death in 1936, his second wife Juana and their children continued to be in possession of the parcel of land
located at Salaan, Mangaldan, Pangasinan (the disputed property), where they lived since they were married in 1919.
On January 24, 1970, Juana executed a Deed of Absolute Sale 3 in favor of respondents-spouses, Soledad, Juana and
Pablo's daughter, and her husband Juanito conveying the subject property. The deed was duly registered with the
Register of Deeds of Lingayen, Pangasinan.
On January 26, 1970, a Joint Affidavit 4 was executed by Alfredo de Guzman and Teofilo Cendana attesting to the fact
that Pablo ceded the property in favor of Juana on the occasion of their marriage, but the document was lost.
Subsequently, Tax Declaration No. 23803 5 was issued in the names of respondents-spouses who religiously paid the
taxes due on the property. Since then respondents-spouses enjoyed exclusive, open and uninterrupted possession of
the property. Later, the disputed property which originally consisted of one whole lot was traversed by a barangay road
dividing it into two (2) lots, namely, Lot 3533, with an area of 690 square meters covered by Tax Declaration No.
212686; and Lot 3559, with an area of 560 square meters covered by Tax declaration No. 21269. 7 Respondents-spouses
Cereno built their house on Lot 3559 and had planted fruit-bearing trees on Lot 3533. Meanwhile, the parcel of
cornland in Palua, Mangaldan, Pangasinan has never been in possession of any of the parties since it eroded and was
submerged under water, eventually forming part of the riverbed.
Sometime in January 1999, petitioners entered and took possession of Lot 3533 by building a small nipa hut thereon.
Respondents then filed before the Municipal Trial Court (MTC) of Mangaldan, Pangasinan an ejectment case against
petitioners. In an Order 8 dated December 9, 1999, the MTC dismissed the case as both parties prayed for its dismissal
considering that petitioners had already left Lot 3533 immediately after the filing of the complaint.
On April 5, 1999, petitioners filed with the RTC of Dagupan City a Complaint for annulment of document, reconveyance
and damages against respondents alleging that: (1) the estate of their grandfather Pablo has not yet been settled or
partitioned among his heirs nor had Pablo made disposition of his properties during his lifetime; (2) it was only through
their tolerance that Juana and his children constructed their house on Lot 3559; (3) the sale of the disputed property
made by Juana to respondents-spouses Cereno and the issuance of tax declarations in the latter's names are null and
void. Petitioners prayed for the annulment of the deed of sale, cancellation of Tax Declaration Nos. 21268 and 21269,
the reconveyance of the property to them and damages.
In their Answer, respondents claimed that after the death of Pablo's first wife, Pablo partitioned his property among his
children and that spouses Nicomedes and Cristita Velasquez acquired most of the properties as they were more
financially capable; that at the time Pablo married Juana, the properties he had were his exclusive share in the
partition; that of the two parcels of land Pablo had at that time, he donated the subject property to Juana in a
donation propter nuptias when they married; that the deed of donation was lost during the Japanese occupation and
such loss was evidenced by the Joint Affidavit executed by Alfredo de Guzman and Teofilo Cendana attesting to such
donation; that Juana could validly convey the property to the Spouses Cereno at the time of the sale because she was

the owner; and that they have been in public and uninterrupted possession of the disputed lot since its acquisition and
have been paying the realty taxes due thereon. As affirmative defense, respondents contended that petitioners' rights
over the property were already barred by the statute of limitations.
After trial, the RTC rendered its Decision 9 dated November 10, 2000, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants:
(a) Declaring as null and void the Deed of Absolute Sale; Tax Declaration Nos. 21268 for Lot 3533 & 21269 for
Lot 3559 in the names of Juanito Cereno and Soledad de Guzman;
(b) Ordering the defendants (1) to reconvey the property in question to the plaintiffs and to peacefully
surrender the possession of the premises to the plaintiffs; and (2) to pay plaintiffs litigation expenses in the
amount of P10,000.00.
SO ORDERED.10
The RTC found that Juana and her children of the second nuptial built their house on the disputed property by tolerance
of Pablos children of the first marriage; that Juana alone sold the property to respondents Spouses Cereno and such
sale was not valid because she was not the owner of the property at the time she sold the same; that the estate of
Pablo has not been settled among the heirs since the property was still in the name of Pablo at the time Juana sold the
same; that respondents Spouses Cerenos claim that the property was donated to Juana by Pablo by way of
donation propter nuptias was not supported by evidence; that Pablo could not have donated the property to Juana
because Pablos children were the legal heirs of his first wife, and have rights and interests over the property. The RTC
found the Joint Affidavit dated January 26, 1970 executed by Alfredo, Pablos son by first marriage, and Teofilo
Cendana, a former Chief of Police of Mangaldan, Pangasinan, attesting that the donation propter nuptias executed by
Pablo in favor of Juana was lost during the Japanese occupation was inconsequential, since it cannot substitute for the
donation which validity was highly questionable; that petitioners were able to prove that the property was the conjugal
property of Pablo and his first wife which has not been divided between Pablo and his children of the first nuptial.
On appeal, the CA rendered its assailed Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, we hereby GRANT the appeal. The assailed decision dated November 10, 2000, of
the Regional Trial Court (RTC), Branch 41, Dagupan City, in Civil Case No. 99-02910-D is consequently REVERSED and
SET ASIDE. Costs against the plaintiffs-appellees.
SO ORDERED.11
While the CA agreed with the findings of the RTC that there was no evidence that Pablo undertook a partition of the
properties of his first marriage before he contracted his second marriage and that the Joint Affidavit dated January 26,
1970 could not be considered as conclusive proof of the transfer of the property by Pablo to Juana, it was not a
sufficient basis for Juana to validly transfer the property to respondent Spouses Cereno, however, the CA gave
probative value to the joint affidavit as it was executed long before the present controversy arose. The CA found that
the joint affidavit was executed by Alfredo, one of Pablos children by his first marriage who was necessarily affected
by the claimed donation propter nuptias and who ought to know the facts attested to; that the affidavit was evidence
of the basis of Juana's own good faith belief that the property was hers to dispose of when she sold it to respondents
Spouses Cereno; that the same affidavit can also be the basis of respondents Spouses Cereno's good faith belief that
Juana, who had undisputably been in possession of the disputed property at the time of the sale, was the owner and
could transfer the property to them by sale.
The CA also gave probative value to the deed of sale executed by Juana in favor of respondents Spouses Cereno as it is
still an evidence of the fact of transaction between Juana and respondents Spouses Cereno for the
sale of the disputed property. The CA found that the deed of sale and the joint affidavit assumed great importance on
the issue of prescription.
The CA found that Juana possessed the property in the concept of an owner, which is a sufficient basis for the belief
that Juana was the owner of the property she conveyed by sale and respondents Spouses Cereno had the good faith
that acquisition by prescription requires when they became the purchasers in the contract of sale with her . The CA
further stated that a sale, coupled with the delivery of the property sold, is one of the recognized modes of acquiring
ownership of real property and that respondents Spouses Cereno immediately took possession of the property which
showed that respondent Spouses Cereno have just title to the property.
The CA further found that respondents Spouses Cereno are in peaceful possession of the property for 29 years and,
thus, have satisfied the ten-year period of open, public and adverse possession in the concept of an owner that the law
on prescription requires. The CA added that petitioners are now barred by laches from claiming ownership of the
disputed property as they have been negligent in asserting their rights.
Petitioners motion for reconsideration was denied in a Resolution dated April 29, 2005.
Petitioners raise the following issues for our consideration:
WHETHER THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT, BRANCH 41,
DAGUPAN CITY.

WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING THE NATURE OF THE PROPERTY IN ISSUE WHEN IT
RENDERED ITS DECISION.
WHETHER LACHES/PRESCRIPTION BARRED HEREIN PETITIONERS FROM CLAIMING THEIR RIGHTFUL SHARE IN THE
PROPERTY IN ISSUE.12
Petitioners contend that since the CA and the RTC found that there was no partition of the property and no valid
donation propter nuptias was made by Pablo to Juana, the rule on co-ownership among Pablos heirs should govern the
property; that when Juana sold the property to respondents Cerenos, the rights of petitioners as co-owners should not
have been affected; that the CAs finding that the joint affidavit attesting to the donation propter nuptias can be the
basis of a belief in good faith that Juana was the owner of the disputed property is erroneous, since Juana had
knowledge from the time she got married to Pablo that the property was acquired during the latter's first marriage;
that respondents Spouses Cereno could not be considered in good faith since Soledad is the daughter of Juana with her
marriage to Pablo and could not be considered a third party to the dispute without knowledge of the nature of the
property; that being co-owners, neither prescription nor laches can be used against them to divest them of their
property rights.
In their Comment, respondents argue that Juana in her own right had acquired the property by prescription; that the
CA correctly considered respondents 29 years of actual and peaceful possession of the property aside from their
purchase of the property from Juana in finding them as the true owners.
Petitioners and respondents submitted their respective memoranda.
The petition has no merit.
We agree with the CA that respondents have acquired the disputed property by acquisitive prescription.
Prescription is another mode of acquiring ownership and other real rights over immovable property. 13 It is concerned
with lapse of time in the manner and under conditions laid down by law, namely, that the possession should be in the
concept of an owner, public, peaceful, uninterrupted and adverse. 14 Possession is open when it is patent, visible,
apparent, notorious and not clandestine. 15 It is continuous when uninterrupted, unbroken and not intermittent or
occasional;16 exclusive when the adverse possessor can show exclusive dominion over the land and an appropriation of
it to his own use and benefit; and notorious when it is so conspicuous that it is generally known and talked of by the
public or the people in the neighborhood. 17 The party who asserts ownership by adverse possession must prove the
presence of the essential elements of acquisitive prescription. 18
Acquisitive prescription of real rights may be ordinary or extraordinary. 19 Ordinary acquisitive prescription requires
possession in good faith and with just title for ten years. 20 In extraordinary prescription, ownership and other real rights
over immovable property are acquired through uninterrupted adverse possession for thirty years without need of title
or of good faith.21
The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was
the owner thereof, and could transmit his ownership. 22 For purposes of prescription, there is just title when the adverse
claimant came into possession of the property through one of the modes recognized by law for the acquisition of
ownership or other real rights, but the grantor was not the owner or could not transmit any right. 23
Records show that as early as 1970, when the property was sold by Juana to respondents Spouses Cereno, the latter
immediately took possession of the property. Since then, respondents possessed the property continuously, openly,
peacefully, in the concept of an owner, exclusively and in good faith with just title, to the exclusion of the petitioners
and their predecessors-in-interest until the filing of the complaint in 1999 which is the subject of this present petition.
Notably, the property was traversed by a barangay road, thus, it was divided into two lots. The house of respondents is
located on the eastern part of the road, while the lot on the western part of the road was planted to fruit- bearing trees
by respondents.24 It was admitted by petitioners that they saw the house of respondents constructed on the lot and yet
never questioned the same.25 It was also established that respondents are the ones gathering the fruits of the land and
enjoying the same26 to the exclusion of petitioners and yet the latter never prevented them from doing so. In fact,
while petitioners learned of the sale of the property by Juana to the Spouses Cereno in 1980, they never took any
action to protect whatever rights they have over the property nor raised any objection on respondents' possession of
the property. Petitioners' inaction is aggravated by the fact that petitioners just live a mere 100 meters away from the
property.27
Moreover, immediately after the sale of the property to the Spouses Cereno, they declared the property in their names
for taxation purposes28 and since then religiously paid the taxes 29 due on the property. Petitioners admitted that they
knew that the Spouses Cerenos are the ones paying the taxes; 30 yet, they never challenged the same for a long period
of time which clearly establishes respondents' claim as owners of the property. Jurisprudence is clear that although tax
declarations or realty tax payments of property are not conclusive evidence of ownership, nevertheless, they are good
indicia of possession in the concept of owner, for no one in his right mind would be paying taxes for a property that is
not in his actual or at least constructive possession. 31They constitute at least proof that the holder has a claim of title
over the property.32 As is well known, the payment of taxes, coupled with actual possession of the land covered by the
tax declaration, strongly supports a claim of ownership. 33
Respondent Juanito also exercised dominion over the property by mortgaging the same to Manaoag Rural Bank in
199434 and the mortgage was cancelled only in January 1999. 351avvphi1

While there is a question regarding the alleged donation propter nuptias at the time Juana executed the deed of sale in
favor of the Spouses Cereno in 1970, however, the requirement of just title and good faith are still satisfied in this
case. As the CA said:
x x x [T]he joint affidavit that the defendants-appellants presented, attesting to the donation propter nuptias of the
disputed property by Pablo to Juana, can be the basis of the belief in good faith that Juana was the owner of the
disputed property. Related to this, it is undisputed that Pablo and Juana had lived in the disputed property from the
time of their marriage in 1919, and Juana continued to live and to possess this property in the concept of an owner
from the time of Pablo's death in 1936 up to the time she sold it to spouses Cereno in 1970. These circumstances, in
our view, are sufficient bases for the belief that Juana was the owner of the property she conveyed by sale, and leave
us convinced that the spouses Cereno had the "good faith" that acquisition by prescription requires when they became
the purchasers in the contract of sale with Juana.36
Notably, one of the affiants in the joint affidavit which was executed in 1970 was Alfredo, Pablo's son by his first
marriage, where he attested that the property was given by his father Pablo to Juana by donation propter nuptias. Not
one among Alfredo's children had ever come out to assail the validity of the affidavit executed by their father. In fact,
not one of Alfredo's heirs joined petitioners in this case. 37 Moreover, not one among the children of the first marriage
when they were still alive ever made a claim on their successional rights over the property by asking for its partition.
Such joint affidavit could constitute a legal basis for Juana's adverse and exclusive character of the possession of the
property38 and would show the Spouses Cereno's good faith belief that Juana was the owner of the property. Thus,
when petitioners filed the instant case, more than 29 years had already elapsed, thus, the ten-year period for
acquisitive prescription has already been satisfied.
We likewise agree with the CA when it found that petitioners are guilty of laches that would bar them from belatedly
asserting their claim.
Laches is defined as the failure to assert a right for an unreasonable and unexplained length of time, warranting a
presumption that the party entitled to assert it has either abandoned or declined to assert it. This equitable defense is
based upon grounds of public policy, which requires the discouragement of stale claims for the peace of society. 39
Juana sold the property to the Spouses Cereno in 1970 and since then have possessed the property peacefully and
publicly without any opposition from petitioners. While petitioners claim that they knew about the sale only in 1980 yet
they did not take any action to recover the same and waited until 1999 to file a suit without offering any excuse for
such delay. Records do not show any justifiable reason for petitioners' inaction for a long time in asserting whatever
rights they have over the property given the publicity of respondents' conduct as owners of the property.
WHEREFORE, the petition is DENIED. The Decision dated August 24, 2004 and the Resolution dated April 29, 2005 of
the Court of Appeals in CA-G.R. CV No. 69446 are AFFIRMED.
SO ORDERED.

G.R. No. 175444

December 14, 2011

JAIME ABALOS and SPOUSES FELIX SALAZAR and CONSUELO SALAZAR, GLICERIO ABALOS, HEIRS OF
AQUILINO ABALOS, namely: SEGUNDA BAUTISTA, ROGELIO ABALOS, DOLORES A. ROSARIO, FELICIDAD
ABALOS, ROBERTO ABALOS, JUANITO ABALOS, TITA ABALOS, LITA A. DELA CRUZ AND HEIRS OF AQUILINA
ABALOS, namely: ARTURO BRAVO, PURITA B. MENDOZA, LOURDES B. AGANON, CONSUELO B. SALAZAR,
PRIMA B. DELOS SANTOS, THELMA APOSTOL and GLECERIO ABALOS,Petitioners,
vs.
HEIRS OF VICENTE TORIO, namely: PUBLIO TORIO, LIBORIO TORIO, VICTORINA TORIO, ANGEL TORIO,
LADISLAO TORIO, PRIMO TORIO and NORBERTO TORIO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to set aside the Decision 1 dated June 30, 2006 and
Resolution2 dated November 13, 2006 by the Court of Appeals (CA) in CA-G.R. SP No. 91887. The assailed Decision
reversed and set aside the Decision3 dated June 14, 2005 of the Regional Trial Court (RTC) of Lingayen, Pangasinan,
Branch 69, while the questioned Resolution denied petitioners' Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
On July 24, 1996, herein respondents filed a Complaint for Recovery of Possession and Damages with the Municipal
Trial Court (MTC) of Binmaley, Pangasinan against Jaime Abalos (Jaime) and the spouses Felix and Consuelo Salazar.
Respondents contended that: they are the children and heirs of one Vicente Torio (Vicente) who died intestate on
September 11, 1973; at the time of the death of Vicente, he left behind a parcel of land measuring 2,950 square
meters, more or less, which is located at San Isidro Norte, Binmaley, Pangasinan; during the lifetime of Vicente and
through his tolerance, Jaime and the Spouses Salazar were allowed to stay and build their respective houses on the
subject parcel of land; even after the death of Vicente, herein respondents allowed Jaime and the Spouses Salazar to
remain on the disputed lot; however, in 1985, respondents asked Jaime and the Spouses Salazar to vacate the subject
lot, but they refused to heed the demand of respondents forcing respondents to file the complaint. 4
Jaime and the Spouses Salazar filed their Answer with Counterclaim, denying the material allegations in the Complaint
and asserting in their Special and Affirmative Defenses that: respondents' cause of action is barred by acquisitive
prescription; the court a quo has no jurisdiction over the nature of the action and the persons of the defendants; the
absolute and exclusive owners and possessors of the disputed lot are the deceased predecessors of defendants;
defendants and their predecessors-in-interest had been in actual, continuous and peaceful possession of the subject
lot as owners since time immemorial; defendants are faithfully and religiously paying real property taxes on the
disputed lot as evidenced by Real Property Tax Receipts; they have continuously introduced improvements on the said
land, such as houses, trees and other kinds of ornamental plants which are in existence up to the time of the filing of
their Answer.5
On the same date as the filing of defendants' Answer with Counterclaim, herein petitioners filed their Answer in
Intervention with Counterclaim. Like the defendants, herein petitioners claimed that their predecessors-in-interest
were the absolute and exclusive owners of the land in question; that petitioners and their predecessors had been in
possession of the subject lot since time immemorial up to the present; they have paid real property taxes and
introduced improvements thereon.6
After the issues were joined, trial ensued.
On December 10, 2003, the MTC issued a Decision, the dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing consideration[s], the Court adjudged the case in favor of the plaintiffs and
against the defendants and defendants-intervenors are ordered to turn over the land in question to the plaintiffs (Lot
Nos. 869 and 870, Cad. 467-D. Binmaley Cadastre located in Brgy. San Isidro Norte, Binmaley, Pangasinan with an area
of 2,950 sq. m., more or less, bounded and described in paragraph 3 of the Complaint[)]; ordering the defendants and
defendants-intervenors to remove their respective houses standing on the land in dispute; further ordering the
defendants and defendants-intervenors, either singly or jointly to pay the plaintiffs land rent in the amount
of P12,000.00 per year to be reckoned starting the year 1996 until defendants and defendants-intervenors will finally
vacate the premises; furthermore, defendants and defendants-intervenors are also ordered to pay, either singly or
jointly, the amount of P10,000.00 as and by way of attorney's fees and costs of suit.
SO ORDERED.7
Jaime and the Spouses Salazar appealed the Decision of the MTC with the RTC of Lingayen, Pangasinan. 8Herein
petitioners, who were intervenors, did not file an appeal.
In its Decision dated June 14, 2005, the RTC ruled in favor of Jaime and the Spouses Salazar, holding that they have
acquired the subject property through prescription. Accordingly, the RTC dismissed herein respondents' complaint.
Aggrieved, herein respondents filed a petition for review with the CA assailing the Decision of the RTC.
On June 30, 2006, the CA promulgated its questioned Decision, the dispositive portion of which reads, thus:

WHEREFORE, the petition is GRANTED. The Decision dated June 14, 2005 of the Regional Trial Court, Branch 69,
Lingayen, Pangasinan is hereby REVERSED and SET ASIDE. In its stead, a new one is entered reinstating the Decision
dated December 10, 2003 of the Municipal Trial Court of Binmaley, Pangasinan.
SO ORDERED.9
Jaime and the Spouses Salazar filed a Motion for Reconsideration, but the same was denied by the CA in its Resolution
dated November 13, 2006.
Hence, the instant petition based on a sole assignment of error, to wit:
THE COURT OF APPEALS ERRED IN NOT APPRECIATING THAT THE PETITIONERS HEREIN ARE NOW THE ABSOLUTE AND
EXCLUSIVE OWNERS OF THE LAND IN QUESTION BY VIRTUE OF ACQUISITIVE PRESCRIPTION. 10
The main issue raised by petitioners is whether they and their predecessors-in-interest possessed the disputed lot in
the concept of an owner, or whether their possession is by mere tolerance of respondents and their predecessors-ininterest. Corollarily, petitioners claim that the due execution and authenticity of the deed of sale upon which
respondents' predecessors-in-interest derived their ownership were not proven during trial.
The petition lacks merit.
Preliminarily, the Court agrees with the observation of respondents that some of the petitioners in the instant petition
were the intervenors 11 when the case was filed with the MTC. Records would show that they did not appeal the
Decision of the MTC.12 The settled rule is that failure to perfect an appeal renders the judgment final and
executory.13 Hence, insofar as the intervenors in the MTC are concerned, the judgment of the MTC had already become
final and executory.
It also bears to point out that the main issue raised in the instant petition, which is the character or nature of
petitioners' possession of the subject parcel of land, is factual in nature.
Settled is the rule that questions of fact are not reviewable in petitions for review on certiorari under Rule 45 of the
Rules of Court.14 Section 1 of Rule 45 states that petitions for review on certiorari "shall raise only questions of law
which must be distinctly set forth."
Doubtless, the issue of whether petitioners possess the subject property as owners, or whether they occupy the same
by mere tolerance of respondents, is a question of fact. Thus, it is not reviewable.
Nonetheless, the Court has, at times, allowed exceptions from the abovementioned restriction. Among the recognized
exceptions are the following:
a.

When the findings are grounded entirely on speculation, surmises, or conjectures;

b.

When the inference made is manifestly mistaken, absurd, or impossible;

c.

When there is grave abuse of discretion;

d.

When the judgment is based on a misapprehension of facts;

e.

When the findings of facts are conflicting;

f.

When in making its findings the CA went beyond the issues of the case, or its findings are contrary to
the admissions of both the appellant and the appellee;

g.

When the CAs findings are contrary to those by the trial court;

h.

When the findings are conclusions without citation of specific evidence on which they are based;

i.

When the facts set forth in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondent;

j.

When the findings of fact are premised on the supposed absence of evidence and contradicted by the
evidence on record; or

k.

When the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion. 15

In the present case, the findings of fact of the MTC and the CA are in conflict with those of the RTC.
After a review of the records, however, the Court finds that the petition must fail as it finds no error in the findings of
fact and conclusions of law of the CA and the MTC.
Petitioners claim that they have acquired ownership over the disputed lot through ordinary acquisitive prescription.
Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. 16 Ordinary acquisitive
prescription requires possession in good faith and with just title for ten (10) years. 17 Without good faith and just title,
acquisitive prescription can only be extraordinary in character which requires uninterrupted adverse possession for
thirty (30) years.18
Possession "in good faith" consists in the reasonable belief that the person from whom the thing is received has been
the owner thereof, and could transmit his ownership. 19 There is "just title" when the adverse claimant came into

possession of the property through one of the modes recognized by law for the acquisition of ownership or other real
rights, but the grantor was not the owner or could not transmit any right. 20
In the instant case, it is clear that during their possession of the property in question, petitioners acknowledged
ownership thereof by the immediate predecessor-in-interest of respondents. This is clearly shown by the Tax
Declaration in the name of Jaime for the year 1984 wherein it contains a statement admitting that Jaime's house was
built on the land of Vicente, respondents' immediate predecessor-in-interest. 21 Petitioners never disputed such an
acknowledgment. Thus, having knowledge that they nor their predecessors-in-interest are not the owners of the
disputed lot, petitioners' possession could not be deemed as possession in good faith as to enable them to acquire the
subject land by ordinary prescription. In this respect, the Court agrees with the CA that petitioners' possession of the
lot in question was by mere tolerance of respondents and their predecessors-in-interest. Acts of possessory character
executed due to license or by mere tolerance of the owner are inadequate for purposes of acquisitive
prescription.22 Possession, to constitute the foundation of a prescriptive right, must be en concepto de dueo, or, to
use the common law equivalent of the term, that possession should be adverse, if not, such possessory acts, no
matter how long, do not start the running of the period of prescription. 23
Moreover, the CA correctly held that even if the character of petitioners' possession of the subject property had
become adverse, as evidenced by their declaration of the same for tax purposes under the names of their
predecessors-in-interest, their possession still falls short of the required period of thirty (30) years in cases of
extraordinary acquisitive prescription. Records show that the earliest Tax Declaration in the name of petitioners was in
1974. Reckoned from such date, the thirty-year period was completed in 2004. However, herein respondents'
complaint was filed in 1996, effectively interrupting petitioners' possession upon service of summons on them. 24 Thus,
petitioners possession also did not ripen into ownership, because they failed to meet the required statutory period of
extraordinary prescription.
This Court has held that the evidence relative to the possession upon which the alleged prescription is based, must be
clear, complete and conclusive in order to establish the prescription. 25 In the present case, the Court finds no error on
the part of the CA in holding that petitioners failed to present competent evidence to prove their alleged good faith in
neither possessing the subject lot nor their adverse claim thereon. Instead, the records would show that petitioners'
possession was by mere tolerance of respondents and their predecessors-in-interest.1avvphi1
Finally, as to the issue of whether the due execution and authenticity of the deed of sale upon which respondents
anchor their ownership were not proven, the Court notes that petitioners did not raise this matter in their Answer as
well as in their Pre-Trial Brief. It was only in their Comment to respondents' Petition for Review filed with the CA that
they raised this issue. Settled is the rule that points of law, theories, issues, and arguments not adequately brought to
the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court. 26They cannot be
raised for the first time on appeal. To allow this would be offensive to the basic rules of fair play, justice and due
process.27
Even granting that the issue of due execution and authenticity was properly raised, the Court finds no cogent reason to
depart from the findings of the CA, to wit:
xxxx
Based on the foregoing, respondents [Jaime Abalos and the Spouses Felix and Consuelo Salazar] have not inherited the
disputed land because the same was shown to have already been validly sold to Marcos Torio, who, thereupon,
assigned the same to his son Vicente, the father of petitioners [herein respondents]. A valid sale was amply
established and the said validity subsists because the deed evidencing the same was duly notarized.
There is no doubt that the deed of sale was duly acknowledged before a notary public. As a notarized document, it has
in its favor the presumption of regularity and it carries the evidentiary weight conferred upon it with respect to its due
execution. It is admissible in evidence without further proof of its authenticity and is entitled to full faith and credit
upon its face.28
Indeed, settled is the rule in our jurisdiction that a notarized document has in its favor the presumption of regularity,
and to overcome the same, there must be evidence that is clear, convincing and more than merely preponderant;
otherwise, the document should be upheld.29 In the instant case, petitioners' bare denials will not suffice to overcome
the presumption of regularity of the assailed deed of sale.
WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
91887 are AFFIRMED.
SO ORDERED.

G.R. No. 184109

February 1, 2012

CELERINO E. MERCADO, Petitioner,

vs.
BELEN* ESPINOCILLA** AND FERDINAND ESPINOCILLA, Respondents.
D E C I S I O N VILLARAMA, JR., J.:
The Case
Petitioner Celerino E. Mercado appeals the Decision 1 dated April 28, 2008 and Resolution 2 dated July 22, 2008 of the
Court of Appeals (CA) in CA-G.R. CV No. 87480. The CA dismissed petitioners complaint 3 for recovery of possession,
quieting of title, partial declaration of nullity of deeds and documents, and damages, on the ground of prescription.
The Antecedent Facts
Doroteo Espinocilla owned a parcel of land, Lot No. 552, with an area of 570 sq. m., located at Magsaysay Avenue,
Zone 5, Bulan, Sorsogon. After he died, his five children, Salvacion, Aspren, Isabel, Macario, and Dionisia divided Lot
No. 552 equally among themselves. Later, Dionisia died without issue ahead of her four siblings, and Macario took
possession of Dionisias share. In an affidavit of transfer of real property 4 dated November 1, 1948, Macario claimed
that Dionisia had donated her share to him in May 1945.
Thereafter, on August 9, 1977, Macario and his daughters Betty Gullaba and Saida Gabelo sold 5 225 sq. m. to his son
Roger Espinocilla, husband of respondent Belen Espinocilla and father of respondent Ferdinand Espinocilla. On March 8,
1985, Roger Espinocilla sold 6 114 sq. m. to Caridad Atienza. Per actual survey of Lot No. 552, respondent Belen
Espinocilla occupies 109 sq. m., Caridad Atienza occupies 120 sq. m., Caroline Yu occupies 209 sq. m., and petitioner,
Salvacion's son, occupies 132 sq. m.7
The Case For Petitioner
Petitioner sued the respondents to recover two portions: an area of 28.5 8 sq. m. which he bought from Aspren and
another 28.5 sq. m. which allegedly belonged to him but was occupied by Macarios house. 9 His claim has since been
modified to an alleged encroachment of only 39 sq. m. that he claims must be returned to him. He avers that he is
entitled to own and possess 171 sq. m. of Lot No. 552, having inherited 142.5 sq. m. from his mother Salvacion and
bought 28.5 sq. m. from his aunt Aspren. According to him, his mothers inheritance is 142.5 sq. m., that is, 114 sq. m.
from Doroteo plus 28.5 sq. m. from Dionisia. Since the area he occupies is only 132 sq. m., 10 he claims that
respondents encroach on his share by 39 sq. m.11
The Case For Respondents
Respondents agree that Doroteos five children each inherited 114 sq. m. of Lot No. 552. However, Macarios share
increased when he received Dionisias share. Macarios increased share was then sold to his son Roger, respondents
husband and father. Respondents claim that they rightfully possess the land they occupy by virtue of acquisitive
prescription and that there is no basis for petitioners claim of encroachment. 12
The Trial Courts Decision
On May 15, 2006, the Regional Trial Court (RTC) ruled in favor of petitioner and held that he is entitled to 171 sq. m.
The RTC found that petitioner inherited 142.5 sq. m. from his mother Salvacion and bought 28.5 sq. m. from his aunt
Aspren. The RTC computed that Salvacion, Aspren, Isabel and Macario each inherited 142.5 sq. m. of Lot No. 552. Each
inherited 114 sq. m. from Doroteo and 28.5 sq. m. from Dionisia. The RTC further ruled that Macario was not entitled to
228 sq. m. Thus, respondents must return 39 sq. m. to petitioner who occupies only 132 sq. m. 13
There being no public document to prove Dionisias donation, the RTC also held that Macarios 1948 affidavit is void
and is an invalid repudiation of the shares of his sisters Salvacion, Aspren, and Isabel in Dionisias share. Accordingly,
Macario cannot acquire said shares by prescription. The RTC further held that the oral partition of Lot No. 552 by
Doroteos heirs did not include Dionisias share and that partition should have been the main action. Thus, the RTC
ordered partition and deferred the transfer of possession of the 39 sq. m. pending partition. 14 The dispositive portion of
the RTC decision reads:
WHEREFORE, in view of the foregoing premises, the court issues the following ORDER, thus a) Partially declaring the nullity of the Deed of Absolute Sale of Property dated August 9, 1977 x x x executed
by Macario Espinocilla, Betty E. Gullaba and Saida E. Gabelo in favor of Roger Espinocilla, insofar as it affects
the portion or the share belonging to Salvacion Espinocilla, mother of [petitioner,] relative to the property left
by Dionisia Espinocilla, including [Tax Declaration] No. 13667 and other documents of the same nature and
character which emanated from the said sale;
b) To leave as is the Deeds of Absolute Sale of May 11, 1983 and March 8, 1985, it having been determined
that they did not involve the portion belonging to [petitioner] x x x.
c) To effect an effective and real partition among the heirs for purposes of determining the exact location of
the share (114 sq. m.) of the late Dionisia Espinocilla together with the 28.5 sq. m. belonging to [petitioners]
mother Salvacion, as well as, the exact location of the 39 sq. m. portion belonging to the [petitioner] being
encroached by the [respondents], with the assistance of the Commissioner (Engr. Fundano) appointed by this
court.

d) To hold in abeyance the transfer of possession of the 39 sq. m. portion to the [petitioner] pending the
completion of the real partition above-mentioned.15
The CA Decision
On appeal, the CA reversed the RTC decision and dismissed petitioners complaint on the ground that extraordinary
acquisitive prescription has already set in in favor of respondents. The CA found that Doroteos four remaining children
made an oral partition of Lot No. 552 after Dionisias death in 1945 and occupied specific portions. The oral partition
terminated the co-ownership of Lot No. 552 in 1945. Said partition also included Dionisias share because the lot was
divided into four parts only. And since petitioners complaint was filed only on July 13, 2000, the CA concluded that
prescription has set in.16 The CA disposed the appeal as follows:
WHEREFORE, the appeal is GRANTED. The assailed May 15, 2006 Decision of the Regional Trial Court (RTC) of Bulan,
Sorsogon is hereby REVERSED and SET ASIDE. The Complaint of the [petitioner] is hereby DISMISSED. No costs. 17
The Instant Petition
The core issue to be resolved is whether petitioners action to recover the subject portion is barred by prescription.
Petitioner confirms oral partition of Lot No. 552 by Doroteo's heirs, but claims that his share increased from 114 sq. m.
to 171 sq. m. and that respondents encroached on his share by 39 sq. m. Since an oral partition is valid, the
corresponding survey ordered by the RTC to identify the 39 sq. m. that must be returned to him could be
made.18 Petitioner also alleges that Macario committed fraud in acquiring his share; hence, any evidence adduced by
him to justify such acquisition is inadmissible. Petitioner concludes that if a person obtains legal title to property by
fraud or concealment, courts of equity will impress upon the title a so-called constructive trust in favor of the
defrauded party.19
The Courts Ruling
We affirm the CA ruling dismissing petitioners complaint on the ground of prescription.
Prescription, as a mode of acquiring ownership and other real rights over immovable property, is concerned with lapse
of time in the manner and under conditions laid down by law, namely, that the possession should be in the concept of
an owner, public, peaceful, uninterrupted, and adverse. Acquisitive prescription of real rights may be ordinary or
extraordinary. Ordinary acquisitive prescription requires possession in good faith and with just title for 10 years. In
extraordinary prescription, ownership and other real rights over immovable property are acquired through
uninterrupted adverse possession for 30 years without need of title or of good faith. 20
Here, petitioner himself admits the adverse nature of respondents possession with his assertion that Macarios
fraudulent acquisition of Dionisias share created a constructive trust. In a constructive trust, there is neither a promise
nor any fiduciary relation to speak of and the so-called trustee (Macario) neither accepts any trust nor intends holding
the property for the beneficiary (Salvacion, Aspren, Isabel). The relation of trustee and cestui que trust does not in fact
exist, and the holding of a constructive trust is for the trustee himself, and therefore, at all times
adverse.21 Prescription may supervene even if the trustee does not repudiate the relationship. 22
Then, too, respondents uninterrupted adverse possession for 55 years of 109 sq. m. of Lot No. 552 was established.
Macario occupied Dionisias share in 1945 although his claim that Dionisia donated it to him in 1945 was only made in
a 1948 affidavit. We also agree with the CA that Macarios possession of Dionisias share was public and adverse since
his other co-owners, his three other sisters, also occupied portions of Lot No. 552. Indeed, the 1977 sale made by
Macario and his two daughters in favor of his son Roger confirms the adverse nature of Macarios possession because
said sale of 225 sq. m. 23 was an act of ownership over Macarios original share and Dionisias share. In 1985, Roger
also exercised an act of ownership when he sold 114 sq. m. to Caridad Atienza. It was only in the year 2000, upon
receipt of the summons to answer petitioners complaint, that respondents peaceful possession of the remaining
portion (109 sq. m.) was interrupted. By then, however, extraordinary acquisitive prescription has already set in in
favor of respondents. That the RTC found Macarios 1948 affidavit void is of no moment. Extraordinary prescription is
unconcerned with Macarios title or good faith. Accordingly, the RTC erred in ruling that Macario cannot acquire by
prescription the shares of Salvacion, Aspren, and Isabel, in Dionisias 114-sq. m. share from Lot No. 552.
Moreover, the CA correctly dismissed petitioners complaint as an action for reconveyance based on an implied or
constructive trust prescribes in 10 years from the time the right of action accrues. 24 This is the other kind of
prescription under the Civil Code, called extinctive prescription, where rights and actions are lost by the lapse of
time.25 Petitioners action for recovery of possession having been filed 55 years after Macario occupied Dionisias
share, it is also barred by extinctive prescription. The CA while condemning Macarios fraudulent act of depriving his
three sisters of their shares in Dionisias share, equally emphasized the fact that Macarios sisters wasted their
opportunity to question his acts.
WHEREFORE, we DENY the petition for review on certiorari for lack of merit and AFFIRM the assailed Decision dated
April 28, 2008 and Resolution dated July 22, 2008 of the Court of Appeals in CA-G.R. CV No. 87480.
No pronouncement as to costs. SO ORDERED.

G.R. No. 165748

September 14, 2011

Heirs of Policronio M. Ureta, Sr.

vs.
Heirs of Liberato M. Ureta
DECISION
MENDOZA, J.:
These consolidated petitions for review on certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure assail
the April 20, 2004 Decision 1 of the Court of Appeals (CA), and its October 14, 2004 Resolution 2 in C.A.-G.R. CV No.
71399, which affirmed with modification the April 26, 2001 Decision 3 of the Regional Trial Court, Branch 9, Kalibo,
Aklan (RTC) in Civil Case No. 5026.
The Facts
In his lifetime, Alfonso Ureta (Alfonso) begot 14 children, namely, Policronio, Liberato, Narciso, Prudencia, Vicente,
Francisco, Inocensio, Roque, Adela, Wenefreda, Merlinda, Benedicto, Jorge, and Andres. The children of
Policronio (Heirs of Policronio), are opposed to the rest of Alfonsos children and their descendants (Heirs of Alfonso).
Alfonso was financially well-off during his lifetime. He owned several fishpens, a fishpond, a sari-sari store, a passenger
jeep, and was engaged in the buying and selling of copra. Policronio, the eldest, was the only child of Alfonso who
failed to finish schooling and instead worked on his fathers lands.
Sometime in October 1969, Alfonso and four of his children, namely, Policronio, Liberato, Prudencia, and Francisco, met
at the house of Liberato. Francisco, who was then a municipal judge, suggested that in order to reduce the inheritance
taxes, their father should make it appear that he had sold some of his lands to his children. Accordingly, Alfonso
executed four (4) Deeds of Sale covering several parcels of land in favor of Policronio, 4Liberato,5 Prudencia,6 and his
common-law wife, Valeriana Dela Cruz.7 The Deed of Sale executed on October 25, 1969, in favor of Policronio, covered
six parcels of land, which are the properties in dispute in this case.
Since the sales were only made for taxation purposes and no monetary consideration was given, Alfonso continued to
own, possess and enjoy the lands and their produce.
When Alfonso died on October 11, 1972, Liberato acted as the administrator of his fathers estate. He was later
succeeded by his sister Prudencia, and then by her daughter, Carmencita Perlas. Except for a portion of parcel 5, the
rest of the parcels transferred to Policronio were tenanted by the Fernandez Family. These tenants never turned over
the produce of the lands to Policronio or any of his heirs, but to Alfonso and, later, to the administrators of his estate.
Policronio died on November 22, 1974. Except for the said portion of parcel 5, neither Policronio nor his heirs ever took
possession of the subject lands.
On April 19, 1989, Alfonsos heirs executed a Deed of Extra-Judicial Partition, 8 which included all the lands that were
covered by the four (4) deeds of sale that were previously executed by Alfonso for taxation purposes. Conrado,
Policronios eldest son, representing the Heirs of Policronio, signed the Deed of Extra-Judicial Partition in behalf of his
co-heirs.
After their fathers death, the Heirs of Policronio found tax declarations in his name covering the six parcels of land. On
June 15, 1995, they obtained a copy of the Deed of Sale executed on October 25, 1969 by Alfonso in favor of
Policronio.
Not long after, on July 30, 1995, the Heirs of Policronio allegedly learned about the Deed of Extra-Judicial Partition
involving Alfonsos estate when it was published in the July 19, 1995 issue of the Aklan Reporter.
Believing that the six parcels of land belonged to their late father, and as such, excluded from the Deed of ExtraJudicial Partition, the Heirs of Policronio sought to amicably settle the matter with the Heirs of Alfonso. Earnest efforts
proving futile, the Heirs of Policronio filed a Complaint for Declaration of Ownership, Recovery of Possession,
Annulment of Documents, Partition, and Damages 9 against the Heirs of Alfonso before the RTC on November 17, 1995
where the following issues were submitted: (1) whether or not the Deed of Sale was valid; (2) whether or not the Deed
of Extra-Judicial Partition was valid; and (3) who between the parties was entitled to damages.
The Ruling of the RTC
On April 26, 2001, the RTC dismissed the Complaint of the Heirs of Policronio and ruled in favor of the Heirs of Alfonso
in a decision, the dispositive portion of which reads:
WHEREFORE, the Court finds that the preponderance of evidence tilts in favor of the defendants, hence the instant
case is hereby DISMISSED.
The counterclaims are likewise DISMISSED.
With costs against plaintiffs.
SO ORDERED.
The RTC found that the Heirs of Alfonso clearly established that the Deed of Sale was null and void. It held that the
Heirs of Policronio failed to rebut the evidence of the Heirs of Alfonso, which proved that the Deed of Sale in the

possession of the former was one of the four (4) Deeds of Sale executed by Alfonso in favor of his 3 children and
second wife for taxation purposes; that although tax declarations were issued in the name of Policronio, he or his heirs
never took possession of the subject lands except a portion of parcel 5; and that all the produce were turned over by
the tenants to Alfonso and the administrators of his estate and never to Policronio or his heirs.
The RTC further found that there was no money involved in the sale. Even granting that there was, as claimed by the
Heirs of Policronio, 2,000.00 for six parcels of land, the amount was grossly inadequate. It was also noted that the
aggregate area of the subject lands was more than double the average share adjudicated to each of the other children
in the Deed of Extra-Judicial Partition; that the siblings of Policronio were the ones who shared in the produce of the
land; and that the Heirs of Policronio only paid real estate taxes in 1996 and 1997. The RTC opined that Policronio must
have been aware that the transfer was merely for taxation purposes because he did not subsequently take possession
of the properties even after the death of his father.
The Deed of Extra-Judicial Partition, on the other hand, was declared valid by the RTC as all the heirs of Alfonso were
represented and received equal shares and all the requirements of a valid extra-judicial partition were met. The RTC
considered Conrados claim that he did not understand the full significance of his signature when he signed in behalf of
his co-heirs, as a gratutitous assertion. The RTC was of the view that when he admitted to have signed all the pages
and personally appeared before the notary public, he was presumed to have understood their contents.
Lastly, neither party was entitled to damages. The Heirs of Alfonso failed to present testimony to serve as factual basis
for moral damages, no document was presented to prove actual damages, and the Heirs of Policronio were found to
have filed the case in good faith.
The Ruling of the CA
Aggrieved, the Heirs of Policronio appealed before the CA, which rendered a decision on April 20, 2004, the dispositive
portion of which reads as follows:
WHEREFORE, the appeal is PARTIALLY GRANTED. The appealed Decision, dated 26 April 2001, rendered by Hon. Judge
Dean R. Telan of the Regional Trial Court of Kalibo, Aklan, Branch 9, is hereby AFFIRMED with MODIFICATION:
1.) The Deed of Sale in favor of Policronio Ureta, Sr., dated 25 October 1969, covering six (6) parcels of land is
hereby declared VOID for being ABSOLUTELY SIMULATED;
2.) The Deed of Extra-Judicial Partition, dated 19 April 1989, is ANNULLED;
3.) The claim for actual and exemplary damages are DISMISSED for lack of factual and legal basis.
The case is hereby REMANDED to the court of origin for the proper partition of ALFONSO URETAS Estate in accordance
with Rule 69 of the 1997 Rules of Civil Procedure. No costs at this instance.
SO ORDERED.
The CA affirmed the finding of the RTC that the Deed of Sale was void. It found the Deed of Sale to be absolutely
simulated as the parties did not intend to be legally bound by it. As such, it produced no legal effects and did not alter
the juridical situation of the parties. The CA also noted that Alfonso continued to exercise all the rights of an owner
even after the execution of the Deed of Sale, as it was undisputed that he remained in possession of the subject
parcels of land and enjoyed their produce until his death.
Policronio, on the other hand, never exercised any rights pertaining to an owner over the subject lands from the time
they were sold to him up until his death. He never took or attempted to take possession of the land even after his
fathers death, never demanded delivery of the produce from the tenants, and never paid realty taxes on the
properties. It was also noted that Policronio never disclosed the existence of the Deed of Sale to his children, as they
were, in fact, surprised to discover its existence. The CA, thus, concluded that Policronio must have been aware that
the transfer was only made for taxation purposes.
The testimony of Amparo Castillo, as to the circumstances surrounding the actual arrangement and agreement
between the parties prior to the execution of the four (4) Deeds of Sale, was found by the CA to be unrebutted. The
RTCs assessment of the credibility of her testimony was accorded respect, and the intention of the parties was given
the primary consideration in determining the true nature of the contract.
Contrary to the finding of the RTC though, the CA annulled the Deed of Extra-Judicial Partition due to the incapacity of
one of the parties to give his consent to the contract. It held that before Conrado could validly bind his co-heirs to the
Deed of Extra-Judicial Partition, it was necessary that he be clothed with the proper authority. The CA ruled that a
special power of attorney was required under Article 1878 (5) and (15) of the Civil Code. Without a special power of
attorney, it was held that Conrado lacked the legal capactiy to give the consent of his co-heirs, thus, rendering the
Deed of Extra-Judicial Partition voidable under Article 1390 (1) of the Civil Code.
As a consequence, the CA ordered the remand of the case to the RTC for the proper partition of the estate, with the
option that the parties may still voluntarily effect the partition by executing another agreement or by adopting the
assailed Deed of Partition with the RTCs approval in either case. Otherwise, the RTC may proceed with the compulsory
partition of the estate in accordance with the Rules.
With regard to the claim for damages, the CA agreed with the RTC and dismissed the claim for actual and
compensatory damages for lack of factual and legal basis.

Both parties filed their respective Motions for Reconsideration, which were denied by the CA for lack of merit in a
Resolution dated October 14, 2004.
In their Motion for Reconsideration, the Heirs of Policronio argued that the RTC violated the best evidence rule in giving
credence to the testimony of Amparo Castillo with regard to the simulation of the Deed of Sale, and that prescription
had set in precluding any question on the validity of the contract.
The CA held that the oral testimony was admissible under Rule 130, Section 9 (b) and (c), which provides that
evidence aliunde may be allowed to explain the terms of the written agreement if the same failed to express the true
intent and agreement of the parties thereto, or when the validity of the written agreement was put in issue.
Furthermore, the CA found that the Heirs of Policronio waived their right to object to evidence aliunde having failed to
do so during trial and for raising such only for the first time on appeal. With regard to prescription, the CA ruled that
the action or defense for the declaration of the inexistence of a contract did not prescribe under Article 1410 of the
Civil Code.
On the other hand, the Heirs of Alfonso argued that the Deed of Extra-Judicial Partition should not have been annulled,
and instead the preterited heirs should be given their share. The CA reiterated that Conrados lack of capacity to give
his co-heirs consent to the extra-judicial settlement rendered the same voidable.
Hence, the present Petitions for Review on Certiorari.
The Issues
The issues presented for resolution by the Heirs of Policronio in G.R. No. 165748 are as follows:
I.
Whether the Court of Appeals is correct in ruling that the Deed of Absolute Sale of 25 October
1969 is void for being absolutely fictitious and in relation therewith, may parol evidence be
entertained to thwart its binding effect after the parties have both died?
Assuming that indeed the said document is simulated, whether or not the parties thereto
including their successors in interest are estopped to question its validity, they being bound by
Articles 1412 and 1421 of the Civil Code?
II.
Whether prescription applies to bar any question respecting the validity of the Deed of Absolute
Sale dated 25 October 1969? Whether prescription applies to bar any collateral attack on the
validity of the deed of absolute sale executed 21 years earlier?
III.
Whether the Court of Appeals correctly ruled in nullifying the Deed of Extrajudicial Partition
because Conrado Ureta signed the same without the written authority from his siblings in
contravention of Article 1878 in relation to Article 1390 of the Civil Code and in relation therewith,
whether the defense of ratification and/or preterition raised for the first time on appeal may be
entertained?
The issues presented for resolution by the Heirs of Alfonso in G.R. No. 165930 are as follows:
I.
Whether or not grave error was committed by the Trial Court and Court of Appeals in declaring the
Deed of Sale of subject properties as absolutely simulated and null and void thru parol evidence
based on their factual findings as to its fictitious nature, and there being waiver of any objection
based on violation of the parol evidence rule.
II.
Whether or not the Court of Appeals was correct in holding that Conrado Uretas lack of capacity
to give his co-heirs consent to the Extra-Judicial Partition rendered the same voidable.
III.
Granting arguendo that Conrado Ureta was not authorized to represent his co-heirs and there was
no ratification, whether or not the Court of Appeals was correct in ordering the remand of the
case to the Regional Trial Court for partition of the estate of Alfonso Ureta.
IV.
Since the sale in favor of Policronio Ureta Sr. was null and void ab initio, the properties covered
therein formed part of the estate of the late Alfonso Ureta and was correctly included in the Deed
of Extrajudicial Partition even if no prior action for nullification of the sale was filed by the heirs of
Liberato Ureta.
V.

Whether or not the heirs of Policronio Ureta Sr. can claim that estoppel based on Article 1412 of
the Civil Code as well as the issue of prescription can still be raised on appeal.
These various contentions revolve around two major issues, to wit: (1) whether the Deed of Sale is valid, and (2)
whether the Deed of Extra-Judicial Partition is valid. Thus, the assigned errors shall be discussed jointly and inseriatim.
The Ruling of the Court
Validity of the Deed of Sale
Two veritable legal presumptions bear on the validity of the Deed of Sale: (1) that there was sufficient consideration for
the contract; and (2) that it was the result of a fair and regular private transaction. If shown to hold, these
presumptions infer prima facie the transactions validity, except that it must yield to the evidence adduced. 10
As will be discussed below, the evidence overcomes these two presumptions.
Absolute Simulation
First, the Deed of Sale was not the result of a fair and regular private transaction because it was absolutely simulated.
The Heirs of Policronio argued that the land had been validly sold to Policronio as the Deed of Sale contained all the
essential elements of a valid contract of sale, by virtue of which, the subject properties were transferred in his name as
evidenced by the tax declaration. There being no invalidation prior to the execution of the Deed of Extra-Judicial
Partition, the probity and integrity of the Deed of Sale should remain undiminished and accorded respect as it was a
duly notarized public instrument.
The Heirs of Policronio posited that his loyal services to his father and his being the eldest among Alfonsos children,
might have prompted the old man to sell the subject lands to him at a very low price as an advance inheritance. They
explained that Policronios failure to take possession of the subject lands and to claim their produce manifests a Filipino
family practice wherein a child would take possession and enjoy the fruits of the land sold by a parent only after the
latters death. Policronio simply treated the lands the same way his father Alfonso treated them - where his children
enjoyed usufructuary rights over the properties, as opposed to appropriating them exclusively to himself. They
contended that Policronios failure to take actual possession of the lands did not prove that he was not the owner as he
was merely exercising his right to dispose of them. They argue that it was an error on the part of the CA to conclude
that ownership by Policronio was not established by his failure to possess the properties sold. Instead, emphasis should
be made on the fact that the tax declarations, being indicia of possession, were in Policronios name.
They further argued that the Heirs of Alfonso failed to appreciate that the Deed of Sale was clear enough to convey the
subject parcels of land. Citing jurisprudence, they contend that there is a presumption that an instrument sets out the
true agreement of the parties thereto and that it was executed for valuable consideration, 11 and where there is no
doubt as to the intention of the parties to a contract, the literal meaning of the stipulation shall control. 12 Nowhere in
the Deed of Sale is it indicated that the transfer was only for taxation purposes. On the contrary, the document clearly
indicates that the lands were sold. Therefore, they averred that the literal meaning of the stipulation should control.
The Court disagrees.
The Court finds no cogent reason to deviate from the finding of the CA that the Deed of Sale is null and void for being
absolutely simulated. The Civil Code provides:
Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend
to be bound at all; the latter, when the parties conceal their true agreement.
Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third
person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds
the parties to their real agreement.
Valerio v. Refresca13 is instructive on the matter of simulation of contracts:
In absolute simulation, there is a colorable contract but it has no substance as the parties have no intention to be
bound by it. The main characteristic of an absolute simulation is that the apparent contract is not really desired or
intended to produce legal effect or in any way alter the juridical situation of the parties. As a result, an absolutely
simulated or fictitious contract is void, and the parties may recover from each other what they may have given under
the contract. However, if the parties state a false cause in the contract to conceal their real agreement, the contract is
relatively simulated and the parties are still bound by their real agreement. Hence, where the essential requisites of a
contract are present and the simulation refers only to the content or terms of the contract, the agreement is absolutely
binding and enforceable between the parties and their successors in interest.
Lacking, therefore, in an absolutely simulated contract is consent which is essential to a valid and enforceable
contract.14 Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer
of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of
transfer is but a sham. 15 Similarly, in this case, Alfonso simulated a transfer to Policronio purely for taxation purposes,
without intending to transfer ownership over the subject lands.
The primary consideration in determining the true nature of a contract is the intention of the parties. If the words of a
contract appear to contravene the evident intention of the parties, the latter shall prevail. Such intention is determined

not only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of the
parties.16 The true intention of the parties in this case was sufficiently proven by the Heirs of Alfonso.
The Heirs of Alfonso established by a preponderance of evidence 17 that the Deed of Sale was one of the four (4)
absolutely simulated Deeds of Sale which involved no actual monetary consideration, executed by Alfonso in favor of
his children, Policronio, Liberato, and Prudencia, and his second wife, Valeriana, for taxation purposes.
Amparo Castillo, the daughter of Liberato, testified, to wit:
Q: Now sometime in the year 1969 can you recall if your grandfather and his children [met] in your house?
A: Yes sir, that was sometime in October 1969 when they [met] in our house, my grandfather, my late uncle Policronio
Ureta, my late uncle Liberato Ureta, my uncle Francisco Ureta, and then my auntie Prudencia Ureta they talk[ed]
about, that idea came from my uncle Francisco Ureta to [sell] some parcels of land to his children to lessen the
inheritance tax whatever happened to my grandfather, actually no money involved in this sale.
Q: Now you said there was that agreement, verbal agreement. [W]here were you when this Alfonso Ureta and his
children gather[ed] in your house?
A: I was near them in fact I heard everything they were talking [about]
xxx
Q: Were there documents of sale executed by Alfonso Ureta in furtherance of their verbal agreement?
A: Yes sir.
Q: To whom in particular did your grandfather Alfonso Ureta execute this deed of sale without money consideration
according to you?
A: To my uncle Policronio Ureta and to Prudencia Ureta Panadero.
Q: And who else?
A: To Valeriana dela Cruz.
Q: How about your father?
A: He has.18
The other Deeds of Sale executed by Alfonso in favor of his children Prudencia and Liberato, and second wife
Valeriana, all bearing the same date of execution, were duly presented in evidence by the Heirs of Alfonso, and were
uncontested by the Heirs of Policronio. The lands which were the subject of these Deeds of Sale were in fact included
in the Deed of Extra-Judicial Partition executed by all the heirs of Alfonso, where it was expressly stipulated:
That the above-named Amparo U. Castillo, Prudencia U. Paradero, Conrado B. Ureta and Merlinda U. Rivera do hereby
recognize and acknowledge as a fact that the properties presently declared in their respective names or in the names
of their respective parents and are included in the foregoing instrument are actually the properties of the deceased
Alfonso Ureta and were transferred only for the purpose of effective administration and development and convenience
in the payment of taxes and, therefore, all instruments conveying or affecting the transfer of said properties are null
and void from the beginning.19
As found by the CA, Alfonso continued to exercise all the rights of an owner even after the execution of the Deeds of
Sale. It was undisputed that Alfonso remained in possession of the subject lands and enjoyed their produce until his
death. No credence can be given to the contention of the Heirs of Policrionio that their father did not take possession
of the subject lands or enjoyed the fruits thereof in deference to a Filipino family practice. Had this been true,
Policronio should have taken possession of the subject lands after his father died. On the contrary, it was admitted that
neither Policronio nor his heirs ever took possession of the subject lands from the time they were sold to him, and even
after the death of both Alfonso and Policronio.
It was also admitted by the Heirs of Policronio that the tenants of the subject lands never turned over the produce of
the properties to Policronio or his heirs but only to Alfonso and the administrators of his estate. Neither was there a
demand for their delivery to Policronio or his heirs. Neither did Policronio ever pay real estate taxes on the properties,
the only payment on record being those made by his heirs in 1996 and 1997 ten years after his death. In sum,
Policronio never exercised any rights pertaining to an owner over the subject lands.
The most protuberant index of simulation of contract is the complete absence of an attempt in any manner on the part
of the ostensible buyer to assert rights of ownership over the subject properties. Policronios failure to take exclusive
possession of the subject properties or, in the alternative, to collect rentals, is contrary to the principle of ownership.
Such failure is a clear badge of simulation that renders the whole transaction void. 20
It is further telling that Policronio never disclosed the existence of the Deed of Sale to his children. This, coupled with
Policronios failure to exercise any rights pertaining to an owner of the subject lands, leads to the conclusion that he
was aware that the transfer was only made for taxation purposes and never intended to bind the parties thereto.
As the above factual circumstances remain unrebutted by the Heirs of Policronio, the factual findings of the RTC, which
were affirmed by the CA, remain binding and conclusive upon this Court. 21

It is clear that the parties did not intend to be bound at all, and as such, the Deed of Sale produced no legal effects and
did not alter the juridical situation of the parties. The Deed of Sale is, therefore, void for being absolutely simulated
pursuant to Article 1409 (2) of the Civil Code which provides:
Art. 1409. The following contracts are inexistent and void from the beginning:
xxx
(2) Those which are absolutely simulated or fictitious;
xxx
For guidance, the following are the most fundamental characteristics of void or inexistent contracts:
1) As a general rule, they produce no legal effects whatsoever in accordance with the principle "quod nullum
est nullum producit effectum."
2) They are not susceptible of ratification.
3) The right to set up the defense of inexistence or absolute nullity cannot be waived or renounced.
4) The action or defense for the declaration of their inexistence or absolute nullity is imprescriptible.
5) The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not
directly affected.22
Since the Deed of Sale is void, the subject properties were properly included in the Deed of Extra-Judicial Partition of
the estate of Alfonso.
Absence and Inadequacy of Consideration
The second presumption is rebutted by the lack of consideration for the Deed of Sale.
In their Answer,23 the Heirs of Alfonso initially argued that the Deed of Sale was void for lack of consideration, and even
granting that there was consideration, such was inadequate. The Heirs of Policronio counter that the defenses of
absence or inadequacy of consideration are not grounds to render a contract void.
The Heirs of Policronio contended that under Article 1470 of the Civil Code, gross inadequacy of the price does not
affect a contract of sale, except as it may indicate a defect in the consent, or that the parties really intended a
donation or some other act or contract. Citing jurisprudence, they argued that inadequacy of monetary consideration
does not render a conveyance inexistent as liberality may be sufficient cause for a valid contract, whereas fraud or bad
faith may render it either rescissible or voidable, although valid until annulled. 24 Thus, they argued that if the contract
suffers from inadequate consideration, it remains valid until annulled, and the remedy of rescission calls for judicial
intervention, which remedy the Heirs of Alfonso failed to take.
It is further argued that even granting that the sale of the subject lands for a consideration of 2,000.00 was
inadequate, absent any evidence of the fair market value of the land at the time of its sale, it cannot be concluded that
the price at which it was sold was inadequate. 25 As there is nothing in the records to show that the Heirs of Alfonso
supplied the true value of the land in 1969, the amount of 2,000.00 must thus stand as its saleable value.
On this issue, the Court finds for the Heirs of Alfonso.
For lack of consideration, the Deed of Sale is once again found to be void. It states that Policronio paid, and Alfonso
received, the 2,000.00 purchase price on the date of the signing of the contract:
That I, ALFONSO F. URETA, x x x for and in consideration of the sum of TWO THOUSAND (2,000.00) PESOS, Philippine
Currency, to me in hand paid by POLICRONIO M. URETA, x x x, do hereby CEDE, TRANSFER, and CONVEY, by way of
absolute sale, x x x six (6) parcels of land x x x. 26 [Emphasis ours]
Although, on its face, the Deed of Sale appears to be supported by valuable consideration, the RTC found that there
was no money involved in the sale. 27 This finding was affirmed by the CA in ruling that the sale is void for being
absolutely simulated. Considering that there is no cogent reason to deviate from such factual findings, they are
binding on this Court.
It is well-settled in a long line of cases that where a deed of sale states that the purchase price has been paid but in
fact has never been paid, the deed of sale is null and void for lack of consideration. 28 Thus, although the contract
states that the purchase price of 2,000.00 was paid by Policronio to Alfonso for the subject properties, it has been
proven that such was never in fact paid as there was no money involved. It must, therefore, follow that the Deed of
Sale is void for lack of consideration.
Given that the Deed of Sale is void, it is unnecessary to discuss the issue on the inadequacy of consideration.
Parol Evidence and Hearsay
The Heirs of Policronio aver that the rules on parol evidence and hearsay were violated by the CA in ruling that the
Deed of Sale was void.
They argued that based on the parol evidence rule, the Heirs of Alfonso and, specifically, Amparo Castillo, were not in
a position to prove the terms outside of the contract because they were not parties nor successors-in-interest in the
Deed of Sale in question. Thus, it is argued that the testimony of Amparo Castillo violates the parol evidence rule.

Stemming from the presumption that the Heirs of Alfonso were not parties to the contract, it is also argued that the
parol evidence rule may not be properly invoked by either party in the litigation against the other, where at least one
of the parties to the suit is not a party or a privy of a party to the written instrument in question and does not base a
claim on the instrument or assert a right originating in the instrument or the relation established thereby. 29
Their arguments are untenable.
The objection against the admission of any evidence must be made at the proper time, as soon as the grounds
therefor become reasonably apparent, and if not so made, it will be understood to have been waived. In the case of
testimonial evidence, the objection must be made when the objectionable question is asked or after the answer is
given if the objectionable features become apparent only by reason of such answer. 30 In this case, the Heirs of
Policronio failed to timely object to the testimony of Amparo Castillo and they are, thus, deemed to have waived the
benefit of the parol evidence rule.
Granting that the Heirs of Policronio timely objected to the testimony of Amparo Castillo, their argument would still fail.
Section 9 of Rule 130 of the Rules of Court provides:
Section 9. Evidence of written agreements. When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can be, between the parties and their successors in
interest, no evidence of such terms other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add to the terms of written agreement if he puts in issue
in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of
the written agreement.
The term "agreement" includes wills.
[Emphasis ours]
Paragraphs (b) and (c) are applicable in the case at bench.
The failure of the Deed of Sale to express the true intent and agreement of the parties was clearly put in issue in the
Answer31 of the Heirs of Alfonso to the Complaint. It was alleged that the Deed of Sale was only made to lessen the
payment of estate and inheritance taxes and not meant to transfer ownership. The exception in paragraph (b) is
allowed to enable the court to ascertain the true intent of the parties, and once the intent is clear, it shall prevail over
what the document appears to be on its face. 32 As the true intent of the parties was duly proven in the present case, it
now prevails over what appears on the Deed of Sale.
The validity of the Deed of Sale was also put in issue in the Answer, and was precisely one of the issues submitted to
the RTC for resolution.33 The operation of the parol evidence rule requires the existence of a valid written agreement. It
is, thus, not applicable in a proceeding where the validity of such agreement is the fact in dispute, such as when a
contract may be void for lack of consideration. 34 Considering that the Deed of Sale has been shown to be void for being
absolutely simulated and for lack of consideration, the Heirs of Alfonso are not precluded from presenting evidence to
modify, explain or add to the terms of the written agreement.
The Heirs of Policronio must be in a state of confusion in arguing that the Heirs of Alfonso may not question the Deed
of Sale for not being parties or successors-in-interest therein on the basis that the parol evidence rule may not be
properly invoked in a proceeding or litigation where at least one of the parties to the suit is not a party or a privy of a
party to the written instrument in question and does not base a claim on the instrument or assert a right originating in
the instrument or the relation established thereby. If their argument was to be accepted, then the Heirs of Policronio
would themselves be precluded from invoking the parol evidence rule to exclude the evidence of the Heirs of Alfonso.
Indeed, the applicability of the parol evidence rule requires that the case be between parties and their successors-ininterest.35 In this case, both the Heirs of Alfonso and the Heirs of Policronio are successors-in-interest of the parties to
the Deed of Sale as they claim rights under Alfonso and Policronio, respectively. The parol evidence rule excluding
evidence aliunde, however, still cannot apply because the present case falls under two exceptions to the rule, as
discussed above.
With respect to hearsay, the Heirs of Policronio contended that the rule on hearsay was violated when the testimony of
Amparo Castillo was given weight in proving that the subject lands were only sold for taxation purposes as she was a
person alien to the contract. Even granting that they did not object to her testimony during trial, they argued that it
should not have been appreciated by the CA because it had no probative value whatsoever. 36
The Court disagrees.
It has indeed been held that hearsay evidence whether objected to or not cannot be given credence for having no
probative value.37 This principle, however, has been relaxed in cases where, in addition to the failure to object to the

admissibility of the subject evidence, there were other pieces of evidence presented or there were other circumstances
prevailing to support the fact in issue. In Top-Weld Manufacturing, Inc. v. ECED S.A., 38 this Court held:
Hearsay evidence alone may be insufficient to establish a fact in an injunction suit (Parker v. Furlong, 62 P. 490) but,
when no objection is made thereto, it is, like any other evidence, to be considered and given the importance it
deserves. (Smith v. Delaware & Atlantic Telegraph & Telephone Co., 51 A 464). Although we should warn of the
undesirability of issuing judgments solely on the basis of the affidavits submitted, where as here, said affidavits are
overwhelming, uncontroverted by competent evidence and not inherently improbable, we are constrained to uphold
the allegations of the respondents regarding the multifarious violations of the contracts made by the petitioner.
In the case at bench, there were other prevailing circumstances which corroborate the testimony of Amparo
Castillo. First, the other Deeds of Sale which were executed in favor of Liberato, Prudencia, and Valeriana on the same
day as that of Policronios were all presented in evidence. Second, all the properties subject therein were included in
the Deed of Extra-Judicial Partition of the estate of Alfonso. Third, Policronio, during his lifetime, never exercised acts of
ownership over the subject properties (as he never demanded or took possession of them, never demanded or
received the produce thereof, and never paid real estate taxes thereon). Fourth, Policronio never informed his children
of the sale.
As the Heirs of Policronio failed to controvert the evidence presented, and to timely object to the testimony of Amparo
Castillo, both the RTC and the CA correctly accorded probative weight to her testimony.
Prior Action Unnecessary
The Heirs of Policronio averred that the Heirs of Alfonso should have filed an action to declare the sale void prior to
executing the Deed of Extra-Judicial Partition. They argued that the sale should enjoy the presumption of regularity,
and until overturned by a court, the Heirs of Alfonso had no authority to include the land in the inventory of properties
of Alfonsos estate. By doing so, they arrogated upon themselves the power of invalidating the Deed of Sale which is
exclusively vested in a court of law which, in turn, can rule only upon the observance of due process. Thus, they
contended that prescription, laches, or estoppel have set in to militate against assailing the validity of the sale.
The Heirs of Policronio are mistaken.
A simulated contract of sale is without any cause or consideration, and is, therefore, null and void; in such case, no
independent action to rescind or annul the contract is necessary, and it may be treated as non-existent for all
purposes.39 A void or inexistent contract is one which has no force and effect from the beginning, as if it has never
been entered into, and which cannot be validated either by time or ratification. A void contract produces no effect
whatsoever either against or in favor of anyone; it does not create, modify or extinguish the juridical relation to which
it refers.40 Therefore, it was not necessary for the Heirs of Alfonso to first file an action to declare the nullity of the
Deed of Sale prior to executing the Deed of Extra-Judicial Partition.
Personality to Question Sale
The Heirs of Policronio contended that the Heirs of Alfonso are not parties, heirs, or successors-in-interest under the
contemplation of law to clothe them with the personality to question the Deed of Sale. They argued that under Article
1311 of the Civil Code, contracts take effect only between the parties, their assigns and heirs. Thus, the genuine
character of a contract which personally binds the parties cannot be put in issue by a person who is not a party
thereto. They posited that the Heirs of Alfonso were not parties to the contract; neither did they appear to be
beneficiaries by way of assignment or inheritance. Unlike themselves who are direct heirs of Policronio, the Heirs of
Alfonso are not Alfonsos direct heirs. For the Heirs of Alfonso to qualify as parties, under Article 1311 of the Civil Code,
they must first prove that they are either heirs or assignees. Being neither, they have no legal standing to question the
Deed of Sale.
They further argued that the sale cannot be assailed for being barred under Article 1421 of the Civil Code which
provides that the defense of illegality of a contract is not available to third persons whose interests are not directly
affected.
Again, the Court disagrees.
Article 1311 and Article 1421 of the Civil Code provide:
Art. 1311. Contracts take effect only between the parties, their assigns and heirs, x x x
Art. 1421. The defense of illegality of contracts is not available to third persons whose interests are not directly
affected.
The right to set up the nullity of a void or non-existent contract is not limited to the parties, as in the case of annullable
or voidable contracts; it is extended to third persons who are directly affected by the contract. Thus, where a contract
is absolutely simulated, even third persons who may be prejudiced thereby may set up its inexistence. 41 The Heirs of
Alfonso are the children of Alfonso, with his deceased children represented by their children (Alfonsos grandchildren).
The Heirs of Alfonso are clearly his heirs and successors-in-interest and, as such, their interests are directly affected,
thereby giving them the right to question the legality of the Deed of Sale.
Inapplicability of Article 842
The Heirs of Policronio further argued that even assuming that the Heirs of Alfonso have an interest in the Deed of
Sale, they would still be precluded from questioning its validity. They posited that the Heirs of Alfonso must first prove

that the sale of Alfonsos properties to Policronio substantially diminished their successional rights or that their
legitimes would be unduly prejudiced, considering that under Article 842 of the Civil Code, one who has compulsory
heirs may dispose of his estate provided that he does not contravene the provisions of the Civil Code with regard to
the legitime of said heirs. Having failed to do so, they argued that the Heirs of Alfonso should be precluded from
questioning the validity of the Deed of Sale.
Still, the Court disagrees.
Article 842 of the Civil Code provides:
Art. 842. One who has no compulsory heirs may dispose by will of all his estate or any part of it in favor of any person
having capacity to succeed.
One who has compulsory heirs may dispose of his estate provided he does not contravene the provisions of this Code
with regard to the legitime of said heirs.
This article refers to the principle of freedom of disposition by will. What is involved in the case at bench is not a
disposition by will but by Deed of Sale. Hence, the Heirs of Alfonso need not first prove that the disposition
substantially diminished their successional rights or unduly prejudiced their legitimes.
Inapplicability of Article 1412
The Heirs of Policronio contended that even assuming that the contract was simulated, the Heirs of Alfonso would still
be barred from recovering the properties by reason of Article 1412 of the Civil Code, which provides that if the act in
which the unlawful or forbidden cause does not constitute a criminal offense, and the fault is both on the contracting
parties, neither may recover what he has given by virtue of the contract or demand the performance of the others
undertaking. As the Heirs of Alfonso alleged that the purpose of the sale was to avoid the payment of inheritance
taxes, they cannot take from the Heirs of Policronio what had been given to their father.
On this point, the Court again disagrees.
Article 1412 of the Civil Code is as follows:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the
following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the
contract, or demand the performance of the others undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract,
or ask for the fulfillment of what has been promised him. The other, who is not at fault, may demand the return of
what he has given without any obligation to comply with his promise.
Article 1412 is not applicable to fictitious or simulated contracts, because they refer to contracts with an illegal cause
or subject-matter.42 This article presupposes the existence of a cause, it cannot refer to fictitious or simulated contracts
which are in reality non-existent. 43 As it has been determined that the Deed of Sale is a simulated contract, the
provision cannot apply to it.
Granting that the Deed of Sale was not simulated, the provision would still not apply. Since the subject properties were
included as properties of Alfonso in the Deed of Extra-Judicial Partition, they are covered by corresponding inheritance
and estate taxes. Therefore, tax evasion, if at all present, would not arise, and Article 1412 would again be
inapplicable.
Prescription
From the position that the Deed of Sale is valid and not void, the Heirs of Policronio argued that any question regarding
its validity should have been initiated through judicial process within 10 years from its notarization in accordance with
Article 1144 of the Civil Code. Since 21 years had already elapsed when the Heirs of Alfonso assailed the validity of the
Deed of Sale in 1996, prescription had set in. Furthermore, since the Heirs of Alfonso did not seek to nullify the tax
declarations of Policronio, they had impliedly acquiesced and given due recognition to the Heirs of Policronio as the
rightful inheritors and should, thus, be barred from laying claim on the land.
The Heirs of Policronio are mistaken.
Article 1410 of the Civil Code provides:
Art. 1410. The action for the declaration of the inexistence of a contract does not prescribe.
This is one of the most fundamental characteristics of void or inexistent contracts. 44
As the Deed of Sale is a void contract, the action for the declaration of its nullity, even if filed 21 years after its
execution, cannot be barred by prescription for it is imprescriptible. Furthermore, the right to set up the defense of
inexistence or absolute nullity cannot be waived or renounced. 45 Therefore, the Heirs of Alfonso cannot be precluded
from setting up the defense of its inexistence.
Validity of the Deed of Extra-Judicial Partition
The Court now resolves the issue of the validity of the Deed of Extra-Judicial Partition.

Unenforceability
The Heirs of Alfonso argued that the CA was mistaken in annulling the Deed of Extra-Judicial Partition due to the
incapacity of Conrado to give the consent of his co-heirs for lack of a special power of attorney. They contended that
what was involved was not the capacity to give consent in behalf of the co-heirs but the authority to represent them.
They argue that the Deed of Extra-Judicial Partition is not a voidable or an annullable contract under Article 1390 of the
Civil Code, but rather, it is an unenforceable or, more specifically, an unauthorized contract under Articles 1403 (1) and
1317 of the Civil Code. As such, the Deed of Extra-Judicial Partition should not be annulled but only be rendered
unenforceable against the siblings of Conrado.
They further argued that under Article 1317 of the Civil Code, when the persons represented without authority have
ratified the unauthorized acts, the contract becomes enforceable and binding. They contended that the Heirs of
Policronio ratified the Deed of Extra-Judicial Partition when Conrado took possession of one of the parcels of land
adjudicated to him and his siblings, and when another parcel was used as collateral for a loan entered into by some of
the Heirs of Policronio. The Deed of Extra-Judicial Partition having been ratified and its benefits accepted, the same
thus became enforceable and binding upon them.
The Heirs of Alfonso averred that granting arguendo that Conrado was not authorized to represent his co-heirs and
there was no ratification, the CA should not have remanded the case to the RTC for partition of Alfonsos estate. They
argued that the CA should not have applied the Civil Code general provision on contracts, but the special provisions
dealing with succession and partition. They contended that contrary to the ruling of the CA, the extra-judicial parition
was not an act of strict dominion, as it has been ruled that partition of inherited land is not a conveyance but a
confirmation or ratification of title or right to the land. 46 Therefore, the law requiring a special power of attorney should
not be applied to partitions.
On the other hand, the Heirs of Policronio insisted that the CA pronouncement on the invalidity of the Deed of ExtraJudicial Partition should not be disturbed because the subject properties should not have been included in the estate of
Alfonso, and because Conrado lacked the written authority to represent his siblings. They argued with the CA in ruling
that a special power of attorney was required before Conrado could sign in behalf of his co-heirs.
The Heirs of Policronio denied that they ratified the Deed of Extra-Judicial Partition. They claimed that there is nothing
on record that establishes that they ratified the partition. Far from doing so, they precisely questioned its execution by
filing a complaint. They further argued that under Article 1409 (3) of the Civil Code, ratification cannot be invoked to
validate the illegal act of including in the partition those properties which do not belong to the estate as it provides
another mode of acquiring ownership not sanctioned by law.
Furthermore, the Heirs of Policronio contended that the defenses of unenforceability, ratification, and preterition are
being raised for the first time on appeal by the Heirs of Alfonso. For having failed to raise them during the trial, the
Heirs of Alfonso should be deemed to have waived their right to do so.
The Court agrees in part with the Heirs of Alfonso.
To begin, although the defenses of unenforceability, ratification and preterition were raised by the Heirs of Alfonso for
the first time on appeal, they are concomitant matters which may be taken up. As long as the questioned items bear
relevance and close relation to those specifically raised, the interest of justice would dictate that they, too, must be
considered and resolved. The rule that only theories raised in the initial proceedings may be taken up by a party
thereto on appeal should refer to independent, not concomitant matters, to support or oppose the cause of action. 47
In the RTC, the Heirs of Policronio alleged that Conrados consent was vitiated by mistake and undue influence, and
that he signed the Deed of Extra-Judicial Partition without the authority or consent of his co-heirs.
The RTC found that Conrados credibility had faltered, and his claims were rejected by the RTC as gratuitous assertions.
On the basis of such, the RTC ruled that Conrado duly represented his siblings in the Deed of Extra-Judicial Partition.
On the other hand, the CA annulled the Deed of Extra-Judicial Partition under Article 1390 (1) of the Civil Code, holding
that a special power of attorney was lacking as required under Article 1878 (5) and (15) of the Civil Code. These
articles are as follows:
Art. 1878. Special powers of attorney are necessary in the following cases:
xxx
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or
for a valuable consideration;
xxx
(15) Any other act of strict dominion.
Art. 1390. The following contracts are voidable or annullable, even though there may have been no damage to the
contracting parties:
(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in court. They are susceptible of ratification.

This Court finds that Article 1878 (5) and (15) is inapplicable to the case at bench. It has been held in several
cases48 that partition among heirs is not legally deemed a conveyance of real property resulting in change of
ownership. It is not a transfer of property from one to the other, but rather, it is a confirmation or ratification of title or
right of property that an heir is renouncing in favor of another heir who accepts and receives the inheritance. It is
merely a designation and segregation of that part which belongs to each heir. The Deed of Extra-Judicial Partition
cannot, therefore, be considered as an act of strict dominion. Hence, a special power of attorney is not necessary.
In fact, as between the parties, even an oral partition by the heirs is valid if no creditors are affected. The requirement
of a written memorandum under the statute of frauds does not apply to partitions effected by the heirs where no
creditors are involved considering that such transaction is not a conveyance of property resulting in change of
ownership but merely a designation and segregation of that part which belongs to each heir. 49
Neither is Article 1390 (1) applicable. Article 1390 (1) contemplates the incapacity of a party to give consent to a
contract. What is involved in the case at bench though is not Conrados incapacity to give consent to the contract, but
rather his lack of authority to do so. Instead, Articles 1403 (1), 1404, and 1317 of the Civil Code find application to the
circumstances prevailing in this case. They are as follows:
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has been given no authority or legal representation,
or who has acted beyond his powers;
Art. 1404. Unauthorized contracts are governed by Article 1317 and the principles of agency in Title X of this Book.
Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law
a right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted
beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it
has been executed, before it is revoked by the other contracting party.
Such was similarly held in the case of Badillo v. Ferrer:
The Deed of Extrajudicial Partition and Sale is not a voidable or an annullable contract under Article 1390 of the New
Civil Code. Article 1390 renders a contract voidable if one of the parties is incapable of giving consent to the contract
or if the contracting partys consent is vitiated by mistake, violence, intimidation, undue influence or fraud. x x x
The deed of extrajudicial parition and sale is an unenforceable or, more specifically, an unauthorized contract under
Articles 1403(1) and 1317 of the New Civil Code.50
Therefore, Conrados failure to obtain authority from his co-heirs to sign the Deed of Extra-Judicial Partition in their
behalf did not result in his incapacity to give consent so as to render the contract voidable, but rather, it rendered the
contract valid but unenforceable against Conrados co-heirs for having been entered into without their authority.
A closer review of the evidence on record, however, will show that the Deed of Extra-Judicial Partition is not
unenforceable but, in fact, valid, binding and enforceable against all the Heirs of Policronio for having given their
consent to the contract. Their consent to the Deed of Extra-Judicial Partition has been proven by a preponderance of
evidence.
Regarding his alleged vitiated consent due to mistake and undue influence to the Deed of Extra-Judicial Partition,
Conrado testified, to wit:
Q: Mr. Ureta you remember having signed a document entitled deed of extra judicial partition consisting of 11 pages
and which have previously [been] marked as Exhibit I for the plaintiffs?
A: Yes sir.
Q: Can you recall where did you sign this document?
A: The way I remember I signed that in our house.
Q: And who requested or required you to sign this document?
A: My aunties.
Q: Who in particular if you can recall?
A: Nay Pruding Panadero.
Q: You mean that this document that you signed was brought to your house by your Auntie Pruding Pa[r]adero [who]
requested you to sign that document?
A: When she first brought that document I did not sign that said document because I [did] no[t] know the contents of
that document.
Q: How many times did she bring this document to you [until] you finally signed the document?
A: Perhaps 3 times.
Q: Can you tell the court why you finally signed it?

A: Because the way she explained it to me that the land of my grandfather will be partitioned.
Q: When you signed this document were your brothers and sisters who are your co-plaintiffs in this case aware of your
act to sign this document?
A: They do not know.
xxx
Q: After you have signed this document did you inform your brothers and sisters that you have signed this document?
No I did not.

51

xxx
Q: Now you read the document when it was allegedly brought to your house by your aunt Pruding Pa[r]adero?
A: I did not read it because as I told her I still want to ask the advise of my brothers and sisters.
Q: So do I get from you that you have never read the document itself or any part thereof?
A: I have read the heading.
xxx
Q: And why is it that you did not read all the pages of this document because I understand that you know also how to
read in English?
A: Because the way Nay Pruding explained to me is that the property of my grandfather will be partitioned that is why I
am so happy.
xxx
Q: You mean to say that after you signed this deed of extra judicial partition up to the present you never informed
them?
A: Perhaps they know already that I have signed and they read already the document and they have read the
document.
Q: My question is different, did you inform them?
A: The document sir? I did not tell them.
Q: Even until now?
A: Until now I did not inform them.52
This Court finds no cogent reason to reverse the finding of the RTC that Conrados explanations were mere gratuitous
assertions not entitled to any probative weight. The RTC found Conrados credibility to have faltered when he testified
that perhaps his siblings were already aware of the Deed of Extra-Judicial Partition. The RTC was in the best position to
judge the credibility of the witness testimony. The CA also recognized that Conrados consent was not vitiated by
mistake and undue influence as it required a special power of attorney in order to bind his co-heirs and, as such, the
CA thereby recognized that his signature was binding to him but not with respect to his co-heirs. Findings of fact of the
trial court, particularly when affirmed by the CA, are binding to this Court. 53
Furthermore, this Court notes other peculiarities in Conrados testimony. Despite claims of undue influence, there is no
indication that Conrado was forced to sign by his aunt, Prudencia Paradero. In fact, he testified that he was happy to
sign because his grandfathers estate would be partitioned. Conrado, thus, clearly understood the document he
signed. It is also worth noting that despite the document being brought to him on three separate occasions and
indicating his intention to inform his siblings about it, Conrado failed to do so, and still neglected to inform them even
after he had signed the partition. All these circumstances negate his claim of vitiated consent. Having duly signed the
Deed of Extra-Judicial Partition, Conrado is bound to it. Thus, it is enforceable against him.
Although Conrados co-heirs claimed that they did not authorize Conrado to sign the Deed of Extra-Judicial Partition in
their behalf, several circumstances militate against their contention.
First, the Deed of Extra-Judicial Partition was executed on April 19, 1989, and the Heirs of Policronio claim that they
only came to know of its existence on July 30, 1995 through an issue of the Aklan Reporter. It is difficult to believe that
Conrado did not inform his siblings about the Deed of Extra-Judicial Partition or at least broach its subject with them for
more than five years from the time he signed it, especially after indicating in his testimony that he had intended to do
so.
Second, Conrado retained possession of one of the parcels of land adjudicated to him and his co-heirs in the Deed of
Extra-Judicial Partition.
Third, after the execution of the partition on April 19, 1989 and more than a year before they claimed to have
discovered the existence of the Deed of Extra-Judicial Partition on July 30, 1995, some of the Heirs of Policronio,
namely, Rita Solano, Macario Ureta, Lilia Tayco, and Venancio Ureta executed on June 1, 1994, a Special Power of
Attorney54 in favor of their sister Gloria Gonzales, authorizing her to obtain a loan from a bank and to mortgage one of
the parcels of land adjudicated to them in the Deed of Extra-Judicial Partition to secure payment of the loan. They were

able to obtain the loan using the land as collateral, over which a Real Estate Mortgage 55 was constituted. Both the
Special Power of Attorney and the Real Estate Mortgage were presented in evidence in the RTC, and were not
controverted or denied by the Heirs of Policronio.
Fourth, in the letter dated August 15, 1995, sent by the counsel of the Heirs of Policronio to the Heirs of Alfonso
requesting for amicable settlement, there was no mention that Conrados consent to the Deed of Extra-Judicial
Partition was vitiated by mistake and undue influence or that they had never authorized Conrado to represent them or
sign the document on their behalf. It is questionable for such a pertinent detail to have been omitted. The body of said
letter is reproduced hereunder as follows:
Greetings:
Your nephews and nieces, children of your deceased brother Policronio Ureta, has referred to me for appropriate legal
action the property they inherited from their father consisting of six (6) parcels of land which is covered by a Deed of
Absolute Sale dated October 25, 1969. These properties ha[ve] already been transferred to the name of their deceased
father immediately after the sale, machine copy of the said Deed of Sale is hereto attached for your ready reference.
Lately, however, there was published an Extra-judicial Partition of the estate of Alfonso Ureta, which to the surprise of
my clients included the properties already sold to their father before the death of said Alfonso Ureta. This inclusion of
their property is erroneous and illegal because these properties were covered by the Deed of Absolute Sale in favor of
their father Policronio Ureta no longer form part of the estate of Alfonso Ureta. Since Policronio Ureta has [sic] died in
1974 yet, these properties have passed by hereditary succession to his children who are now the true and lawful
owners of the said properties.
My clients are still entitled to a share in the estate of Alfonso Ureta who is also their grandfather as they have stepped
into the shoes of their deceased father Policronio Ureta. But this estate of Alfonso Ureta should already exclude the six
(6) parcels of land covered by the Deed of Absolute Sale in favor of Policronio Ureta.
My clients cannot understand why the properties of their late father [should] be included in the estate of their
grandfather and be divided among his brothers and sisters when said properties should only be divided among
themselves as children of Policronio Ureta.
Since this matter involves very close members of the same family, I have counseled my clients that an earnest effort
towards a compromise or amicable settlement be first explored before resort to judicial remedy is pursued. And a
compromise or amicable settlement can only be reached if all the parties meet and discuss the problem with an open
mind. To this end, I am suggesting a meeting of the parties on September 16, 1995 at 2:00 P.M. at B Place Restaurant
at C. Laserna St., Kalibo, Aklan. It would be best if the parties can come or be represented by their duly designated
attorney-in-fact together with their lawyers if they so desire so that the problem can be discussed unemotionally and
intelligently.
I would, however, interpret the failure to come to the said meeting as an indication that the parties are not willing to or
interested in amicable settlement of this matter and as a go signal for me to resort to legal and/or judicial remedies to
protest the rights of my clients.
Thank you very much.56
Based on the foregoing, this Court concludes that the allegation of Conrados vitiated consent and lack of authority to
sign in behalf of his co-heirs was a mere afterthought on the part of the Heirs of Policronio. It appears that the Heirs of
Policronio were not only aware of the existence of the Deed of Extra-Judicial Partition prior to June 30, 1995 but had, in
fact, given Conrado authority to sign in their behalf. They are now estopped from questioning its legality, and the Deed
of Extra-Judicial Partition is valid, binding, and enforceable against them.
In view of the foregoing, there is no longer a need to discuss the issue of ratification.
Preterition
The Heirs of Alfonso were of the position that the absence of the Heirs of Policronio in the partition or the lack of
authority of their representative results, at the very least, in their preterition and not in the invalidity of the entire deed
of partition. Assuming there was actual preterition, it did not render the Deed of Extra-Judicial Partition voidable. Citing
Article 1104 of the Civil Code, they aver that a partition made with preterition of any of the compulsory heirs shall not
be rescinded, but the heirs shall be proportionately obliged to pay the share of the person omitted. Thus, the Deed of
Extra-Judicial Partition should not have been annulled by the CA. Instead, it should have ordered the share of the heirs
omitted to be given to them.
The Heirs of Alfonso also argued that all that remains to be adjudged is the right of the preterited heirs to represent
their father, Policronio, and be declared entitled to his share. They contend that remand to the RTC is no longer
necessary as the issue is purely legal and can be resolved by the provisions of the Civil Code for there is no dispute
that each of Alfonsos heirs received their rightful share. Conrado, who received Policronios share, should then fully
account for what he had received to his other co-heirs and be directed to deliver their share in the inheritance.
These arguments cannot be given credence.
Their posited theory on preterition is no longer viable. It has already been determined that the Heirs of Policronio gave
their consent to the Deed of Extra-Judicial Partition and they have not been excluded from it. Nonetheless, even

granting that the Heirs of Policronio were denied their lawful participation in the partition, the argument of the Heirs of
Alfonso would still fail.
Preterition under Article 854 of the Civil Code is as follows:
Art. 854. The preterition or omission of one, some, or all of the compulsory heirs in the direct line, whether living at the
time of the execution of the will or born after the death of the testator, shall annul the institution of heir; but the
devises and legacies shall be valid insofar as they are not inofficious.
If the omitted compulsory heirs should die before the testator, the institution shall be effectual, without prejudice to
the right of representation.
Preterition has been defined as the total omission of a compulsory heir from the inheritance. It consists in the silence
of the testator with regard to a compulsory heir, omitting him in the testament, either by not mentioning him at all, or
by not giving him anything in the hereditary property but without expressly disinheriting him, even if he is mentioned
in the will in the latter case. 57 Preterition is thus a concept of testamentary succession and requires a will. In the case
at bench, there is no will involved. Therefore, preterition cannot apply.
Remand Unnecessary
The Deed of Extra-Judicial Partition is in itself valid for complying with all the legal requisites, as found by the RTC, to
wit:
A persual of the Deed of Extra-judicial Partition would reveal that all the heirs and children of Alfonso Ureta were
represented therein; that nobody was left out; that all of them received as much as the others as their shares; that it
distributed all the properties of Alfonso Ureta except a portion of parcel 29 containing an area of 14,000 square
meters, more or less, which was expressly reserved; that Alfonso Ureta, at the time of his death, left no debts; that the
heirs of Policronio Ureta, Sr. were represented by Conrado B. Ureta; all the parties signed the document, was witnessed
and duly acknowledged before Notary Public Adolfo M. Iligan of Kalibo, Aklan; that the document expressly stipulated
that the heirs to whom some of the properties were transferred before for taxation purposes or their children,
expressly recognize and acknowledge as a fact that the properties were transferred only for the purpose of effective
administration and development convenience in the payment of taxes and, therefore, all instruments conveying or
effecting the transfer of said properties are null and void from the beginning (Exhs. 1-4, 7-d). 58
Considering that the Deed of Sale has been found void and the Deed of Extra-Judicial Partition valid, with the consent
of all the Heirs of Policronio duly given, there is no need to remand the case to the court of origin for partition.1vvph!1
WHEREFORE, the petition in G.R. No. 165748 is DENIED. The petition in G.R. No. 165930 is GRANTED. The assailed
April 20, 2004 Decision and October 14, 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 71399, are
hereby MODIFIED in this wise:
(1) The Deed of Extra-Judicial Partition, dated April 19, 1989, is VALID, and
(2) The order to remand the case to the court of origin is hereby DELETED.
SO ORDERED.

G.R. No. 171717

December 15, 2010

RAMON B. BRITO, SR., Petitioner,

vs.
SEVERINO D. DIANALA, VIOLETA DIANALA SALES, JOVITA DIANALA DEQUINTO, ROSITA DIANALA, CONCHITA
DIANALA and JOEL DEQUINTO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to annul and set aside the Decision 1 dated January 12,
2005 and Resolution2 dated February 13, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 70009. The assailed
Decision set aside the Joint Orders3 dated June 29, 2000 of the Regional Trial Court (RTC) of Negros Occidental, Branch
60, Cadiz City, while the questioned Resolution denied petitioner's Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
Subject of the present petition is a parcel of land located at Barrio Sicaba, Cadiz City, Negros Occidental. The said tract
of land is a portion of Lot No. 1536-B, formerly known as Lot No. 591-B, originally owned by a certain Esteban Dichimo
and his wife, Eufemia Dianala, both of whom are already deceased.
On September 27, 1976, Margarita Dichimo, assisted by her husband, Ramon Brito, Sr., together with Bienvenido
Dichimo, Francisco Dichimo, Edito Dichimo, Maria Dichimo, Herminia Dichimo, assisted by her husband, Angelino
Mission, Leonora Dechimo, assisted by her husband, Igmedio Mission, Felicito, and Merlinda Dechimo, assisted by her
husband, Fausto Dolleno, filed a Complaint for Recovery of Possession and Damages with the then Court of First
Instance (now Regional Trial Court) of Negros Occidental, against a certain Jose Maria Golez. The case was docketed as
Civil Case No. 12887.
Petitioner's wife, Margarita, together with Bienvenido and Francisco, alleged that they are the heirs of a certain Vicente
Dichimo, while Edito, Maria, Herminia, Leonora, Felicito and Merlinda claimed to be the heirs of one Eusebio Dichimo;
that Vicente and Eusebio are the only heirs of Esteban and Eufemia; that Esteban and Eufemia died intestate and upon
their death Vicente and Eusebio, as compulsory heirs, inherited Lot No. 1536-B; that, in turn, Vicente and Eusebio, and
their respective spouses, also died intestate leaving their pro indiviso shares of Lot No. 1536-B as part of the
inheritance of the complainants in Civil Case No. 12887.
On July 29, 1983, herein respondents filed an Answer-in-Intervention claiming that prior to his marriage to Eufemia,
Esteban was married to a certain Francisca Dumalagan; that Esteban and Francisca bore five children, all of whom are
already deceased; that herein respondents are the heirs of Esteban and Francisca's children; that they are in open,
actual, public and uninterrupted possession of a portion of Lot No. 1536-B for more than 30 years; that their legal
interests over the subject lot prevails over those of petitioner and his co-heirs; that, in fact, petitioner and his co-heirs
have already disposed of their shares in the said property a long time ago.
On November 26, 1986, the trial court issued an Order dismissing without prejudice respondents' Answer-inIntervention for their failure to secure the services of a counsel despite ample opportunity given them.
Civil Case No. 12887 then went to trial.
Subsequently, the parties in Civil Case No. 12887 agreed to enter into a Compromise Agreement wherein Lot No. 1536B was divided between Jose Maria Golez, on one hand, and the heirs of Vicente, namely: Margarita, Bienvenido, and
Francisco, on the other. It was stated in the said agreement that the heirs of Eusebio had sold their share in the said lot
to the mother of Golez. Thus, on September 9, 1998, the Regional Trial Court (RTC) of Bacolod City, Branch 45 rendered
a decision approving the said Compromise Agreement.
Thereafter, TCT No. T-12561 was issued by the Register of Deeds of Cadiz City in the name of Margarita, Bienvenido
and Francisco.
On January 18, 1999, herein petitioner and his co-heirs filed another Complaint for Recovery of Possession and
Damages, this time against herein respondents. The case, filed with the RTC of Cadiz City, Branch 60, was docketed as
Civil Case No. 548-C. Herein respondents, on the other hand, filed with the same court, on August 18, 1999, a
Complaint for Reconveyance and Damages against petitioner and his co-heirs. The case was docketed as Civil Case
No. 588-C.
The parties filed their respective Motions to Dismiss. Thereafter, the cases were consolidated.
On June 29, 2000, the RTC issued Joint Orders, disposing as follows:
WHEREFORE, in view of the foregoing, this Court hereby orders the following:
1. The Motion to Dismiss Civil Case No. 548-C is hereby GRANTED and Civil Case No. 548[-C] is hereby ordered
DISMISSED for violation of the rule on forum shopping;
2. The Motion to Dismiss Civil Case No. 588-C is likewise hereby GRANTED and the Complaint dated August 13,
1999 is hereby DISMISSED for want of jurisdiction.
3. All counterclaims in both cases, Civil Case No. 548-C and 588-C are likewise ordered DISMISSED.

SO ORDERED.4
The parties filed their respective motions for reconsideration, but both were denied by the RTC in an Order dated
October 5, 2000.
Herein respondents then appealed the case to the CA praying that the portion of the RTC Joint Orders dismissing Civil
Case No. 588-C be declared null and void and that the case be decided on the merits.
On January 12, 2005, the CA rendered judgment disposing as follows:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING the appeal filed in
this case and SETTING ASIDE, as we hereby set aside, the Joint Order[s] dated June 29, 2000 of the RTC of Cadiz City,
Branch 60, dismissing Civil Case No. 588-C. Further, let the entire records of this case be remanded to the court a quo
for the trial and hearing on the merits of Civil Case No. 588-C.
SO ORDERED.5
Petitioner filed a Motion for Reconsideration, but the CA denied it in a Resolution dated February 13, 2006.
Hence, the instant petition with the following assigned errors:
I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE LOWER COURT HAS THE
JURISDICTION TO HEAR THE RECONVEYANCE CASE OF THE HEREIN PLAINTIFFS-APPELLANTS BEFORE THE
REGIONAL TRIAL COURT OF NEGROS OCCIDENTAL, BRANCH 60, CADIZ CITY.
II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE AMENDMENT OF THE DECISION IN CIVIL
CASE NO. 12887 IS NOT TANTAMOUNT TO ANNULMENT OF THE SAID DECISION. THE HONORABLE COURT IS
WITHOUT JURISDICTION TO TAKE COGNIZANCE OF THIS CASE. 6
In his first assigned error, petitioner claims that the CA erred in holding that respondents are not parties in Civil Case
No. 12887 contending that, since their Answer-in-Intervention was admitted, respondents should be considered parties
in the said case. Petitioner also avers that, being parties in Civil Case No. 12887, respondents are bound by the
judgment rendered therein.
The Court is not persuaded.
It is true that the filing of motions seeking affirmative relief, such as, to admit answer, for additional time to file
answer, for reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are
considered voluntary submission to the jurisdiction of the court. 7 In the present case, when respondents filed their
Answer-in-Intervention they submitted themselves to the jurisdiction of the court and the court, in turn, acquired
jurisdiction over their persons. Respondents, thus, became parties to the action. Subsequently, however, respondents'
Answer-in-Intervention was dismissed without prejudice. From then on, they ceased to be parties in the case so much
so that they did not have the opportunity to present evidence to support their claims, much less participate in the
compromise agreement entered into by and between herein petitioner and his co-heirs on one hand and the defendant
in Civil Case No. 12887 on the other. Stated differently, when their Answer-in-Intervention was dismissed, herein
respondents lost their standing in court and, consequently, became strangers to Civil Case No. 12887. It is basic that
no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by
judgment rendered by the court. 8 Thus, being strangers to Civil Case No. 12887, respondents are not bound by the
judgment rendered therein.
Neither does the Court concur with petitioner's argument that respondents are barred by prescription for having filed
their complaint for reconveyance only after more than eight years from the discovery of the fraud allegedly committed
by petitioner and his co-heirs, arguing that under the law an action for reconveyance of real property resulting from
fraud prescribes in four years, which period is reckoned from the discovery of the fraud.
In their complaint for reconveyance and damages, respondents alleged that petitioner and his co-heirs acquired the
subject property by means of fraud.
Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes, by operation of law, a
trustee of an implied trust for the benefit of the real owner of the property. An action for reconveyance based on an
implied trust prescribes in ten years, the reckoning point of which is the date of registration of the deed or the date of
issuance of the certificate of title over the property. 9 Thus, in Caro v. Court of Appeals,10 this Court held as follows:
x x x The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September 30, 1987,154 SCRA 396,
illuminated what used to be a gray area on the prescriptive period for an action to reconvey the title to real property
and, corollarily, its point of reference:
x x x It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil Code, the old
Code of Civil Procedure (Act No. 190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real property can only be brought
within the following periods after the right of action accrues:
xxx

xxx

xxx

3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in such case shall not be
deemed to have accrued until the discovery of the fraud;

xxx

xxx

xxx

In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law
(Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the
true owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx

xxx

x x x (Italics supplied.)

An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not
otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it
is now well settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years
from the issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin vs. Medalla, which
states that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by
the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948, hence
Section 43(3) of Act No. 190, was applied, the new Civil Code not coming into effect until August 30, 1950 as
mentioned earlier. It must be stressed, at this juncture, that article 1144 and article 1456, are new provisions. They
have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as
legal basis of the four-year prescriptive period for an action for reconveyance of title of real property acquired under
false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the
parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on
the original petition or application, x x x.
This provision should be read in conjunction with Article 1456 of the Civil Code, x x x
xxxx
The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the true
owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code with
Article 1144(2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently registered real
property is ten (10) years reckoned from the date of the issuance of the certificate of title. x x x 11
In the instant case, TCT No. T-12561 was obtained by petitioner and his co-heirs on September 28, 1990, while
respondents filed their complaint for reconveyance on August 18, 1999. Hence, it is clear that the ten-year prescriptive
period has not yet expired.
The Court, likewise, does not agree with petitioner's contention that respondents are guilty of laches and are already
estopped from questioning the decision of the RTC in Civil Case No. 12887 on the ground that they slept on their rights
and allowed the said decision to become final.
In the first place, respondents cannot be faulted for not appealing the decision of the RTC in Civil Case No. 12887
simply because they are no longer parties to the case and, as such, have no personality to assail the said judgment.
Secondly, respondents' act of filing their action for reconveyance within the ten-year prescriptive period does not
constitute an unreasonable delay in asserting their right. The Court has ruled that, unless reasons of inequitable
proportions are adduced, a delay within the prescriptive period is sanctioned by law and is not considered to be a
delay that would bar relief.12 Laches is recourse in equity. 13 Equity, however, is applied only in the absence, never in
contravention, of statutory law.14
Moreover, the prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff
is not in possession thereof. 15 Otherwise, if the plaintiff is in possession of the property, prescription does not
commence to run against him. 16 Thus, when an action for reconveyance is nonetheless filed, it would be in the nature
of a suit for quieting of title, an action that is imprescriptible. 17 The reason for this is that one who is in actual
possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is
attacked before taking steps to vindicate his right, the rationale for the rule being, that his undisturbed possession
provides him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the
adverse claim of a third party and its effect on his own title, which right can be claimed only by the one who is in
possession.18
In the present case, there is no dispute that respondents are in possession of the subject property as evidenced by the
fact that petitioner and his co-heirs filed a separate action against respondents for recovery of possession thereof.
Thus, owing to respondents' possession of the disputed property, it follows that their complaint for reconveyance is, in
fact, imprescriptible. As such, with more reason should respondents not be held guilty of laches as the said doctrine,
which is one in equity, cannot be set up to resist the enforcement of an imprescriptible legal right.

In his second assignment of error, petitioner argues that the objective of respondents in filing Civil Case No. 588-C with
the RTC of Cadiz City was to have the decision of the RTC of Bacolod City in Civil Case No. 12887 amended, which is
tantamount to having the same annulled. Petitioner avers that the RTC of Cadiz City has no jurisdiction to act on Civil
Case No. 588-C, because it cannot annul the decision of the RTC of Bacolod City which is a co-equal court.
The Court does not agree.
The action filed by respondents with the RTC of Cadiz City is for reconveyance and damages.1awphi1 They are not
seeking the amendment nor the annulment of the Decision of the RTC of Bacolod City in Civil Case No. 12887. They are
simply after the recovery of what they claim as their rightful share in the subject lot as heirs of Esteban Dichimo.
As earlier discussed, respondents' Answer-in-Intervention was dismissed by the RTC of Bacolod City without prejudice.
This leaves them with no other option but to institute a separate action for the protection and enforcement of their
rights and interests. It will be the height of inequity to declare herein petitioner and his co-heirs as exclusive owners of
the disputed lot without giving respondents the opportunity to prove their claims that they have legal interest over the
subject parcel of land, that it forms part of the estate of their deceased predecessor and that they are in open, and
uninterrupted possession of the same for more than 30 years. Much more, it would be tantamount to a violation of the
constitutional guarantee that no person shall be deprived of property without due process of law. 19
WHEREFORE, the instant petition is DENIED. The assailed Decision dated January 12, 2005 and Resolution dated
February 13, 2006 of the Court of Appeals in CA-G.R. CV No. 70009 are AFFIRMED.
SO ORDERED.

G.R. No. L-3489

September 7, 1907

VICENTE NAVALES, plaintiff-appellee,

vs.
EULOGIA RIAS, ET AL., defendants-appellants.
Pantaleon E. del Rosario for appellants.
F. Sevilla y Macam for appellee.
TORRES, J.:
On the 18th of November, 1904, Vicente Navales filed a complaint with the Court of First Instance of Cebu against
Eulogia Rias and Maximo Requiroso, claiming that the latter should be sentenced to pay him the sum of 1,200 pesos,
Philippine currency, as damages, together with costs and such other expenses as the court might consider just and
equitable. To this end he alleged that the said defendants, without due cause, ordered the pulling down and
destruction of his house erected in Daanbuangan, town of Naga, Island of Cebu, which was 6 meters in height with an
area of 8.70 square meters, built of wood with a nipa roof, and worth 1,000 pesos, which amount he expended in its
construction. He further alleged that the destruction took place in the month of April, 1904, and that, notwithstanding
his efforts, he had not obtained any reimbursement from the defendants, and that by reason of their refusal he had
been prejudiced to the extent of 200 pesos, Philippine currency.
The defendant, in answer to the foregoing complaint, denied all and each one of the allegations therein contained, and
asked that judgment be entered dismissing the complaint with costs against the plaintiff.
After considering the proofs submitted by both parties and the proceedings upon the trial, the judge, on the 17th of
January, 1906, rendered judgment declaring that the decision entered by the justice of the peace of Naga, and the
order given by virtue thereof were illegal, as well as the action of the deputy sheriff Luciano Bacayo, that the
defendant were thereby liable for the damages caused to the plaintiff, which amounted to 500 pesos, and that the
defendants were sentenced to pay the said sum to the plaintiff, with costs. The defendant upon being informed of this
decision, asked that it be set aside, and also moved for a new trial on the ground that the decision was not in
accordance with the weight of the evidence. The motion was denied, to which exception was taken, and at the request
of the interested party, the corresponding bill of exceptions was limited.
The aim of this litigation, therefore, is to obtain payment through a judicial decision, of the damages said to have been
caused by the execution of a judgment rendered by the justice of the peace, in an action for ejectment.
It is undeniable that, in order to remove from the land of Eulogia Rias, situated within the jurisdiction of the town of
Naga, the house which Vicente Navales had constructed thereon, by virtue of the decision of the justice in the action
instituted by the said Eulogia Rias against the owner of the house , Vicente Navales, the deputy sheriff who carried the
judgment into execution was obliged to destroy the said house and removed it from the land, according to the usual
procedure in the action for ejectment.
In the order of execution issued to the deputy sheriff, the directive portion of the judgment of the justice of the peace
was inserted, and it contained the essential statement that the said judgment, by reason of its not having been
appealed from, had become final, and from the contents of the same may be inferred that there had been an action for
ejectment between the above-named parties, and that there was no reason why it should not be enforced when it had
already become final and acquired the nature of res adjudicata.
Section 72 of the Code of Civil Procedure reads:
Execution. If no appeal from a judgment of a justice of the peace shall be perfected as herein provided, the
justice of the peace shall, at the request of the successful party, issue execution for the enforcement of the
judgment, and the expiration of the time limited by law for the perfection of an appeal.
Assuming that the order for execution of final judgment was issued in accordance with the law, and in view of the fact
that it has not been alleged nor proven that the sheriff when complying with the same had committed trespass or
exceeded his functions, it must be presumed according to section 334 (14) of the said Code of Procedure, that the
official duty was regularly performed. Therefore, it is not possible to impute liability to the plaintiff who obtained the
judgment and the execution thereof, when the same was not disputed nor alleged to be null or illegal, and much less
to compel the payment of damages to the person who was defeated in the action and sentenced to be ejected from
the land which he improperly occupied with his house.
No proof has been submitted that a contract had been entered into between the plaintiff and the defendants, or that
the latter had committed illegal acts or omissions or incurred in any kind of fault or negligence, from any of which an
obligation might have arisen on the part of the defendants to indemnify the plaintiff. For this reason, the claim for
indemnity, on account of acts performed by the sheriff while enforcing a judgment, can not under any consideration be
sustained. (Art. 1089, Civil Code.)
The illegality of the judgment of the justice of the peace, that of the writ of execution thereunder, or of the acts
performed by the sheriff for the enforcement of the judgment, has not been shown. Therefore, for the reasons
hereinbefore set forth, the judgment appealed from is hereby reversed, and the complaint for damages filed by
Vicente Navales against Eulogia Rias and Maximo Requiroso is dismissed without special ruling as to costs. SO
ORDERED.

G.R. No. L-46179 January 31, 1978

CANDIDA VIRATA, TOMAS VIRATA, MANOLITO VIRATA, EDERLINDA VIRATA, NAPOLEON VIRATA, ARACELY VIRATA,
ZENAIDA VIRATA, LUZMINDA VIRATA, PACITA VIRATA, and EVANGELINA VIRATA, petitioners,
vs.
VICTORIO OCHOA, MAXIMO BORILLA and THE COURT OF FIRST INSTANCE OF CAVITE, 7th JUDICIAL DISTRICT, BRANCH
V, stationed at BACOOR, CAVITE, respondents.
This is an appeal by certiorari, from the order of the Court of First Instance of Cavite, Branch V, in Civil Case No. B-134
granting the motion of the defendants to dismiss the complaint on the ground that there is another action pending
between the same parties for the same cause. 1
The record shows that on September 24, 1975 one Arsenio Virata died as a result of having been bumped while
walking along Taft Avenue, Pasay City by a passenger jeepney driven by Maximo Borilla and registered in the name Of
Victoria Ochoa; that Borilla is the employer of Ochoa; that for the death of Arsenio Virata, a action for homicide
through reckless imprudence was instituted on September 25, 1975 against Maximo Borilla in the Court of First
Instance of Rizal at Pasay City, docketed as C Case No. 3162-P of said court; that at the hearing of the said criminal
case on December 12, 1975, Atty. Julio Francisco, the private prosecutor, made a reservation to file a separate civil
action for damages against the driver on his criminal liability; that on February 19, 1976 Atty. Julio Francisco filed a
motion in said c case to withdraw the reservation to file a separate civil action; that thereafter, the private prosecutor
actively participated in the trial and presented evidence on the damages; that on June 29, 1976 the heirs of Arsenio
Virata again reserved their right to institute a separate civil action; that on July 19, 1977 the heirs of Arsenio Virata,
petitioners herein, commenced Civil No. B-134 in the Court of First Instance of Cavite at Bacoor, Branch V, for damages
based on quasi-delict against the driver Maximo Borilla and the registered owner of the jeepney, Victorio Ochoa; that
on August 13, 1976 the defendants, private respondents filed a motion to dismiss on the ground that there is another
action, Criminal Case No. 3162-P, pending between the same parties for the same cause; that on September 8, 1976
the Court of First Instance of Rizal at Pasay City a decision in Criminal Case No. 3612-P acquitting the accused Maximo
Borilla on the ground that he caused an injury by name accident; and that on January 31, 1977, the Court of First
Instance of Cavite at Bacoor granted the motion to Civil Case No. B-134 for damages. 2
The principal issue is whether or not the of the Arsenio Virata, can prosecute an action for the damages based on
quasi-delict against Maximo Borilla and Victoria Ochoa, driver and owner, respectively on the passenger jeepney that
bumped Arsenio Virata.
It is settled that in negligence cases the aggrieved parties may choose between an action under the Revised Penal
Code or of quasi-delict under Article 2176 of the Civil Code of the Philippines. What is prohibited by Article 2177 of the
Civil Code of the Philippines is to recover twice for the same negligent act.
The Supreme Court has held that:
According to the Code Commission: 'The foregoing provision (Article 2177) though 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 extra-contractual' or quasi-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 Bocobo about construction that upholds 'the spirit that given life' 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 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 language in Rakes vs. Atlantic Gulf and Pacific Co., 7 Phil. to 359, to hod as
We do hold, that Article 2176, where it refers to 'fault covers not only acts 'not punishable by law' but also criminal in
character, whether intentional and voluntary or consequently, a separate civil action lies against the in a criminal act,
whether or not he is criminally prosecuted and found guilty and 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 refereed to in Par. (c) of Section 13, 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 extinguished even by a declaration in the criminal case that the criminal act charged has not
happened or has not been committed by the accused. Brief stated, We hold, in reitration of Garcia, that culpa aquilina
includes voluntary and negligent acts which may be punishable by law. 3
The petitioners are not seeking to recover twice for the same negligent act. Before Criminal Case No. 3162-P was
decided, they manifested in said criminal case that they were filing a separate civil action for damages against the
owner and driver of the passenger jeepney based on quasi-delict. The acquittal of the driver, Maximo Borilla, of the

crime charged in Criminal Case No. 3162-P is not a bar to the prosecution of Civil Case No. B-134 for damages based
on quasi-delict The source of the obligation sought to be enforced in Civil Case No. B-134 is quasi-delict, not an act or
omission punishable by law. Under Article 1157 of the Civil Code of the Philippines, quasi-delict and an act or omission
punishable by law are two different sources of obligation.
Moreover, for the petitioners to prevail in the action for damages, Civil Case No. B-134, they have only to establish
their cause of action by preponderance of the evidence.
WHEREFORE, the order of dismissal appealed from is hereby set aside and Civil Case No. B-134 is reinstated and
remanded to the lower court for further proceedings, with costs against the private respondents. SO ORDERED.

G.R. No. 140847 September 23, 2005

HOSPICIO DE SAN JOSE DE BARILI, CEBU CITY, Petitioners,
vs.
DEPARTMENT OF AGRARIAN REFORM, Respondent.
DECISION

Tinga, J.:

At the core of this case is an obscure old special law. The issue is whether a provision in the law prohibiting the sale of
the properties donated to the charitable organization that was incorporated by the same law bars the implementation
of agrarian reform laws as regards said properties.
Petitioner Hospicio de San Jose de Barili ("Hospicio") is a charitable organization created as a body corporate in 1925
by Act No. 3239. The law was enacted in order to formally accept the offer made by Pedro Cui and Benigna Cui to
establish a home for the care and support, free of charge, of indigent invalids and incapacitated and helpless
persons.1 The Hospicio was to be maintained with the revenues of the personal and real properties to be endowed by
the Cuis and other donors.2
Section 4 of Act No. 3239 provides that "[t]he personal and real property donated to the [Hospicio] by its founders or
by other persons shall not be sold under any consideration." 3
On 10 October 1987, the Department of Agrarian Reform Regional Office (DARRO) Region VII issued an order ordaining
that two parcels of land owned by the Hospicio be placed under Operation Land Transfer in favor of twenty-two (22)
tillers thereof as beneficiaries. Presidential Decree (P.D.) No. 27, a land reform law, was cited as legal basis for the
order. The Hospicio filed a motion for the reconsideration of the order with the Department of Agrarian Reform (DAR)
Secretary, citing the aforementioned Section 4 of Act No. 3239. It argued that Act No. 3239 is a special law, which
could not have been repealed by P.D. No. 27, a general law, or by the latters general repealing clause.
The DAR Secretary rejected the motion for reconsideration in an Order dated 30 March 1997. Therein, the DAR
Secretary held that P.D. No. 27 was a special law, as it applied only to particular individuals in the State, specifically
the tenants of rice and corn lands. Moreover, P.D. No. 27, which covered all rice and corn lands, provides no
exemptions based on the manner of acquisition of the land by the landowner. 4
The Order of the DAR Secretary was assailed in a Petition for Certiorari filed with the Court of Appeals. In
aDecision5 dated 9 July 1999, the Court of Appeals Special Eleventh Division affirmed the DAR Secretarys issuance. It
sustained the position of the Office of the Solicitor General (OSG) position that Section 4 of Act No. 3239 was expressly
repealed not only by P.D. No. 27, but also by Republic Act No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988, both laws being explicit in mandating the distribution of agricultural lands to qualified
beneficiaries. The Court of Appeals further noted that the subject lands did not fall among the exemptions provided
under Section 10 of Rep. Act No. 6657. Finally, the appellate court brought into play the aims of land reform, affirming
as it did "the need to distribute and create an economic equilibrium among the inhabitants of this land, most
especially those with less privilege in life, our peasant farmer." 6
Unsatisfied with the Court of Appeals Decision, the Hospicio lodged the present Petition for Review. The Hospicio
alleges that P.D. No. 27, the CARL, and Executive Order No. 407 7 all violate Section 10, Article III of the Constitution,
which provides that "no law impairing the obligation of contracts shall be passed." More sedately, the Hospicio also
argues that Act No. 3239 was not repealed either by P.D. No. 27 or Rep. Act No. 6657 and that the forced disposition of
the Hospicios landholdings would incapacitate the discharge of its charitable functions, which equally promote social
justice and the upliftment of the lives of the less fortunate.
On the other hand, the OSG, representing respondent DAR, bluntly replies that Act No. 3239 was repealed by P.D. No.
27 and Rep. Act No. 6657, which do not exempt lands owned by eleemosynary or charitable institutions from the
coverage of those agrarian reform laws.
A brief recapitulation of the relevant laws is in order.
P.D. No. 27, "Decreeing the Emancipation of Tenants from the Bondage of the Soil, Transferring to Them Ownership of
the Land they Till, and Providing the Instrument and Mechanism Therefor," has once been touted as perhaps "a radical
solution in its pristine sense, one that goes at the root [of the problem of land tenancy]." 8 Its constitutionality was
upheld in De Chavez v. Zobel.9 The law generally "ordains the emancipation of tenants and confers on them ownership
of the lands they till."10 The following provisions of P.D. No. 27 have concretized this policy:
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the
Constitution as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to Proclamation No. 1081,
dated September 21, 1972, and General Order No. 1 dated September 22, 1972, as amended do hereby decree and
order the emancipation of all tenant farmers as of this day, October 21, 1972;
This shall apply to tenant farmers of private agricultural lands[ 11] primarily devoted to rice and corn under a system of
sharecrop or lease-tenancy, whether classified as landed estate or not;
The tenant farmer, whether in land classified as landed estate or not, shall be deemed owner of a portion constituting
a family-size farm of five (5) hectares if not irrigated and three (3) hectares if irrigated;
In all cases, the landowner may retain an area of not more than seven (7) hectares if such landowner is cultivating
such area or will now cultivate it;

The CARL was not yet in effect when the DARRO and the DAR issued their respective orders. Said law vests P.D. No. 27
with suppletory effect insofar as the earlier law does not run inconsistent with the later law. 12 Under Section 4 of the
CARL, placed under coverage are all public and private agricultural lands regardless of tenurial arrangement and
commodity produced, subject to the exempted lands listed in Section 10 thereof.
We agree with the Court of Appeals that neither P.D. No. 27 nor the CARL exempts the lands of the Hospicio or other
charitable institutions from the coverage of agrarian reform. Ultimately, the result arrived at in the assailed issuances
should be affirmed. Nonetheless, both the DAR Secretary and the appellate court failed to appreciate what to this
Court is indeed the decisive legal dimension of the case.
Section 4 of Act No. 3239 prohibits the sale "under any consideration" of the lands donated to the Hospicio. But the
land transfers mandated under P.D. No. 27 cannot be considered a conventional sale under our civil laws.
Generally, sale arises out of a contractual obligation. Thus, it must meet the first essential requisite of every contract
that is the presence of consent. 13 Consent implies an act of volition in entering into the agreement. 14The absence or
vitiation of consent renders the sale either void or voidable.
In this case, the deprivation of the Hospicios property did not arise as a consequence of the Hospicios consent to the
transfer. There was no meeting of minds between the Hospicio, on one hand, and the DAR or the tenants, on the other,
on the properties and the cause which are to constitute the contract 15 that is to serve ultimately as the basis for the
transfer of ownership of the subject lands. 16 Instead, the obligation to transfer arises by compulsion of law, particularly
P.D. No. 27.17
Agrarian reform is justified under the States inherent power of eminent domain that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation to the owner. 18 It has even been
characterized as beyond the traditional exercise of eminent domain, but a revolutionary kind of expropriation. As
expounded in the landmark case of Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian
Reform, thus:
. . . . However, we do not deal here with the traditional exercise of the power of eminent domain. This is not an
ordinary expropriation where only a specific property of relatively limited area is sought to be taken by
the State from its owner for a specific and perhaps local purpose. What we deal with here is
arevolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever found and of whatever kind as
long as they are in excess of the maximum retention limits allowed their owners. This kind of expropriation
is intended for the benefit not only of a particular community or of a small segment of the population but of the entire
Filipino nation, from all levels of our society, from the impoverished farmer to the land-glutted owner. Its purpose does
not cover only the whole territory of this country but goes beyond in time to the foreseeable future, which it hopes to
secure and edify with the vision and the sacrifice of the present generation of Filipinos. Generations yet to come are as
involved in this program as we are today, although hopefully only as beneficiaries of a richer and more fulfilling life we
will guarantee to them tomorrow through our thoughtfulness today. And, finally, let it not be forgotten that it is no less
than the Constitution itself that has ordained this revolution in the farms, calling for "a just distribution" among the
farmers of lands that have heretofore been the prison of their dreams but can now become the key at least to their
deliverance.19
This characterization is warranted whether the expropriation is operative under the CARL or P.D. No. 27, as both laws
are keyed into the same governmental objective. Moreover, under both laws, the landowner is entitled to just
compensation for the properties taken.
The twin process of expropriation of lands under agrarian reform and the payment of just compensation is akin to a
forced sale, which has been aptly described in common law jurisdictions as "sale made under the process of the court,
and in the mode prescribed by law," and "which is not the voluntary act of the owner, such as to satisfy a debt,
whether of a mortgage, judgment, tax lien, etc." 20 The term has not been precisely defined in this jurisdiction, but
reference to the phrase itself is made in Articles 223, 232, 237 and 243 of the Civil Code, which uniformly exempt the
family home "from execution, forced sale, or attachment." 21 Yet a forced sale is clearly different from the sales
described under Book V of the Civil Code which are conventional sales, as it does not arise from the consensual
agreement of the vendor and vendee, but by compulsion of law. Still, since law is recognized as one of the sources of
obligation, there can be no dispute on the efficacy of a forced sale, so long as it is authorized by law.
The crucial question now arises, whether the sale prohibited under Section 4 of Act No. 3239 includes even a forced
sale. Of course an overly literal reading of the provision would justify such inclusion, but appropriately a more
sophisticated approach to statutory construction is warranted.
No sance is required to discern the intent of Section 4. It ensures that the properties received by the Hospicio are not
alienated for profit by the officers or administrators, in contravention of the charitable purpose for which the Hospicio
was created. To an extent, it makes possible the perpetual operation of the Hospicio, which was empowered by law to
operate for an indefinite period, by assuring the existence of the property on which the Hospicio could operate. We
also do not doubt that whatever fruits of the forcibly retained property would also serve a source of funding for the
operations of the Hospicio.
The salutariness of these objectives is beyond doubt. The interests they seek to protect are present whether the
prohibition encompasses only conventional sales, or even forced sales. Yet to insist that Section 4 likewise prohibits

sales or dispositions by operation of law would necessarily imply that the Hospicio is also beyond the reach of any form
of judicial execution. The charitable nature of the Hospicio does not shield it from susceptibility to civil liability, and an
absolute prohibition on sales, whether forced or conventional, deprives whatever judgment creditors of the Hospicio
from any effective means of enforcing relief.
Was it the intent of the framers of Act No. 3239 to exempt the Hospicio from all judicial processes, even those arising
from civil transactions? We do not think so. The contemporaneous construction of Section 4 indicates that the
prohibition intended by the crafters of the law pertained only to conventional sales, and not forced sales. The law was
promulgated in 1925, or when the Spanish Civil Code of 1889 was in effect. The provisions in the Civil Code referring to
"forced sales" were not derived from the Spanish Civil Code. On the other hand, the consensual nature of the contract
of sale, and of
contracts in general, is recognized under the Spanish Civil Code. Under Article 1261 of the Spanish Civil Code, there is
no contract unless the consent of the contracting parties exists. 22
Evidently, the word "sale," as contemplated by the framers of the law in 1925, pertains to its concept in civil law, with
the requisite of consent being present. It cannot refer to sales or dispositions that arise by operation of law, such as
through judicial execution, or, as in this case, expropriation.
Thus, we can hardly characterize the acquisition of the subject properties from the Hospicio for the benefit of the
tenants as a sale, within the contemplation of Section 4 of Act No. 3239. The transfer arises from compulsion of law,
and not the desire of any parties. Even if the Hospicio had voluntarily offered to surrender its properties to agrarian
reform, the resulting transaction would not be considered as a conventional sale, since the obligation is created not
out of the mandate of the parties, but the will of the law.
The DARRO Order did note that Section 4 of Act No. 3239 is not applicable in this case, since the transfer is
compulsory
on
the
part
of
the
landowner,
unlike
in
ordinary sale.23 Regrettably, the DAR Secretary and the Court of Appeals failed to apply that sound principle, preferring
to rely instead on the conclusion that Section 4 was repealed by P.D. No. 27 and the CARL.
Nonetheless, even assuming for the nonce that Section 4 contemplates even forced sales such as those through
expropriation, we would agree with the DAR Secretary and the Court of Appeals that Section 4 is deemed repealed by
P.D. No. 27 and the CARL.
The scope of lands subjected to agrarian reform under these two laws is overwhelming. P.D. No. 27 applies to all
private agricultural lands primarily devoted to rice and corn with tenant farmers under a system of sharecrop or leasetenancy,24 while the CARL is even broader in scope, generally covering all public and private agricultural lands
regardless of tenurial arrangement and commodity produced. Under Section 10 of the CARL, the only exempted lands
are:
Lands actually, directly and exclusively used and found to be necessary for parks, wildlife, forest reserves,
reforestation, fish sanctuaries and breeding grounds, watersheds, and mangroves, national defense, school sites and
campuses including experimental farm stations operated by public or private schools for educational purposes, seeds
and seedlings research and pilot production centers, church sites and convents appurtenant thereto, mosque sites and
Islamic centers appurtenant thereto, communal burial grounds and cemeteries, penal colonies and penal farms
actually worked by the inmates, government and private research and quarantine centers and all lands with eighteen
percent (18%) slope and over, except those already developed . . . .
Arguing against "too literal an interpretation" of Section 10, the Hospicio claims that "a serious reading" of the
provision is revelatory of the spirit and intent of the exemptions. It argues that there are three categories of exemption
as: "(1) those needed by the nation, such as parks, wildlife and forest reserves, fishponds and for national defense,
etc.; (2) those for educational purposes such as school sites; and (3) for religious and charitable purposes like church
sites, etc."25 The Hospicio then claims it falls under the third category of "religious and charitable purposes." 26
To begin with, the terms "charitable purposes" and "charitable organizations" do not appear in Section 10 of the CARL.
For its part, Hospicio unduly assumes that charity is integrally wedded to religiosity, despite the fact that there are
charitable institutions that are avowedly secular in orientation. We disagree that there is a clear intent or spirit to
include properties held by charitable institutions, even those directly utilized for charitable purposes, in the list of
exempted properties under the CARL. Section 10 does not include properties which are generally used for charitable
purposes, such as orphanages, from the exemption. Not even all properties owned by religious institutions are exempt,
save for those places of worship and the convents/Islamic centers appurtenant thereto. Even assuming that the
Hospicio were actually owned and operated by the Catholic Church, it still would not be exempted from the CARL.
It is axiomatic that where a general rule is established by a statute with exceptions, the Court will not curtail nor add to
the latter by implication, and it is a rule that an express exception excludes all others. 27 We cannot simply impute into
a statute an exception which the Congress did not incorporate. Moreover, general welfare legislation such as land
reform laws is to be construed in favor of the promotion of social justice to ensure the well-being and economic
security of the people.28 Since a broad construction of the provision listing the properties exempted under the CARL
would tend to denigrate the aims of agrarian reform, a strict application of these exceptions is in order.
The crafters of P.D. No. 27 and the CARL were presumably aware of the radical scale of the intended legislation, and
the massive effects on property relations nationwide. Considering the magnitude of the changes ordained in these
laws, it would be foolhardy to require or expect the legislature to denominate each and every law that would be

consequently or logically amended or repealed by the new laws. Hence, the viability of general repealing clauses,
which are existent in both P.D. No. 27 29 and the CARL,30 as a means of repealing all previous enactments inconsistent
with revolutionary new laws. The presence of such general repealing clause in a later statute clearly indicates the
legislative intent to repeal all prior inconsistent laws on the subject matter, whether the prior law is a general law or a
special law, or as in this case, a special private law. Without such clause, a later general law will ordinarily not repeal a
prior special law on the same subject. But with such clause contained in the subsequent general law, the prior special
law will be deemed repealed, as the clause is a clear legislative intent to bring about that result. 31
Should we construe Section 4 of Act No. 3239 as barring forced sales through expropriation of the properties of the
Hospicio, such prohibition would irreconcilably countermand both P.D. No. 27 and the CARL and their mandate to
subject the properties to agrarian reform. The general repealing clauses of the two later laws would then sufficiently
repeal Section 4 of Act No. 3239, to the extent that it may prohibit expropriation of agricultural lands for agrarian
reform.
Still, in light of our earlier determinative pronouncement that Section 4 of Act No. 3239 does not contemplate forced
sales as part of the prohibition therein, there ultimately is no need to make an abject declaration that Section 4 has
indeed been repealed. Indeed, the Court considers the prohibition on Section 4 as still effectual, but only insofar as it
relates to conventional sales under the Civil Code.
The other arguments raised by the Hospicio are similarly bereft of merit. It wants us to hold that P.D. No. 27 and the
CARL, both enacted to implement the urgently needed policy of agrarian reform, violate the non-impairment of
contracts clause under the Bill of Rights. Yet the broad sweep of this argument ignores the nuances adopted by this
Court in interpreting Section 10 of Article III. We have held that the States exercise of police powers may prevail over
obligations imposed by private contracts. 32 Especially in point is Kabiling v. NHA,33 wherein a law authorizing the
expropriation of properties in favor of qualified squatter families was challenged on the basis of the non-impairment
clause. The Court held:
The stated objective of the decree, namely, to resolve the land tenure problem in the Agno-Leveriza area to allow the
implementation of the comprehensive development plans for this depressed community, provides the justification for
the exercise of the police power of the State. The police power of the State has been described as "the most essential,
insistent and illimitable of powers." It is a power inherent in the State, plenary, "suitably vague and far from precisely
defined, rooted in the conception that man in organizing the state and imposing upon the government limitations to
safeguard constitutional rights did not intend thereby to enable individual citizens or group of citizens to obstruct
unreasonably the enactment of such salutary measure to ensure communal peace, safety, good order and welfare.
The objection raised by petitioners that P.D. No. 1808 impairs the obligations of contract is without merit. The
constitutional guaranty of non-impairment of obligations of contract is limited by and subject to the exercise of the
police power of the State in the interest of public health, safety, morals and general welfare. 34
More pertinently, what the Hospicio alleges would be impaired is not actually a contract, but a legislative act, Act No.
3239. The Hospicio admits just as much in its petition, "[Act No. 3239] is not merely an ordinary contract but a contract
enacted into law . . . Act No. 3239 is thus a contract within the purview of the impairment clause of the Constitution." 35
The inanity of this argument is palpable. The non-impairment clause reads: "No law impairing the obligation of
contracts shall be passed." If, as the Hospicio argues, the constitutional provision applies as well to the impairment of
obligations created by law, then Section 10, Article III operates to bar the legislature from amending or repealing its
own enactments. This is of course not the case, as the provision was intended to shield the impairment of obligations
created by private agreements, and not by legislative fiat. Certainly, Congress can at any time expressly amend or
repeal any and all sections of Act No. 3239 without fear of violating the non-impairment clause of the Constitution. In
fine, Section 1036 of Act 3239 provides that the privileges granted by the Act to the Hospicio are subject to the
conditions on the grant of franchises as provided in the Jones Law. Section 28 of the Jones Law in turn provides in part,
thus:
No franchise or right shall be granted to any individual, firm, or corporation except under the conditions that it shall
be subject to amendment, alteration, or repeal by the Congress of the United States, and that lands or right of
use and occupation of lands thus granted shall revert to the government by which they were respectively granted
upon the termination of the franchises and rights under which they were granted or upon their revocation or repeal.
(Emphasis supplied.)
Finally, the Hospicio alludes to its functions as a charitable institution, which equally promote social justice and the
upliftment of lives of the less fortunate. It notes that these purposes are no less noble than giving land to the landless,
whom they, with perhaps a touch of contempt, suggest are "perfectly healthy to care for themselves." 37
The rationale for holding that the properties of the Hospicio are covered by P.D. No. 27 and Rep. Act No. 6657 is so
well-grounded in law that it obviates any resort to the sordid game of choosing which of the two competing aspirations
is nobler. The body which would have unquestionable discretion in assigning hierarchical values on the modalities by
which social justice may be implemented is the legislature. Land reform affords the opportunity for the landless to
break away from the vicious cycle of having to perpetually rely on the kindness of others. By refusing to exempt
properties owned by charitable institutions or maintained for charitable purposes from agrarian reform, the legislature
has indicated a policy choice which the Court is bound to implement.
WHEREFORE, the Petition is DENIED. No pronouncement as to costs.

SO ORDERED.

G.R. No. 186382

April 5, 2010

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
DOMINGO PANITERCE, Accused-Appellant.
RESOLUTION

LEONARDO-DE CASTRO, J.:

Before Us is an appeal filed by Domingo Paniterce y Martinez (Paniterce) assailing the Decision 1 dated August 22, 2008
of the Court of Appeals in CA-G.R. CR-H.C. No. 01001, entitled People of the Philippines v. Domingo Paniterce," which
affirmed with modification the Decision dated March 2, 2005 of the Regional Trial Court (RTC) of Iriga City, Branch 37,
in Criminal Case Nos. 6076, 6077, 6078, 6079, 6080 and 6081. 2 The RTC found Paniterce guilty beyond reasonable
doubt of the crimes of Rape and Acts of Lasciviousness.
In four Informations, all dated February 11, 2002, 4th Assistant Provincial Prosecutor Hedy S. Aganan charged
Paniterce with four counts of rape of his daughter AAA. Except for the dates 3 of the commission of the rapes, the four
Informations identically read:
Criminal Case Nos. 6076, 6077, 6078 and 6079
That sometime in the year 1997 in x x x Philippines and within the jurisdiction of this Honorable Court, the abovenamed accused, with grave abuse of confidence being the father of the offended party with lewd designs by means of
force and intimidation, did then and there willfully, unlawfully and feloniously succeed in having carnal knowledge with
his daughter AAA, a 10 year-old minor, against her will and without her consent, to her damage and prejudice in such
amount as may be awarded by the Honorable Court.4
In two Amended Informations, both dated December 3, 2002, Assistant Provincial Prosecutor Daniel M. Salvadora
charged Paniterce with two counts of rape of his other daughter BBB. Aside from the dates 5 of the commission of the
rapes, the Informations similarly state:
Criminal Case Nos. 6080 and 6081
That on or about 6:00 oclock in the morning of August 26, 2000 x x x Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, with grave abuse of confidence being the father of the offended party
with lewd designs by means of force and intimidation, did then and there willfully, unlawfully and feloniously
committed RAPE upon his 12- year old daughter BBB by then and there, caressing and inserting his finger inside her
vagina against her will and without her consent, to her damage and prejudice in such amount as may be awarded by
the Honorable Court.6
When arraigned, Paniterce pleaded not guilty to all the charges.
After trial on the merits, the RTC rendered a Decision on March 2, 2005, with the following dispositive portion:
WHEREFORE, in view of all the foregoing, the prosecution having proved the guilt of accused Domingo Paniterce of the
crimes of Rape as charged in the aforementioned Informations, he is hereby sentenced to suffer the penalties of
imprisonment, to wit:
In Criminal Case No. 6076, he is hereby sentenced to suffer the penalty of imprisonment ranging from FOUR (4)
MONTHS and ONE (1) DAY of arresto mayor as minimum to FOUR (4) YEARS, TWO (2) MONTHS AND ONE (1) DAY of
prision correccional as maximum for Acts of Lasciviousness under Article 336 of the Revised Penal Code as the alleged
molestation took place in April 1997 and RA 8353 took effect only on October 22, 1997;
In Criminal Cases Nos. 6077, 6078, 6080 and 6081, he is hereby sentenced to suffer in each every case the penalty of
imprisonment ranging from FOUR (4) YEARS, TWO (2) MONTHS and ONE (1) DAY of prision correccional as minimum to
EIGHT (8) YEARS and ONE (1) DAY of prision mayor as maximum and to pay AAA and BBB Fifty Thousand Pesos
(P50,000.00) each as moral damages and Fifty Thousand Pesos (P50,000.00) as exemplary damages;
In Criminal Case No. 6079, he is hereby sentenced to suffer the penalty of DEATH and to pay AAA the amount of Fifty
Thousand Pesos (P50,000.00) as moral damages and Fifty Thousand Pesos (P50,000.00) as exemplary damages. 7
On June 4, 2005, Paniterce was committed to the Bureau of Corrections in Muntinlupa City.
Paniterce filed an appeal with the Court of Appeals, which was docketed as CA-G.R. CR-H.C. No. 01001. The appellate
court rendered a Decision on August 22, 2008 affirming the RTC judgment with modifications, to wit:
WHEREFORE, the Decision of the trial court convicting DOMINGO PANITERCE is hereby AFFIRMED with the following
modifications:
1. For Acts of Lasciviousness, in Criminal Cases Nos. 6077, 6078, 6080 and 6081, appellant is hereby
sentenced to suffer in each [and] every case an indeterminate prison term of six (6) months of arresto mayor,
as minimum, to six (6) years of prision correccional, as maximum and to pay AAA and BBB Fifty Thousand
Pesos (P50,000.00) each as moral damages and Fifty Thousand Pesos (P50,000.00) as exemplary damages;
and
2. For Rape, in Criminal Case No. 6079, appellant is hereby sentenced to suffer the penalty of Reclusion
Perpetua and to pay AAA the amount of Fifty Thousand Pesos (P50,000.00) as moral damages and Fifty
Thousand Pesos (P50,000.00) as exemplary damages.

The decision of the trial court finding appellant guilty for Acts of Lasciviousness in Criminal Case No. 6076 is AFFIRMED
without any modification.8
On 16 September 2008, Paniterce, through counsel, filed a Notice of Appeal with the Court of Appeals conveying his
intention to appeal to us the aforementioned Decision dated August 22, 2008 of the appellate court. The Court of
Appeals gave due course to Paniterces Notice of Appeal on September 23, 2008, 9 and directed its Judicial Records
Division to elevate to us the original records in CA-G.R. CR-H.C. No. 01001.
On 15 April 2009, we required 10 the parties to file their supplemental briefs, and the Director of the Bureau of
Corrections to confirm the commitment of Paniterce at the Bureau of Corrections and submit his report thereon within
10 days from notice.
Paniterce filed his Supplemental Brief11 on June 16, 2009, while the Office of the Solicitor General filed a
Manifestation12 on June 18, 2009 stating that it would no longer file a supplemental brief considering that Paniterce did
not raise any new issue in his appeal. On July 22, 2009, we submitted G.R. No. 186382 for resolution.
However, in a letter dated October 12, 2009, Julio A. Arciaga, the Assistant Director for Prisons and Security of the
Bureau of Corrections, informed us that Paniterce had died on August 22, 2009 at the New Bilibid Prison Hospital.
Paniterces Death Certificate was attached to said letter.
Given Paniterces death, we are now faced with the question of the effect of such death on the present appeal.
Paniterces death on August 22, 2009, during the pendency of his appeal, extinguished not only his criminal liabilities
for the rape and acts of lasciviousness committed against his daughters, but also his civil liabilities solely arising from
or based on said crimes.1awphi1
According to Article 89(1) of the Revised Penal Code, criminal liability is totally extinguished:
1. By the death of the convict, as to the personal penalties; and as to pecuniary penalties, liability therefor is
extinguished only when the death of the offender occurs before final judgment.
Applying the foregoing provision, we laid down the following guidelines in People v. Bayotas 13:
1. Death of the accused pending appeal of his conviction extinguishes his criminal liability as well as the civil
liability based solely thereon. As opined by Justice Regalado, in this regard, "the death of the accused prior to
final judgment terminates his criminal liability and only the civil liability directly arising from and based solely
on the offense committed, i.e., civil liability ex delicto in senso strictiore."
2. Corollarily, the claim for civil liability survives notwithstanding the death of (the) accused, if the same may
also be predicated on a source of obligation other than delict. Article 1157 of the Civil Code enumerates these
other sources of obligation from which the civil liability may arise as a result of the same act or omission:
a.

Law

b.

Contracts

c.

Quasi-contracts

d.

xxxx

e.

Quasi-delicts

3. Where the civil liability survives, as explained in Number 2 above, an action for recovery therefor may be
pursued but only by way of filing a separate civil action and subject to Section 1, Rule 111 of the 1985 Rules on
Criminal Procedure as amended. This separate civil action may be enforced either against the
executor/administrator or the estate of the accused, depending on the source of obligation upon which the
same is based as explained above.
4. Finally, the private offended party need not fear a forfeiture of his right to file this separate civil action by
prescription, in cases where during the prosecution of the criminal action and prior to its extinction, the
private-offended party instituted together therewith the civil action. In such case, the statute of limitations on
the civil liability is deemed interrupted during the pendency of the criminal case, conformably with the
provisions of Article 1155 of the Civil Code that should thereby avoid any apprehension on a possible privation
of right by prescription.14
Clearly, it is unnecessary for the Court to rule on Paniterces appeal. Whether or not he was guilty of the crimes
charged has become irrelevant since, following Article 89(1) of the Revised Penal Code and our disquisition in Bayotas,
even assuming Paniterce had incurred criminal liabilities, they were totally extinguished by his death. Moreover,
because Paniterces appeal was still pending and no final judgment of conviction had been rendered against him when
he died, his civil liabilities arising from the crimes, being civil liabilities ex delicto, were likewise extinguished by his
death.
Consequently, the appealed Decision dated August 22, 2008 of the Court of Appeals finding Paniterce guilty of rape
and acts of lasciviousness, sentencing him to imprisonment, and ordering him to indemnify his victims had become
ineffectual.

WHEREFORE, in view of the death of accused-appellant Domingo Paniterce y Martinez, the Decision dated August 22,
2008 of the Court of Appeals in CA-G.R. CR-H.C. No. 01001 is SET ASIDE and Criminal Case Nos. 6076, 6077, 6078,
6079, 6080, and 6081 before the Regional Trial Court of Iriga City are DISMISSED. Costs de oficio.
SO ORDERED.

G.R. No. 183204

January 13, 2014

THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner,

vs.
ANA GRACE ROSALES AND YO YUK TO, Respondents.
DECISION
DEL CASTILLO, J.:
Bank deposits, which are in the nature of a simple loan or mutuum, 1 must be paid upon demand by the depositor. 2
This Petition for Review on Certiorari 3 under Rule 45 of the Rules of Court assails the April 2, 2008 Decision 4 and the
May 30, 2008 Resolution5 of he Court of Appeals CA) in CA-G.R. CV No. 89086.
Factual Antecedents
Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly organized and existing under
the laws of the Philippines. 6 Respondent Ana Grace Rosales (Rosales) is the owner of China Golden Bridge Travel
Services,7 a travel agency.8 Respondent Yo Yuk To is the mother of respondent Rosales. 9
In 2000, respondents opened a Joint Peso Account 10 with petitioners Pritil-Tondo Branch. 11 As of August 4, 2004,
respondents Joint Peso Account showed a balance of P2,515,693.52.12
In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese National applying for a retirees
visa from the Philippine Leisure and Retirement Authority (PLRA), to petitioners branch in Escolta to open a savings
account, as required by the PLRA. 13 Since Liu Chiu Fang could speak only in Mandarin, respondent Rosales acted as an
interpreter for her.14
On March 3, 2003, respondents opened with petitioners Pritil-Tondo Branch a Joint Dollar Account 15 with an initial
deposit of US$14,000.00.16
On July 31, 2003, petitioner issued a "Hold Out" order against respondents accounts. 17
On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan Aguirre, filed before the
Office of the Prosecutor of Manila a criminal case for Estafa through False Pretences, Misrepresentation, Deceit, and
Use of Falsified Documents, docketed as I.S. No. 03I-25014, 18 against respondent Rosales.19Petitioner accused
respondent Rosales and an unidentified woman as the ones responsible for the unauthorized and fraudulent
withdrawal of US$75,000.00 from Liu Chiu Fangs dollar account with petitioners Escolta Branch. 20Petitioner alleged
that on February 5, 2003, its branch in Escolta received from the PLRA a Withdrawal Clearance for the dollar account of
Liu Chiu Fang;21 that in the afternoon of the same day, respondent Rosales went to petitioners Escolta Branch to
inform its Branch Head, Celia A. Gutierrez (Gutierrez), that Liu Chiu Fang was going to withdraw her dollar deposits in
cash;22 that Gutierrez told respondent Rosales to come back the following day because the bank did not have enough
dollars;23 that on February 6, 2003, respondent Rosales accompanied an unidentified impostor of Liu Chiu Fang to the
bank;24 that the impostor was able to withdraw Liu Chiu Fangs dollar deposit in the amount of US$75,000.00; 25 that on
March 3, 2003, respondents opened a dollar account with petitioner; and that the bank later discovered that the serial
numbers of the dollar notes deposited by respondents in the amount of US$11,800.00 were the same as those
withdrawn by the impostor.26
Respondent Rosales, however, denied taking part in the fraudulent and unauthorized withdrawal from the dollar
account of Liu Chiu Fang. 27 Respondent Rosales claimed that she did not go to the bank on February 5, 2003. 28Neither
did she inform Gutierrez that Liu Chiu Fang was going to close her account. 29 Respondent Rosales further claimed that
after Liu Chiu Fang opened an account with petitioner, she lost track of her. 30 Respondent Rosales version of the
events that transpired thereafter is as follows:
On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang was at the bank to close her
account.31 At noon of the same day, respondent Rosales went to the bank to make a transaction. 32While she was
transacting with the teller, she caught a glimpse of a woman seated at the desk of the Branch Operating Officer,
Melinda Perez (Perez).33 After completing her transaction, respondent Rosales approached Perez who informed her that
Liu Chiu Fang had closed her account and had already left. 34 Perez then gave a copy of the Withdrawal Clearance
issued by the PLRA to respondent Rosales. 35 On June 16, 2003, respondent Rosales received a call from Liu Chiu Fang
inquiring about the extension of her PLRA Visa and her dollar account. 36 It was only then that Liu Chiu Fang found out
that her account had been closed without her knowledge. 37 Respondent Rosales then went to the bank to inform
Gutierrez and Perez of the unauthorized withdrawal. 38 On June 23, 2003, respondent Rosales and Liu Chiu Fang went to
the PLRA Office, where they were informed that the Withdrawal Clearance was issued on the basis of a Special Power
of Attorney (SPA) executed by Liu Chiu Fang in favor of a certain Richard So. 39 Liu Chiu Fang, however, denied
executing the SPA.40 The following day, respondent Rosales, Liu Chiu Fang, Gutierrez, and Perez met at the PLRA Office
to discuss the unauthorized withdrawal. 41 During the conference, the bank officers assured Liu Chiu Fang that the
money would be returned to her.42
On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution dismissing the criminal case for
lack of probable cause.43 Unfazed, petitioner moved for reconsideration.
On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila a Complaint 44 for Breach of
Obligation and Contract with Damages, docketed as Civil Case No. 04110895 and raffled to Branch 21, against

petitioner. Respondents alleged that they attempted several times to withdraw their deposits but were unable to
because petitioner had placed their accounts under "Hold Out" status. 45 No explanation, however, was given by
petitioner as to why it issued the "Hold Out" order. 46 Thus, they prayed that the "Hold Out" order be lifted and that they
be allowed to withdraw their deposits. 47 They likewise prayed for actual, moral, and exemplary damages, as well as
attorneys fees.48
Petitioner alleged that respondents have no cause of action because it has a valid reason for issuing the "Hold Out"
order.49 It averred that due to the fraudulent scheme of respondent Rosales, it was compelled to reimburse Liu Chiu
Fang the amount of US$75,000.0050 and to file a criminal complaint for Estafa against respondent Rosales. 51
While the case for breach of contract was being tried, the City Prosecutor of Manila issued a Resolution dated February
18, 2005, reversing the dismissal of the criminal complaint. 52 An Information, docketed as Criminal Case No. 05236103,53 was then filed charging respondent Rosales with Estafa before Branch 14 of the RTC of Manila. 54
Ruling of the Regional Trial Court
On January 15, 2007, the RTC rendered a Decision 55 finding petitioner liable for damages for breach of contract. 56 The
RTC ruled that it is the duty of petitioner to release the deposit to respondents as the act of withdrawal of a bank
deposit is an act of demand by the creditor. 57 The RTC also said that the recourse of petitioner is against its negligent
employees and not against respondents. 58 The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner] METROPOLITAN BANK & TRUST
COMPANY to allow [respondents] ANA GRACE ROSALES and YO YUK TO to withdraw their Savings and Time Deposits
with the agreed interest, actual damages of P50,000.00, moral damages of P50,000.00, exemplary damages
of P30,000.00 and 10% of the amount due [respondents] as and for attorneys fees plus the cost of suit.
The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.
SO ORDERED.59
Ruling of the Court of Appeals
Aggrieved, petitioner appealed to the CA.
On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual damages because "the basis for
[respondents] claim for such damages is the professional fee that they paid to their legal counsel for [respondent]
Rosales defense against the criminal complaint of [petitioner] for estafa before the Office of the City Prosecutor of
Manila and not this case."60 Thus, the CA disposed of the case in this wise:
WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, Branch 21, Manila in Civil Case No.
04-110895 is AFFIRMED with MODIFICATION that the award of actual damages to [respondents] Rosales and Yo Yuk To
is hereby DELETED.
SO ORDERED.61
Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008 Resolution. 62
Issues
Hence, this recourse by petitioner raising the following issues:
A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE APPLICATION AND AGREEMENT FOR
DEPOSIT ACCOUNT DOES NOT APPLY IN THIS CASE.
B. THE [CA] ERRED WHEN IT RULED THAT PETITIONERS EMPLOYEES WERE NEGLIGENT IN RELEASING LIU CHIU
FANGS FUNDS.
C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY DAMAGES, AND ATTORNEYS
FEES.63
Petitioners Arguments
Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in the Application and
Agreement for Deposit Account. 64 It posits that the said clause applies to any and all kinds of obligation as it does not
distinguish between obligations arising ex contractu or ex delictu. 65 Petitioner also contends that the fraud committed
by respondent Rosales was clearly established by evidence; 66 thus, it was justified in issuing the "Hold-Out"
order.67 Petitioner likewise denies that its employees were negligent in releasing the dollars. 68 It claims that it was the
deception employed by respondent Rosales that caused petitioners employees to release Liu Chiu Fangs funds to the
impostor.69
Lastly, petitioner puts in issue the award of moral and exemplary damages and attorneys fees. It insists that
respondents failed to prove that it acted in bad faith or in a wanton, fraudulent, oppressive or malevolent manner. 70
Respondents Arguments
Respondents, on the other hand, argue that there is no legal basis for petitioner to withhold their deposits because
they have no monetary obligation to petitioner. 71 They insist that petitioner miserably failed to prove its accusations
against respondent Rosales.72 In fact, no documentary evidence was presented to show that respondent Rosales
participated in the unauthorized withdrawal. 73 They also question the fact that the list of the serial numbers of the

dollar notes fraudulently withdrawn on February 6, 2003, was not signed or acknowledged by the alleged
impostor.74 Respondents likewise maintain that what was established during the trial was the negligence of petitioners
employees as they allowed the withdrawal of the funds without properly verifying the identity of the
depositor. 75 Furthermore, respondents contend that their deposits are in the nature of a loan; thus, petitioner had the
obligation to return the deposits to them upon demand. 76 Failing to do so makes petitioner liable to pay respondents
moral and exemplary damages, as well as attorneys fees. 77
Our Ruling
The Petition is bereft of merit.
At the outset, the relevant issues in this case are (1) whether petitioner breached its contract with respondents, and
(2) if so, whether it is liable for damages. The issue of whether petitioners employees were negligent in allowing the
withdrawal of Liu Chiu Fangs dollar deposits has no bearing in the resolution of this case. Thus, we find no need to
discuss the same.
The "Hold Out" clause does not apply
to the instant case.
Petitioner claims that it did not breach its contract with respondents because it has a valid reason for issuing the "Hold
Out" order. Petitioner anchors its right to withhold respondents deposits on the Application and Agreement for Deposit
Account, which reads:
Authority to Withhold, Sell and/or Set Off:
The Bank is hereby authorized to withhold as security for any and all obligations with the Bank, all monies, properties
or securities of the Depositor now in or which may hereafter come into the possession or under the control of the Bank,
whether left with the Bank for safekeeping or otherwise, or coming into the hands of the Bank in any way, for so much
thereof as will be sufficient to pay any or all obligations incurred by Depositor under the Account or by reason of any
other transactions between the same parties now existing or hereafter contracted, to sell in any public or private sale
any of such properties or securities of Depositor, and to apply the proceeds to the payment of any Depositors
obligations heretofore mentioned.
xxxx
JOINT ACCOUNT
xxxx
The Bank may, at any time in its discretion and with or without notice to all of the Depositors, assert a lien on any
balance of the Account and apply all or any part thereof against any indebtedness, matured or unmatured, that may
then be owing to the Bank by any or all of the Depositors. It is understood that if said indebtedness is only owing from
any of the Depositors, then this provision constitutes the consent by all of the depositors to have the Account answer
for the said indebtedness to the extent of the equal share of the debtor in the amount credited to the Account. 78
Petitioners reliance on the "Hold Out" clause in the Application and Agreement for Deposit Account is misplaced.
The "Hold Out" clause applies only if there is a valid and existing obligation arising from any of the sources of
obligation enumerated in Article 115779 of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasidelict. In this case, petitioner failed to show that respondents have an obligation to it under any law, contract, quasicontract, delict, or quasi-delict. And although a criminal case was filed by petitioner against respondent Rosales, this is
not enough reason for petitioner to issue a "Hold Out" order as the case is still pending and no final judgment of
conviction has been rendered against respondent Rosales. In fact, it is significant to note that at the time petitioner
issued the "Hold Out" order, the criminal complaint had not yet been filed. Thus, considering that respondent Rosales
is not liable under any of the five sources of obligation, there was no legal basis for petitioner to issue the "Hold Out"
order. Accordingly, we agree with the findings of the RTC and the CA that the "Hold Out" clause does not apply in the
instant case.
In view of the foregoing, we find that petitioner is guilty of breach of contract when it unjustifiably refused to release
respondents deposit despite demand. Having breached its contract with respondents, petitioner is liable for damages.
Respondents are entitled to moral and exemplary damages and attorneys fees.
In cases of breach of contract, moral damages may be recovered only if the defendant acted fraudulently or in bad
faith,80 or is "guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations." 81
In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order reveals that petitioner
issued the "Hold Out" order in bad faith. First of all, the order was issued without any legal basis. Second, petitioner did
not inform respondents of the reason for the "Hold Out." 82 Third, the order was issued prior to the filing of the criminal
complaint. Records show that the "Hold Out" order was issued on July 31, 2003, 83 while the criminal complaint was filed
only on September 3, 2003. 84 All these taken together lead us to conclude that petitioner acted in bad faith when it
breached its contract with respondents. As we see it then, respondents are entitled to moral damages.
As to the award of exemplary damages, Article 2229 85 of the Civil Code provides that exemplary damages may be
imposed "by way of example or correction for the public good, in addition to the moral, temperate, liquidated or

compensatory damages." They are awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive
or malevolent manner.86
In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or malevolent manner
when it refused to release the deposits of respondents without any legal basis. We need not belabor the fact that the
banking industry is impressed with public interest. 87 As such, "the highest degree of diligence is expected, and high
standards of integrity and performance are even required of it." 88 It must therefore "treat the accounts of its depositors
with meticulous care and always to have in mind the fiduciary nature of its relationship with them." 89 For failing to do
this, an award of exemplary damages is justified to set an example.
The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 2208 90 of the Civil Code.
In closing, it must be stressed that while we recognize that petitioner has the right to protect itself from fraud or
suspicions of fraud, the exercise of his right should be done within the bounds of the law and in accordance with due
process, and not in bad faith or in a wanton disregard of its contractual obligation to respondents.
WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May 30, 2008 Resolution of
the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED. SO ORDERED.

G.R. No. L-30511 February 14, 1980

MANUEL M. SERRANO, petitioner,
vs.
CENTRAL BANK OF THE PHILIPPINES; OVERSEAS BANK OF MANILA; EMERITO M. RAMOS, SUSANA B. RAMOS,
EMERITO B. RAMOS, JR., JOSEFA RAMOS DELA RAMA, HORACIO DELA RAMA, ANTONIO B. RAMOS, FILOMENA RAMOS
LEDESMA, RODOLFO LEDESMA, VICTORIA RAMOS TANJUATCO, and TEOFILO TANJUATCO, respondents.
CONCEPCION, JR., J.:
Petition for mandamus and prohibition, with preliminary injunction, that seeks the establishment of joint and solidary
liability to the amount of Three Hundred Fifty Thousand Pesos, with interest, against respondent Central Bank of the
Philippines and Overseas Bank of Manila and its stockholders, on the alleged failure of the Overseas Bank of Manila to
return the time deposits made by petitioner and assigned to him, on the ground that respondent Central Bank failed in
its duty to exercise strict supervision over respondent Overseas Bank of Manila to protect depositors and the general
public. 1 Petitioner also prays that both respondent banks be ordered to execute the proper and necessary documents
to constitute all properties fisted in Annex "7" of the Answer of respondent Central Bank of the Philippines in G.R. No. L29352, entitled "Emerita M. Ramos, et al vs. Central Bank of the Philippines," into a trust fund in favor of petitioner and
all other depositors of respondent Overseas Bank of Manila. It is also prayed that the respondents be prohibited
permanently from honoring, implementing, or doing any act predicated upon the validity or efficacy of the deeds of
mortgage, assignment. and/or conveyance or transfer of whatever nature of the properties listed in Annex "7" of the
Answer of respondent Central Bank in G.R. No. 29352. 2
A sought for ex-parte preliminary injunction against both respondent banks was not given by this Court.
Undisputed pertinent facts are:
On October 13, 1966 and December 12, 1966, petitioner made a time deposit, for one year with 6% interest, of One
Hundred Fifty Thousand Pesos (P150,000.00) with the respondent Overseas Bank of Manila. 3 Concepcion Maneja also
made a time deposit, for one year with 6-% interest, on March 6, 1967, of Two Hundred Thousand Pesos
(P200,000.00) with the same respondent Overseas Bank of Manila. 4
On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano, assigned and conveyed to petitioner
Manuel M. Serrano, her time deposit of P200,000.00 with respondent Overseas Bank of Manila. 5
Notwithstanding series of demands for encashment of the aforementioned time deposits from the respondent
Overseas Bank of Manila, dating from December 6, 1967 up to March 4, 1968, not a single one of the time deposit
certificates was honored by respondent Overseas Bank of Manila. 6
Respondent Central Bank admits that it is charged with the duty of administering the banking system of the Republic
and it exercises supervision over all doing business in the Philippines, but denies the petitioner's allegation that the
Central Bank has the duty to exercise a most rigid and stringent supervision of banks, implying that respondent
Central Bank has to watch every move or activity of all banks, including respondent Overseas Bank of Manila.
Respondent Central Bank claims that as of March 12, 1965, the Overseas Bank of Manila, while operating, was only on
a limited degree of banking operations since the Monetary Board decided in its Resolution No. 322, dated March 12,
1965, to prohibit the Overseas Bank of Manila from making new loans and investments in view of its chronic reserve
deficiencies against its deposit liabilities. This limited operation of respondent Overseas Bank of Manila continued up to
1968. 7
Respondent Central Bank also denied that it is guarantor of the permanent solvency of any banking institution as
claimed by petitioner. It claims that neither the law nor sound banking supervision requires respondent Central Bank to
advertise or represent to the public any remedial measures it may impose upon chronic delinquent banks as such
action may inevitably result to panic or bank "runs". In the years 1966-1967, there were no findings to declare the
respondent Overseas Bank of Manila as insolvent. 8
Respondent Central Bank likewise denied that a constructive trust was created in favor of petitioner and his
predecessor in interest Concepcion Maneja when their time deposits were made in 1966 and 1967 with the respondent
Overseas Bank of Manila as during that time the latter was not an insolvent bank and its operation as a banking
institution was being salvaged by the respondent Central Bank. 9
Respondent Central Bank avers no knowledge of petitioner's claim that the properties given by respondent Overseas
Bank of Manila as additional collaterals to respondent Central Bank of the Philippines for the former's overdrafts and
emergency loans were acquired through the use of depositors' money, including that of the petitioner and Concepcion
Maneja. 10
In G.R. No. L-29362, entitled "Emerita M. Ramos, et al. vs. Central Bank of the Philippines," a case was filed by the
petitioner Ramos, wherein respondent Overseas Bank of Manila sought to prevent respondent Central Bank from
closing, declaring the former insolvent, and liquidating its assets. Petitioner Manuel Serrano in this case, filed on
September 6, 1968, a motion to intervene in G.R. No. L-29352, on the ground that Serrano had a real and legal interest
as depositor of the Overseas Bank of Manila in the matter in litigation in that case. Respondent Central Bank in G.R.
No. L-29352 opposed petitioner Manuel Serrano's motion to intervene in that case, on the ground that his claim as
depositor of the Overseas Bank of Manila should properly be ventilated in the Court of First Instance, and if this Court
were to allow Serrano to intervene as depositor in G.R. No. L-29352, thousands of other depositors would follow and

thus cause an avalanche of cases in this Court. In the resolution dated October 4, 1968, this Court denied Serrano's,
motion to intervene. The contents of said motion to intervene are substantially the same as those of the present
petition. 11
This Court rendered decision in G.R. No. L-29352 on October 4, 1971, which became final and executory on March 3,
1972, favorable to the respondent Overseas Bank of Manila, with the dispositive portion to wit:
WHEREFORE, the writs prayed for in the petition are hereby granted and respondent Central Bank's
resolution Nos. 1263, 1290 and 1333 (that prohibit the Overseas Bank of Manila to participate in
clearing, direct the suspension of its operation, and ordering the liquidation of said bank) are hereby
annulled and set aside; and said respondent Central Bank of the Philippines is directed to comply with
its obligations under the Voting Trust Agreement, and to desist from taking action in violation therefor.
Costs against respondent Central Bank of the Philippines. 12
Because of the above decision, petitioner in this case filed a motion for judgment in this case, praying for a decision on
the merits, adjudging respondent Central Bank jointly and severally liable with respondent Overseas Bank of Manila to
the petitioner for the P350,000 time deposit made with the latter bank, with all interests due therein; and declaring all
assets assigned or mortgaged by the respondents Overseas Bank of Manila and the Ramos groups in favor of the
Central Bank as trust funds for the benefit of petitioner and other depositors. 13
By the very nature of the claims and causes of action against respondents, they in reality are recovery of time deposits
plus interest from respondent Overseas Bank of Manila, and recovery of damages against respondent Central Bank for
its alleged failure to strictly supervise the acts of the other respondent Bank and protect the interests of its depositors
by virtue of the constructive trust created when respondent Central Bank required the other respondent to increase its
collaterals for its overdrafts said emergency loans, said collaterals allegedly acquired through the use of depositors
money. These claims shoud be ventilated in the Court of First Instance of proper jurisdiction as We already pointed out
when this Court denied petitioner's motion to intervene in G.R. No. L-29352. Claims of these nature are not proper in
actions for mandamus and prohibition as there is no shown clear abuse of discretion by the Central Bank in its exercise
of supervision over the other respondent Overseas Bank of Manila, and if there was, petitioner here is not the proper
party to raise that question, but rather the Overseas Bank of Manila, as it did in G.R. No. L-29352. Neither is there
anything to prohibit in this case, since the questioned acts of the respondent Central Bank (the acts of dissolving and
liquidating the Overseas Bank of Manila), which petitioner here intends to use as his basis for claims of damages
against respondent Central Bank, had been accomplished a long time ago.
Furthermore, both parties overlooked one fundamental principle in the nature of bank deposits when the petitioner
claimed that there should be created a constructive trust in his favor when the respondent Overseas Bank of Manila
increased its collaterals in favor of respondent Central Bank for the former's overdrafts and emergency loans, since
these collaterals were acquired by the use of depositors' money.
Bank deposits are in the nature of irregular deposits. They are really loans because they earn interest. All kinds of bank
deposits, whether fixed, savings, or current are to be treated as loans and are to be covered by the law on
loans. 14 Current and savings deposit are loans to a bank because it can use the same. The petitioner here in making
time deposits that earn interests with respondent Overseas Bank of Manila was in reality a creditor of the respondent
Bank and not a depositor. The respondent Bank was in turn a debtor of petitioner. Failure of he respondent Bank to
honor the time deposit is failure to pay s obligation as a debtor and not a breach of trust arising from depositary's
failure to return the subject matter of the deposit
WHEREFORE, the petition is dismissed for lack of merit, with costs against petitioner.
SO ORDERED.

G.R. No. 60210.

March 27, 1984.

ARTURO P. SANTOS and ADELINA Y. SANTOS, Petitioners, v. THE COURT OF APPEALS and AURORA GUTIERREZ,
Respondents.
SYLLABUS
1.
CIVIL LAW; OBLIGATIONS AND CONTRACTS; LEASE; MONTH-TO-MONTH CONTRACT OF LEASE, A LEASE
WITH DEFINITE PERIOD; CASE AT BAR. Petitioners, in their "Answer with Counterclaim" admit that they are
"the legitimate tenants and/or lessees of the subject apartment with the present rental rate of P250.00 a
month on a month-to-month contract of lease." The aforequoted provision of the agreement on occupancy of
the apartment cannot but mean as providing for a definite period of the lease.

2.
ID.; ID.; ID.; ID.; EJECTMENT OF LESSEE PROPER AFTER THE EXPIRATION OF THE PERIOD OF LEASE;
CASE AT BAR. Judicial ejectment under Paragraph 1 of Article 1673 of the Civil Code lies when the lease is
for a definite period or when the fixed or definite period agreed upon has expired. It is an exception to Section
4 of Presidential Decree No. 20. The lease in the case at bar having a definite period, it follows that private
respondents right to judicially eject petitioners from the premises may be enforced. As aptly stated by
respondent Court of Appeals," [e]ven on the strength alone of the Rantael ruling, the petitioners can be
lawfully ejected, regardless of the motive or intent of the lessor-private Respondent."

3.
ID.; ID.; ID.; PRESIDENTIAL DECREE 1517 REFERS TO PREEMPTIVE RIGHT OF THE LESSEE ONLY IF A
TENANT HAS BUILT HIS HOME ON THE LAND OF THE LESSOR; NOT APPLICABLE IN CASE AT BAR. "P.D. 1517,
in referring to the preemptive or redemptive right of the lessee speaks only of urban land under lease on which
a tenant has built his home and in which he has resided for ten years or more. If both land and building belong
to the lessor, the right referred to hereinabove does not apply."
MELENCIO-HERRERA, J., dissenting and concurring:

1.

CIVIL LAW; OBLIGATIONS AND CONTRACTS; LEASE; PERIOD NOT DEFINITE WHERE MONTH-TO-MONTH BASIS OF
LEASE DETERMINED PURSUANT TO ARTICLE 1687 OF CIVIL CODE. In paragraph 2 of their Answer with
Counterclaim, petitioners stated that they are "the legitimate tenants and/or lessees of the subject apartment
with the present rental rate of P250.00 a month on a month-to-month contract of lease." In paragraph 11 of
their Special and Affirmative Defenses, however, they also averred that they principally rely on their verbal
month-to-month contract. Upon the facts, the lease involved herein is not for a definite period, the period
being determined, not by any agreement of the parties, but pursuant to Article 1687 of the Civil Code, which
provides that if the period for the lease has not been fixed, it is understood to be . . . from month to month, if it
(the rent agreed upon) is monthly.

2.

ID.; ID.; ID.; ID.; EXPIRATION OF PERIOD NOT A GROUND FOR EJECTMENT; CASE AT BAR. The subject lease is
not for a definite period because the month-to-month basis of the verbal contract has been determined
pursuant to Article 1687 of the Civil Code. Consequently, the subject lease falls squarely within the purview of
Article 1673 of the Civil Code, the effects of which were suspended by Section 6 of Batas Pambansa Blg. 25
(formerly Section 4 of P.D. 20). Construing the foregoing provisions together, it results that even if a month-tomonth lease under Article 1687 of the Civil Code expires, it cannot be a ground for ejectment in view of the
suspension of Article 1673 (1) by Batas Pambansa Blg. 25.

3.

ID.; ID.; ID.; ID.; RANTAEL DOCTRINE NOT APPLICABLE IN CASE AT BAR. The Rantael doctrine is not invocable
because of the striking difference that the lease in that case was embodied in a written "Agreement on
Occupancy of Apartment" by which terms, "the lessee agreed to use and live in the apartment on a month-tomonth basis, beginning today." Hence, our ruling therein that a lease contract on a month-to-month basis

provides a definite period and may be terminated at the end of any month. That was a conventional lease as
contrasted to the legal lease herein. In the case at bar, as found by the Court of First Instance, there was no
formal agreement between private respondent and petitioners, "it appearing that the former merely
acquiesced to the latters continued occupation of the property in question" after private respondent had
purchased the premises from the previous owner. The subject lease, therefore, cannot be said to be a lease for
a definite period, determined as that period is by Article 1687 of the Civil Code, for, otherwise, there would
hardly be any occasion for the application of Section 6 of Batas Pambansa Blg. 25. As a matter of fact, the
Rantael case specifically states that judicial ejectment would not lie even though the periods fixed under
Article 1687 may have expired.

4.

ID.; ID.; ID.; EJECTMENT IN CASE AT BAR PROPER ON TWO GROUNDS. I concur in the ejectment of petitioners
for, as held in Baens v. Court of Appeals, et als., (G.R. No. 57091, November 23, 1983), even if the month to
month arrangement is on a verbal basis, the lease is considered terminated at the end of the month, if
statutory grounds to eject under Section 5 of Batas Pambansa Blg. 25 exist. In this case two such grounds are
present, particularly, (1) arrears in the payment of rentals (Sec. 5[b], B.P. Blg. 25) as found by the City Court,
which held petitioners "culpably delinquent" ; and (2) the need of the lessor to make necessary repairs, there
being already an order of condemnation by appropriate administrative authorities (Sec. 5[e] B.P. Blg. 25),
which petitioners admit having received.

DECISION
RELOVA, J.:
Appeal by certiorari from the decision of the then Court of Appeals in CA-G.R. No. SP-13056, affirming the one rendered
by the then Court of First Instance of Manila, Branch XVI, in Civil Case No. 138472.
Records show that herein private respondent Aurora Gutierrez instituted an unlawful detainer case in the then City
Court of Manila against herein petitioners Arturo P. Santos and Adelina Y. Santos on grounds that she needs the
premises for her personal use and the necessity of repairs thereon, and that the petitioners were delinquent in the
payment of rentals.
In their Answer with Counterclaim, Petitioners, among others, admitted that they are "the legitimate tenants and/or
lessees of the subject apartment with the present rental rate of P250.00 a month on a month-to-month contract of
lease." (p. 62, Rollo)
After trial, the City Court rendered judgment
"Premises considered, this Court hereby renders judgment for the plaintiff and against the defendants and hereby
orders the defendants and all persons claiming under them to vacate the premises in question known as No. 1836
Cavite St., Sta. Cruz, Manila and surrender its possession to the plaintiff.
"The defendants are further ordered to pay the plaintiff P2,500.00 as rentals for the period December 1978 through
September 1979, and, further to pay the plaintiff rentals at the rate of P250.00 per month from October 1979 until
such time as possession of the premises in question shall have been restored to the plaintiff minus whatever amount
may have been already received by the plaintiff from deposits made in Court. The defendants are further ordered to
pay the plaintiff P1,000.00 as and for attorneys fees plus costs of suit. All claims by the defendants against the
plaintiff are dismissed, for lack of merit." (p. 74, Rollo).
Petitioners appealed the foregoing judgment to the then Court of First Instance which found the same "in accordance
with both the evidence and the law" and affirmed the decision. Thereafter, petitioners went to the Court of Appeals on
a petition for review and the latter, on January 29, 1982, rendered judgment as follows:
"PREMISES CONSIDERED, there being substantial evidence to support the decision under review, the instant petition is
hereby DENIED DUE COURSE and is resultantly hereby DISMISSED." (p. 22, Rollo)
Hence, this petition for review on certiorari, the Santoses submitting that (1) they were never delinquent in the
payment of rentals only the collector failed to get the money and since the whereabouts of private respondent was
unknown, they were forced to deposit them to the bank; (2) the mere sending of a notice to vacate by registered mail
which the postal clerk refused to deliver to them for the reason of wrong name cannot be considered sufficient

compliance with the jurisdictional requirement of notice; (3) they have been leasing the apartment for 28 years and
are therefore entitled to preferential right to purchase their unit under Presidential Decree No. 1517; (4) there is no real
need of the premises by private respondent; (5) it was an error to order their ejectment without complying with the
mandatory requirements of Batas Pambansa Blg. 25 and the ruling in Rantael v. Llave, 97 SCRA 453; (6) respondent
court erred in stating that a contract of lease of residential apartment involving a rental of P250.00 a month may be
terminated at the end of the month without default on the part of the lessee; (7) there was improper change of theory
on appeal on the part of private respondent; and, (8) there was error in affirming the decision of the lower court.
We find no merit in the petition.
1.

Petitioners, in their "Answer with Counterclaim" (Annex "B", Petition, page 62, Rollo) admit that they are "the
legitimate tenants and/or lessees of the subject apartment with the present rental rate of P250.00 a month on
a month-to-month contract of lease." (Emphasis supplied)

The aforequoted provision of the agreement on occupancy of the apartment cannot but mean as providing for a
definite period of the lease. The parties expressly agreed that upon proper notice, one may terminate the agreement.
As stated in Rantael v. Court of Appeals, 97 SCRA 453, 459
". . . The contractual relations between petitioner Rantael and respondent Llave ceased after the expiration of the first
thirty days reckoned from August 1, 1974 but continued for the next thirty-day period and expired after the last day
thereof, repeating the same cycle for the succeeding thirty-day periods, until the said respondent Llave exercised her
express prerogative under the agreement to terminate the same."
2.

Paragraph 1 of Article 1673 of the Civil Code is an exception to Section 4 of Presidential Decree No. 20. Said
Section 1 of Article 1673 provides

"Art. 1673.

The lessor may judicially eject the lessee for any of the following causes:

(1)
When the period agreed upon, or that which is fixed for the duration of lease under article 1682 and 1687, has
expired;"
Thus, judicial ejectment lies when the lease is for a definite period or when the fixed or definite period agreed upon
has expired. The lease in the case at bar having a definite period, it follows that private respondents right to judicially
eject petitioners from the premises may be enforced. As aptly stated by respondent Court of Appeals," [e]ven on the
strength alone of the Rantael ruling, the petitioners can be lawfully ejected, regardless of the motive or intent of the
lessor-private Respondent. We thus see no point in discussing the other issues raised except to state that P.D. No.
1517, in referring to the pre-emptive or redemptive right of a lease speaks only of urban land under lease on which a
tenant has built his home and in which he has resided for ten years or more. If both land and the building belong to the
lessor, the right referred to hereinabove does not apply." (p. 22, Rollo).
ACCORDINGLY, judgment is hereby rendered DISMISSING the instant petition for review and AFFIRMING the decision of
respondent Court of Appeals. With costs.
SO ORDERED.

G.R. No. 177056

September 18, 2009

THE OFFICE OF THE SOLICITOR GENERAL, Petitioner,

vs.
AYALA LAND INCORPORATED, ROBINSON'S LAND CORPORATION, SHANGRI-LA PLAZA CORPORATION and
SM PRIME HOLDINGS, INC., Respondents.
D E C I S I O N CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari, 1 under Rule 45 of the Revised Rules of Court, filed by petitioner
Office of the Solicitor General (OSG), seeking the reversal and setting aside of the Decision 2 dated 25 January 2007 of
the Court of Appeals in CA-G.R. CV No. 76298, which affirmed in toto the Joint Decision 3 dated 29 May 2002 of the
Regional Trial Court (RTC) of Makati City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210; and (2) the
Resolution4 dated 14 March 2007 of the appellate court in the same case which denied the Motion for Reconsideration
of the OSG. The RTC adjudged that respondents Ayala Land Incorporated (Ayala Land), Robinsons Land Corporation
(Robinsons), Shangri-la Plaza Corporation (Shangri-la), and SM Prime Holdings, Inc. (SM Prime) could not be obliged to
provide free parking spaces in their malls to their patrons and the general public.
Respondents Ayala Land, Robinsons, and Shangri-la maintain and operate shopping malls in various locations in Metro
Manila. Respondent SM Prime constructs, operates, and leases out commercial buildings and other structures, among
which, are SM City, Manila; SM Centerpoint, Sta. Mesa, Manila; SM City, North Avenue, Quezon City; and SM Southmall,
Las Pias.
The shopping malls operated or leased out by respondents have parking facilities for all kinds of motor vehicles, either
by way of parking spaces inside the mall buildings or in separate buildings and/or adjacent lots that are solely devoted
for use as parking spaces. Respondents Ayala Land, Robinsons, and SM Prime spent for the construction of their own
parking facilities. Respondent Shangri-la is renting its parking facilities, consisting of land and building specifically used
as parking spaces, which were constructed for the lessors account.
Respondents expend for the maintenance and administration of their respective parking facilities. They provide
security personnel to protect the vehicles parked in their parking facilities and maintain order within the area. In turn,
they collect the following parking fees from the persons making use of their parking facilities, regardless of whether
said persons are mall patrons or not:
Respondent
Ayala Land

Robinsons

Shangri-la
SM Prime

Parking Fees
On weekdays, P25.00 for the first four hours andP10.00
for every succeeding hour; on weekends, flat rate
of P25.00 per day
P20.00 for the first three hours and P10.00 for every
succeeding hour
Flat rate of P30.00 per day
P10.00 to P20.00 (depending on whether the parking
space is outdoors or indoors) for the first three hours
and 59 minutes, and P10.00 for every succeeding hour
or fraction thereof

The parking tickets or cards issued by respondents to vehicle owners contain the stipulation that respondents shall not
be responsible for any loss or damage to the vehicles parked in respondents parking facilities.
In 1999, the Senate Committees on Trade and Commerce and on Justice and Human Rights conducted a joint
investigation for the following purposes: (1) to inquire into the legality of the prevalent practice of shopping malls of
charging parking fees; (2) assuming arguendo that the collection of parking fees was legally authorized, to find out the
basis and reasonableness of the parking rates charged by shopping malls; and (3) to determine the legality of the
policy of shopping malls of denying liability in cases of theft, robbery, or carnapping, by invoking the waiver clause at
the back of the parking tickets. Said Senate Committees invited the top executives of respondents, who operate the
major malls in the country; the officials from the Department of Trade and Industry (DTI), Department of Public Works
and Highways (DPWH), Metro Manila Development Authority (MMDA), and other local government officials; and the
Philippine Motorists Association (PMA) as representative of the consumers group.
After three public hearings held on 30 September, 3 November, and 1 December 1999, the afore-mentioned Senate
Committees jointly issued Senate Committee Report No. 225 5 on 2 May 2000, in which they concluded:
In view of the foregoing, the Committees find that the collection of parking fees by shopping malls is contrary to the
National Building Code and is therefor [sic] illegal. While it is true that the Code merely requires malls to provide
parking spaces, without specifying whether it is free or not, both Committees believe that the reasonable and logical

interpretation of the Code is that the parking spaces are for free. This interpretation is not only reasonable and logical
but finds support in the actual practice in other countries like the United States of America where parking spaces
owned and operated by mall owners are free of charge.
Figuratively speaking, the Code has "expropriated" the land for parking something similar to the subdivision law
which require developers to devote so much of the land area for parks.
Moreover, Article II of R.A. No. 9734 (Consumer Act of the Philippines) provides that "it is the policy of the State to
protect the interest of the consumers, promote the general welfare and establish standards of conduct for business
and industry." Obviously, a contrary interpretation (i.e., justifying the collection of parking fees) would be going against
the declared policy of R.A. 7394.
Section 201 of the National Building Code gives the responsibility for the administration and enforcement of the
provisions of the Code, including the imposition of penalties for administrative violations thereof to the Secretary of
Public Works. This set up, however, is not being carried out in reality.
In the position paper submitted by the Metropolitan Manila Development Authority (MMDA), its chairman, Jejomar C.
Binay, accurately pointed out that the Secretary of the DPWH is responsible for the implementation/enforcement of the
National Building Code. After the enactment of the Local Government Code of 1991, the local government units (LGUs)
were tasked to discharge the regulatory powers of the DPWH. Hence, in the local level, the Building Officials enforce all
rules/ regulations formulated by the DPWH relative to all building plans, specifications and designs including parking
space requirements. There is, however, no single national department or agency directly tasked to supervise the
enforcement of the provisions of the Code on parking, notwithstanding the national character of the law. 6
Senate Committee Report No. 225, thus, contained the following recommendations:
In light of the foregoing, the Committees on Trade and Commerce and Justice and Human Rights hereby recommend
the following:
1. The Office of the Solicitor General should institute the necessary action to enjoin the collection of parking
fees as well as to enforce the penal sanction provisions of the National Building Code. The Office of the
Solicitor General should likewise study how refund can be exacted from mall owners who continue to collect
parking fees.
2. The Department of Trade and Industry pursuant to the provisions of R.A. No. 7394, otherwise known as the
Consumer Act of the Philippines should enforce the provisions of the Code relative to parking. Towards this end,
the DTI should formulate the necessary implementing rules and regulations on parking in shopping malls, with
prior consultations with the local government units where these are located. Furthermore, the DTI, in
coordination with the DPWH, should be empowered to regulate and supervise the construction and
maintenance of parking establishments.
3. Finally, Congress should amend and update the National Building Code to expressly prohibit shopping malls
from collecting parking fees by at the same time, prohibit them from invoking the waiver of liability. 7
Respondent SM Prime thereafter received information that, pursuant to Senate Committee Report No. 225, the DPWH
Secretary and the local building officials of Manila, Quezon City, and Las Pias intended to institute, through the OSG,
an action to enjoin respondent SM Prime and similar establishments from collecting parking fees, and to impose upon
said establishments penal sanctions under Presidential Decree No. 1096, otherwise known as the National Building
Code of the Philippines (National Building Code), and its Implementing Rules and Regulations (IRR). With the
threatened action against it, respondent SM Prime filed, on 3 October 2000, a Petition for Declaratory Relief 8 under
Rule 63 of the Revised Rules of Court, against the DPWH Secretary and local building officials of Manila, Quezon City,
and Las Pias. Said Petition was docketed as Civil Case No. 00-1208 and assigned to the RTC of Makati City, Branch
138, presided over by Judge Sixto Marella, Jr. (Judge Marella). In its Petition, respondent SM Prime prayed for judgment:
a) Declaring Rule XIX of the Implementing Rules and Regulations of the National Building Code as ultra vires,
hence, unconstitutional and void;
b) Declaring [herein respondent SM Prime]s clear legal right to lease parking spaces appurtenant to its
department stores, malls, shopping centers and other commercial establishments; and
c) Declaring the National Building Code of the Philippines Implementing Rules and Regulations as ineffective,
not having been published once a week for three (3) consecutive weeks in a newspaper of general circulation,
as prescribed by Section 211 of Presidential Decree No. 1096.
[Respondent SM Prime] further prays for such other reliefs as may be deemed just and equitable under the premises. 9
The very next day, 4 October 2000, the OSG filed a Petition for Declaratory Relief and Injunction (with Prayer for
Temporary Restraining Order and Writ of Preliminary Injunction) 10 against respondents. This Petition was docketed as
Civil Case No. 00-1210 and raffled to the RTC of Makati, Branch 135, presided over by Judge Francisco B. Ibay (Judge
Ibay). Petitioner prayed that the RTC:
1. After summary hearing, a temporary restraining order and a writ of preliminary injunction be issued
restraining respondents from collecting parking fees from their customers; and

2. After hearing, judgment be rendered declaring that the practice of respondents in charging parking fees is
violative of the National Building Code and its Implementing Rules and Regulations and is therefore invalid, and
making permanent any injunctive writ issued in this case.
Other reliefs just and equitable under the premises are likewise prayed for. 11
On 23 October 2000, Judge Ibay of the RTC of Makati City, Branch 135, issued an Order consolidating Civil Case No. 001210 with Civil Case No. 00-1208 pending before Judge Marella of RTC of Makati, Branch 138.
As a result of the pre-trial conference held on the morning of 8 August 2001, the RTC issued a Pre-Trial Order 12of even
date which limited the issues to be resolved in Civil Cases No. 00-1208 and No. 00-1210 to the following:
1. Capacity of the plaintiff [OSG] in Civil Case No. 00-1210 to institute the present proceedings and relative
thereto whether the controversy in the collection of parking fees by mall owners is a matter of public welfare.
2. Whether declaratory relief is proper.
3. Whether respondent Ayala Land, Robinsons, Shangri-La and SM Prime are obligated to provide parking
spaces in their malls for the use of their patrons or the public in general, free of charge.
4. Entitlement of the parties of [sic] award of damages. 13
On 29 May 2002, the RTC rendered its Joint Decision in Civil Cases No. 00-1208 and No. 00-1210.
The RTC resolved the first two issues affirmatively. It ruled that the OSG can initiate Civil Case No. 00-1210 under
Presidential Decree No. 478 and the Administrative Code of 1987. 14 It also found that all the requisites for an action for
declaratory relief were present, to wit:
The requisites for an action for declaratory relief are: (a) there is a justiciable controversy; (b) the controversy is
between persons whose interests are adverse; (c) the party seeking the relief has a legal interest in the controversy;
and (d) the issue involved is ripe for judicial determination.
SM, the petitioner in Civil Case No. 001-1208 [sic] is a mall operator who stands to be affected directly by the position
taken by the government officials sued namely the Secretary of Public Highways and the Building Officials of the local
government units where it operates shopping malls. The OSG on the other hand acts on a matter of public interest and
has taken a position adverse to that of the mall owners whom it sued. The construction of new and bigger malls has
been announced, a matter which the Court can take judicial notice and the unsettled issue of whether mall operators
should provide parking facilities, free of charge needs to be resolved. 15
As to the third and most contentious issue, the RTC pronounced that:
The Building Code, which is the enabling law and the Implementing Rules and Regulations do not impose that parking
spaces shall be provided by the mall owners free of charge. Absent such directive[,] Ayala Land, Robinsons, Shangri-la
and SM [Prime] are under no obligation to provide them for free. Article 1158 of the Civil Code is clear:
"Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are
demandable and shall be regulated by the precepts of the law which establishes them; and as to what has not been
foreseen, by the provisions of this Book (1090).["]
xxxx
The provision on ratios of parking slots to several variables, like shopping floor area or customer area found in Rule XIX
of the Implementing Rules and Regulations cannot be construed as a directive to provide free parking spaces, because
the enabling law, the Building Code does not so provide. x x x.
To compel Ayala Land, Robinsons, Shangri-La and SM [Prime] to provide parking spaces for free can be considered as
an unlawful taking of property right without just compensation.
Parking spaces in shopping malls are privately owned and for their use, the mall operators collect fees. The legal
relationship could be either lease or deposit. In either case[,] the mall owners have the right to collect money which
translates into income. Should parking spaces be made free, this right of mall owners shall be gone. This, without just
compensation. Further, loss of effective control over their property will ensue which is frowned upon by law.
The presence of parking spaces can be viewed in another light. They can be looked at as necessary facilities to entice
the public to increase patronage of their malls because without parking spaces, going to their malls will be
inconvenient. These are[,] however[,] business considerations which mall operators will have to decide for themselves.
They are not sufficient to justify a legal conclusion, as the OSG would like the Court to adopt that it is the obligation of
the mall owners to provide parking spaces for free.16
The RTC then held that there was no sufficient evidence to justify any award for damages.
The RTC finally decreed in its 29 May 2002 Joint Decision in Civil Cases No. 00-1208 and No. 00-1210 that:
FOR THE REASONS GIVEN, the Court declares that Ayala Land[,] Inc., Robinsons Land Corporation, Shangri-la Plaza
Corporation and SM Prime Holdings[,] Inc. are not obligated to provide parking spaces in their malls for the use of their
patrons or public in general, free of charge.
All counterclaims in Civil Case No. 00-1210 are dismissed.

No pronouncement as to costs.17
CA-G.R. CV No. 76298 involved the separate appeals of the OSG 18 and respondent SM Prime19 filed with the Court of
Appeals. The sole assignment of error of the OSG in its Appellants Brief was:
THE TRIAL COURT ERRED IN HOLDING THAT THE NATIONAL BUILDING CODE DID NOT INTEND MALL PARKING SPACES
TO BE FREE OF CHARGE[;]20
while the four errors assigned by respondent SM Prime in its Appellants Brief were:
I
THE TRIAL COURT ERRED IN FAILING TO DECLARE RULE XIX OF THE IMPLEMENTING RULES AS HAVING BEEN ENACTED
ULTRA VIRES, HENCE, UNCONSTITUTIONAL AND VOID.
II
THE TRIAL COURT ERRED IN FAILING TO DECLARE THE IMPLEMENTING RULES INEFFECTIVE FOR NOT HAVING BEEN
PUBLISHED AS REQUIRED BY LAW.
III
THE TRIAL COURT ERRED IN FAILING TO DISMISS THE OSGS PETITION FOR DECLARATORY RELIEF AND INJUNCTION FOR
FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES.
IV
THE TRIAL COURT ERRED IN FAILING TO DECLARE THAT THE OSG HAS NO LEGAL CAPACITY TO SUE AND/OR THAT IT IS
NOT A REAL PARTY-IN-INTEREST IN THE INSTANT CASE. 21
Respondent Robinsons filed a Motion to Dismiss Appeal of the OSG on the ground that the lone issue raised therein
involved a pure question of law, not reviewable by the Court of Appeals.
The Court of Appeals promulgated its Decision in CA-G.R. CV No. 76298 on 25 January 2007. The appellate court
agreed with respondent Robinsons that the appeal of the OSG should suffer the fate of dismissal, since "the issue on
whether or not the National Building Code and its implementing rules require shopping mall operators to provide
parking facilities to the public for free" was evidently a question of law. Even so, since CA-G.R. CV No. 76298 also
included the appeal of respondent SM Prime, which raised issues worthy of consideration, and in order to satisfy the
demands of substantial justice, the Court of Appeals proceeded to rule on the merits of the case.
In its Decision, the Court of Appeals affirmed the capacity of the OSG to initiate Civil Case No. 00-1210 before the RTC
as the legal representative of the government, 22 and as the one deputized by the Senate of the Republic of the
Philippines through Senate Committee Report No. 225.
The Court of Appeals rejected the contention of respondent SM Prime that the OSG failed to exhaust administrative
remedies. The appellate court explained that an administrative review is not a condition precedent to judicial relief
where the question in dispute is purely a legal one, and nothing of an administrative nature is to be or can be done.
The Court of Appeals likewise refused to rule on the validity of the IRR of the National Building Code, as such issue was
not among those the parties had agreed to be resolved by the RTC during the pre-trial conference for Civil Cases No.
00-1208 and No. 00-1210. Issues cannot be raised for the first time on appeal. Furthermore, the appellate court found
that the controversy could be settled on other grounds, without touching on the issue of the validity of the IRR. It
referred to the settled rule that courts should refrain from passing upon the constitutionality of a law or implementing
rules, because of the principle that bars judicial inquiry into a constitutional question, unless the resolution thereof is
indispensable to the determination of the case.
Lastly, the Court of Appeals declared that Section 803 of the National Building Code and Rule XIX of the IRR were clear
and needed no further construction. Said provisions were only intended to control the occupancy or congestion of
areas and structures. In the absence of any express and clear provision of law, respondents could not be obliged and
expected to provide parking slots free of charge.
The fallo of the 25 January 2007 Decision of the Court of Appeals reads:
WHEREFORE, premises considered, the instant appeals are DENIED. Accordingly, appealed Decision is hereby
AFFIRMED in toto.23
In its Resolution issued on 14 March 2007, the Court of Appeals denied the Motion for Reconsideration of the OSG,
finding that the grounds relied upon by the latter had already been carefully considered, evaluated, and passed upon
by the appellate court, and there was no strong and cogent reason to modify much less reverse the assailed judgment.
The OSG now comes before this Court, via the instant Petition for Review, with a single assignment of error:
THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE RULING OF THE LOWER COURT THAT RESPONDENTS
ARE NOT OBLIGED TO PROVIDE FREE PARKING SPACES TO THEIR CUSTOMERS OR THE PUBLIC. 24
The OSG argues that respondents are mandated to provide free parking by Section 803 of the National Building Code
and Rule XIX of the IRR.
According to Section 803 of the National Building Code:

SECTION 803. Percentage of Site Occupancy

(a) Maximum site occupancy shall be governed by the use, type of construction, and height of the building and
the use, area, nature, and location of the site; and subject to the provisions of the local zoning requirements
and in accordance with the rules and regulations promulgated by the Secretary.
In connection therewith, Rule XIX of the old IRR,25 provides:
RULE XIX PARKING AND LOADING SPACE REQUIREMENTS
Pursuant to Section 803 of the National Building Code (PD 1096) providing for maximum site occupancy, the following
provisions on parking and loading space requirements shall be observed:
1. The parking space ratings listed below are minimum off-street requirements for specific uses/occupancies for
buildings/structures:
1.1 The size of an average automobile parking slot shall be computed as 2.4 meters by 5.00 meters for perpendicular
or diagonal parking, 2.00 meters by 6.00 meters for parallel parking. A truck or bus parking/loading slot shall be
computed at a minimum of 3.60 meters by 12.00 meters. The parking slot shall be drawn to scale and the total
number of which shall be indicated on the plans and specified whether or not parking accommodations, are attendantmanaged. (See Section 2 for computation of parking requirements).
xxxx
1.7 Neighborhood shopping center 1 slot/100 sq. m. of shopping floor area
The OSG avers that the aforequoted provisions should be read together with Section 102 of the National Building Code,
which declares:
SECTION 102. Declaration of Policy
It is hereby declared to be the policy of the State to safeguard life, health, property, and public welfare, consistent with
the principles of sound environmental management and control; and to this end, make it the purpose of this Code to
provide for all buildings and structures, a framework of minimum standards and requirements to regulate and control
their location, site, design, quality of materials, construction, use, occupancy, and maintenance.
The requirement of free-of-charge parking, the OSG argues, greatly contributes to the aim of safeguarding "life, health,
property, and public welfare, consistent with the principles of sound environmental management and control."
Adequate parking spaces would contribute greatly to alleviating traffic congestion when complemented by quick and
easy access thereto because of free-charge parking. Moreover, the power to regulate and control the use, occupancy,
and maintenance of buildings and structures carries with it the power to impose fees and, conversely, to control -partially or, as in this case, absolutely -- the imposition of such fees.
The Court finds no merit in the present Petition.
The explicit directive of the afore-quoted statutory and regulatory provisions, garnered from a plain reading thereof, is
that respondents, as operators/lessors of neighborhood shopping centers, should provide parking and loading spaces,
in accordance with the minimum ratio of one slot per 100 square meters of shopping floor area. There is nothing
therein pertaining to the collection (or non-collection) of parking fees by respondents. In fact, the term "parking fees"
cannot even be found at all in the entire National Building Code and its IRR.
Statutory construction has it that if a statute is clear and unequivocal, it must be given its literal meaning and applied
without any attempt at interpretation. 26 Since Section 803 of the National Building Code and Rule XIX of its IRR do not
mention parking fees, then simply, said provisions do not regulate the collection of the same. The RTC and the Court of
Appeals correctly applied Article 1158 of the New Civil Code, which states:
Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special
laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has
not been foreseen, by the provisions of this Book. (Emphasis ours.)
Hence, in order to bring the matter of parking fees within the ambit of the National Building Code and its IRR, the OSG
had to resort to specious and feeble argumentation, in which the Court cannot concur.
The OSG cannot rely on Section 102 of the National Building Code to expand the coverage of Section 803 of the same
Code and Rule XIX of the IRR, so as to include the regulation of parking fees. The OSG limits its citation to the first part
of Section 102 of the National Building Code declaring the policy of the State "to safeguard life, health, property, and
public welfare, consistent with the principles of sound environmental management and control"; but totally ignores the
second part of said provision, which reads, "and to this end, make it the purpose of this Code to provide for all
buildings and structures, a framework of minimum standards and requirements to regulate and control their location,
site, design, quality of materials, construction, use, occupancy, and maintenance." While the first part of Section 102
of the National Building Code lays down the State policy, it is the second part thereof that explains how said policy
shall be carried out in the Code. Section 102 of the National Building Code is not an all-encompassing grant of
regulatory power to the DPWH Secretary and local building officials in the name of life, health, property, and public
welfare. On the contrary, it limits the regulatory power of said officials to ensuring that the minimum standards and
requirements for all buildings and structures, as set forth in the National Building Code, are complied with.

Consequently, the OSG cannot claim that in addition to fixing the minimum requirements for parking spaces for
buildings, Rule XIX of the IRR also mandates that such parking spaces be provided by building owners free of charge. If
Rule XIX is not covered by the enabling law, then it cannot be added to or included in the implementing rules. The rulemaking power of administrative agencies must be confined to details for regulating the mode or proceedings to carry
into effect the law as it has been enacted, and it cannot be extended to amend or expand the statutory requirements
or to embrace matters not covered by the statute. Administrative regulations must always be in harmony with the
provisions of the law because any resulting discrepancy between the two will always be resolved in favor of the basic
law.27
From the RTC all the way to this Court, the OSG repeatedly referred to Republic v. Gonzales 28 and City of Ozamis v.
Lumapas29 to support its position that the State has the power to regulate parking spaces to promote the health,
safety, and welfare of the public; and it is by virtue of said power that respondents may be required to provide free
parking facilities. The OSG, though, failed to consider the substantial differences in the factual and legal backgrounds
of these two cases from those of the Petition at bar.
In Republic, the Municipality of Malabon sought to eject the occupants of two parcels of land of the public domain to
give way to a road-widening project. It was in this context that the Court pronounced:
Indiscriminate parking along F. Sevilla Boulevard and other main thoroughfares was prevalent; this, of course, caused
the build up of traffic in the surrounding area to the great discomfort and inconvenience of the public who use the
streets. Traffic congestion constitutes a threat to the health, welfare, safety and convenience of the people and it can
only be substantially relieved by widening streets and providing adequate parking areas.
The Court, in City of Ozamis, declared that the City had been clothed with full power to control and regulate its streets
for the purpose of promoting public health, safety and welfare. The City can regulate the time, place, and manner of
parking in the streets and public places; and charge minimal fees for the street parking to cover the expenses for
supervision, inspection and control, to ensure the smooth flow of traffic in the environs of the public market, and for
the safety and convenience of the public.
Republic and City of Ozamis involved parking in the local streets; in contrast, the present case deals with privately
owned parking facilities available for use by the general public. In Republic and City of Ozamis, the concerned local
governments regulated parking pursuant to their power to control and regulate their streets; in the instant case, the
DPWH Secretary and local building officials regulate parking pursuant to their authority to ensure compliance with the
minimum standards and requirements under the National Building Code and its IRR. With the difference in subject
matters and the bases for the regulatory powers being invoked, Republic and City of Ozamis do not constitute
precedents for this case.
Indeed, Republic and City of Ozamis both contain pronouncements that weaken the position of the OSG in the case at
bar. In Republic, the Court, instead of placing the burden on private persons to provide parking facilities to the general
public, mentioned the trend in other jurisdictions wherein the municipal governments themselves took the initiative to
make more parking spaces available so as to alleviate the traffic problems, thus:
Under the Land Transportation and Traffic Code, parking in designated areas along public streets or highways is
allowed which clearly indicates that provision for parking spaces serves a useful purpose. In other jurisdictions where
traffic is at least as voluminous as here, the provision by municipal governments of parking space is not limited to
parking along public streets or highways. There has been a marked trend to build off-street parking facilities with the
view to removing parked cars from the streets. While the provision of off-street parking facilities or carparks has been
commonly undertaken by private enterprise, municipal governments have been constrained to put up carparks in
response to public necessity where private enterprise had failed to keep up with the growing public demand. American
courts have upheld the right of municipal governments to construct off-street parking facilities as clearly redounding to
the public benefit. 30
In City of Ozamis, the Court authorized the collection by the City of minimal fees for the parking of vehicles along the
streets: so why then should the Court now preclude respondents from collecting from the public a fee for the use of the
mall parking facilities? Undoubtedly, respondents also incur expenses in the maintenance and operation of the mall
parking facilities, such as electric consumption, compensation for parking attendants and security, and upkeep of the
physical structures.
It is not sufficient for the OSG to claim that "the power to regulate and control the use, occupancy, and maintenance of
buildings and structures carries with it the power to impose fees and, conversely, to control, partially or, as in this
case, absolutely, the imposition of such fees." Firstly, the fees within the power of regulatory agencies to impose are
regulatory fees. It has been settled law in this jurisdiction that this broad and all-compassing governmental
competence to restrict rights of liberty and property carries with it the undeniable power to collect a regulatory fee. It
looks to the enactment of specific measures that govern the relations not only as between individuals but also as
between private parties and the political society. 31 True, if the regulatory agencies have the power to impose regulatory
fees, then conversely, they also have the power to remove the same. Even so, it is worthy to note that the present
case does not involve the imposition by the DPWH Secretary and local building officials of regulatory fees upon
respondents; but the collection by respondents of parking fees from persons who use the mall parking facilities.
Secondly, assuming arguendo that the DPWH Secretary and local building officials do have regulatory powers over the
collection of parking fees for the use of privately owned parking facilities, they cannot allow or prohibit such collection
arbitrarily or whimsically. Whether allowing or prohibiting the collection of such parking fees, the action of the DPWH

Secretary and local building officials must pass the test of classic reasonableness and propriety of the measures or
means in the promotion of the ends sought to be accomplished. 32
Keeping in mind the aforementioned test of reasonableness and propriety of measures or means, the Court notes that
Section 803 of the National Building Code falls under Chapter 8 on Light and Ventilation. Evidently, the Code deems it
necessary to regulate site occupancy to ensure that there is proper lighting and ventilation in every building. Pursuant
thereto, Rule XIX of the IRR requires that a building, depending on its specific use and/or floor area, should provide a
minimum number of parking spaces. The Court, however, fails to see the connection between regulating site
occupancy to ensure proper light and ventilation in every building vis--vis regulating the collection by building owners
of fees for the use of their parking spaces. Contrary to the averment of the OSG, the former does not necessarily
include or imply the latter. It totally escapes this Court how lighting and ventilation conditions at the malls could be
affected by the fact that parking facilities thereat are free or paid for.
The OSG attempts to provide the missing link by arguing that:
Under Section 803 of the National Building Code, complimentary parking spaces are required to enhance light and
ventilation, that is, to avoid traffic congestion in areas surrounding the building, which certainly affects the ventilation
within the building itself, which otherwise, the annexed parking spaces would have served. Free-of-charge parking
avoids traffic congestion by ensuring quick and easy access of legitimate shoppers to off-street parking spaces
annexed to the malls, and thereby removing the vehicles of these legitimate shoppers off the busy streets near the
commercial establishments.33
The Court is unconvinced. The National Building Code regulates buildings, by setting the minimum specifications and
requirements for the same. It does not concern itself with traffic congestion in areas surrounding the building. It is
already a stretch to say that the National Building Code and its IRR also intend to solve the problem of traffic
congestion around the buildings so as to ensure that the said buildings shall have adequate lighting and ventilation.
Moreover, the Court cannot simply assume, as the OSG has apparently done, that the traffic congestion in areas
around the malls is due to the fact that respondents charge for their parking facilities, thus, forcing vehicle owners to
just park in the streets. The Court notes that despite the fees charged by respondents, vehicle owners still use the mall
parking facilities, which are even fully occupied on some days. Vehicle owners may be parking in the streets only
because there are not enough parking spaces in the malls, and not because they are deterred by the parking fees
charged by respondents. Free parking spaces at the malls may even have the opposite effect from what the OSG
envisioned: more people may be encouraged by the free parking to bring their own vehicles, instead of taking public
transport, to the malls; as a result, the parking facilities would become full sooner, leaving more vehicles without
parking spaces in the malls and parked in the streets instead, causing even more traffic congestion.
Without using the term outright, the OSG is actually invoking police power to justify the regulation by the State,
through the DPWH Secretary and local building officials, of privately owned parking facilities, including the collection
by the owners/operators of such facilities of parking fees from the public for the use thereof. The Court finds, however,
that in totally prohibiting respondents from collecting parking fees from the public for the use of the mall parking
facilities, the State would be acting beyond the bounds of police power.
Police power is the power of promoting the public welfare by restraining and regulating the use of liberty and property.
It is usually exerted in order to merely regulate the use and enjoyment of the property of the owner. The power to
regulate, however, does not include the power to prohibit. A fortiori, the power to regulate does not include the power
to confiscate. Police power does not involve the taking or confiscation of property, with the exception of a few cases
where there is a necessity to confiscate private property in order to destroy it for the purpose of protecting peace and
order and of promoting the general welfare; for instance, the confiscation of an illegally possessed article, such as
opium and firearms. 34
When there is a taking or confiscation of private property for public use, the State is no longer exercising police power,
but another of its inherent powers, namely, eminent domain. Eminent domain enables the State to forcibly acquire
private lands intended for public use upon payment of just compensation to the owner. 35
Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of,
the expropriated property; but no cogent reason appears why the said power may not be availed of only to impose a
burden upon the owner of condemned property, without loss of title and possession. 36 It is a settled rule that neither
acquisition of title nor total destruction of value is essential to taking. It is usually in cases where title remains with the
private owner that inquiry should be made to determine whether the impairment of a property is merely regulated or
amounts to a compensable taking. A regulation that deprives any person of the profitable use of his property
constitutes a taking and entitles him to compensation, unless the invasion of rights is so slight as to permit the
regulation to be justified under the police power. Similarly, a police regulation that unreasonably restricts the right to
use business property for business purposes amounts to a taking of private property, and the owner may recover
therefor.371avvphi1
Although in the present case, title to and/or possession of the parking facilities remain/s with respondents, the
prohibition against their collection of parking fees from the public, for the use of said facilities, is already tantamount
to a taking or confiscation of their properties. The State is not only requiring that respondents devote a portion of the
latters properties for use as parking spaces, but is also mandating that they give the public access to said parking
spaces for free. Such is already an excessive intrusion into the property rights of respondents. Not only are they being
deprived of the right to use a portion of their properties as they wish, they are further prohibited from profiting from its

use or even just recovering therefrom the expenses for the maintenance and operation of the required parking
facilities.
The ruling of this Court in City Government of Quezon City v. Judge Ericta 38 is edifying. Therein, the City Government of
Quezon City passed an ordinance obliging private cemeteries within its jurisdiction to set aside at least six percent of
their total area for charity, that is, for burial grounds of deceased paupers. According to the Court, the ordinance in
question was null and void, for it authorized the taking of private property without just compensation:
There is no reasonable relation between the setting aside of at least six (6) percent of the total area of all private
cemeteries for charity burial grounds of deceased paupers and the promotion of' health, morals, good order, safety, or
the general welfare of the people. The ordinance is actually a taking without compensation of a certain area from a
private cemetery to benefit paupers who are charges of the municipal corporation. Instead of' building or maintaining
a public cemetery for this purpose, the city passes the burden to private cemeteries.
'The expropriation without compensation of a portion of private cemeteries is not covered by Section 12(t) of Republic
Act 537, the Revised Charter of Quezon City which empowers the city council to prohibit the burial of the dead within
the center of population of the city and to provide for their burial in a proper place subject to the provisions of general
law regulating burial grounds and cemeteries. When the Local Government Code, Batas Pambansa Blg. 337 provides in
Section 177(q) that a sangguniang panlungsod may "provide for the burial of the dead in such place and in such
manner as prescribed by law or ordinance" it simply authorizes the city to provide its own city owned land or to buy or
expropriate private properties to construct public cemeteries. This has been the law, and practise in the past. It
continues to the present. Expropriation, however, requires payment of just compensation. The questioned ordinance is
different from laws and regulations requiring owners of subdivisions to set aside certain areas for streets, parks,
playgrounds, and other public facilities from the land they sell to buyers of subdivision lots. The necessities of public
safety, health, and convenience are very clear from said requirements which are intended to insure the development
of communities with salubrious and wholesome environments. The beneficiaries of the regulation, in turn, are made to
pay by the subdivision developer when individual lots are sold to homeowners.
In conclusion, the total prohibition against the collection by respondents of parking fees from persons who use the mall
parking facilities has no basis in the National Building Code or its IRR. The State also cannot impose the same
prohibition by generally invoking police power, since said prohibition amounts to a taking of respondents property
without payment of just compensation.
Given the foregoing, the Court finds no more need to address the issue persistently raised by respondent SM Prime
concerning the unconstitutionality of Rule XIX of the IRR. In addition, the said issue was not among those that the
parties, during the pre-trial conference for Civil Cases No. 12-08 and No. 00-1210, agreed to submit for resolution of
the RTC. It is likewise axiomatic that the constitutionality of a law, a regulation, an ordinance or an act will not be
resolved by courts if the controversy can be, as in this case it has been, settled on other grounds. 39
WHEREFORE, the instant Petition for Review on Certiorari is hereby DENIED. The Decision dated 25 January 2007 and
Resolution dated 14 March 2007 of the Court of Appeals in CA-G.R. CV No. 76298, affirming in toto the Joint Decision
dated 29 May 2002 of the Regional Trial Court of Makati City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210
are hereby AFFIRMED. No costs.
SO ORDERED.

G.R. No. 121810

December 7, 2001

SPOUSES INOCENCIO AND ADORACION SAN ANTONIO, petitioners,

vs.
COURT OF APPEALS AND SPOUSES MARIO AND GREGORIO GERONIMO, respondents.
QUISUMBING, J.:
This is a petition for review seeking the reversal of the decision 1 dated April 28, 1995, of the Court of Appeals in CAG.R. SP No. 35271 affirming the orders dated May 5, 1994, 2 July 12, 19943 and September 1, 1994,4respectively, of the
Regional Trial Court of Malolos Bulacan, Branch 22, granting the motion for execution of compromise judgment dated
September 22, 1993 in Civil Case No. 233-M-92.
The facts, as culled from the records, are as follows:
Private respondents spouses Mario and Gregoria Geronimo obtained a loan in the amount of One Million Twenty Eight
Thousand Pesos (P1,028,000) from petitioners, the spouses Inocencio and Adoracion San Antonio. To secure the loan,
private respondents mortgaged two parcels of land covered by TCT No. RT-6653 with an area of 10,390 square meters
and TCT No. RT-6652 with an area of 2,556 square meters, both situated in Barrio Tabe, Guiguinto, Bulacan.
Subsequently, private respondents obtained an additional loan of Nine Hundred Fifty Nine Pesos (P991,859) with an
interest of 3.33% per month, thus making their total obligation in the amount of Two Million Nineteen Thousand Eight
Hundred Fifty Nine Pesos (P2,019,859), payable on or before February 15, 1991. Private respondents failed to pay the
loan and the interest on the due date, hence, the mortgage was extra-judicially foreclosed. During the auction sale,
petitioners, being the highest bidder bought the two parcels of land.
Before the one-year redemption period expired, private respondents filed a complaint for annulment of extra-judicial
foreclosure with preliminary mandatory injunction, docketed as Civil Case No. 233-M-92, with the Regional Trial Court
of Bulacan, Branch 22. After the parties presented their respective evidence, they submitted to the court on
September 16, 1993, a compromise agreement dated August 25, 1993, the terms and conditions of which are quoted
as follows:
COME NOW parties assisted by their respective counsels and before the Honorable Court most respectfully
submit this compromise agreement, the terms and conditions of which are:
1. For a consideration of TWO MILLION PESOS (P2,000,000.00) Philippine Currency in hand received today by
the defendants spouses Inocencio and Adoracion San Antonio from the plaintiffs, defendants San Antonio will
execute a deed of resale/reconveyance/redemption of that subject property covered by TCT No. RT-6653 (T209250) of the Registry of Deeds of Bulacan including its improvements;
2. For the release/resale/reconveyance of the other property involved in the case described in TCT No. RT-6652
(T-296744) of the other property involved in the case described in TCT No. RT-6652 (T-296744) of the Registry
of Deeds of Bulacan together with its improvements, plaintiffs obligate themselves to transfer the ownership of
the following to the defendants San Antonio.
a. That lot including its improvements situated in Brgy. Tuctucan, Municipality of Guiguinto, Bulcan,
covered by TCT No. 29832, Blk. 4, Lot No. 3 consisting of 135 square meters;
b. That lot situated in Brgy. Tuctucan, Municipality of Guiguinto, Bulcan covered by TCT No. 30078, Blk.
9, Lot 27 consisting of 78 square meters;
c. Another lot situated in Brgy. Tuctucan, Municipality of Guiguinto, Bulcan, covered by TCT No. 30079,
Blk. No. 38 consisting of 75 square meters.
Within six (6) months from signing of this compromise agreement simultaneous to which delivery of the title to
the afore-mentioned properties in the names of the defendants San Antonio, the defendants San Antonio will
execute the corresponding instrument of resale/reconveyance/redemption over that properly together with its
improvements covered by TCT No. RT-6652 (T-296744), for the purpose of the cancellation of the annulment of
the sale in the title subject to the condition that should plaintiffs fail to deliver the titles to the three lots
heretofore mentioned to the defendants San Antonio, the said plaintiffs shall be deemed to have waived and
renounced any all rights, claims and demands whatsoever they may have over that property covered by TCT
No. RT-6652 (T-296744) including its improvements and thenceforth bind themselves to respect the right of
ownership, and possession of the defendants San Antonio over said property, or to pay Two Million Pesos
(P2,000,000.00) within the same period;
3. That the parties further agree to set aside any claim, damages and counter-claims they may have against
each other;
4. That in the meantime, the possession of the plaintiffs of the subject property covering TCT No. 6652 (T296744) and TCT No. RT-6653 (T-209250) shall it be respect; (SIC)
5. This compromise agreement shall be in full settlement of the obligations of the plaintiffs with respect to
Kasulatan ng Sanglaan dated February 14, 1989 and the Susog ng Kasulatan ng Sanglaan dated July 16, 1990,
subject matter of the complaint, and those related there.
6. This compromise agreement is immediately executory (underscoring supplied).5

Finding the above to be in order, the trial court approved the same in its order dated September 22, 1993, thus:
A careful perusal of the Compromise Agreement dated August 25, 1993 reveals that the terms and conditions
thereof are not contrary to law, morals and public policy.
ACCORDINGLY, the compromise agreement dated August 25, 1993 is hereby APPROVED. The parties are
enjoined to comply faithfully with their obligation under said agreement.
SO ORDERED.6
In accordance with the stipulations in paragraph 1 of the Compromise Agreement, petitioners executed a Certificate of
Redemption and Cancellation of Sale covering TCT No. RT-6653 after private respondents paid them Two Million Pesos
(P2,000,000). Private respondents, however, failed to transfer the ownership and deliver the titles of the three parcels
of land described in paragraph 2 of the agreement or to pay 2 Million Pesos within the six-month period from August
25, 1993. It was only on March 4, 1994, after the lapse of six months that private respondents delivered the three titles
to petitioners. As the delivery was beyond the agreed six-month period, petitioners refused to accept the same or
execute an instrument for the resale, reconveyance or redemption of the property covered by TCT No. RT-6652.
Consequently, TCT No. RT-6652 was cancelled and in lieu thereof, TCT No. T-47229 was issued in the names of
petitioners.
Private respondents filed a motion for execution of the September 22, 1993 order with the trial court. This was granted
on May 5, 1994. Petitioners filed a motion for reconsideration but this was denied on July 12, 1994. A second motion
for reconsideration by petitioners was likewise denied in an order dated September 1, 1994.
Petitioners filed a Petition for Certiorari with application for a Temporary Restraining Order and/or Writ of Preliminary
Injunction with the Court of Appeals. As said earlier, the Court of Appeals denied the petition on April 28, 1995, thus:
WHEREFORE, the petition for certiorari is hereby DENIED DUE COURSE, and is DISMISSED. The Orders of
respondent court dated May 1[5], July 12, and September 1, 1994 are AFFIRMED.
SO ORDERED.7
Hence this petition for review wherein petitioners aver that the Court of Appeals erred in:
I. RULING THAT THE ORDER DATED MAY 5, 1994 DID NOT SUBSTANTIALLY AMEND THE FINAL AND
EXECUTORY JUDGMENT RENDERED BASED ON A COMPROMISE AGREEMENT.
II. RULING THAT THE PRINCIPLE OF EQUITY IS A GROUND TO JUSTIFY THE AMENDMENT OF A FINAL AND
EXECUTORY JUDGMENT.
III. RULING THAT THE DELAY IN THE DELIVERY OF THE TITLES IS ATTRIBUTABLE TO THE REGISTER OF DEEDS
OF BULACAN.
IV. APPLYING ARTICLE 1191 OF THE NEW CIVIL CODE.
V. NOT RULING THAT THE COMPROMISE AGREEMENT IS IMMEDIATELY EXECUTORY AS PROVIDED IN
PARAGRAPH 6 THEREOF.
VI. NOT RULING THAT PETITIONERS HAVE ALREADY COMPLIED WITH PARAGRAPH 1 OF THE COMPROMISE
AGREEMENT.8
In sum, petitioners raise the following issues for our resolution:
1.

Did the trial court err in granting the writ to execute the compromise judgment?

2.

Is Article 1191 of the New Civil Code applicable in this case?

On the first issue, did the trial court err in granting the writ to execute the compromise judgment? Petitioners claim
that the trial court did. The compromise agreement approved by the trial court in its order dated September 22, 1993,
provided that private respondents had six months within which to deliver the titles. If they failed, ownership of the land
covered by TCT No. RT-6652 would be transferred to petitioners. Petitioners contend that judgement based on a
compromise is conclusive upon the parties and is immediately executory. It has the force and effect ofres
judicata, hence it cannot be modified. The trial court therefore, cannot compel petitioners, via a writ of execution, to
accept the three titles beyond the six-month period, because it is in effect an amendment to the compromise
agreement, petitioners said. They explain that even on equitable considerations this was not allowed because once a
decision becomes final, the court which rendered it loses jurisdiction over the case and it can no longer be modified
except for clerical errors.
Petitioners also contend that private respondents should not blame the Register of Deeds for the delay in the delivery
of the three titles since private respondents submitted the registration documents to the Register of Deeds only on
March 2, 1994, beyond the six-month period deadline.
Further, petitioners deny that they are guilty of delay for not executing the deed of resale, reconveyance or
redemption despite their receipt of two million pesos. They said that as early as August 25, 1993, they already
executed a Certificate of Redemption and Cancellation of Sale of the land covered by TCT No. RT-6653.
Private respondents counter that there has been no modification of the final judgment when the trial judge issued the
writ of execution, as the judge issued the writ of execution, as the judge was merely performing a ministerial duty.

Also, private respondents deny that they delivered the three titles late and if ever the delivery was delayed it was the
Register of Deeds who was to blame. Private respondents additionally point out that in reciprocal obligations, like the
ones in this case, delay sets in only when one part fulfills his obligation and the other is unable to perform his part of
the obligation. Likewise, a person obligated to deliver something incurs in delay only after demand. As herein
petitioners have not yet made demand and as they have not yet performed their part of the agreement, which was the
execution of the deed of reconveyance, delay by private respondents has not yet occurred.
We find petitioners' petition impressed with merit.
A compromise agreement, once approved by final order of the court, has the force of res judicata between the parties
and should not be disturbed except for vices of consent or forgery. 9 In this case, the compromise agreement clearly
provided private respondents six months, i.e., from August 25, 1993 to February 25, 1994, to deliver the titles to the
three parcels of land described in the agreement. If after the lapse of the said period and no delivery is yet made by
private respondents, ownership over the land covered by TCT No. RT-6652 would be transferred to petitioners. As the
facts of this case show, private respondents failed to deliver the titles on February 25, 1994, as it was only on March 4,
1994, when they gave the titles to petitioners. Hence, pursuant to the terms of the compromise agreement, petitioners
could rightfully refuse acceptance of the titles. It was error therefore for the trial court to grant the writ of execution in
favor of private respondents because it effectively compelled petitioners to accept delivery of the three titles in
exchange for the release of the land covered by TCT No. RT-6652 even after the lapse of the six-month period.
Private respondents claim that the trial court, in issuing the writ, was merely performing a ministerial duty. While it
becomes the trial court's ministerial duty to issue a writ of execution may be refused on equitable grounds. 10 In this
case, it will be unjust to petitioners if we compel them to accept the three titles despite the lapse of the agreed period.
Contractual obligations between parties have the force of law between them and absent any allegation that the same
are contrary to law, morals, good customs, public order or public policy, they must be complied with in good faith. 11
Both the trial court and the Court of Appeals attributed to the Register of Deeds private respondents' delay in the
delivery of the three titles. But as shown in their decisions, private respondents submitted to the Register of Deeds the
pertinent documents for registration of the three titles in petitioners' name only on March 2, 1994, beyond the sixmonth period.12 Private respondents could have done so earlier, but they did not. This only shows that private
respondents did not intend to truly comply with their obligations.
As to the alleged delay on the part of petitioners in executing the Deed of Resale and Reconveyance, we find that this
point serves only to confuse the Court on the real facts of the case. Despite the fact that the compromise agreement
involved two parcels of land up for redemption, private respondents did not indicate as to which parcel of land
petitioners did not execute a deed of resale. 13 Nevertheless, private respondents admitted that petitioners already
executed a Certificate of Redemption. 14 For us, this was sufficient compliance of petitioners' duty under the
Compromise Agreement.
Lastly, is Article 1191 of the New Civil Code 15 applicable in this case? According to petitioners, the Court of Appeals
erred when it found that private respondents' delay did not constitute substantial breach to warrant rescission of the
compromise agreement. They assert that they were not seeking rescission of the compromise agreement but its full
enforcement regardless of whether the delay is slight or substantial.
While indeed private respondents did not meet head on this issue, we find that it should be properly addressed. In
filing the petition before the Court of Appeals, petitioners sought the appellate court's declaration that the trial court
committed grave abuse of discretion. In their view, the trial court should have enforced the compromise agreement
instead of rescinding it. Thus, it was error for the Court of Appeals to apply Article 1191 of the New Civil Code which
concerns rescission of contract. Applicable here is Article 1159 which enjoins compliance in good faith by the parties
who entered into a valid contract. 16 Compromise agreements are contracts, whereby the parties undertake reciprocal
obligations to avoid litigation, or put an end to one already commenced. 17
WHEREFORE, the petition is GRANTED. The decision dated April 28, 1995, and resolution dated September 11, 1995,
of the Court of Appeals in CA-G.R. SP No. 35271 are REVERSED AND SET ASIDE. Accordingly, the orders dated May
5, 1994, July 12, 1994 and September 1, 1994, of the Regional Trial Court of Malolos, Bulacan, Branch 22, are hereby
declared NULL AND VOID. Private respondents are ordered to cease and desist from disturbing the ownership and
possession by petitioners of the parcel of land covered by TCT No. RT-6652. Costs against private respondents. SO
ORDERED.

G.R. No. 142830

March 24, 2006

WILLIAM GOLANGCO CONSTRUCTION CORPORATION, Petitioner,

vs.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK*, Respondent
D E C I S I O N CORONA, J.:
The facts of this case are straightforward. 1
William Golangco Construction Corporation (WGCC) and the Philippine Commercial International Bank (PCIB) entered
into a contract for the construction of the extension of PCIB Tower II (denominated as PCIB Tower II, Extension Project
[project])2 on October 20, 1989. The project included, among others, the application of a granitite wash-out finish 3 on
the exterior walls of the building.
PCIB, with the concurrence of its consultant TCGI Engineers (TCGI), accepted the turnover of the completed work by
WGCC in a letter dated June 1, 1992. To answer for any defect arising within a period of one year, WGCC submitted a
guarantee bond dated July 1, 1992 issued by Malayan Insurance Company, Inc. in compliance with the construction
contract.4
The controversy arose when portions of the granitite wash-out finish of the exterior of the building began peeling off
and falling from the walls in 1993. WGCC made minor repairs after PCIB requested it to rectify the construction defects.
In 1994, PCIB entered into another contract with Brains and Brawn Construction and Development Corporation to re-do
the entire granitite wash-out finish after WGCC manifested that it was "not in a position to do the new finishing work,"
though it was willing to share part of the cost. PCIB incurred expenses amounting toP11,665,000 for the repair work.
PCIB filed a request for arbitration with the Construction Industry Arbitration Commission (CIAC) for the reimbursement
of its expenses for the repairs made by another contractor. It complained of WGCCs alleged non-compliance with their
contractual terms on materials and workmanship. WGCC interposed a counterclaim forP5,777,157.84 for material cost
adjustment.
The CIAC declared WGCC liable for the construction defects in the project.5 WGCC filed a petition for review with the
Court of Appeals (CA) which dismissed it for lack of merit.6 Its motion for reconsideration was similarly denied.7
In this petition for review on certiorari, WGCC raises this main question of law: whether or not petitioner WGCC is liable
for defects in the granitite wash-out finish that occurred after the lapse of the one-year defects liability period provided
in Art. XI of the construction contract.8
We rule in favor of WGCC.
The controversy pivots on a provision in the construction contract referred to as the defects liability period:
ARTICLE XI GUARANTEE
Unless otherwise specified for specific works, and without prejudice to the rights and causes of action of the OWNER
under Article 1723 of the Civil Code, the CONTRACTOR hereby guarantees the work stipulated in this
Contract, and shall make good any defect in materials and workmanship which [becomes] evident within
one (1) year after the final acceptance of the work. The CONTRACTOR shall leave the work in perfect order upon
completion and present the final certificate to the ENGINEER promptly.
If in the opinion of the OWNER and ENGINEER, the CONTRACTOR has failed to act promptly in rectifying any defect in
the work which appears within the period mentioned above, the OWNER and the ENGINEER may, at their own
discretion, using the Guarantee Bond amount for corrections, have the work done by another contractor at the
expense of the CONTRACTOR or his bondsmen.
However, nothing in this section shall in any way affect or relieve the CONTRACTORS responsibility to
the OWNER. On the completion of the [w]orks, the CONTRACTOR shall clear away and remove from the site all
constructional plant, surplus materials, rubbish and temporary works of every kind, and leave the whole of the [s]ite
and [w]orks clean and in a workmanlike condition to the satisfaction of the ENGINEER and OWNER.9(emphasis ours)
Although both parties based their arguments on the same stipulations, they reached conflicting conclusions. A careful
reading of the stipulations, however, leads us to the conclusion that WGCCs arguments are more tenable.
Autonomy of contracts
The autonomous nature of contracts is enunciated in Article 1306 of the Civil Code.
Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
Obligations arising from contracts have the force of law between the parties and should be complied with in good
faith.10 In characterizing the contract as having the force of law between the parties, the law stresses the obligatory
nature of a binding and valid agreement.
The provision in the construction contract providing for a defects liability period was not shown as contrary to law,
morals, good customs, pubic order or public policy. By the nature of the obligation in such contract, the provision
limiting liability for defects and fixing specific guaranty periods was not only fair and equitable; it was also necessary.

Without such limitation, the contractor would be expected to make a perpetual guarantee on all materials and
workmanship.
The adoption of a one-year guarantee, as done by WGCC and PCIB, is established usage in the Philippines for private
and government construction contracts.11 The contract did not specify a different period for defects in the granitite
wash-out finish; hence, any defect therein should have been brought to WGCCs attention within the one-year defects
liability period in the contract.
We cannot countenance an interpretation that undermines a contractual stipulation freely and validly agreed upon.
The courts will not relieve a party from the effects of an unwise or unfavorable contract freely entered into.12
[T]he inclusion in a written contract for a piece of work [,] such as the one in question, of a provision defining a
warranty period against defects, is not uncommon. This kind of a stipulation is of particular importance to the
contractor, for as a general rule, after the lapse of the period agreed upon therein, he may no longer be held
accountable for whatever defects, deficiencies or imperfections that may be discovered in the work executed by
him.13
Interpretation of contracts
To challenge the guarantee period provided in Article XI of the contract, PCIB calls our attention to Article 62.2 which
provides:
62.2 Unfulfilled Obligations
Notwithstanding the issue of the Defects Liability Certificate[,] the Contractor and the Owner shall remain liable
for the fulfillment of any obligation[,] incurred under the provisions of the Contract prior to the issue of
the Defects Liability Certificate[,] which remains unperformed at the time such Defects Liability
Certificate is issued[. And] for the purpose of determining the nature and extent of any such obligation, the Contract
shall be deemed to remain in force between the parties of the Contract. (emphasis ours)
The defects in the granitite wash-out finish were not the "obligation" contemplated in Article 62.2. It was not an
obligation that remained unperformed or unfulfilled at the time the defects liability certificate was issued. The alleged
defects occurred more than a year from the final acceptance by PCIB.
An examination of Article 1719 of the Civil Code is enlightening:
Art. 1719. Acceptance of the work by the employer relieves the contractor of liability for any defect in the work, unless:
(1) The defect is hidden and the employer is not, by his special knowledge, expected to recognize the
same; or
(2) The employer expressly reserves his rights against the contractor by reason of the defect.
The lower courts conjectured that the peeling off of the granitite wash-out finish was probably due to "defective
materials and workmanship." This they characterized as hidden or latent defects. We, however, do not agree with the
conclusion that the alleged defects were hidden.
First, PCIBs team of experts14 (who were specifically employed to detect such defects early on) supervised WGCCs
workmanship. Second, WGCC regularly submitted progress reports and photographs. Third, WGCC worked under fair
and transparent circumstances. PCIB had access to the site and it exercised reasonable supervision over WGCCs work.
Fourth, PCIB issued several "punch lists" for WGCCs compliance before the issuance of PCIBs final certificate of
acceptance. Fifth, PCIB supplied the materials for the granitite wash-out finish. And finally, PCIBs team of experts gave
their concurrence to the turnover of the project.
The purpose of the defects liability period was precisely to give PCIB additional, albeit limited, opportunity to oblige
WGCC to make good any defect, hidden or otherwise, discovered within one year.
Contrary to the CAs conclusion, the first sentence of the third paragraph of Article XI on guarantee previously quoted
did not operate as a blanket exception to the one-year guarantee period under the first paragraph. Neither did it
modify, extend, nullify or supersede the categorical terms of the defects liability period.
Under the circumstances, there were no hidden defects for which WGCC could be held liable. Neither was there any
other defect for which PCIB made any express reservation of its rights against WGCC. Indeed, the contract should not
be interpreted to favor the one who caused the confusion, if any. The contract was prepared by TCGI for PCIB.15
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 41152 is
ANNULED and SET ASIDE. SO ORDERED.

G.R. No. 179105

July 26, 2010

METROPOLITAN BANK AND TRUST COMPANY, Petitioner,

vs.
LARRY MARIAS, Respondent.
DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to annul and set aside the Court
of Appeals (CA) Decision 1 dated July 31, 2007, affirming with modification the Regional Trial Court (RTC) decision 2 dated
October 14, 2004.
The factual and procedural antecedents are as follows:
Sometime in April 1998, respondent Larry Marias returned to the Philippines from the United States of America. He
opened a personal dollar savings account 3 by depositing US$100,000.00 with petitioner Metropolitan Bank and Trust
Company. On April 13, 1998, respondent obtained a loan from petitioner in the amount of P2,300,000.00, evidenced by
Promissory Note No. 355873. 4 From the initial deposit of US$100,000.00, respondent withdrew 5 US$67,227.95,6 then
deposited it under Account No. 0-26400171-6 (Foreign Currency Deposit [FCD] No. 505671), 7 which he used as
security8 for the P2,300,000.00 loan.
Respondent subsequently opened two more foreign currency accounts Account No. 0-26400244-5 (FCD No.
505688)9 and Account No. 0-264-00357-3 (FCD No. 739809) 10 depositing therein US$25,000.00 and US$17,000.00,
respectively. On April 30, 1999, respondent obtained a second loan of P645,150.00,11 secured12by Account No. 0-26400357-3 (FCD No. 739809).
When he inquired about his dollar deposits, respondent discovered that petitioner made deductions against the
formers accounts. On May 31, 1999, respondent, through his counsel, demanded from petitioner a proper and
complete accounting of his dollar deposits, and the restoration of his deposits to their proper amount without the
deductions.13 In response, petitioner explained that the deductions made from respondents dollar accounts were used
to pay the interest due on the latters loan with the former. These deductions, according to petitioner, were authorized
by respondent through the Deeds of Assignment with Power of Attorney voluntarily executed by respondent. 14
Unsatisfied, and believing that the deductions were unauthorized, respondent commenced an action for Damages
against petitioner and its Kabihasnan, Paraaque City Branch Manager Expedito Fernandez (Fernandez) before the RTC,
Las Pias City. The case was docketed as Civil Case No. 99-0172 and was raffled to Branch 255. While admitting the
existence of the P2,300,000.00 and P645,150.00 loans, respondent claimed that when he signed the loan documents,
they were all in blank and they were actually filled up by petitioner. Aside from the complete accounting of his dollar
accounts and the restoration of the true amounts of his deposits, respondent sought the payment of P400,000.00 as
moral damages, P100,000.00 as exemplary damages, and P100,000.00 as attorneys fees.15
On its part, petitioner insisted that respondent freely and voluntarily signed the loan documents. While admitting the
full payment of respondents P2,300,000.00 and P645,150.00 loans, petitioner claimed that the payments were made
using the formers US$67,227.95, US$25,000.00, and US$17,000.00 time deposits. Accordingly, there was nothing to
account for and restore. By way of counterclaim, petitioner prayed for the payment of P200,000.00 as attorneys
fees, P1,000,000.00 as moral damages, and P500,000.00 as exemplary damages.16
As no amicable settlement was reached, trial on the merits ensued.
On October 14, 2004, the RTC rendered a decision in favor of respondent, the dispositive portion of which reads:
WHEREFORE, the foregoing considered, judgment is hereby rendered in favor of plaintiff Larry Mari[]as, and against
the defendants Metropolitan Bank and Trust Company and Expedito Fernandez, ordering the said defendants to
account for the dollar deposits of the plaintiff in the amounts of US$30,000.00 and US$25,000.00, respectively, and
then return the same, including the interests due thereon reckoned from 31 May 1999 until fully paid.
Likewise, the defendants are hereby directed to pay to the herein plaintiff the following amounts, to wit:
1. P100,000.00 in moral damages;
2. P50,000.00 in exemplary damages;
3. P50,000.00 as and by way of attorneys fees; and
4. Costs of suit.
SO ORDERED.17
The RTC sustained the validity and regularity of the loan documents signed by respondent, and consequently the
existence of the P2,300,000.00 and P645,150.00 loans obtained from petitioner. Acknowledging the full payment of
both loans, the trial court found that the payments were made from respondents foreign currency deposits,
particularly Account Numbers 0-26400171-6 (FCD No. 505671) and 0-264-00357-3 (FCD No. 739809), amounting to
US$67,227.95 and US$17,000.00, respectively. There is no doubt that respondent specifically assigned these accounts
to secure the payment of his loans pursuant to the Deeds of Assignment with Power of Attorney. Hence, the deductions
made from such accounts were valid. However, the RTC found that petitioner should account for and eventually return
the US$30,000.00 and US$25,000.00 deposits of respondent since they were not assigned to answer for the latters

loans, and that any deductions made from these accounts were, therefore, illegal. Consequently, petitioner was made
to answer for damages suffered by respondent. 18 Being the petitioners Kabihasnan Branch Manager, Fernandez was
declared solidarily liable with petitioner.
On appeal, the CA modified the RTC decision by absolving Fernandez from liability. The appellate court held that
Fernandez could not be made to answer for acts done in the performance of his duty absent any showing that he
assented to patently unlawful acts of the corporation or was guilty of bad faith or gross negligence in directing its
affairs, or that he agreed to hold himself personally and solidarily liable with the corporation. 19 No proof was adduced
in this regard.
Hence, the instant petition raising the following issues:
1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN ORDERING PETITIONER TO ACCOUNT
FOR AND RETURN TO RESPONDENT THE SUMS OF US$30,000.00 AND US$25,000.00.
2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING PETITIONER LIABLE TO
RESPONDENT FOR MORAL AND EXEMPLARY DAMAGES, AS WELL AS ATTORNEYS FEES AND COSTS OF SUIT. 20
Petitioner assails the CA Decision affirming the formers culpability for making unlawful deductions from respondents
dollar accounts without the latters consent. Additionally, it questions the award of moral and exemplary damages, as
well as attorneys fees.
We agree with the CAs factual findings as to the deposits and withdrawals made and loans obtained by respondent.
We do not, however, agree with its conclusion that petitioner absolutely lacked the authority to make deductions from
respondents deposits for the payment of his outstanding obligations.
It is apt to stress the well-settled principle that factual findings of the trial court, affirmed by the CA, are binding and
conclusive upon this Court. 21 In the absence of any showing that the findings complained of are totally devoid of
support in the evidence on record, or that they are so glaringly erroneous as to constitute serious abuse of discretion,
such findings must stand.22 The Court is not a trier of facts, its jurisdiction being limited to reviewing only errors of law
that may have been committed by the lower courts. 23 It is not the function of the Court to analyze or weigh all over
again the evidence or premises supportive of such factual determination. 24 The law creating the CA was intended
mainly to take away from the Supreme Court the work of examining the evidence, so that it may confine its task to the
determination of questions which do not call for the reading and study of transcripts containing the testimony of
witnesses.25
In the present case, we find no justification to deviate from the factual findings of the trial court and the appellate
court. Petitioner has utterly failed to convince us that the assailed findings are devoid of basis or are not supported by
substantial evidence.
It is noteworthy that respondent opened four accounts with petitioner: 1) Account No. 2264-00145-0 for
US$100,000.00; 2) Account No. 0-26400171-6 (FCD No. 505671) for US$67,227.95; 3) Account No. 0-26400244-5 (FCD
No. 505688) for US$25,000.00; and 4) Account No. 0-264-00357-3 (FCD No. 739809) for US$17,000.00. Admittedly,
respondent withdrew $70,000.00 from Account No. 2264-00145-0, leaving a balance of $30,000.00.
It is likewise undisputed that respondent obtained two separate loans from petitioner in amounts of P2,300,000.00
and P645,150.00. These were evidenced by promissory notes and secured by respondents two dollar accounts
Account Numbers 0-26400171-6 (FCD No. 505671) and 0-264-00357-3 (FCD No. 739809) for US$67,227.95 and
US$17,000.00, respectively. Respondents first loan of P2,300,000.00, obtained on April 13, 1998, was payable on April
8, 1999; while the second loan of P645,150.00, obtained on April 30, 1999, was payable on April 24, 2000. Records
show that the first loan was paid on April 21, 1999, with the payment therefor taken from Account No. 0-26400171-6.
The second loan, on the other hand, was paid on May 10, 1999, out of respondents Account No. 0-264-00357-3. It
should be clarified, though, that these payments referred only to the payment of the principal ( P2,300,000.00
and P645,150.00) of respondents loans, exclusive of interests stipulated in the promissory notes executed by the
latter.
Aside from obligating himself to pay P2,300,000.00 as principal, respondent also agreed to pay interest at the rate of
22.929% per annum (not monthly) from April 13, 1998 until full payment. As respondent made full payment of the
principal on April 21, 1999, respondent was also obliged to pay interest until that date. As to the P645,150.00 loan,
respondent agreed to pay interest at the rate of 16.987% per annum.
Respondent later discovered that his accounts with petitioner were all depleted. Upon inquiry from petitioner, it
explained that pursuant to the Deeds of Assignment with Power of Attorney executed by respondent, it deducted from
respondents accounts the interest due on his loans.1avvphi1
Contrary to the conclusions of the RTC and the CA, we find that petitioner is empowered to make lawful deductions
from respondents accounts for such amounts due it. This is authorized in the Promissory Notes and Deeds of
Assignment with Power of Attorney executed by respondent, to wit:
I/We hereby give the Bank a general lien upon, and/or right of set-off and/or right to hold and/or apply to the loan
account, or any claim of the Bank against any of us, all my/our rights, title and interest in and to the balance of every
deposit account, money, negotiable instruments, commercial papers, notes, bonds, stocks, dividends, securities,
interest, credits, chose in action, claims, demands, funds or any interest in any thereof, and in any other property,
rights and interest of any of us or any evidence thereof, which have been, or at any time shall be delivered to, or

otherwise come into the possession, control or custody of the Bank or any of its subsidiaries, affiliates, agents or
correspondents now or anytime hereafter, for any purpose, whether or not accepted for the purpose or purposes for
which they are delivered or intended. For this purpose, I/We hereby appoint the Bank as my/our irrevocable Attorneyin-fact with full power of substitution/delegation to sign or endorse any and all documents and perform any and all acts
and things required or necessary in the premises. 26
Effective upon default in the payment of CREDIT, or any part thereof, the ASSIGNOR hereby grants to the ASSIGNEE,
full power and authority to collect/withdraw the deposit/proceeds/receivables/ investments/securities and apply the
collection/deposit to the payment of the outstanding principal, interest and other charges on the CREDIT. For this
purpose, the ASSIGNOR hereby names, constitutes and appoints the ASSIGNEE as his/its true and lawful Attorney-inFact, with powers of substitution, to ask, demand, collect, sue for, recover and receive the
deposit/proceeds/receivables/investments/securities or any part thereof, as well as to encash, negotiate and endorse
checks, drafts and other commercial papers/instruments received by and paid to the ASSIGNEE, incident thereto and
to execute all instruments and agreements connected therewith. A written Certification by the ASSIGNEE of the
amount of its claims from the ASSIGNOR and/or the BORROWER shall be conclusive on the ASSIGNOR and/or the
BORROWER absent manifest error. 27
As provided in Article 1159 of the Civil Code, "obligations arising from contract have the force of law between the
contracting parties and should be complied with in good faith." Verily, parties may freely stipulate their duties and
obligations which perforce would be binding on them. Not being repugnant to any legal proscription, the agreement
entered into between petitioner and respondent must be respected and given the force of law between them. 28
Upon the maturity of the first loan on April 8, 1999, petitioner was authorized to automatically deduct, by way of
offsetting, respondents outstanding debt (including interests) to it from the latters deposit accounts and their
accumulated interest. Respondent did not object to the deduction made from the proceeds of Account No. 026400171-6, but would limit such deduction only to the payment of the principal of P2,300,000.00. However, it should
be borne in mind that in addition to the authority to effect the said deduction for the principal loan amount, petitioner
was authorized to make further deductions for interest payments at the rate of 22.929% per annum until April 21,
1999.
With respect to the second loan, barely a month after the execution of the promissory note and definitely prior to the
maturity date, respondent already paid the principal of P645,150.00 out of the deposited amount in Account No. 0-26400357-3. Pursuant to the promissory note, respondent agreed to pay interest at the rate of 16.987% per annum. While
it is conceded that petitioner had the right to offset the unpaid interests due it against the deposits of respondent, the
issue of whether it acted judiciously is an entirely different matter. 29 As business affected with public interest, and
because of the nature of their functions, banks are under obligation to treat the accounts of their depositors with
meticulous care, always having in mind the fiduciary nature of their relationship. 30
Pursuant to the above disquisition, it is clear that despite such authority, petitioner should still account for whatever
excess deductions made on respondents deposits and return to respondent such amounts taken from him. To be sure,
respondent had interest-earning deposits with petitioner in accordance with their agreement. On the other hand, after
respondent paid the principal on April 21, 1999 and May 10, 1999 on the two loans which he obtained from petitioner,
the latter had the authority to make deductions for the payment of interest as stipulated in respondents promissory
notes.
When we consider the total amount of respondents deposits in his dollar accounts inclusive of interests earned vis-vis his total obligations to petitioner, we find that the total depletion of his accounts is not warranted. Hence, we find
no reason to disturb the CA conclusion on the award of damages. As aptly explained in Bank of the Philippine Islands v.
Court of Appeals:
For the above reasons, the Court finds no reason to disturb the award of damages granted by the CA against
petitioner. This whole incident would have been avoided had petitioner adhered to the standard of diligence expected
of one engaged in the banking business. A depositor has the right to recover reasonable moral damages even if the
banks negligence may not have been attended with malice and bad faith, if the former suffered mental anguish,
serious anxiety, embarrassment and humiliation. Moral damages are not meant to enrich a complainant at the
expense of defendant. It is only intended to alleviate the moral suffering she has undergone. The award of exemplary
damages is justified, on the other hand, when the acts of the bank are attended by malice, bad faith or gross
negligence. The award of reasonable attorneys fees is proper where exemplary damages are awarded. It is proper
where depositors are compelled to litigate to protect their interest. 31
WHEREFORE, premises considered, the Court of Appeals Decision dated July 31, 2007 is hereby AFFIRMED with
MODIFICATION. Petitioner is ordered to account for respondents dollar deposits inclusive of interests, subject to its
right to deduct from the said deposits his loan obligations amounting to P2,300,000.00, plus interest at 22.929% per
annum until full payment on April 21, 1999; and P645,150.00, plus interest at 16.987% per annum until full payment
on May 10, 1999. After such accounting, petitioner shall restore to respondent whatever excess amounts may have
been deducted from such deposits, together with the earned interests.
All other aspects of the assailed decision STAND.
SO ORDERED.

G.R. No. 185066

October 2, 2009

PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioner,

vs.
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Respondent.
RESOLUTION

BRION, J.:

Petitioner Philippine Charter Insurance Corporation (PCIC) submits the present motion for the reconsideration 1 of our
Resolution dated December 17, 2008, which denied due course to its petition for review on certiorari.2 It seeks to
reinstate the petition and effect a reversal of the Court of Appeals (CA) Decision3 and Resolution4 dated January 7,
2008 and October 29, 2008, respectively, in CA-G.R. CV No. 86948. In its petition, the petitioner imputes reversible
error on the appellate court for ruling that it is liable under PCIC Bond No. 27547 and under PCIC Bond No. 27546, as
the latter bond was not covered by the complaint for collection of sum of money filed by respondent Philippine
National Construction Corporation (PNCC).5
The facts, as drawn from the records, are briefly summarized below.
PNCC is engaged in the construction business and tollway operations. On October 16, 1997, PNCC conducted a public
bidding for the supply of labor, materials, tools, supervision, equipment, and other incidentals necessary for the
fabrication and delivery of 27 tollbooths to be used for the automation of toll collection along the expressways.
Orlando Kalingo (Kalingo) won in the bidding and was awarded the contract.
On November 13, 1997, PNCC issued in favor of Kalingo Purchase Order (P.O.) No. 71024L for 25 units of tollbooths
for a total of P2,100,000.00, and P.O. No. 71025L for two units of tollbooths amounting to P168,000.00. These
issuances were subject to the condition, among others, that each P.O. shall be covered by a surety bond equivalent to
100% of the total down payment (50% of the total cost reflected on the P.O.), and that the surety bond shall continue
in full force until the supplier shall have complied with all the undertakings and covenants to the full satisfaction of
PNCC.
Kalingo, hence, posted surety bonds Surety Bond Nos. 27546 and 27547 issued by the PCIC and whose terms and
conditions read:
Surety Bond No. 27546
To supply labor, materials, tools, supervision equipment, and other incidentals necessary for the fabrication and
delivery of Two (2) Units Toll Booth at San Fernando Interchange SB Entry as per Purchase Order No. 71025L, copy of
which is attached as Annex "A." This bond also guarantees the repayment of the down payment or whatever balance
thereof in the event of failure on the part of the Principal to finish the project due to his own fault.
It is understood that the liability of the Surety under this bond shall in no case exceed the sum of P84,000.00,
Philippine Currency.6
Surety Bond No. 27547
To supply labor, materials, tools, supervision equipment, and other incidentals necessary for the fabrication and
delivery of Twenty-five (25) Units Toll Booth at designated Toll Plaza as per Purchase Order No. 71024L, copy of which is
attached as Annex "A." This bond also guarantees the repayment of the down payment or whatever balance thereof in
the event of failure on the part of the Principal to finish the project due to his own fault.
It is understood that the liability of the Surety under this bond shall in no case exceed the sum of P1,050,000.00,
Philippine Currency.7
To illustrate, the PCIC surety bonds are in the amounts corresponding to down payments on each P.O., as follows:
Surety Bond
No.

Purchase
Order

Units
Covered

Total Cost

Surety Amount(equivalent to 50%

down payment)

Bond
No. 27547

P.O. No. 71024L

25

P2,100,000

P1,050,000

Bond
No. 27546

P.O. No. 71025L

P 168,000

P 84,000

Both surety bonds also contain the following conditions:

(1) the liability of PCIC under the bonds expires on March 16, 1998; and
(2) a written extrajudicial demand must first be tendered to the surety, PCIC, within 15 days from the
expiration date; otherwise PCIC shall not be liable thereunder and the obligee waives the right to claim
or file any court action to collect on the bond. The following stipulation appears in the last paragraph of these
bonds:

The liability of PHILIPPINE CHARTER INSURANCE CORPORATION under this bond will expire on March 16, 1998.
Furthermore, it is hereby agreed and understood that PHILIPPINE CHARTER INSURANCE CORPORATION will not
be liable for any claim not presented to it in writing within FIFTEEN (15) DAYS from the expiration of this
bond, and that the Obligee hereby waives its right to claim or file any court action against the Surety
after the termination of FIFTEEN (15) DAYS from the time its cause of action accrues.8 (Emphasis supplied.)
PNCC released two checks to Kalingo representing the down payment of 50% of the total project cost, which were
properly receipted by Kalingo.9 Kalingo in turn submitted the two PCIC surety bonds securing the down payments,
which bonds were accepted by PNCC.
On March 3, 4, and 5, 1998, Kalingo made partial/initial delivery of four units of tollbooths under P.O. No. 71024L.
However, the tollbooths delivered were incomplete or were not fabricated according to PNCC specifications. Kalingo
failed to deliver the other 23 tollbooths up to the time of filing of the complaint; despite demands, he failed and
refused to comply with his obligation under the POs.
On March 9, 1998, six days before the expiration of the surety bonds and after the expiration of the delivery period
provided for under the award, PNCC filed a written extrajudicial claim against PCIC notifying it of Kalingos default and
demanding the repayment of the down payment on P.O. No. 71024L as secured by PCIC Bond No. 27547, in the
amount of P1,050,000.00. The claim went unheeded despite repeated demands. For this reason, on April 24, 2001,
PNCC filed with the Regional Trial Court (RTC), Mandaluyong City a complaint for collection of a sum of money against
Kalingo and PCIC.10 PNCC's complaint against PCIC called solely on PCIC Bond No. 27547; it did not raise or plead
collection under PCIC Bond No. 27546 which secured the down payment ofP84,000.00 on P.O. No. 71025L.
PCIC, in its answer, argued that the partial delivery of four out of the 25 units of tollbooth by Kalingo under P.O. No.
71024L should reduce Kalingo's obligation.
The RTC, by Decision of October 31, 2005, ruled in favor of PNCC and ordered PCIC and Kalingo to jointly and severally
pay the latter P1,050,000.00, representing the value of PCIC Bond No. 27547, plus legal interest from last demand,
and P50,000.00 as attorney's fees. Reconsideration of the trial court's decision was denied. The trial court made no
ruling on PCICs liability under PCIC Bond No. 27546, a claim that was not pleaded in the complaint.
On appeal, the CA, by Decision 11 of January 7, 2008, held that the RTC erred in ruling that PCIC's liability is limited only
to the payment of P1,050,000.00 under PCIC Bond No. 27547 which secured the down payment on P.O. No.
71024L. The appellate court held that PCIC, as surety, is liable jointly and severally with Kalingo for the amount of
the two bonds securing the two POs to Kalingo; thus, the CA also held PCIC liable under PCIC Bond No. 27546 which
secured the P84,000.00 down payment on P.O. No. 71025L.
Reconsideration having been denied by the appellate court in its Resolution 12 of October 29, 2008, the PCIC lodged a
petition for review on certiorari13 before this Court.
The Court, by Resolution of December 17, 2008, denied due course to the petition. 14 Hence, the PCIC filed the present
motion for reconsideration submitting the following issues for our resolution:
I. WHETHER THE APPELLATE COURT ERRED IN RULING THAT PCIC SHOULD ALSO BE HELD LIABLE UNDER BOND
NO. 27546, COLLECTION UNDER WHICH WAS NOT SUBJECT OF RESPONDENT PNCC's COMPLAINT FOR
COLLECTION OF SUM OF MONEY;
II. WHETHER THE CHECKS ISSUED IN "1997" BY RESPONDENT PNCC TO KALINGO WERE GIVEN 10 MONTHS
PRIOR TO THE AWARD OF THE PROJECT AND AMOUNTS TO CONCEALMENT OF MATERIAL FACT VITIATING THE
SURETY BONDS ISSUED BY THE PETITIONER; and
III. WHETHER THE APPELLATE COURT ERRED IN HOLDING PETITIONER PCIC LIABLE FOR ATTORNEY'S FEES.
The second issue is a factual matter not proper in proceedings before this Court. The PCICs position that the checks
were issued 10 months prior to the award had already been rejected by both the RTC and the CA; both found that the
year "1997" appearing on the checks was a mere typographical error which should have been written as
"1998."15 Consequently, we shall no longer discuss the PCIC's allegation of material concealment; the factual findings
of the RTC, as affirmed by the CA, are conclusive on us.
Our consideration shall focus on the remaining two issues.
The PCIC presents, as its first issue, the argument that "[w]hen the Court of Appeals rendered judgment on Bond No.
27546, which was not subject of respondent's complaint, on the ground that respondent was incorrect in not filing suit
for Bond No. 27546, the Court of Appeals virtually acted as lawyer for respondent." 16
We find the PCICs position meritorious.
The issue before us calls for a discussion of a courts basic appreciation of allegations in a complaint. The fundamental
rule is that reliefs granted a litigant are limited to those specifically prayed for in the complaint; other reliefs prayed for
may be granted only when related to the specific prayer(s) in the pleadings and supported by the evidence on record.
Necessarily, any such relief may be granted only where a cause of action therefor exists, based on the complaint, the
pleadings, and the evidence on record.
Section 2, Rule 2 of the 1997 Rules of Civil Procedure defines a cause of action as the act or omission by which a party
violates the right of another. It is the delict or the wrongful act or omission committed by the defendant in violation of
the primary right of the plaintiff.17 Its essential elements are as follows:

1. A right in favor of the plaintiff by whatever means and under whatever law it arises or is created;
2. An obligation on the part of the named defendant to respect or not to violate such right; and
3. Act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of damages or
other appropriate relief.18
Only upon the occurrence of the last element does a cause of action arise, giving the plaintiff the right to maintain an
action in court for recovery of damages or other appropriate relief. 19
Each of the surety bonds issued by PCIC created a right in favor of PNCC to collect the repayment of the bonded down
payments made on the two POs if contractor Kalingo defaults on his obligation under the award to fabricate and
deliver to PNCC the tollbooths contracted for. Concomitantly, PCIC, as surety, had the obligation to comply with its
undertaking under the bonds to repay PNCC the down payments the latter made on the POs if Kalingo defaults.
It must be borne in mind that each of the two bonds is a distinct contract by itself, subject to its own terms and
conditions. They each contain a provision that the surety, PCIC, will not be liable for any claim not presented to it in
writing within 15 days from the expiration of the bond, and that the obligee (PNCC) thereby waives its right to claim or
file any court action against the surety (PCIC) after the termination of 15 days from the time its cause of action
accrues. This written claim provision creates a condition precedent for the accrual of: (1) PCICs obligation
to comply with its promise under the particular bond, and of (2) PNCC's right to collect or sue on these
bonds. PCICs liability to repay the bonded down payments arises only upon PNCC's filing of a written
claim notifying PCIC of principal Kalingos default and demanding collection under the bond within 15
days from the bonds expiry date. PNCCs failure to comply with the written claim provision has the effect
of extinguishing PCICs liability and constitutes a waiver by PNCC of the right to claim or sue under the
bond.
Liability on a bond is contractual in nature and is ordinarily restricted to the obligation expressly assumed therein. We
have repeatedly held that the extent of a surety's liability is determined only by the clause of the contract of
suretyship and by the conditions stated in the bond. It cannot be extended by implication beyond the terms of the
contract.20 Equally basic is the principle that obligations arising from contracts have the force of law between the
parties and should be complied with in good faith. 21 Nothing can stop the parties from establishing stipulations,
clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy. 22 Here, nothing in the records shows the invalidity of the written claim provision;
therefore, the parties must strictly and in good faith comply with this requirement.
The records reveal that PNCC complied with the written claim provision, but only with respect to PCIC Bond No. 27547.
PNCC filed an extrajudicial demand with PCIC informing it of Kalingos default under the award and demanding the
repayment of the bonded down payment on P.O. No. 71024L. Conversely, nothing in the records shows that PNCC ever
complied with the provision with respect to PCIC Bond No. 27546. Why PNCC complied with the written claim provision
with respect to PCIC Bond No. 27547, but not with respect to PCIC Bond No. 27546, has not been explained by
PNCC. Under the circumstances, PNCCs cause of action with respect to PCIC Bond No. 27546 did not and
cannot exist, such that no relief for collection thereunder may be validly awarded.
Hence, the trial courts decision finding PCIC liable solely under PCIC Bond No. 27547 is correct not only
because collection under the other bond, PCIC Bond No. 27546, was not raised or pleaded in the
complaint, but for the more important reason that no cause of action arose in PNCCs favor with respect
to this bond. Consequently, the appellate court was in error for including liability under PCIC Bond No.
27546.
PNCC insists that conformably with the ruling of the CA, it should be entitled to collection under PCIC Bond No. 27546,
although collection thereunder was not specifically raised or pleaded in its complaint, because the bond was attached
to the complaint and formed part of the records. Also, considering that PCICs liability as surety has been duly proven
before the trial and appellate courts, PNCC posits that it is entitled to repayment under PCIC Bond No. 27546.
PNCC might be alluding to Section 2(c), Rule 7 of the Rules of Court, which provides that a pleading shall specify the
relief sought, but may add a general prayer for such further or other reliefs as may be deemed just and equitable.
Under this rule, a court can grant the relief warranted by the allegation and the proof even if it is not specifically
sought by the injured party; 23 the inclusion of a general prayer may justify the grant of a remedy different from or
together with the specific remedy sought,24 if the facts alleged in the complaint and the evidence introduced so
warrant.25
We find PNCCs argument to be misplaced. A general prayer for "other reliefs just and equitable" appearing on a
complaint or pleading normally enables the court to award reliefs supported by the complaint or other pleadings, by
the facts admitted at the trial, and by the evidence adduced by the parties, even if these reliefs are not specifically
prayed for in the complaint. We cannot, however, grant PNCC the "other relief" of recovering under PCIC Bond No.
27546 because of the respect due the contractual stipulations of the parties. While it is true that PCICs liability under
PCIC Bond No. 27546 would have been clear under ordinary circumstances (considering that Kalingo's default under
his contract with PNCC is now beyond dispute), it cannot be denied that the bond contains a written claim provision,
and compliance with it is essential for the accrual of PCICs liability and PNCCs right to collect under the bond.

As already discussed, this provision is the law between the parties on the matter of liability and collection under the
bond. Knowing fully well that PCIC Bond No. 27546 is a matter of record, duly proven and susceptible of the courts
scrutiny, the trial and appellate courts must respect the terms of the bond and cannot just disregard its terms and
conditions in the absence of any showing that they are contrary to law, morals, good customs, public order, or public
policy. For its failure to file a written claim with PCIC within 15 days from the bonds expiry date, PNCC clearly waived
its right to collect under PCIC Bond No. 27546. That, wittingly or unwittingly, PNCC did not collect under one bond in
favor of calling on the other creates no other conclusion than that the right to collect under the former had been lost.
Consequently, PNCCs cause of action with respect to PCIC Bond No. 27546 cannot juridically exist and no relief
therefore may be validly given. Hence, the CA invalidly rendered judgment with respect to PCIC Bond No. 27546, and
its award based on this bond must be deleted.
On the third issue, we hold that PCIC should be held liable for the attorney's fees PNCC incurred in bringing suit. PCICs
unjust refusal to pay despite PNCCs written claim compelled the latter to hire the services of an attorney to collect on
PCIC Bond No. 27547.
WHEREFORE, premises considered, we SET ASIDE our Resolution of December 17, 2008 and GRANT the present
motion for reconsideration. The petition for review on certiorari is PARTLY GRANTED. The assailed Court of Appeals
Decision of January 7, 2008 and Resolution of October 29, 2008 are hereby AFFIRMED with MODIFICATION, deleting
petitioner PCIC's liability under PCIC Bond No. 27546. All other matters in the assailed Court of Appeals decision and
resolution are AFFIRMED.
SO ORDERED.

G.R. No. L-5671

August 24, 1910

BENITO DE LOS REYES, plaintiff-appellant,

vs.
VERONICA ALOJADO, defendant-appellee.
TORRES, J.:
On or about January 22, 1905, Veronica Alojado received, as a loan, from Benito de los Reyes that the sum P67 .60, for
the purpose of paying a debt she owed to Olimpia Zaballa. It was agreed between Alojado and Reyes that the debtor
should remain as a servant in the house and in the service of her creditor, without any renumeration whatever, until
she should find some one who would furnish her with the said sum where with to repeat the loan. The defendant,
Veronica Alojado, afterwards left the house of the plaintiff, on March 12, 1906, without having paid him her debt, nor
did she do so at any subsequent date, notwithstanding his demands. The plaintiff, therefore, on the 15th of march,
1906, filed suit in the court of the justice of the peace of Santa Rosa, La Laguna, against Veronica Alojado to recover
the said sum or, in a contrary case, to compel her to return to his service. The trial having been had, the justice of the
peace, on April 14, 1906, rendered judgment whereby he sentenced the defendant to pay to the plaintiff the sum
claimed and declared that, in case the debtor should be insolvent, she should be obliged to fulfill the agreement
between her and the plaintiff. The costs of the trial were assessed against the defendant.
The defendant appealed from the said judgment to the Court of First Instance to which the plaintiff, after the case had
been docketed by the clerk of court, made a motion on May 4, 1906, requesting that the appeal interposed by the
defendant be disallowed, with the costs of both instances against her. The grounds alleged in support of this motion.
were that the appeal had been filed on the sixth day following that when judgment was rendered in the trial, on April
14th, and that it, therefore, did not come within the period of the five days prescribed by section 76 of the Code of Civil
Procedure, as proven by the certificate issued by the justice of the peace of Santa Rosa. The Court of First Instance,
however, by order of July 16, 1906, overruled the motion of the plaintiff-appellee, for the reasons therein stated,
namely, that the defendant was not notified of the judgment rendered in the case on April 14th of that year until the
16th of the same month, and the appeal having been filed four days later, on the 20th, it could having seen that the
five days specified by section 76 of the Code of Civil Procedure had not expired. The plaintiff was advised to reproduce
his complaint within ten days, in order that due procedure might he had thereupon.
The plaintiff took exception to the aforementioned order and at the same time reproduced the complaint he had filed
in the court of the justice of the peace, in which, after relating to the facts hereinbefore stated, added that the
defendant, besides the sum above-mentioned, had also received from the plaintiff, under the same conditions, various
small amounts between the dates of January 22, 1905, and March 10, 1906, aggregating altogether P11.97, and that
they had not been repaid to him. He therefore asked that judgment be rendered sentencing the defendant to comply
with the said contract and to pay to the plaintiff the sums referred to, amounting in all to P79.57, and that until this
amount should have been in paid, the defendant should remain gratuitously in the service of plaintiff's household, and
that she should pay the costs of the trial.
The defendant, in her written answer of August 15, 1906, to the aforesaid complaint, denied the allegations contained
in paragraphs 1 and 2 of the complaint and alleged that, although she had left the plaintiff's service, it was because
the latter had paid her no sum whatever for the services she had rendered in his house. The defendant likewise denied
the conditions expressed in paragraph 4 of the complaint, averring that the effects purchased, to the amount of
P11.97, were in the possession of the plaintiff, who refused to deliver them to her. She therefore asked that she be
absolved from the complaint and that the plaintiff be absolved from the complaint the wages due her for the services
she had rendered.
The case came to trial on October 19, 1906, and, after the production of testimony by both parties, the judge, on
November 21st of the same year, rendered judgment absolving the defendant from the complain, with the costs
against the plaintiff, and sentencing the latter to pay to the former the sum of P2.43, the balance found to exist
between the defendant's debt of P79.57 and the wages due her by the plaintiff, which amounted to P82. The plaintiff,
on the 6th of December, filed a written exception to the judgment aforesaid through the regular channels, and moved
for a new trial on the ground that the findings of fact set forth in the judgment were manifestly contrary to the weight
of the evidence. This motion was overruled on the 17th of the same month, to which exception was taken by the
appellant, who afterwards filed the proper bill of exceptions, which was approved, certified, and forwarded to the clerk
of this court.
The present suit, initiated in a justice of the peace court and appealed to the Court of First Instance of La Laguna at a
time prior to the enactment of Act No. 1627, which went into effect on July 1, 1907, which limited to two instances the
procedure to be observed in verbal actions, concerns the collection of certain sum received as a loan by the defendant
from the plaintiff, and of the wages earned by the former for services rendered as a servant in the said plaintiff's
house.
Notwithstanding the denial of the defendant, it is a fact clearly proven, as found in the judgment appealed from, that
the plaintiff did deliver to Hermenegildo de los Santos the sum of P67.60 to pay a debt was paid by De los Santos with
the knowledge and in behalf of the said defendant who, of her free will, entered the service of the plaintiff and
promised to pay him as soon as she should find the money wherewith to do so.
The duty to pay the said sum, as well as that of P11.97 delivered to the defendant in small amounts during the time
that she was in the plaintiff's house, is unquestionable, inasmuch as it is a positive debt demandable of the defendant

by her creditor. (Arts. 1754, 1170, Civil Code.) However, the reason alleged by the plaintiff as a basis for the loan is
untenable, to wit, that the defendant was obliged to render service in his house as a servant without remuneration
whatever and to remain therein so long as she had not paid her debt, inasmuch as this condition is contrary to law and
morality. (Art. 1255, Civil Code.)
Domestic services are always to be remunerated, and no agreement may subsist in law in which it is stipulated that
any domestic service shall be absolutely gratuitous, unless it be admitted that slavery may be established in this
country through a covenant entered into between the interested parties.
Articles 1583, 1584, and 1585 of the Civil Code prescribe rules governing the hiring of services of domestics servants,
the conditions of such hire, the term during which the service may rendered and the wages that accrue to the servant,
also the duties of the latter and of the master. The first of the articles cited provides that a hiring for life by either of
the contracting parties is void, and, according to the last of three articles just mentioned, besides what is prescribed in
the preceding articles with regard to masters and servants, the provisions of special laws and local ordinances shall be
observed.
During the regime of the former sovereignty, the police regulations governing domestic service, of the date of
September 9, 1848, were in force, article 19 of which it is ordered that all usurious conduct toward the servants and
employees of every class is prohibited, and the master who, under pretext of an advance of pay or of having paid the
debts or the taxes of his servant, shall have succeeded in retaining the latter in his service at his house, shall be
compelled to pay to such servant all arrears due him and any damages he may have occasioned him, and the master
shall also be fined.
The aforementioned article 1585 of the Civil Code undoubtedly refers to the provisions of the regulations just cited.
When legal regulations prohibit even a usurious contract and all abuses prejudicial to subordinates and servant, in
connection with their salaries and wages, it will be understood at once that the compact whereby service rendered by
a domestic servant in the house of any inhabitant of this country is to be gratuitous, is in all respects reprehensible
and censurable; and consequently, the contention of the plaintiff, that until the defendant shall have paid him her debt
she must serve him in his house gratuitously is absolutely inadmissible.
The trial record discloses no legal reason for the rejection of the findings of fact and of law contained in the judgment
appealed from, nor for an allowance of the errors attributed appealed from, nor for an allowance of the errors
attributed thereto; on the contrary, the reasons hereinabove stated show the propriety of the said judgment.
For the foregoing reasons, and accepting those set forth in the judgment appealed from, it is proper, in our opinion, to
affirm and we hereby affirm the said judgment, with the costs against the appellant.