G.R. No.

138814

April 16, 2009

MAKATI STOCK EXCHANGE, INC., MA. VIVIAN YUCHENGCO, ADOLFO M. DUARTE, MYRON
C. PAPA, NORBERTO C. NAZARENO, GEORGE UY-TIOCO, ANTONIO A. LOPA, RAMON B.
ARNAIZ, LUIS J.L. VIRATA, and ANTONIO GARCIA, JR. Petitioners,
vs.
MIGUEL V. CAMPOS, substituted by JULIA ORTIGAS VDA. DE CAMPOS,1 Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 seeking the reversal of the Decision2 dated
11 February 1997 and Resolution dated 18 May 1999 of the Court of Appeals in CA-G.R. SP No.
38455.
The facts of the case are as follows:
SEC Case No. 02-94-4678 was instituted on 10 February 1994 by respondent Miguel V. Campos,
who filed with the Securities, Investigation and Clearing Department (SICD) of the Securities and
Exchange Commission (SEC), a Petition against herein petitioners Makati Stock Exchange, Inc.
(MKSE) and MKSE directors, Ma. Vivian Yuchengco, Adolfo M. Duarte, Myron C. Papa, Norberto C.
Nazareno, George Uy-Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis J.L. Virata, and Antonio
Garcia, Jr. Respondent, in said Petition, sought: (1) the nullification of the Resolution dated 3 June
1993 of the MKSE Board of Directors, which allegedly deprived him of his right to participate equally
in the allocation of Initial Public Offerings (IPO) of corporations registered with MKSE; (2) the
delivery of the IPO shares he was allegedly deprived of, for which he would pay IPO prices; and (3)
the payment of P2 million as moral damages,P1 million as exemplary damages, and P500,000.00 as
attorneys fees and litigation expenses.
On 14 February 1994, the SICD issued an Order granting respondents prayer for the issuance of a
Temporary Restraining Order to enjoin petitioners from implementing or enforcing the 3 June 1993
Resolution of the MKSE Board of Directors.
The SICD subsequently issued another Order on 10 March 1994 granting respondents application
for a Writ of Preliminary Injunction, to continuously enjoin, during the pendency of SEC Case No. 0294-4678, the implementation or enforcement of the MKSE Board Resolution in question. Petitioners
assailed this SICD Order dated 10 March 1994 in a Petition for Certiorari filed with the SEC en banc,
docketed as SEC-EB No. 393.
On 11 March 1994, petitioners filed a Motion to Dismiss respondents Petition in SEC Case No. 0294-4678, based on the following grounds: (1) the Petition became moot due to the cancellation of the
license of MKSE; (2) the SICD had no jurisdiction over the Petition; and (3) the Petition failed to state
a cause of action.
The SICD denied petitioners Motion to Dismiss in an Order dated 4 May 1994. Petitioners again
challenged the 4 May 1994 Order of SICD before the SEC en banc through another Petition for
Certiorari, docketed as SEC-EB No. 403.
In an Order dated 31 May 1995 in SEC-EB No. 393, the SEC en banc nullified the 10 March 1994
Order of SICD in SEC Case No. 02-94-4678 granting a Writ of Preliminary Injunction in favor of

respondent. Likewise, in an Order dated 14 August 1995 in SEC-EB No. 403, the SEC en banc
annulled the 4 May 1994 Order of SICD in SEC Case No. 02-94-4678 denying petitioners Motion to
Dismiss, and accordingly ordered the dismissal of respondents Petition before the SICD.
Respondent filed a Petition for Certiorari with the Court of Appeals assailing the Orders of the SEC
en banc dated 31 May 1995 and 14 August 1995 in SEC-EB No. 393 and SEC-EB No. 403,
respectively. Respondents Petition before the appellate court was docketed as CA-G.R. SP No.
38455.
On 11 February 1997, the Court of Appeals promulgated its Decision in CA-G.R. SP No. 38455,
granting respondents Petition for Certiorari, thus:
WHEREFORE, the petition in so far as it prays for annulment of the Orders dated May 31, 1995 and
August 14, 1995 in SEC-EB Case Nos. 393 and 403 is GRANTED. The said orders are hereby
rendered null and void and set aside.
Petitioners filed a Motion for Reconsideration of the foregoing Decision but it was denied by the
Court of Appeals in a Resolution dated 18 May 1999.
Hence, the present Petition for Review raising the following arguments:
I.
THE SEC EN BANC DID NOT COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION WHEN IT DISMISSED THE PETITION FILED BY RESPONDENT
BECAUSE ON ITS FACE, IT FAILED TO STATE A CAUSE OF ACTION.
II.
THE GRANT OF THE IPO ALLOCATIONS IN FAVOR OF RESPONDENT WAS A MERE
ACCOMMODATION GIVEN TO HIM BY THE BOARD OF [DIRECTORS] OF THE MAKATI STOCK
EXCHANGE, INC.
III.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE SEC EN BANC COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
MADE AN EXTENDED INQUIRY AND PROCEEDED TO MAKE A DETERMINATION AS TO THE
TRUTH OF RESPONDENTS ALLEGATIONS IN HIS PETITION AND USED AS BASIS THE
EVIDENCE ADDUCED DURING THE HEARING ON THE APPLICATION FOR THE WRIT OF
PRELIMINARY INJUNCTION TO DETERMINE THE EXISTENCE OR VALIDITY OF A STATED
CAUSE OF ACTION.
IV.
IPO ALLOCATIONS GRANTED TO BROKERS ARE NOT TO BE BOUGHT BY THE BROKERS
FOR THEMSELVES BUT ARE TO BE DISTRIBUTED TO THE INVESTING PUBLIC. HENCE,
RESPONDENTS CLAIM FOR DAMAGES IS ILLUSORY AND HIS PETITION A NUISANCE SUIT.3

On 18 September 2001, counsel for respondent manifested to this Court that his client died on 7
May 2001. In a Resolution dated 24 October 2001, the Court directed the substitution of respondent
by his surviving spouse, Julia Ortigas vda. de Campos.
Petitioners want this Court to affirm the dismissal by the SEC en banc of respondents Petition in
SEC Case No. 02-94-4678 for failure to state a cause of action. On the other hand, respondent
insists on the sufficiency of his Petition and seeks the continuation of the proceedings before the
SICD.
A cause of action is the act or omission by which a party violates a right of another.4 A complaint
states a cause of action where it contains three essential elements of a cause of action, namely: (1)
the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or
omission of the defendant in violation of said legal right. If these elements are absent, the complaint
becomes vulnerable to dismissal on the ground of failure to state a cause of action.
If a defendant moves to dismiss the complaint on the ground of lack of cause of action, he is
regarded as having hypothetically admitted all the averments thereof. The test of sufficiency of the
facts found in a complaint as constituting a cause of action is whether or not admitting the facts
alleged, the court can render a valid judgment upon the same in accordance with the prayer thereof.
The hypothetical admission extends to the relevant and material facts well pleaded in the complaint
and inferences fairly deducible therefrom. Hence, if the allegations in the complaint furnish sufficient
basis by which the complaint can be maintained, the same should not be dismissed regardless of
the defense that may be assessed by the defendant.5
Given the foregoing, the issue of whether respondents Petition in SEC Case No. 02-94-4678
sufficiently states a cause of action may be alternatively stated as whether, hypothetically admitting
to be true the allegations in respondents Petition in SEC Case No. 02-94-4678, the SICD may
render a valid judgment in accordance with the prayer of said Petition.
A reading of the exact text of respondents Petition in SEC Case No. 02-94-4678 is, therefore,
unavoidable. Pertinent portions of the said Petition reads:
7. In recognition of petitioners invaluable services, the general membership of respondent
corporation [MKSE] passed a resolution sometime in 1989 amending its Articles of Incorporation, to
include the following provision therein:
"ELEVENTH WHEREAS, Mr. Miguel Campos is the only surviving incorporator of the Makati Stock
Exchange, Inc. who has maintained his membership;
"WHEREAS, he has unselfishly served the Exchange in various capacities, as governor from 1977
to the present and as President from 1972 to 1976 and again as President from 1988 to the present;
"WHEREAS, such dedicated service and leadership which has contributed to the advancement and
well being not only of the Exchange and its members but also to the Securities industry, needs to be
recognized and appreciated;
"WHEREAS, as such, the Board of Governors in its meeting held on February 09, 1989 has
correspondingly adopted a resolution recognizing his valuable service to the Exchange, reward the
same, and preserve for posterity such recognition by proposing a resolution to the membership body
which would make him as Chairman Emeritus for life and install in the Exchange premises a
commemorative bronze plaque in his honor;

"NOW, THEREFORE, for and in consideration of the above premises, the position of the "Chairman
Emeritus" to be occupied by Mr. Miguel Campos during his lifetime and irregardless of his continued
membership in the Exchange with the Privilege to attend all membership meetings as well as the
meetings of the Board of Governors of the Exchange, is hereby created."
8. Hence, to this day, petitioner is not only an active member of the respondent corporation, but its
Chairman Emeritus as well.
9. Correspondingly, at all times material to this petition, as an active member and Chairman
Emeritus of respondent corporation, petitioner has always enjoyed the right given to all the other
members to participate equally in the Initial Public Offerings (IPOs for brevity) of corporations.
10. IPOs are shares of corporations offered for sale to the public, prior to the listing in the trading
floor of the countrys two stock exchanges. Normally, Twenty Five Percent (25%) of these shares are
divided equally between the two stock exchanges which in turn divide these equally among their
members, who pay therefor at the offering price.
11. However, on June 3, 1993, during a meeting of the Board of Directors of respondent-corporation,
individual respondents passed a resolution to stop giving petitioner the IPOs he is entitled to, based
on the ground that these shares were allegedly benefiting Gerardo O. Lanuza, Jr., who these
individual respondents wanted to get even with, for having filed cases before the Securities and
Exchange (SEC) for their disqualification as member of the Board of Directors of respondent
corporation.
12. Hence, from June 3, 1993 up to the present time, petitioner has been deprived of his right to
subscribe to the IPOs of corporations listing in the stock market at their offering prices.
13. The collective act of the individual respondents in depriving petitioner of his right to a share in the
IPOs for the aforementioned reason, is unjust, dishonest and done in bad faith, causing petitioner
substantial financial damage.6
There is no question that the Petition in SEC Case No. 02-94-4678 asserts a right in favor of
respondent, particularly, respondents alleged right to subscribe to the IPOs of corporations listed in
the stock market at their offering prices; and stipulates the correlative obligation of petitioners to
respect respondents right, specifically, by continuing to allow respondent to subscribe to the IPOs of
corporations listed in the stock market at their offering prices.
However, the terms right and obligation in respondents Petition are not magic words that would
automatically lead to the conclusion that such Petition sufficiently states a cause of action. Right and
obligation are legal terms with specific legal meaning. A right is a claim or title to an interest in
anything whatsoever that is enforceable by law.7 An obligation is defined in the Civil Code as a
juridical necessity to give, to do or not to do.8 For every right enjoyed by any person, there is a
corresponding obligation on the part of another person to respect such right. Thus, Justice J.B.L.
Reyes offers9 the definition given by Arias Ramos as a more complete definition:
An obligation is a juridical relation whereby a person (called the creditor) may demand from another
(called the debtor) the observance of a determinative conduct (the giving, doing or not doing), and in
case of breach, may demand satisfaction from the assets of the latter.
The Civil Code enumerates the sources of obligations:

Art. 1157. Obligations arise from:

(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
Therefore, an obligation imposed on a person, and the corresponding right granted to another, must
be rooted in at least one of these five sources. The mere assertion of a right and claim of an
obligation in an initiatory pleading, whether a Complaint or Petition, without identifying the basis or
source thereof, is merely a conclusion of fact and law. A pleading should state the ultimate facts
essential to the rights of action or defense asserted, as distinguished from mere conclusions of fact
or conclusions of law.10 Thus, a Complaint or Petition filed by a person claiming a right to the Office
of the President of this Republic, but without stating the source of his purported right, cannot be said
to have sufficiently stated a cause of action. Also, a person claiming to be the owner of a parcel of
land cannot merely state that he has a right to the ownership thereof, but must likewise assert in the
Complaint either a mode of acquisition of ownership or at least a certificate of title in his name.
In the case at bar, although the Petition in SEC Case No. 02-94-4678 does allege respondents right
to subscribe to the IPOs of corporations listed in the stock market at their offering prices, and
petitioners obligation to continue respecting and observing such right, the Petition utterly failed to lay
down the source or basis of respondents right and/or petitioners obligation.
Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in 1989,
granting him the position of Chairman Emeritus of MKSE for life. However, there is nothing in the
said Petition from which the Court can deduce that respondent, by virtue of his position as Chairman
Emeritus of MKSE, was granted by law, contract, or any other legal source, the right to subscribe to
the IPOs of corporations listed in the stock market at their offering prices.
A meticulous review of the Petition reveals that the allocation of IPO shares was merely alleged to
have been done in accord with a practice normally observed by the members of the stock exchange,
to wit:
IPOs are shares of corporations offered for sale to the public, prior to their listing in the trading floor
of the countrys two stock exchanges. Normally, Twenty-Five Percent (25%) of these shares are
divided equally between the two stock exchanges which in turn divide these equally among their
members, who pay therefor at the offering price.11(Emphasis supplied)
A practice or custom is, as a general rule, not a source of a legally demandable or enforceable
right.12 Indeed, in labor cases, benefits which were voluntarily given by the employer, and which
have ripened into company practice, are considered as rights that cannot be diminished by the
employer.13 Nevertheless, even in such cases, the source of the employees right is not custom, but
ultimately, the law, since Article 100 of the Labor Code explicitly prohibits elimination or diminution of
benefits.

There is no such law in this case that converts the practice of allocating IPO shares to MKSE
members, for subscription at their offering prices, into an enforceable or demandable right. Thus,
even if it is hypothetically admitted that normally, twenty five percent (25%) of the IPOs are divided
equally between the two stock exchanges -- which, in turn, divide their respective allocation equally
among their members, including the Chairman Emeritus, who pay for IPO shares at the offering
price -- the Court cannot grant respondents prayer for damages which allegedly resulted from the
MKSE Board Resolution dated 3 June 1993 deviating from said practice by no longer allocating any
shares to respondent.
1avv phi 1

Accordingly, the instant Petition should be granted. The Petition in SEC Case No. 02-94-4678
should be dismissed for failure to state a cause of action. It does not matter that the SEC en banc, in
its Order dated 14 August 1995 in SEC-EB No. 403, overstepped its bounds by not limiting itself to
the issue of whether respondents Petition before the SICD sufficiently stated a cause of action. The
SEC en banc may have been mistaken in considering extraneous evidence in granting petitioners
Motion to Dismiss, but its discussion thereof are merely superfluous and obiter dictum. In the main,
the SEC en banc did correctly dismiss the Petition in SEC Case No. 02-94-4678 for its failure to
state the basis for respondents alleged right, to wit:
Private respondent Campos has failed to establish the basis or authority for his alleged right to
participate equally in the IPO allocations of the Exchange. He cited paragraph 11 of the amended
articles of incorporation of the Exchange in support of his position but a careful reading of the said
provision shows nothing therein that would bear out his claim. The provision merely created the
position of chairman emeritus of the Exchange but it mentioned nothing about conferring upon the
occupant thereof the right to receive IPO allocations.14
With the dismissal of respondents Petition in SEC Case No. 02-94-4678, there is no more need for
this Court to resolve the propriety of the issuance by SCID of a writ of preliminary injunction in said
case.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 11 February
1997 and its Resolution dated 18 May 1999 in CA-G.R. SP No. 38455 are REVERSED and SET
ASIDE. The Orders dated 31 May 1995 and 14 August 1995 of the Securities and Exchange
Commission en banc in SEC-EB Case No. 393 and No. 403, respectively, are hereby reinstated. No
pronouncement as to costs.
SO ORDERED.

G.R. No. 162826

October 14, 2013

NARCISO DEGAOS,1 Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.
DECISION
BERSAMIN, J.:
Novation is not a mode of extinguishing criminal liability under the penal laws of the country. Only
the. State may validly waive the criminal action against an accused. Novation is relevant only to
determine if the parties have meanwhile altered the nature of the obligation prior to the
commencement of the criminal prosecution in order to prevent the incipient criminal liability of the
accused.
Antecedents
In an amended information dated March 23, 1994, the Office of the Provincial Prosecutor of Bulacan
charged Brigida D. Luz, alias Aida Luz, and Narciso Degaos in the Regional Trial Court in Malolos,
Bulacan with estafa under Article 315 paragraph 1 b) of the Revised Penal Code, allegedly
committed as follows:
That on or about the 27th day of April, 1987 until July 20, 1987, in the municipality of Meycauayan,
province of Bulacan, Philippines, and within the jurisdiction of this Honorable Court, the abovenamed accused conspiring, confederating and helping one another, received from Spouses Atty.
Jose Bordador and Lydia Bordador gold and pieces of jewelry worth P438,702.00, under express
obligation to sell the same on commission and remit the proceeds thereof or return the unsold gold
and pieces of jewelry, but the said accused, once in possession of the said merchandise and far
from complying with their aforesaid obligation, inspite of repeated demands for compliance
therewith, did then and there willfully, unlawfully and feloniously, with intent of gain and grave abuse
of confidence misapply, misappropriate and convert to their own use and benefit the said
merchandise and/or the proceeds thereof, to the damage and prejudice of said Sps. Atty. Jose
Bordador and Lydia Bordador in the said amount of P438,702.00.
Contrary to law.2
The decision of the Court of Appeals (CA) summarized the evidence of the parties as follows:
Prior to the institution of the instant case, a separate civil action for the recovery of sum of money
was filed on June 25, 1990 by the private complainants spouses Jose and Lydia Bordador against
accused Brigida D. Luz alias Aida D. Luz and Narciso Degaos. In an amended complaint dated
November 29, 1993, Ernesto Luz, husband of Brigida Luz, was impleaded as party defendant. The
case docketed as Civil Case No. 412-M-90 was raffled to Branch 15, RTC of Malolos, Bulacan. On
June 23, 1995, the said court found Narciso Degaos liable and ordered him to pay the sum
of P725,463,98 as actual and consequential damages plus interest and attorneys fees in the
amount ofP10,000.00. On the other hand, Brigida Luz alias Aida Luz was ordered to pay the amount
of P21,483.00, representing interest on her personal loan. The case against Ernesto Luz was
dismissed for insufficiency of evidence. Both parties appealed to the Court of Appeals. On July 9,
1997, this Court affirmed the aforesaid decision. On further appeal, the Supreme Court on
December 15, 1997 sustained the Court of Appeals. Sometime in 1994, while the said civil case was
pending, the private complainants instituted the present case against the accused.
EVIDENCE FOR THE PROSECUTION

The prosecution evidence consists of the testimonies of the private complainants-spouses, Jose and
Lydia Bordador.
Private complainant Lydia Bordador, a jeweler, testified that accused Narciso Degaos and
Brigida/Aida Luz are brother and sister. She knew them because they are the relatives of her
husband and their Kumpadre/kumadre. Brigida/Aida Luz was the one who gave instructions to
Narciso Degaos to get gold and jewelry from Lydia for them to sell. Lydia came to know Narciso
Degaos because the latter frequently visited their house selling religious articles and books. While
in their house, Narciso Degaos saw her counting pieces of jewelry and he asked her if he could
show the said pieces of jewelry to his sister, Brigida/Aida Luz, to which she agreed. Thereafter,
Narciso Degaos returned the jewelry and Aida/Brigida Luz called her to ask if she could trust
Narciso Degaos to get the pieces of jewelry from her for Aida/Brigida Luz to sell. Lydia agreed on
the condition that if they could not pay it in cash, they should pay it after one month or return the
unsold jewelry within the said period. She delivered the said jewelry starting sometime in 1986 as
evidenced by several documents entitled "Katibayan at Kasunduan", the earliest of which is dated
March 16, 1986. Everytime Narciso Degaos got jewelry from her, he signed the receipts in her
presence. They were able to pay only up to a certain point. However, receipt nos. 614 to 745 dated
from April 27, 1987 up to July 20, 1987 (Exhs. "A"-"O") were no longer paid and the accused failed to
return the jewelry covered by such receipts. Despite oral and written demands, the accused failed
and refused to pay and return the subject jewelry. As of October 1998, the total obligation of the
accused amounted to P725,000.00.
Private complainant Atty. Jose Bordador corroborated the testimony of his wife, Lydia. He confirmed
that their usual business practice with the accused was for Narciso Degaos to receive the jewelry
and gold items for and in behalf of Brigida/Aida Luz and for Narciso Degaos to sign the "Kasunduan
at Katibayan" receipts while Brigida/Aida Luz will pay for the price later on. The subject items were
usually given to Narciso Degaos only upon instruction from Brigida/Aida Luz through telephone
calls or letters. For the last one year, the "Kasunduan at Katibayan" receipts were signed in his
presence. Said business arrangement went on for quite sometime since Narciso Degaos and
Brigida/Aida Luz had been paying religiously. When the accused defaulted in their payment, they
sent demand letters. It was the accuseds sister, Julie dela Rosa, who responded, seeking an
extension of time for the accused to settle their obligation.
EVIDENCE FOR THE DEFENSE
The defense presented accused Brigida/Aida Luz, who testified that she started transacting business
of selling gold bars and jewelry with the private complainants sometime in 1986 through her brother,
Narciso Degaos. It was the usual business practice for Narciso Degaos to get the gold bars and
pieces of jewelry from the private complainants after she placed orders through telephone calls to
the private complainants, although sometimes she personally went to the private complainants
house to get the said items. The gold bars and pieces of jewelry delivered to her by Narciso
Degaos were usually accompanied by a pink receipt which she would sign and after which she
would make the payments to the private complainants through Narciso Degaos, which payments
are in the form of postdated checks usually with a thirty-day period. In return, the private
complainants would give the original white receipts to Narciso Degaos for him to sign. Thereafter,
as soon as the postdated checks were honored by the drawee bank, the said white receipts were
stamped "paid" by Lydia Bordador, after which the same would be delivered to her by Narciso
Degaos.
On September 2, 1987, she sent a letter to private complainant Lydia Bordador requesting for an
accounting of her indebtedness. Lydia Bordador made an accounting which contained the amount
of P122,673.00 as principal andP21,483.00 as interest. Thereafter, she paid the principal amount

through checks. She did not pay the interest because the same was allegedly excessive. In 1998,
private complainant Atty. Jose Bordador brought a ledger to her and asked her to sign the same.
The said ledger contains a list of her supposed indebtedness to the private complainants. She
refused to sign the same because the contents thereof are not her indebtedness but that of his
brother, Narciso Degaos. She even asked the private complainants why they gave so many pieces
of jewelry and gold bars to Narciso Degaos without her permission, and told them that she has no
participation in the transactions covered by the subject "Kasunduan at Katibayan" receipts.
Co-accused Narciso Degaos testified that he came to know the private complainants when he went
to the latters house in 1986 to sell some Bible books. Two days later he returned to their house and
was initially given a gold bracelet and necklace to sell. He was able to sell the same and paid the
private complainants with the proceeds thereof. Since then he started conducting similar business
transactions with the private complainants. Said transactions are usually covered by receipts
denominated as "Kasunduan at Katibayan". All the "Kasunduan at Katibayan" receipts were issued
by the private complainants and was signed by him. The phrase "for Brigida Luz" and for "Evely
Aquino" were written on the receipts so that in case he fails to pay for the items covered therein, the
private complainants would have someone to collect from. He categorically admitted that he is the
only one who was indebted to the private complainants and out of his indebtedness, he already
made partial payments in the amount of P53,307.00. Included in the said partial payments is the
amount of P20,000.00 which was contributed by his brothers and sisters who helped him and which
amount was delivered by Brigida Luz to the private complainants.3
Ruling of the RTC
On June 23, 1999, the RTC found Degaos guilty as charged but acquitted Luz for insufficiency of
evidence, imposing on Degaos twenty years of reclusion temporal, viz:
WHEREFORE, judgment is hereby rendered as follows:
1. finding accused Narciso Degaos GUILTY beyond reasonable doubt of the crime of estafa
penalized under Article 315, Subsection 1, paragraph (b) of the Revised Penal code and
hereby sentences him to suffer the penalty of TWENTY YEARS (20) of reclusion temporal;
2. finding accused Brigida Luz NOT GUILTY and is hereby ACQUITTED on the ground of
insufficiency of evidence.
SO ORDERED.4
Decision of the CA
On appeal, Degaos assailed his conviction upon the following grounds, to wit:
I
THE HONORABLE COURT A QUO ERRED IN NOT FINDING THAT THE AGREEMENT
BETWEEN THE PRIVATE COMPLAINANT LYDIA BORDADOR AND THE ACCUSED WAS ONE
OF SALE ON CREDIT.
II

THE HONORABLE COURT A QUO ERRED IN NOT FINDING THAT NOVATION HAD
CONVERTED THE LIABILITY OF THE ACCUSED INTO A CIVIL ONE.
III
THE HONORABLE COURT ERRED IN NOT APPLYING THE INDETERMINATE SENTENCE
LAW.5
On September 23, 2003, however, the CA affirmed the conviction of Degaos but modified the
prescribed penalty,6thusly:
WHEREFORE, the appealed Decision finding the accused-appellant Narciso Degaos guilty beyond
reasonable doubt of the crime of Estafa under Article 315 (1) par. b of the Revised Penal code is
hereby AFFIRMED with the modification that the accused-appellant is sentenced to suffer an
indeterminate penalty of imprisonment of four (4) years and two (2) months of prision correccional in
its medium period, as the minimum, to twenty (20) years of reclusion temporal as maximum .
SO ORDERED.7
Issues
Hence, Degaos has appealed, again submitting that:
I.
THE HONORABLE COURT A QUO ERRED IN NOT FINDING THAT THE AGREEMENT
BETWEEN THE PRIVATE COMPLAINANT LYDIA BORDADOR AND THE ACCUSED WAS ONE
OF SALE ON CREDIT;
II.
THE HONORABLE COURT A QUO ERRED IN NOT FINDING THAT NOVATION HAD
CONVERTED THE LIABILITY OF THE ACCUSED INTO A CIVIL ONE.8
Ruling
The appeal lacks merit.
I.
Transaction was an agency, not a sale on credit
Degaos contends that his agreement with the complainants relative to the items of jewelry and gold
subject of the amended information as embodied in the relevant Kasunduan at Katibayan was a sale
on credit, not a consignment to sell on commission basis.
The contention of Degaos is devoid of factual and legal bases.
The text and tenor of the relevant Kasunduan at Katibayan follow:

KASUNDUAN AT KATIBAYAN
xxxx
Akong nakalagda sa ibaba nito ay nagpapatunay na tinanggap ko kay Ginang LYDIA BORDADOR
ng Calvario, Meycauayan, Bulacan ang mga hiyas (jewelries) [sic] na natatala sa ibaba nito upang
ipagbili ko sa kapakanan ng nasabing Ginang. Ang pagbibilhan ko sa nasabing mga hiyas ay aking
ibibigay sa nasabing Ginang, sa loob ng __________ araw at ang hindi mabili ay aking isasauli sa
kanya sa loob din ng nasabing taning na panahon sa mabuting kalagayan katulad ng aking
tanggapin. Ang bilang kabayaran o pabuya sa akin ay ano mang halaga na aking mapalabis na mga
halagang nakatala sa ibaba nito. Ako ay walang karapatang magpautang o kaya ay magpalako sa
ibang tao ng nasabing mga hiyas.9
xxxx
Based on the express terms and tenor of the Kasunduan at Katibayan , Degaos received and
accepted the items under the obligation to sell them in behalf of the complainants ("ang mga hiyas
(jewelries) na natatala sa ibaba nito upang ipagbili ko sa kapakanan ng nasabing Ginang"), and he
would be compensated with the overprice as his commission ("Ang bilang kabayaran o pabuya sa
akin ay ano mang halaga na aking mapalabis na mga halagang nakatala sa ibaba nito."). Plainly, the
transaction was a consignment under the obligation to account for the proceeds of sale, or to return
the unsold items. As such, he was the agent of the complainants in the sale to others of the items
listed in the Kasunduan at Katibayan.
In contrast, according the first paragraph of Article 1458 of the Civil Code, one of the contracting
parties in a contract of sale obligates himself to transfer the ownership of and to deliver a
determinate thing, while the other party obligates himself to pay therefor a price certain in money or
its equivalent. Contrary to the contention of Degaos, there was no sale on credit to him because the
ownership of the items did not pass to him.
II.
Novation did not transpire as to prevent the incipient criminal liability from arising
Degaos claims that his partial payments to the complainants novated his contract with them from
agency to loan, thereby converting his liability from criminal to civil. He insists that his failure to
complete his payments prior to the filing of the complaint-affidavit by the complainants
notwithstanding, the fact that the complainants later required him to make a formal proposal before
the barangay authorities on the payment of the balance of his outstanding obligations confirmed that
novation had occurred.
The CA rejected the claim of Degaos, opining as follows:
Likewise untenable is the accused-appellants argument that novation took place when the private
complainants accepted his partial payments before the criminal information was filed in court and
therefore, his criminal liability was extinguished.
Novation is not one of the grounds prescribed by the Revised Penal Code for the extinguishment of
criminal liability. It is well settled that criminal liability for estafa is not affected by compromise or
novation of contract, for it is a public offense which must be prosecuted and punished by the
Government on its own motion even though complete reparation should have been made of the
1w phi1

damage suffered by the offended party. A criminal offense is committed against the People and the
offended party may not waive or extinguish the criminal liability that the law imposes for the
commission of the offense. The criminal liability for estafa already committed is not affected by the
subsequent novation of the contract.10
We sustain the CA.
Degaos claim was again factually unwarranted and legally devoid of basis, because the partial
payments he made and his purported agreement to pay the remaining obligations did not equate to
a novation of the original contractual relationship of agency to one of sale. As we see it, he
misunderstands the nature and the role of novation in a criminal prosecution.
Novation is the extinguishment of an obligation by the substitution or change of the obligation by a
subsequent one that terminates the first, either by (a) changing the object or principal conditions; or
(b) substituting the person of the debtor; or (c) subrogating a third person in the rights of the creditor.
In order that an obligation may be extinguished by another that substitutes the former, it is
imperative that the extinguishment be so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.11 Obviously, in case of only slight
modifications, the old obligation still prevails.12
The Court has further pointed out in Quinto v. People:13
Novation is never presumed, and the animus novandi, whether totally or partially, must appear by
express agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken.
The extinguishment of the old obligation by the new one is necessary element of novation which
may be effected either expressly or impliedly. The term "expressly" means that the contracting
parties incontrovertibly disclose that their object in executing the new contract is to extinguish the old
one. Upon the other hand, no specific form is required for an implied novation, and all that is
prescribed by law would be an incompatibility between the two contracts. While there is really no
hard and fast rule to determine what might constitute to be a sufficient change that can bring about
novation, the touchstone for contrarity, however would be an irreconcilable incompatibility between
the old and the new obligations.
There are two ways which could indicate, in fine, the presence of novation and thereby produce the
effect of extinguishing an obligation by another which substitutes the same. The firs t is when
novation has been explicitly stated and declared in unequivocal terms. The second is when the old
and the new obligations are incompatible on every point. The test of incompatibility is whether or not
the two obligations can stand together, each one having its independent existence. If they cannot,
they are incompatible and the latter obligation novates the first. Corollarily, changes that breed
incompatibility must be essential in nature and not merely accidental. The incompatibility must take
place in any of the essential elements of the obligation, such as its object, cause or principal
conditions thereof; otherwise, the change would be merely modificatory in nature and insufficient to
extinguish the original obligation.
The changes alluded to by petitioner consists only in the manner of payment. There was really no
substitution of debtors since private complainant merely acquiesced to the payment but did not give
her consent to enter into a new contract.14 x x x
1wphi1

The legal effects of novation on criminal liability were explained by the Court, through Justice J.B.L.
Reyes, in People v. Nery,15 viz:

The novation theory may perhaps apply prior to the filing of the criminal information in court by the
state prosecutors because up to that time the original trust relation may be converted by the parties
into an ordinary creditor-debtor situation, thereby placing the complainant in estoppel to insist on the
original trust. But after the justice authorities have taken cognizance of the crime and instituted
action in court, the offended party may no longer divest the prosecution of its power to exact the
criminal liability, as distinguished from the civil. The crime being an offense against the state, only
the latter can renounce it (People vs. Gervacio, 54 Off. Gaz. 2898; People vs. Velasco, 42 Phil. 76;
U.S. vs. Montaes, 8 Phil. 620).
It may be observed in this regard that novation is not one of the means recognized by the Penal
Code whereby criminal liability can be extinguished; hence, the role of novation may only be to either
prevent the rise of criminal liability or to cast doubt on the true nature of the original basic
transaction, whether or not it was such that its breach would not give rise to penal responsibility, as
when money loaned is made to appear as a deposit, or other similar disguise is resorted to (cf.
Abeto vs. People, 90 Phil. 581; U.S. vs. Villareal, 27 Phil. 481).
Even in Civil Law the acceptance of partial payments, without further change in the original relation
between the complainant and the accused, can not produce novation. For the latter to exist, there
must be proof of intent to extinguish the original relationship, and such intent can not be inferred
from the mere acceptance of payments on account of what is totally due. Much less can it be said
that the acceptance of partial satisfaction can effect the nullification of a criminal liability that is fully
matured, and already in the process of enforcement. Thus, this Court has ruled that the offended
partys acceptance of a promissory note for all or part of the amount misapplied does not obliterate
the criminal offense (Camus vs. Court of Appeals, 48 Off. Gaz. 3898).
Novation is not a ground under the law to extinguish criminal liability. Article 89 (on total
extinguishment)16 and Article 94 (on partial extinguishrnent)17 of the Revised Penal Code list down
the various grounds for the extinguishment of criminal liability. Not being included in the list, novation
is limited in its effect only to the civil aspect of the liability, and, for that reason, is not an efficient
defense in estafa. This is because only the State may validly waive the criminal action against an
accused.18 The role of novation may only be either to prevent the rise of criminal liability, or to cast
doubt on the true nature of the original basic transaction, whether or not it was such that the breach
of the obligation would not give rise to penal responsibility, as when money loaned is made to
appear as a deposit, or other similar disguise is resorted to.19
Although the novation of a contract of agency to make it one of sale may relieve an offender from an
incipient criminal liability, that did not happen here, for the partial payments and the proposal to pay
the balance the accused made during the barangay proceedings were not at all incompatible with
Degafios liability under the agency that had already attached. Rather than converting the agency to
sale, therefore, he even thereby confirmed his liability as the sales agent of the complainants.
VHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on September
23, 2003; and ORDERS petitioner to pay the costs of suit.

G.R. No. 109125 December 2, 1994

ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT
CORPORATION, respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.

VITUG, J.:
Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December
1991, in CA-G.R. SP No. 26345 setting aside and declaring without force and effect the orders of
execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 8741058.
The antecedents are recited in good detail by the appellate court thusly:
On July 29, 1987 a Second Amended Complaint for Specific Performance was filed
by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu
Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil
Case No. 87-41058, alleging, among others, that plaintiffs are tenants or lessees of
residential and commercial spaces owned by defendants described as Nos. 630-638
Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and
have been religiously paying the rental and complying with all the conditions of the
lease contract; that on several occasions before October 9, 1986, defendants
informed plaintiffs that they are offering to sell the premises and are giving them
priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a
price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs
thereafter asked the defendants to put their offer in writing to which request
defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on
October 24, 1986 asking that they specify the terms and conditions of the offer to
sell; that when plaintiffs did not receive any reply, they sent another letter dated
January 28, 1987 with the same request; that since defendants failed to specify the
terms and conditions of the offer to sell and because of information received that
defendants were about to sell the property, plaintiffs were compelled to file the
complaint to compel defendants to sell the property to them.
Defendants filed their answer denying the material allegations of the complaint and
interposing a special defense of lack of cause of action.
After the issues were joined, defendants filed a motion for summary judgment which
was granted by the lower court. The trial court found that defendants' offer to sell was
never accepted by the plaintiffs for the reason that the parties did not agree upon the
terms and conditions of the proposed sale, hence, there was no contract of sale at
all. Nonetheless, the lower court ruled that should the defendants subsequently offer
their property for sale at a price of P11-million or below, plaintiffs will have the right of
first refusal. Thus the dispositive portion of the decision states:

WHEREFORE, judgment is hereby rendered in favor of the

defendants and against the plaintiffs summarily dismissing the
complaint subject to the aforementioned condition that if the
defendants subsequently decide to offer their property for sale for a
purchase price of Eleven Million Pesos or lower, then the plaintiffs
has the option to purchase the property or of first refusal, otherwise,
defendants need not offer the property to the plaintiffs if the purchase
price is higher than Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to this Court in
CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned
by Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and
Fernando A. Santiago), this Court affirmed with modification the lower court's
judgment, holding:
In resume, there was no meeting of the minds between the parties
concerning the sale of the property. Absent such requirement, the
claim for specific performance will not lie. Appellants' demand for
actual, moral and exemplary damages will likewise fail as there exists
no justifiable ground for its award. Summary judgment for defendants
was properly granted. Courts may render summary judgment when
there is no genuine issue as to any material fact and the moving party
is entitled to a judgment as a matter of law (Garcia vs. Court of
Appeals, 176 SCRA 815). All requisites obtaining, the decision of the
court a quois legally justifiable.
WHEREFORE, finding the appeal unmeritorious, the judgment
appealed from is hereby AFFIRMED, but subject to the following
modification: The court a quo in the aforestated decision gave the
plaintiffs-appellants the right of first refusal only if the property is sold
for a purchase price of Eleven Million pesos or lower; however,
considering the mercurial and uncertain forces in our market
economy today. We find no reason not to grant the same right of first
refusal to herein appellants in the event that the subject property is
sold for a price in excess of Eleven Million pesos. No pronouncement
as to costs.
SO ORDERED.
The decision of this Court was brought to the Supreme Court by petition for review
on certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency
in form and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by
this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition)
transferring the property in question to herein petitioner Buen Realty and
Development Corporation, subject to the following terms and conditions:
1. That for and in consideration of the sum of FIFTEEN MILLION
PESOS (P15,000,000.00), receipt of which in full is hereby

acknowledged, the VENDORS hereby sells, transfers and conveys

for and in favor of the VENDEE, his heirs, executors, administrators
or assigns, the above-described property with all the improvements
found therein including all the rights and interest in the said property
free from all liens and encumbrances of whatever nature, except the
pending ejectment proceeding;
2. That the VENDEE shall pay the Documentary Stamp Tax,
registration fees for the transfer of title in his favor and other
expenses incidental to the sale of above-described property including
capital gains tax and accrued real estate taxes.
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng
spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name
of petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to
the lessees demanding that the latter vacate the premises.
On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner
brought the property subject to the notice of lis pendens regarding Civil Case No. 8741058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in
Civil Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No.
21123.
On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted
as follows:
Presented before the Court is a Motion for Execution filed by plaintiff
represented by Atty. Antonio Albano. Both defendants Bobby Cu
Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and
Atty. Anacleto Magno respectively were duly notified in today's
consideration of the motion as evidenced by the rubber stamp and
signatures upon the copy of the Motion for Execution.
The gist of the motion is that the Decision of the Court dated
September 21, 1990 as modified by the Court of Appeals in its
decision in CA G.R. CV-21123, and elevated to the Supreme Court
upon the petition for review and that the same was denied by the
highest tribunal in its resolution dated May 6, 1991 in G.R. No.
L-97276, had now become final and executory. As a consequence,
there was an Entry of Judgment by the Supreme Court as of June 6,
1991, stating that the aforesaid modified decision had already
become final and executory.
It is the observation of the Court that this property in dispute was the
subject of the Notice of Lis Pendens and that the modified decision of
this Court promulgated by the Court of Appeals which had become
final to the effect that should the defendants decide to offer the
property for sale for a price of P11 Million or lower, and considering

the mercurial and uncertain forces in our market economy today, the
same right of first refusal to herein plaintiffs/appellants in the event
that the subject property is sold for a price in excess of Eleven Million
pesos or more.
WHEREFORE, defendants are hereby ordered to execute the
necessary Deed of Sale of the property in litigation in favor of
plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15 Million pesos in recognition of plaintiffs' right of
first refusal and that a new Transfer Certificate of Title be issued in
favor of the buyer.
All previous transactions involving the same property notwithstanding
the issuance of another title to Buen Realty Corporation, is hereby set
aside as having been executed in bad faith.
SO ORDERED.
On September 22, 1991 respondent Judge issued another order, the dispositive
portion of which reads:
WHEREFORE, let there be Writ of Execution issue in the aboveentitled case directing the Deputy Sheriff Ramon Enriquez of this
Court to implement said Writ of Execution ordering the defendants
among others to comply with the aforesaid Order of this Court within
a period of one (1) week from receipt of this Order and for defendants
to execute the necessary Deed of Sale of the property in litigation in
favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for
the consideration of P15,000,000.00 and ordering the Register of
Deeds of the City of Manila, to cancel and set aside the title already
issued in favor of Buen Realty Corporation which was previously
executed between the latter and defendants and to register the new
title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong
and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the corresponding writ of execution (Annex
C, Petition) was issued. 1
On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and
declared without force and effect the above questioned orders of the court a quo.
In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the
writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the
name of Buen Realty, at the time of the latter's purchase of the property on 15 November 1991 from
the Cu Unjiengs.
We affirm the decision of the appellate court.

A not too recent development in real estate transactions is the adoption of such arrangements as the
right of first refusal, a purchase option and a contract to sell. For ready reference, we might point out
some fundamental precepts that may find some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation
is constituted upon the concurrence of the essential elements thereof, viz: (a) The vinculum
juris or juridical tie which is the efficient cause established by the various sources of obligations (law,
contracts, quasi-contracts, delicts and quasi-delicts); (b) the object which is the prestation or
conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who,
viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor)
subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds
between two persons whereby one binds himself, with respect to the other, to give something or to
render some service (Art. 1305, Civil Code). A contract undergoes various stages that include its
negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the
period from the time the prospective contracting parties indicate interest in the contract to the time
the contract is concluded (perfected). The perfection of the contract takes place upon the
concurrence of the essential elements thereof. A contract which is consensual as to perfection is so
established upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the
object and on the cause thereof. A contract which requires, in addition to the above, the delivery of
the object of the agreement, as in a pledge or commodatum, is commonly referred to as
a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as
in a donation of real property, is essential in order to make the act valid, the prescribed form being
thereby an essential element thereof. The stage of consummation begins when the parties perform
their respective undertakings under the contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation. In sales, particularly, to which the topic for discussion about the case at bench
belongs, the contract is perfected when a person, called the seller, obligates himself, for a price
certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over
which the latter agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the
ownership of the thing sold is retained until the fulfillment of a positive suspensive condition
(normally, the full payment of the purchase price), the breach of the condition will prevent the
obligation to convey title from acquiring an obligatory force. 2 In Dignos vs. Court of Appeals (158
SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still absolute
where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon
actual or constructive delivery (e.g., by the execution of a public document) of the property sold. Where
the condition is imposed upon the perfection of the contract itself, the failure of the condition would
prevent such perfection. 3 If the condition is imposed on the obligation of a party which is not fulfilled, the
other party may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil Code). 4

An unconditional mutual promise to buy and sell, as long as the object is made determinate and the
price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be
exacted. 5
An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when
coupled with a valuable consideration distinct and separate from the price, is what may properly be
termed a perfected contract ofoption. This contract is legally binding, and in sales, it conforms with
the second paragraph of Article 1479 of the Civil Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a price certain
is binding upon the promissor if the promise is supported by a consideration distinct
from the price. (1451a) 6
Observe, however, that the option is not the contract of sale itself. 7 The optionee has the right, but not
the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of
the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to
comply with their respective undertakings. 8

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

promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are
ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a
contract is perfected, are not considered binding commitments. Thus, at any time prior to the
perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage,
may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its
mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil.
270). Where a period is given to the offeree within which to accept the offer, the following rules
generally govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and
has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before
the offeror's coming to know of such fact, by communicating that withdrawal to the offeree (see Art.
1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is
applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South
Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of
Paraaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to
withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a
damage claim under Article 19 of the Civil Code which ordains that "every person must, in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it
would be a breach of that contract to withdraw the offer during the agreed period. The option,
however, is an independent contract by itself, and it is to be distinguished from the projected main
agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the
optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optioneeofferee, the latter may not sue for specific performance on the proposed contract ("object" of the
option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders
himself liable for damages for breach of the option. In these cases, care should be taken of the real
nature of theconsideration given, for if, in fact, it has been intended to be part of the consideration for
the main contract with a right of withdrawal on the part of the optionee, the main contract could be

deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can
evidence its perfection (Art. 1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to
point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code.
Neither can the right of first refusal, understood in its normal concept, per se be brought within the
purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer
under Article 1319 9 of the same Code. An option or an offer would require, among other things, 10 a clear
certainty on both the object and the cause or consideration of the envisioned contract. In a right of first
refusal, while the object might be made determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another
but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at
best be so described as merely belonging to a class of preparatory juridical relations governed not by
contracts (since the essential elements to establish the vinculum juris would still be indefinite and
inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the
Civil Code on human conduct.

Even on the premise that such right of first refusal has been decreed under a final judgment, like
here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment
that merely recognizes its existence, nor would it sanction an action for specific performance without
thereby negating the indispensable element of consensuality in the perfection of contracts. 11 It is not
to say, however, that the right of first refusal would be inconsequential for, such as already intimated
above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 12 of
the Civil Code, can warrant a recovery for damages.

The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of
first refusal" in favor of petitioners. The consequence of such a declaration entails no more than what
has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the
failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution
on the judgment, since there is none to execute, but an action for damages in a proper forum for the
purpose.
Furthermore, whether private respondent Buen Realty Development Corporation, the alleged
purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any
case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058
are matters that must be independently addressed in appropriate proceedings. Buen Realty, not
having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution
issued by respondent Judge, let alone ousted from the ownership and possession of the property,
without first being duly afforded its day in court.
We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the
writ of execution varies the terms of the judgment in Civil Case No. 87-41058, later affirmed in CAG.R. CV-21123. The Court of Appeals, in this regard, has observed:
Finally, the questioned writ of execution is in variance with the decision of the trial
court as modified by this Court. As already stated, there was nothing in said
decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs and
respondent lessees, or the fixing of the price of the sale, or the cancellation of title in the
name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila
vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA
885).

It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed
at the time the execution of any deed of sale between the Cu Unjiengs and petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders,
dated 30 August 1991 and 27 September 1991, of the court a quo. Costs against petitioners.
SO ORDERED

Social Security System, petitioner vs. Moonwalk Development and Housing

Corporation, et al, respondents.
G.R. No. 73345. April 7, 1993
221 SCRA 119

Obligations; Requisites in order that debtor may be in default; Necessity of demand.

To be in default x x x is different from mere delay in grammatical sense, because it
involves the beginning of a special condition or status which has its own peculiar effects or
results.
In order that the debtor may be in default it is necessary that the following requisites
be present:
(1) That the obligation be demandable and already liquidated;
(2) That the debtor delays performance; and
(3) That the creditor requires the performance judicially or extrajudicially.
Default generally begins from the moment the creditor demands the performance of
the obligation.

CASE:
Petition for review on certiorari of the decision of the then Intermediate Appellate Court affirming in toto
the decision of the former Court of First Instance of Rizal, Seventh Judicial District, Branch XXIX, Pasay City.

FACTS:
On February 20, 1980, the petitioner Social Security System filed a complaint in the Court of First Instance
of Rizal against the respondent Moonwalk Development and Housing Corporation.
The petitioner alleged that it had committed an error in failing to compute the 12% interest due on
delayed payments on the loan of the respondent and also in not reflecting in its statement of account an unpaid
balance on the said penalties for delayed payments.
The respondent answered denying the claims and asserting that the petitioner had the opportunity to
ascertain the truth but it failed to do so.
Decision of the Court of First Instance:
The Court of First Instance dismissed the complaint on the ground that the obligation was already
extinguished by the payment by the respondent of its indebtedness to the petitioner and by the latters
cancellation of the real estate mortgages executed in its favor by the defendant.
The Motion for Reconsideration filed by the petitioner was dismissed by the trial court.
Decision of the Intermediate Appellate Court:
The respondent court held that the respondents obligation was extinguished and affirmed the decision
of the trial court.

ISSUE:
Whether or not respondent Moonwalk Development and Housing Corporation incurred delay in the
performance of its obligation.

RULING:
Under the Civil Code, delay begins from the time the obligee judicially or extrajudicially demands from the
obligor the performance of the obligation. (Article 1169 of the Civil Code)
Article 1169 of the Civil Code provides for three (3) instances when demand in not necessary to render
the obligation in default:
(1) When the obligation or the law expressly so declares;
(2) When from the nature and the circumstances of the obligation it appears that the
designation of the time when the thing is to be delivered or the service to be rendered was a
controlling motive for the establishment of the contract;
(3) When demand would be useless, as when the obligor has rendered it beyond his power to
perform.

The case at bar does not fall within any of the established exceptions. Hence, petitioner is not excused
from making a demand.
It is true that respondent has long been delinquent in meeting its monthly arrears and in paying the full
amount of the loan itself as the obligation matured sometime in January, 1977.
But mere delinquency in payment does not necessarily mean delay in the legal concept. Default generally
begins from the moment the creditor demands the performance of the obligation.
In the present case, the petitioner never demanded from the respondents the payment of its monthly
amortizations. It was clear that respondent was never in default because petitioner never compelled performance.

The petition was DISMISSED and the decision of the Intermediate Appellate Court was
AFFIRMED.

G.R. No. 153827

April 25, 2006

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner,

vs.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Respondent.
DECISION
GARCIA, J.:
In this petition for review under Rule 45 of the Rules of Court, petitioner Asian Construction and
Development Corporation or "ASIAKONSTRUKT," seeks the reversal and setting aside of the
decision1dated March 15, 2002 and the Resolution2 dated June 3, 2002 of the Court of Appeals (CA)
in CA-G.R. CV No. 68189. The assailed decision affirm with modification the Summary Judgment
rendered by the Regional Trial Court (RTC) of Makati City in an action for a sum of money thereat
commenced by the herein respondent, Philippine Commercial International Bank (PCIBANK) against
the petitioner, while the challenged resolution denied petitioners motion for reconsideration.
The facts:
On February 24, 1999, in the RTC of Makati City, respondent PCIBANK filed a complaint3 for a sum
of money with prayer for a writ of preliminary attachment against petitioner ASIAKONSTRUKT.
Docketed as Civil Case No. 99-432, the complaint alleged, inter alia, as follows:
FIRST CAUSE OF ACTION
2.01 On various occasions, ASIAKONSTRUKT obtained U.S. dollar denominated credit
accommodations from PCIBANK in the amount of Four Million Four Hundred Eighty Seven
Thousand U.S. dollars (US$4,487,000.00), exclusive of interests, charges and fees thereon and the
cost of collecting the same. These credit accommodations are covered by the following promissory
notes:
xxx xxx xxx

2.02 Prompt and faithful payment of all the foregoing promissory notes was secured by the following
deeds of assignment executed by ASIAKONSTRUKT in favor of PCIBANK:
(a) Deed of Assignment of Receivables/Contract Proceeds dated 20 July 1994 where
ASIAKONSTRUKT assigned its receivables from its Contract with the National Power
Corporation (NPC) in the amount of .P54,500,000;
(b) Deed of Assignment of Receivables dated 28 June 1995 where ASIAKONSTRUKT
assigned its receivables from its Contract with the NPC in the amount of
P26,281,000.00;
(c) Deed of Assignment of Receivables dated 28 August 1995 where ASIAKONSTRUKT
assigned its receivables from its Sub-Contract with ABB Power, Inc., in the amount
of P43,000,000.00;
(d) Deed of Assignment of Contract Proceeds dated 27 March 1996 where
ASIAKONSTRUKT assigned its receivables from its contracts with PNOC in the
aggregate amount of P46,000,000.00; and
(e) Deed of Assignment of Contract Proceeds dated 20 February 1997 where
ASIAKONSTRUKT assigned its receivables from the Ormat Philippines, Inc., in the
aggregate amount of US$3,350,000.00;
2.03 All the foregoing deeds of assignments stipulate, among others, the following terms and
conditions:
a) The assignment is for the purpose of securing payment of the principal amount and the
interests and bank charges accruing thereon, the costs of collecting the same and all other
expenses which PCIBANK may be put in connection with or as an incident of the
assignment;
b) That the assignment secures also any extension or renewal of the credit which is the
subject thereof as any and all other obligations of ASIAKONSTRUKT of whatever kind and
nature as appear in the records of PCIBANK, which ASIAKONSTRUKT accepts as the final
and conclusive evidence of such obligations to PCIBANK, "whether contracted before, during
or after the constitution of [the assignment agreement]";
c) That PCIBANK authorizes ASIAKONSTRUKT, at the latters expense, to "collect and
receive for [PCIBANK] all the Receivables"; and
d) That ASIAKONSTRUKT "shall have no right, and agrees not to use any of the proceeds of
any collections, it being agreed by the parties that [ASIAKONSTRUKT] divests itself of all the
rights, title and interest in said Receivables and the proceeds of the collection received
thereon."
1avvphil.net

2.04 The promissory notes have remained not fully paid despite their having become due and
demandable. Repeated verbal and written demands were made upon ASIAKONSTRUKT, but to no
avail. It has failed and refused, and continues to fail and refuse, to pay its outstanding obligations to
PCIBANK;

2.05 As a result of ASIAKONSTRUKTs refusal to pay its outstanding obligations, PCIBANK was
constrained to refer the matter to counsel and thus incur attorneys fees and legal costs.
2.06 The aggregate unpaid obligation of ASIAKONSTRUKT to PCIBANK, as of 31 December 1998,
amounts to US$4,553,446.06, broken down as follows:
Principal

US$ 4,067,867.23

Interest

US$ 291,263.27

Penalties

US$ 194,315.56

TOTAL

US$ 4,553,446.06

For its second cause of action, PCIBANK alleged in the same complaint as follows:
SECOND CAUSE OF ACTION
4.02 as a result of the fraudulent acts of ASIAKONSTRUKT, PCIBANK suffered the following
damages, all of which ASIAKONSTRUKT must be held to pay PCIBANK:
4.02.1 Exemplary damages, in the interest of public good and purposes of correction, in the amount
of not less than .P50,000.00;
4.02.2 Attorneys fees in the amount of not less than . P1,800,000.00; and
4.02.3 Costs of suit.
In support of its prayer for a writ of preliminary attachment embodied in the complaint, plaintiff
PCIBANK alleges the following:
3.02 ASIAKONSTRUKT is guilty of fraud in contracting the debt, in the performance thereof, or
both, xxx;
303. PCIBANK agreed to enter into the above-mentioned credit accommodations primarily because
of the existence of the deeds of assignment listed above. However, from telephone inquiries made
with responsible officers of the National Power Corporation, ABB Power, Inc., PNOC and Ormat
Philippines, Inc., PCIBANK was surprised to learn that ASIAKONSTRUKT had long ago collected
the contract proceeds, or portions thereof, which were previously assigned to PCIBANK. However,
to date, it has yet to turn over these proceeds to PCIBANK. Worse, PCIBANK learned that the
contract proceeds were used by ASIAKONSTRUKT for its own purposes clear evidence of fraud,
which has deprived PCIBANK of its security. ASIAKONSTRUKTs unauthorized use of the contract
proceeds for its own purposes was subsequently confirmed by Mr. Napoleon Garcia, Vice President
for Finance of ASIAKONSTRUKT, in a telephone discussion on 12 January 1999 with Ms. Maricel E.
Salaveria of PCIBANK. xxx Needless to say, ASIAKONSTRUKT has fraudulently collected such
receivables to the prejudice of PCIBANK.
3.04 it is evident that ASIAKONSTRUKT never had any intention of complying with the deeds of
assignment. ASIAKONSTRUKT only misled PCIBANK into believing that it had sufficient security to
ensure payment of its loan obligations.

3.05 Alternatively, granting, in argumenti gratia, that ASIAKONSTRUKT, at the time it executed the
foregoing deeds of assignment, really intended to abide by their terms and conditions, it
nevertheless committed manifest fraud when it collected the contract proceeds, and instead of
remitting them to PCIBANK, used them for its own purposes.
In an order4 dated April 13, 1999, the trial court, after receiving ex parte PCIBANKs evidence in
support of its prayer for preliminary attachment, directed the issuance of the desired writ, thus:
WHEREFORE, let a writ of preliminary attachment issue against all the property of defendant not
exempt from execution or so much thereof as may be sufficient to satisfy plaintiffs principal claim of
US$4,553,446.06, representing the alleged unpaid obligation of defendant, inclusive of interest and
penalty charges, as of December 31, 1998, which is equivalent to P174,260,380.72, upon plaintiffs
filing of a bond in an equal amount to answer for all it may sustain by reason of the attachment if the
Court shall finally adjudge that plaintiff was not entitled thereto.
SO ORDERED.
With plaintiff PCIBANK having posted the requisite bond, a writ of preliminary attachment was
thereafter issued by the trial court. Per records, defendant ASIAKONSTRUKT did not file any motion
for the quashal or dissolution of the writ.
Meanwhile, on August 27, 1999, defendant ASIAKONSTRUKT filed its Answer,5 thereunder making
admissions and denials. Defendant admits, subject to its defenses, the material allegations of the
Complaint as regards its indebtedness to plaintiff PCIBANK and its execution of the various deeds of
assignment enumerated therein. It, however, denies, for lack of knowledge sufficient to form a belief
as to the truth thereof, the averments in the Complaint that it has not paid, despite demands, its due
and demandable obligations, as well as the amounts due the plaintiff as itemized in paragraph 2.06,
supra, of the Complaint. It likewise denies PCIBANKs allegations in the same Complaint in support
of its prayer for a writ of preliminary attachment, particularly its having fraudulently misappropriated
for its own use the contract proceeds/receivables under the contracts mentioned in the several
deeds of assignments, claiming in this respect that it has still remaining receivables from those
contracts.
By way of defenses, defendant pleads in its Answer the alleged "severe financial and currency crisis"
which hit the Philippines in July 1997, which adversely affected and ultimately put it out of business.
Defendant adds that the deeds of assignments it executed in favor of PCIBANK were standard forms
proposed by the bank as pre-condition for the release of the loans and therefore partake of the
nature of contracts of adhesion, leaving the defendant to the alternative of "taking it or leaving it." By
way of counterclaim, defendant prayed for an award of P1,000,000.00 as and for attorneys fees
and P200,000.00 as litigation expenses.
On January 24, 2000, plaintiff PCIBANK filed a verified Motion for Summary Judgment,6 therein
contending that the defenses interposed by the defendant are sham and contrived, that the alleged
financial crisis pleaded in the Answer is not a fortuitous event that would excuse debtors from their
loan obligations, nor is it an exempting circumstance under Article 1262 of the New Civil Code
where, as here, the same is attended by bad faith. In the same motion, PCIBANK also asserts that
the deeds of assignments executed in its favor are not contracts of adhesion, and even if they were,
the same are valid.
To the Motion for Summary Judgment, defendant interposed an Opposition7 insisting that its Answer
tendered or raised genuine and substantial issues of material facts which require full-blown trial,
namely:

1. Whether or not defendant received all or part of the proceeds/receivables due from the
contracts mentioned in the deeds of assignment at the time the complaint was filed;
2. Granting that defendant received those proceeds/receivables, whether or not defendant
fraudulently misappropriated the same;
3. Whether or not defendant is virtually insolvent as a result of the regionwide economic
crisis that hit Asia, causing the Philippine peso to depreciate drastically; and
4. Whether the parties dealt with each other on equal footing with respect to the execution of
the deeds of assignment as to give the defendant an honest opportunity to reject the onerous
terms imposed therein.
Significantly, defendant did not append to its aforementioned Opposition any affidavit in support of
the alleged genuine issues of material facts mentioned therein.
Before the pending incident (motion for summary judgment) could be resolved by the trial court,
plaintiff PCIBANK waived its claim for exemplary damages and agreed to reduce its claim for
attorneys fees from P1,800,000.00 toP1,260,000.00, but made it clear that its waiver of exemplary
damages and reduction of attorneys fees are subject to the condition that a full and final disposition
of the case is obtained via summary judgment.
On May 16, 2000, the trial court, acting favorably on PCIBANKs motion for summary judgment,
came out with its Summary Judgment,8 the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff:
1. the sum of US$4,553,446.06, or its equivalent in Philippine currency at the time of
payment, with interest thereon at the rate of 8.27% per annum from February 24, 1999 until
fully paid;
2. P1,260,000.00 as and for attorneys fees; and
3. the costs of suit.
SO ORDERED.
Explains the trial court in rendering its Summary Judgment:
A thorough examination of the parties pleadings and their respective stand in the foregoing motion,
the court finds that indeed with defendants admission of the first cause of action there remains no
question of facts in issue. Further, the proffered defenses are worthless, unsubstantial, sham and
contrived.
Considering that there is no more issue to be resolved, the court hereby grants plaintiffs Motion and
renders Judgment in favor of the plaintiff against the defendant based on their respective pleadings
in accordance with Section 4, Rule 35 of the Rules of Court.
In time, petitioner went to the CA whereat its appellate recourse was docketed as CA-G.R. CV No.
68189. As stated at the threshold hereof, the CA, in its decision9 of May 15, 2002, affirmed with

modification the Summary Judgment rendered by the trial court, the modification being as regards
the award for attorneys fees which the CA reduced toP1,000,000.00, to wit:
IN THE LIGHT OF ALL THE FOREGOING, the appeal is PARTIALLY GRANTED. The "Decision"
appealed from is AFFIRMED with the MODIFICATION THAT THE AWARD FOR ATTORNEYS
FEES is reduced to P1,000,000.00.
SO ORDERED.
With its motion for reconsideration having been denied by the CA in its Resolution10 of June 3, 2002,
petitioner is now with us via the present recourse, raising the following issues:
I WHETHER OR NOT THERE IS A GENUINE ISSUE AS TO A MATERIAL FACT WHICH RULES
OUT THE PROPRIETY OF A SUMMARY JUDGMENT.
II WHETHER OR NOT THE AWARD OF ATTORNEYS FEES IS EXORBITANT OR
UNCONSCIONABLE.
We DENY.
As in the two courts below, it is petitioners posture that summary judgment is improper in this case
because there are genuine issues of fact which have to be threshed out during trial, to wit: (a)
whether or not petitioner was able to collect only a portion of the contract proceeds/receivables it
was bound to deliver, remit and tender to respondent under the several deeds of assignment it
executed in favor of the latter; and (b) whether or not petitioner fraudulently misappropriated and
used for its benefit the said proceeds/receivables. Ergo, so petitioner maintains, genuine triable
issues of fact are present in this case, which thereby precludes rendition of summary judgment.
We are not persuaded.
Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to the amount of damages,
when there is no genuine issue as to any material fact and the moving party is entitled to a judgment
as a matter of law, summary judgment may be allowed.11 Summary or accelerated judgment is a
procedural technique aimed at weeding out sham claims or defenses at an early stage of litigation
thereby avoiding the expense and loss of time involved in a trial.12
Under the Rules, summary judgment is appropriate when there are no genuine issues of fact which
call for the presentation of evidence in a full-blown trial. Even if on their face the pleadings appear to
raise issues, when the affidavits, depositions and admissions show that such issues are not genuine,
then summary judgment as prescribed by the Rules must ensue as a matter of law. The
determinative factor, therefore, in a motion for summary judgment, is the presence or absence of a
genuine issue as to any material fact.
A "genuine issue" is an issue of fact which requires the presentation of evidence as distinguished
from a sham, fictitious, contrived or false claim. When the facts as pleaded appear uncontested or
undisputed, then there is no real or genuine issue or question as to the facts, and summary
judgment is called for. The party who moves for summary judgment has the burden of demonstrating
clearly the absence of any genuine issue of fact, or that the issue posed in the complaint is patently
unsubstantial so as not to constitute a genuine issue for trial. Trial courts have limited authority to
render summary judgments and may do so only when there is clearly no genuine issue as to any

material fact. When the facts as pleaded by the parties are disputed or contested, proceedings for
summary judgment cannot take the place of trial.13
The CA, in its challenged decision, stated and we are in full accord with it:
In the present recourse, the [petitioner] relied not only on the judicial admissions in its pleadings,
more specifically its "Answer" to the complaint, the testimony of Maricel Salaveria as well as Exhibits
"A" to "T-3", adduced in evidence by the [respondent], during the hearing on its plea for the
issuance, by the Court a quo, of a writ of preliminary attachment. Significantly, the [petitioner] did not
bother filing a motion for the quashal of the "Writ" issued by the Court a quo.
It must be borne in mind, too, that the [petitioner] admitted, in its "Answer" the due execution and
authenticity of the documents appended to the complaint . The [petitioner] did not deny its liability
for the principal amount claimed by the [respondent] in its complaint. The [petitioner] merely alleged,
by way of defenses, that it failed to pay its account because of the region-wide economic crisis
that engulfed Asia, in July, 1997, and the "Deeds of Assignment" executed by it in favor of the
[respondent] were contracts of adhesion:
xxx xxx xxx
The [petitioner] elaborated on and catalogued its defenses in its "Appellants Brief" what it believed,
as "genuine issues".
"(i) Whether or not [petitioner] received all or part of the proceeds/receivables due from the
construction contracts at the time the civil action was filed;
(ii) Granting that [petitioner] received the proceeds/receivables from the construction
contracts, whether or not [petitioner] fraudulently misappropriated the same;
(iii) Whether or not [petitioner] had become virtually insolvent as a result of the region-wide
economic crisis that hit Asia, causing the Philippine peso to depreciate dramatically; and
(iv) Whether or not [respondent] and [petitioner] dealt with each other on equal footing with
respect to the execution of the deeds of assignment of receivables as to give [petitioner] an
honest opportunity to reject the onerous terms imposed on it."
However, the [petitioner] failed to append, to its "Opposition" to the "Motion for Summary Judgment",
"Affidavits" showing the factual basis for its defenses of "extraordinary deflation," including facts,
figures and data showing its financial condition before and after the economic crisis and that the
crisis was the proximate cause of its financial distress. It bears stressing that the [petitioner] was
burdened to demonstrate, by its "Affidavits" and documentary evidence, that, indeed, the Philippines
was engulfed in an extraordinary deflation of the Philippine Peso and that the same was the
proximate cause of the financial distress, it claimed, it suffered.
xxx xxx xxx
Where, on the basis of the records, inclusive of the pleadings of the parties, and the testimonial and
documentary evidence adduced by the [respondent], supportive of its plea for a writ of preliminary
attachment, the [respondent] had causes of action against the [petitioner], it behooved the
[petitioner] to controvert the same with affidavits/documentary evidence showing a prima
facie genuine defense. As the Appellate Court of Illinois so aptly declared:

The defendant must show that he has a bona fide defense to the action, one which he may be able
to establish. It must be a plausible ground of defense, something fairly arguable and of a substantial
character. This he must show by affidavits or other proof.
The trial court, of course, must determine from the affidavits filed whether the defendant has
interposed a sufficiently good defense to entitle it to defend, but where defendants affidavits present
no substantial triable issues of fact, the court will grant the motion for summary judgment.
xxx xxx xxx
The failure of the [petitioner] to append to its "Opposition" any "Affidavits" showing that its defenses
were not contrived or cosmetic to delay judgment created a presumption that the defenses of the
[petitioner] were not offered in good faith and that the same could not be sustained (Unites States
versus Fiedler, et al., Federal Reported, 2nd, 578).
If, indeed, the [petitioner] believed it that was prevented from complying with its obligations to the
[respondent], under its contracts, it should have interposed a counterclaims for rescission of
contracts, conformably with the pronouncement of our Supreme Court, thus:
xxx xxx xxx
The [petitioner] did not. This only exposed the barrenness of the pose of the [petitioner].
The [petitioner] may have experienced financial difficulties because of the "1997 economic crisis"
that ensued in Asia. However, the same does not constitute a valid justification for the [petitioner] to
renege on its obligations to the [respondent]. The [petitioner] cannot even find solace in Articles
1266 and 1267 of the New Civil Code for, as declared by our Supreme Court:
It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations
arising therefrom have the force of law between the parties and should be complied with in good
faith. But the law recognizes exceptions to the principle of the obligatory force of contracts. One
exception is laid down in Article 1266 of the Civil Code, which reads: The debtor in obligations to do
shall also be released when the prestation becomes legally or physically impossible without the fault
of the obligor.
Petitioner cannot, however, successfully take refuge in the said article, since it is applicable only to
obligations "to do," and not obligations "to give." An obligation "to do" includes all kinds of work or
service; while an obligation "to give" is a prestation which consists in the delivery of a movable or an
immovable thing in order to create a real right, or for the use of the recipient, or for its simple
possession, or in order to return it to its owner.
xxx xxx xxx
In this case, petitioner wants this Court to believe that the abrupt change in the political climate of
the country after the EDSA Revolution and its poor financial condition "rendered the performance of
the lease contract impractical and inimical to the corporate survival of the petitioner." (Philippine
National Construction Corporation versus Court of Appeals, et al., 272 SCRA 183, at pages 191192, supra)
The [petitioner] even failed to append any "Affidavit" to its "Opposition" showing how much it had
received from its construction contracts and how and to whom the said collections had been

appended. The [petitioner] had personal and sole knowledge of the aforesaid particulars while the
[respondent] did not.
In fine, we rule and so hold that the CA did not commit any reversible error in affirming the summary
judgment rendered by the trial court as, at bottom, there existed no genuine issue as to any material
fact. We also sustain the CAs reduction in the award of attorneys fees to only P1,000,000.00, given
the fact that there was no full-blown trial.
WHEREFORE, the assailed CA decision is AFFIRMED in toto and this petition is DENIED for lack of
merit.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48889 May 11, 1989
DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,
vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First
Instance of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA
VILLAFUERTE, respondents.

GANCAYCO, J.:
The issue posed in this petition for review on certiorari is the validity of a promissory note which was
executed in consideration of a previous promissory note the enforcement of which had been barred
by prescription.
On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural loan
from the Agricultural and Industrial Bank (AIB), now the Development of the Philippines (DBP), in the
sum of P2,000.00, Philippine Currency, as evidenced by a promissory note of said date whereby
they bound themselves jointly and severally to pay the account in ten (10) equal yearly
amortizations. As the obligation remained outstanding and unpaid even after the lapse of the
aforesaid ten-year period, Confesor, who was by then a member of the Congress of the Philippines,
executed a second promissory note on April 11, 1961 expressly acknowledging said loan and
promising to pay the same on or before June 15, 1961. The new promissory note reads as follows

I hereby promise to pay the amount covered by my promissory note on or before

June 15, 1961. Upon my failure to do so, I hereby agree to the foreclosure of my
mortgage. It is understood that if I can secure a certificate of indebtedness from the
government of my back pay I will be allowed to pay the amount out of it.
Said spouses not having paid the obligation on the specified date, the DBP filed a complaint dated
September 11, 1970 in the City Court of Iloilo City against the spouses for the payment of the loan.
After trial on the merits a decision was rendered by the inferior court on December 27, 1976, the
dispositive part of which reads as follows:
WHEREFORE, premises considered, this Court renders judgment, ordering the
defendants Patricio Confesor and Jovita Villafuerte Confesor to pay the plaintiff
Development Bank of the Philippines, jointly and severally, (a) the sum of P5,760.96
plus additional daily interest of P l.04 from September 17, 1970, the date Complaint
was filed, until said amount is paid; (b) the sum of P576.00 equivalent to ten (10%) of
the total claim by way of attorney's fees and incidental expenses plus interest at the
legal rate as of September 17,1970, until fully paid; and (c) the costs of the suit.
Defendants-spouses appealed therefrom to the Court of First Instance of Iloilo wherein in due course
a decision was rendered on April 28, 1978 reversing the appealed decision and dismissing the
complaint and counter-claim with costs against the plaintiff.
A motion for reconsideration of said decision filed by plaintiff was denied in an order of August 10,
1978. Hence this petition wherein petitioner alleges that the decision of respondent judge is contrary
to law and runs counter to decisions of this Court when respondent judge (a) refused to recognize
the law that the right to prescription may be renounced or waived; and (b) that in signing the second
promissory note respondent Patricio Confesor can bind the conjugal partnership; or otherwise said
respondent became liable in his personal capacity. The petition is impressed with merit. The right to
prescription may be waived or renounced. Article 1112 of Civil Code provides:
Art. 1112. Persons with capacity to alienate property may renounce prescription
already obtained, but not the right to prescribe in the future.
Prescription is deemed to have been tacitly renounced when the renunciation results
from acts which imply the abandonment of the right acquired.
There is no doubt that prescription has set in as to the first promissory note of February 10, 1940.
However, when respondent Confesor executed the second promissory note on April 11, 1961
whereby he promised to pay the amount covered by the previous promissory note on or before June
15, 1961, and upon failure to do so, agreed to the foreclosure of the mortgage, said respondent
thereby effectively and expressly renounced and waived his right to the prescription of the action
covering the first promissory note.
This Court had ruled in a similar case that
... when a debt is already barred by prescription, it cannot be enforced by the
creditor. But a new contract recognizing and assuming the prescribed debt would be
valid and enforceable ... . 1
Thus, it has been held

Where, therefore, a party acknowledges the correctness of a debt and promises to

pay it after the same has prescribed and with full knowledge of the prescription he
thereby waives the benefit of prescription. 2
This is not a mere case of acknowledgment of a debt that has prescribed but a new promise to pay
the debt. The consideration of the new promissory note is the pre-existing obligation under the first
promissory note. The statutory limitation bars the remedy but does not discharge the debt.
A new express promise to pay a debt barred ... will take the case from the operation
of the statute of limitations as this proceeds upon the ground that as a statutory
limitation merely bars the remedy and does not discharge the debt, there is
something more than a mere moral obligation to support a promise, to wit a preexisting debt which is a sufficient consideration for the new the new promise; upon
this sufficient consideration constitutes, in fact, a new cause of action. 3
... It is this new promise, either made in express terms or deduced from an
acknowledgement as a legal implication, which is to be regarded as reanimating the old
promise, or as imparting vitality to the remedy (which by lapse of time had become
extinct) and thus enabling the creditor to recover upon his original contract. 4

However, the court a quo held that in signing the promissory note alone, respondent Confesor
cannot thereby bind his wife, respondent Jovita Villafuerte, citing Article 166 of the New Civil Code
which provides:
Art. 166. Unless the wife has been declared a non compos mentis or a spend thrift,
or is under civil interdiction or is confined in a leprosarium, the husband cannot
alienate or encumber any real property of the conjugal partnership without, the wife's
consent. If she ay compel her to refuses unreasonably to give her consent, the court
m grant the same.
We disagree. Under Article 165 of the Civil Code, the husband is the administrator of the conjugal
partnership. As such administrator, all debts and obligations contracted by the husband for the
benefit of the conjugal partnership, are chargeable to the conjugal partnership. 5 No doubt, in this
case, respondent Confesor signed the second promissory note for the benefit of the conjugal partnership.
Hence the conjugal partnership is liable for this obligation.

WHEREFORE, the decision subject of the petition is reversed and set aside and another decision is
hereby rendered reinstating the decision of the City Court of Iloilo City of December 27, 1976,
without pronouncement as to costs in this instance. This decision is immediately executory and no
motion for extension of time to file motion for reconsideration shall be granted.
SO ORDERED.

G.R. No. L-13667

April 29, 1960

PRIMITIVO ANSAY, ETC., ET AL., plaintiffs-appellants,

vs.
THE BOARD OF DIRECTORS OF THE NATIONAL DEVELOPMENT COMPANY, ET
AL., defendants-appellees.
Celso A. Fernandez for appellants.
Juan C. Jimenez, for appellees.
PARAS, C. J.:
On July 25, 1956, appellants filed against appellees in the Court of First Instance of Manila a
complaint praying for a 20% Christmas bonus for the years 1954 and 1955. The court a quo on
appellees' motion to dismiss, issued the following order:
Considering the motion to dismiss filed on 15 August, 1956, set for this morning; considering
that at the hearing thereof, only respondents appeared thru counsel and there was no
appearance for the plaintiffs although the court waited for sometime for them; considering,
however, that petitioners have submitted an opposition which the court will consider together
with the arguments presented by respondents and the Exhibits marked and presented,
namely, Exhibits 1 to 5, at the hearing of the motion to dismiss; considering that the action in
brief is one to compel respondents to declare a Christmas bonus for petitioners workers in
the National Development Company; considering that the Court does not see how petitioners
may have a cause of action to secure such bonus because:
(a) A bonus is an act of liberality and the court takes it that it is not within its judicial powers
to command respondents to be liberal;
(b) Petitioners admit that respondents are not under legal duty to give such bonus but that
they had only ask that such bonus be given to them because it is a moral obligation of
respondents to give that but as this Court understands, it has no power to compel a party to
comply with a moral obligation (Art. 142, New Civil Code.).
IN VIEW WHEREOF, dismissed. No pronouncement as to costs.
A motion for reconsideration of the afore-quoted order was denied. Hence this appeal.
Appellants contend that there exists a cause of action in their complaint because their claim rests on
moral grounds or what in brief is defined by law as a natural obligation.
Since appellants admit that appellees are not under legal obligation to give such claimed bonus; that
the grant arises only from a moral obligation or the natural obligation that they discussed in their
brief, this Court feels it urgent to reproduce at this point, the definition and meaning of natural
obligation.
Article 1423 of the New Civil Code classifies obligations into civil or natural. "Civil obligations are a
right of action to compel their performance. Natural obligations, not being based on positive law but
on equity and natural law, do not grant a right of action to enforce their performance, but after
voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or
rendered by reason thereof".

It is thus readily seen that an element of natural obligation before it can be cognizable by the court is
voluntary fulfillment by the obligor. Certainly retention can be ordered but only after there has been
voluntary performance. But here there has been no voluntary performance. In fact, the court cannot
order the performance.
At this point, we would like to reiterate what we said in the case of Philippine Education Co. vs. CIR
and the Union of Philippine Education Co., Employees (NUL) (92 Phil., 381; 48 Off. Gaz., 5278)
xxx

xxx

xxx

From the legal point of view a bonus is not a demandable and enforceable obligation. It is so
when it is made a part of the wage or salary compensation.
And while it is true that the subsequent case of H. E. Heacock vs. National Labor Union, et al., 95
Phil., 553; 50 Off. Gaz., 4253, we stated that:
Even if a bonus is not demandable for not forming part of the wage, salary or compensation
of an employee, the same may nevertheless, be granted on equitable consideration as when
it was given in the past, though withheld in succeeding two years from low salaried
employees due to salary increases.
still the facts in said Heacock case are not the same as in the instant one, and hence the ruling
applied in said case cannot be considered in the present action.
Premises considered, the order appealed from is hereby affirmed, without pronouncement as to
costs.
Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Endencia Barrera and
Gutierrez David, JJ.,concur

G.R. No. 133347

October 15, 2008

ABS-CBN BROADCASTING CORPORATION, EUGENIO LOPEZ, JR., AUGUSTO ALMEDALOPEZ, and OSCAR M. LOPEZ, petitioners,
vs.
OFFICE OF THE OMBUDSMAN, ROBERTO S. BENEDICTO,* EXEQUIEL B. GARCIA, MIGUEL
V. GONZALES, and SALVADOR (BUDDY) TAN,* respondent.
DECISION
NACHURA, J.:
At bar is a petition for certiorari under Rule 65 of the Rules of Court challenging the Joint
Resolution1 dated May 2, 1997 of then Ombudsman Aniano Desierto in OMB-0-94-1109, dismissing
the complaint filed by petitioners against private respondents, and the Order2 denying their motion
for reconsideration.
This case stems from an all too familiar chapter in Philippine history, i.e., the declaration of martial
law by then President Ferdinand Marcos and the simultaneous sequestration of not a few private
corporations, including one of the petitioners herein, ABS-CBN Broadcasting Corporation (ABSCBN).
On April 18 and 26, 1994, petitioners Eugenio, Jr., Oscar and Augusto Almeda, all surnamed Lopez,
as officers and on behalf of ABS-CBN, executed separate complaint-affidavits charging private
respondents Roberto S. Benedicto, Exequiel B. Garcia, Miguel V. Gonzalez, and Salvador (Buddy)
Tan with the following crimes penalized under the Revised Penal Code (RPC): (a) Article 298 Execution of Deeds by Means of Violence or Intimidation; (b) Article 315 paragraphs 1[b], 2[a], 3[a] Estafa; (c) Article 308 - Theft; (d) Article 302 - Robbery; (e) Article 312 - Occupation of Real Property
or Usurpation of Real Rights in Property; and (f) Article 318 - Other Deceits.
Individual petitioners' complaint-affidavits3 uniformly narrated the following facts:
1. The day after the declaration of martial law, or on September 22, 1972, just before midnight,
military troops arrived at the ABS-CBN Broadcast Center in Bohol Avenue, Quezon City, and
informed the officers and personnel thereat of the seizure and closure of the premises by virtue of
Letter of Instruction (LOI) No. 1 issued by President Marcos ordering the closure of all radio and
television stations in the country.
2. LOI No. 1 authorized the Secretary of National Defense to "take over or control, or cause the
taking over and control of all x x x newspapers, magazines, radio and television facilities and all
other media of communications" throughout the country. Consequently, a total of seven (7) television
stations owned and operated by ABS-CBN were closed down by the government.4
3. When it became apparent that petitioners would not be granted a permit to re-open, ABS-CBN on
October 31, 1972, terminated the services of all its employees, giving each employee his/her
retirement benefits. Corollary thereto, sometime in November 1972, Eugenio Lopez, Jr., then
president of ABS-CBN, wrote then Secretary of National Defense, Juan Ponce Enrile,5 of their desire
to sell ABS-CBN to the government. In that same month, however, Eugenio Lopez, Jr. was arrested
by the military, and detained at Fort Bonifacio for almost five (5) years until his escape therefrom on
September 30, 1977.

4. Subsequently, after the proposal to sell ABS-CBN to the Marcos government did not materialize,
ABS-CBN started negotiations with then Governor of Leyte, Benjamin "Kokoy" Romualdez, who
expressed his desire and intention to acquire the former. However, the negotiations with Kokoy
Romualdez in 1973 likewise did not result in the sale and re-opening of ABS-CBN.
5. On June 6, 1973, the television and radio stations of Kanlaon Broadcasting System (KBS) on
Roxas Boulevard, Pasay City were consumed by fire. KBS was the umbrella corporation of the
Benedicto Group of broadcasting companies, including Radio Philippines Network (RPN),6 which
operated TV Channel 9, the only television station allowed to continue operating during the early
years of the martial law regime. Respondent Benedicto, then Philippine Ambassador to Japan,
managed, controlled, and was one of the principal stockholders of RPN.
6. On even date, both Benedicto and Alfredo Montelibano, who at that time was Chairperson of the
Board of Directors (BOD) of ABS-CBN, were in Bacolod. Benedicto constituted Montelibano as his
emissary to the Lopezes, relaying his plan to temporarily use ABS-CBN's broadcast studios in
Quezon City, from which to operate TV Channel 9, for such period of time as may be necessary to
rebuild KBS' burned studios.
7. On June 8, 1973, Montelibano met with other officers and executives of ABS-CBN, including
herein petitioners Oscar and Augusto Lopez, informing them of Benedicto's request. Oscar and
Augusto, and the rest of the ABS-CBN management team, strongly opposed the request. Eventually,
however, when Montelibano mentioned that Malacaang and Romualdez had cleared said request,
the possibility of a government-ordered confiscation of ABS-CBN, and not least of all, the possible
release of Eugenio Lopez, Jr., petitioners Oscar and Augusto, as with the rest of ABS-CBN's
executives, acquiesced to Benedicto's request.
8. Thus, at noontime on the same day, representatives of KBS headed by Jose Montalvo arrived at
the Meralco Building to finalize the proposed arrangement with ABS-CBN. The transaction between
ABS-CBN and KBS is evidenced by a letter-agreement dated June 8, 1973, which reads in relevant
part:
This is to confirm the agreement arrived at between RPN and ABS-CBN to the following
effect:
1. Commencing on the date hereof, ABS-CBN hereby conveys to RPN by way of lease its
TV and radio equipment (excluding TV channels and radio frequencies) and its premises at
the ABS-CBN Broadcast Center, Bohol Avenue, Quezon City (collectively called the "leased
facilities") listed in the schedule attached hereto and marked as Annex "A".
2. RPN shall pay ABS-CBN monthly rental as is reasonable compensation for the use of the
leased facilities. The amount of the rental shall be determined after a discussion with
Ambassador Roberto Benedicto.
3. The term of this lease shall commence on the date hereof and continue for such
reasonable time as may be normally necessary for the rehabilitation of RPN's facilities
unless an earlier period may be fixed by RPN and ABS-CBN after discussion with
Ambassador Benedicto.
4. RPN hereby assumes full and complete responsibility for the leased facilities and shall be
answerable for any and all losses and damages to such facilities.
xxxx

6. Upon termination of this lease, RPN shall return the possession of the leased facilities to
ABS-CBN and vacate the same without the need of notice or demand.
7. ABS-CBN, through its Chairman, Mr. Alfredo Montelibano, shall have the right to select
and designate the personnel (not to exceed 20 at any one time) to maintain and operate all
specialized TV and radio equipment.
xxxx
10. ABS-CBN shall have the right to enter the Broadcast Center at any reasonable time
during the term of this lease for the purpose of determining compliance by RPN of the terms
hereof.
xxxx
12. RPN shall not, without the prior written consent of ABS-CBN, sub-lease the leased
facilities or any part thereof nor shall any part be removed from the premises except the
equipment, which are intended for operation the Broadcast Center in due course of
operations.
9. Meanwhile, it appears that the parties were hard pressed to negotiate and fix the monthly rental
rate. Several attempts by Oscar to set up a meeting with Benedicto for the fixing of the monthly
rentals proved unsuccessful.
10. After more than four months of trying, a meeting between Oscar and Benedicto finally
materialized on October 31, 1973. At that meeting, the discussion not only covered fixing of
reasonable rentals for the lease of the ABS-CBN studios, but likewise included the possibility of an
outright sale.
11. Thereafter, the discussions and negotiations stopped as none of the petitioners were able to
meet anew with Benedicto who had supposedly referred the matter to "people above" and the "man
on top."
12. Frustrated, then Senator Lorenzo Taada, as counsel for ABS-CBN, in May 1976, wrote
Benedicto demanding vacation of the ABS-CBN Broadcast Center and payment of back rentals for
the use of the ABS-CBN studios and facilities.
13. In response, Senator Estanislao Fernandez, on behalf of Benedicto, met with Senator Taada in
June 1976. Another meeting took place between the parties' respective counsels which included
respondent Gonzales, another counsel for Benedicto. Despite these meetings, no agreement was
reached between Benedicto and ABS-CBN. On the whole, from June 8, 1973, the time KBS
occupied the ABS-CBN studios in Quezon City, no rental was paid by the former to the latter.
14. In the years following until the Marcos government was toppled in 1986, the ABS-CBN stations
were transferred to the National Media Production Center (NMPC) headed by Gregorio Cendaa of
the Ministry of Information. Starting in January 1980, KBS, on a staggered basis, transferred
possession, control and management of ABS-CBN's provincial television stations to NMPC. Some of
the radio stations of ABS-CBN were turned over to the government's Bureau of Broadcast, while
some were retained by KBS thru the Banahaw Broadcasting Corporation (BBC) and Radio
Philippines Network (RPN).

15. Parenthetically, during a military inventory in 1979-1980, and a visit by ABS-CBN executives at
ABS-CBN's radio transmitting stations in Meycauayan, Bulacan, headed by petitioner Augusto, on
August 13, 1984, ABS-CBN properties and massive equipment were found to be missing. In
addition, the musical records and radio dramas accumulated by ABS-CBN in a span of twenty-five
(25) years and stored in its library were now gone.
16. In June 1986, President Corazon Aquino, acting on the request of ABS-CBN through Senator
Taada, returned to ABS-CBN these radio and TV stations on a gradual and scheduled basis.
As required by the Ombudsman, the respondents, except for Garcia, filed their respective counteraffidavits,7 with Benedicto adopting that of Gonzales', denying petitioners' charges, and averring that:
1. The execution of the June 8, 1973 letter-agreement was a free and voluntary act of ABS-CBN
which agreed thereto fully expecting remuneration in the form of rentals, thus:
2. RPN shall pay ABS-CBN monthly rental as is reasonable compensation for the use of the
lease facilities. The amount of the rental shall be determined after a discussion with
Ambassador Roberto Benedicto.
2. In that regard, respondent Gonzales, counsel for KBS, RPN and Benedicto, participated in the
negotiations and was present at three (3) meetings for the fixing of rentals. Also in attendance were
former Senator Estanislao Fernandez, specially engaged to represent RPN and Benedicto, and
Senator Taada and petitioner Augusto for ABS-CBN.
3. Initially, the discussions centered on the possible formulas for the fixing of rentals. Later on,
however, before an agreement on the rental rate could be reached, the discussions shifted to the
possibility of an outright sale. The discussions on the sale were expanded as various creditors of
ABS-CBN had made and presented claims before respondent Garcia, then Comptroller of KBSRPN.
4. However, the discussions were discontinued when then Secretary of National Defense Juan
Ponce Enrile reminded KBS of the sequestered status of ABS-CBN facilities such that arrangements
undertaken for the use and lease thereof should be taken up with the government.8
5. Meanwhile, in July 1974, Secretary Ponce Enrile authorized KBS, acting on behalf of BBC, to
make use of the ABS-CBN provincial stations which were not covered by the June 8, 1973 letteragreement. The authorization was granted in connection with the increased undertakings assigned
by the Department of National Defense (DND) to KBS, specifically, for the government's mass-media
developmental peace and order nationwide campaign.
7. Thereafter, in October 1977, RPN vacated the ABS-CBN studios and turned over the properties to
George Viduya, the general manager of the government station GTV-4. Viduya continued operations
of GTV-4 at the ABS-CBN properties, after which, the properties were all delivered in 1979 to the
NMPC headed by Cendaa. The provincial stations were delivered and turned over on a staggered
basis, with the DZRI station in Dagupan handed over in 1979. The successive transfer of all ABSCBN studios and stations, in Quezon City and the provinces, were covered by receipts which were
collated by the law firm of respondent Gonzales retained by KBS for that purpose.
8. The use of the ABS-CBN studios involved only three (3) juridical entities, RPN, ABS-CBN and the
government. The charges leveled by petitioners in their complaint-affidavits merely point to civil
liability as specified in the letter-agreement itself:

4. RPN hereby assumes full and complete responsibility for the leased facilities and shall be
answerable for any and all losses and damages to such facilities.
On the whole, the allegations of petitioners do not support the elements of the crimes charged.
9. Lastly, respondents invoke the grant of absolute immunity to Benedicto as part of the Compromise
Agreement in Sandiganbayan Civil Case No. 34 which states:
The Government hereby extends absolute immunity, as authorized under the pertinent
provisions of Executive Orders Nos. 1, 2, 14 and 14-A, to Benedicto, the members of his
family, officers and employees of the corporations above mentioned, who are included in
past, present and future cases and investigations of the Philippine Government, such that
there shall be no criminal investigation or prosecution against said persons for acts,
omissions committed prior to February 25, 1986 that may be alleged to have violated any
penal law, including but not limited to Republic Act No. 3019, in relation to the acquisition of
any asset treated, mentioned or included in this Agreement.
Expectedly, the petitioners in their joint reply-affidavit refuted respondents' counter-affidavits.
Contrary to respondents' allegations, petitioners reiterated Benedicto's over-all ploy, in conspiracy
with the other respondents who were officers of KBS and/or RPN, to use and occupy ABS-CBN
properties without paying compensation therefor. Petitioners maintain that respondents' grand
scheme was to take-over ABS-CBN, albeit ostensibly covered by the letter-lease agreement, giving
the take over a semblance of legality.
Thereafter, with the issues having been joined, the Ombudsman issued the herein assailed Joint
Resolution dismissing petitioners' complaints. To the Ombudsman, the following circumstances did
not give rise to probable cause necessary to indict respondents for the various felonies charged:
1. The Letter-Agreement of June 8, 1973 belie any illegal take-over of the ABS-CBN
complex.
While the Lopezes are now complaining that the letter-agreement was virtually forced unto
them thru intimidation, hence, the vitiated consent of Mr. Montelibano, there is nothing
however which the complainants adduced to prove this allegation except their threadbare
allegations of threats. On the contrary, it appears that the Lopezes blessed the letteragreement hoping that their financial difficulties with respect to the affairs of the ABS-CBN
and their problem concerning the continued detention of Eugenio Lopez, Jr. by the military,
would at least be mitigated. x x x
It is thus clear that the ABS-CBN complex was freely leased by Montelibano upon
consultation with the Lopezes who entertained some ulterior motives of their own which they
expect would result from the agreement, either directly or indirectly. Of course, the Lopezes
may not have realized some of these expectations (i.e., the rentals, the release of Eugenio,
Jr. from detention) but this does not change the fact that the parties' consent to the contract
appears to have been freely given. Perforce, the complaint under Article 298 of the Revised
Penal Code of the Philippines must fail.
2. Other TV and radio stations were taken over pursuant to LOI 1-A, hence no violations of
Art. 312, 302 and 308 of RPC.
To the alleged violation of Art. 312 of the Revised Penal Code, the respondents contended
that their use of ABS-CBN's facilities other than those included in the lease-agreement, was

in fact with the authority of the then Department of National Defense (DND). There is no
denying that all of the ABS-CBN properties including the provincial ones are under
sequestration pursuant to Presidential Letter of Instruction No. 1-A, issued on September 28,
1972. It was under the strength of this Presidential Letter of Instruction that KBS-RPN was
authorized to enter, occupy and operate the facilities of ABS-CBN. This was also confirmed
by DND Secretary Juan Ponce Enrile in his letter to RPN dated June 26, 1976.
Unmistakably, KBS-RPN's possession of the ABS-CBN's property other than those in the
ABS-CBN complex is primarily anchored on the authority pursuant to LOI 1-A. With this
apparent authority, this investigation can not see in any which way how the respondents
could have illegally taken over the properties of the [petitioners], particularly those in the
province; there is therefore no convincing proof to support a charge under Article 312 of the
Revised Penal Code. It may come to mind that "occupation of real property or usurpation of
real rights in property" under Article 312 requires as one of its elements the presence of
violence against or intimidation of persons as a means in securing real property or rights
belonging to another. Plainly, this element is not shown. The complainants may have felt
intimidated by the sequestration order, but it is in the nature of such Order to be coercive. It
was an act flowing from the martial law powers of then President Marcos.
3. No unlawful taking as to justify charges for Robbery or Theft.
Robbery and Theft under Articles 302 and 308 of the Revised Penal Code were also
attributed by the [petitioners] against the respondents. From the records, it is clear that KBSRPN has juridical possession of the ABS-CBN properties subject of this complaint; a right
which can be validly set-up even against ABS-CBN itself. It can be recalled that KBS-RPN
was authorized to enter, occupy and operate ABS-CBN facilities by virtue of the authority
granted by the President, pursuant to LOI No. 1-A. Aside, the Broadcast Center itself was
covered by the lease-agreement. Under these situations, there is obviously no basis to
charge the respondents for robbery and theft; for these penal offense require as an element
the act of unlawful taking or asportation. Asportation is simply poles apart from the juridical
possession which KBS-RPN enjoyed over the properties.
4. No deceit was employed to gain possession of the Broadcast Center and the provincial TV
and radio stations.
In the prosecution for estafa under [Articles 315, paragraphs 2(a), 3(a) and 318] of the
Revised Penal Code, it is indispensable that the element of deceit, consisting in the false
statement of fraudulent representation of the accused, be made prior to, or, at least
simultaneously with, the delivery of the thing by the complainants, it being essential that such
false statement or fraudulent representation constitutes the very cause or the only motive
which induces the complainants to part with the thing. If there be no such prior or
simultaneous false statement or fraudulent representation, any subsequent act of the
respondent, however fraudulent or suspicious it may appear, can not serve as basis for the
prosecution of these crimes.
[From petitioners' complaint-affidavits], it is very clear that the late Alfredo Montelibano was
the one who talked with Roberto Benedicto, preparatory to the signing of the leaseagreement. As the complainants did not identify exactly which constitute the deceitful act (or
the intimidation) which could have induced the Lopezes into accepting the lease agreement,
in most probability, the occurrences which vitiated their consent happened during this
preliminary discussion. Noticeably however, it is not Alfredo Montelibano, the one who
supposedly talked with Benedicto, who is testifying on the alleged "veiled threat" or deceits, if
there are. Precisely, because he is already dead.

x x x [I]t is submitted that the Lopezes can not now testify on something which are not
derived from their own personal perception. The bottomline is that what they are now trying
to adduce, pertaining to the alleged deceits [or intimidation] attending the negotiation of the
lease agreement are purely hearsay. This is a matter which only Alfredo Montelibano could
testify competently.9
The Ombudsman saw no need to discuss the defenses of prescription and immunity from suit raised
by the respondents given his dismissal of the complaint-affidavits on the merits. However, in a
subsequent Order denying petitioners Motion for Reconsideration of the Joint Resolution, the
Ombudsman lifted the Office of the Chief Legal Counsel's ratiocination for dismissing the complaintaffidavits, thus:
Incidentally, RPN has been identified as among the corporation in which respondent
Benedicto has substantial interests. In fact, it was one of the subject matters of the
Compromise Agreement reached by the government and respondent Benedicto in
Sandiganbayan Civil Case no. 34.
In that Compromise Agreement, for and in consideration of respondent Benedicto's cession
of equities, and assignment of his rights and interest in corporations therein listed, among
them RPN, the government extended "absolute immunity" to Benedicto, including officers of
his corporations as therein mentioned, "such that there shall be no criminal investigation or
prosecution against said persons for acts or omissions committed prior to February 25, 1986
that may be alleged to have violated any penal law, including but not limited to Republic Act
No. 3019, in relation to the acquisition of any asset treated or included in this Agreement."
In effect, the People of the Philippines as the offended party in criminal cases has waived its
right to proceed criminally against Benedicto, et. al., for whatever crime they may have
committed relative to, among others, the alleged plunder of ABS-CBN properties. Again,
whatever liability that remains thereabout on respondents' part is perforce only civil in
nature.10
Hence, this recourse by the petitioners alleging grave abuse of discretion in the Ombudsman's Joint
Resolution and Order.
Before anything else, we note that on April 5, 1999 and June 13, 2000, the respective counsel for
respondents Tan and Benedicto, in compliance with Section 16,11 Rule 3 of the Rules of Court, filed
pleadings informing the Court of their clients' demise. Benedicto's counsel filed a Notice of Death
(With Prayer for Dismissal)12 moving that Benedicto be dropped as respondent in the instant case for
the reason "that the pending criminal cases subject of this appeal are actions which do not survive
the death of the party accused."
Petitioners opposed the move to drop Benedicto as respondent, citing Torrijos v. Court of
Appeals13 which held that "civil liability of the accused survives his death; because death is not a
valid cause for the extinguishment of civil obligations."
Our ruling on this issue need not be arduous. The rules on whether the civil liability of an accused,
upon death, is extinguished together with his criminal liability, has long been clarified and settled in
the case of People v. Bayotas:14
1. Death of an accused pending appeal of his conviction extinguishes his criminal liability as
well as the civil liability based solely thereon. As opined by Justice Regalado, in this regard,
"the death of the accused prior to final judgment terminates his criminal liability and only the

civil liability directly arising from and based solely on the offense committed, i.e., civil
liability ex delicto in senso strictiore."
2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the
same may also be predicated on a source of obligation other than delict. Article 1157 of the
Civil Code enumerates these other sources of obligation from which the civil liability may
arise as a result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) x x x
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 Procedure15 as amended. The separate
civil action may be enforced either against the executor/administrator or the estate of the
accused, depending on the source of obligation upon which the same is based as explained
above.
4. Finally, the private offended party need not fear a forfeiture of his right to file this separate
civil action by prescription, in cases where during the prosecution of the criminal action and
prior to its extinction, the private-offended party instituted together therewith the civil action.
In such case, the statute of limitations on the civil liability is deemed interrupted during the
pendency of the criminal case, conformably with provisions of Article 1155 of the Civil Code,
that should thereby avoid any apprehension on a possible [de]privation of right by
prescription.
Applying the foregoing rules, ABS-CBN's insistence that the case at bench survives because the civil
liability of the respondents subsists is stripped of merit.
To begin with, there is no criminal case as yet against the respondents. The Ombudsman did not
find probable cause to prosecute respondents for various felonies in the RPC. As such, the rule that
a civil action is deemed instituted along with the criminal action unless the offended party: (a) waives
the civil action, (b) reserves the right to institute it separately, or (c) institutes the civil action prior to
the criminal action,16 is not applicable.
In any event, consistent with People v. Bayotas,17 the death of the accused necessarily calls for the
dismissal of the criminal case against him, regardless of the institution of the civil case with it. The
civil action which survives the death of the accused must hinge on other sources of obligation
provided in Article 1157 of the Civil Code. In such a case, a surviving civil action against the accused
founded on other sources of obligation must be prosecuted in a separate civil action. In other words,
civil liability based solely on the criminal action is extinguished, and a different civil action cannot be
continued and prosecuted in the same criminal action.

Significantly, this Court in Benedicto v. Court of Appeals,18 taking cognizance of respondent

Benedicto's death on May 15, 2000, has ordered that the latter be dropped as a party, and declared
extinguished any criminal as well as civil liability ex delicto that might be attributable to him in
Criminal Cases Nos. 91-101879 to 91-101883, 91-101884 to 101892, and 92-101959 to 92-101969
pending before the Regional Trial Court of Manila.
Lastly, we note that petitioners appear to have already followed our ruling in People v. Bayotas19 by
filing a separate civil action to enforce a claim against the estate of respondent Benedicto.20 The
claim against the estate of Benedicto is based on contract-the June 8, 1973 letter- agreement-in
consonance with Section 5,21 Rule 86 of the Rules of Court. Plainly, the dropping of respondents
Benedicto and Tan as parties herein is in order.
We now come to the core issue of whether the Ombudsman committed grave abuse of discretion in
dismissing petitioners' complaint against the respondents. We rule in the negative and, accordingly,
dismiss the petition.
We cannot overemphasize the fact that the Ombudsman is a constitutional officer duty bound to
"investigate on its own, or on complaint by any person, any act or omission of any public official,
employee, office or agency, when such act or omission appears to be illegal, unjust, improper, or
inefficient."22 The raison d 'etre for its creation and endowment of broad investigative authority is to
insulate it from the long tentacles of officialdom that are able to penetrate judges' and fiscals' offices,
and others involved in the prosecution of erring public officials, and through the execution of official
pressure and influence, quash, delay, or dismiss investigations into malfeasances and misfeasances
committed by public officers.23
In Presidential Commission on Good Government (PCGG) v. Desierto,24 we dwelt on the powers,
functions and duties of the Ombudsman, to wit:
The prosecution of offenses committed by public officers is vested primarily in the Office of
the Ombudsman. It bears emphasis that the Office has been given a wide latitude of
investigatory and prosecutory powers under the Constitution and Republic Act No. 6770 (The
Ombudsman Act of 1989). This discretion is all but free from legislative, executive or judicial
intervention to ensure that the Office is insulated from any outside pressure and improper
influence.
Indeed, the Ombudsman is empowered to determine whether there exist reasonable
grounds to believe that a crime has been committed and that the accused is probably guilty
thereof and, thereafter, to file the corresponding information with the appropriate courts. The
Ombudsman may thus conduct an investigation if the complaint filed is found to be in the
proper form and substance. Conversely, the Ombudsman may also dismiss the complaint
should it be found insufficient in form or substance.
Unless there are good and compelling reasons to do so, the Court will refrain from interfering
with the exercise of the Ombudsman's powers, and respect the initiative and independence
inherent in the latter who, beholden to no one, acts as the champion of the people and the
preserver of the integrity of public service.
The pragmatic basis for the general rule was explained in Ocampo v. Ombudsman:
The rule is based not only upon respect for the investigatory and prosecutory powers
granted by the Constitution to the Office of the Ombudsman but upon practicality as
well. Otherwise, the functions of the courts will be grievously hampered by

innumerable petitions assailing the dismissal of investigatory proceedings conducted

by the Office of the Ombudsman with regard to complaints filed before it, in much the
same way that the courts would be extremely swamped if they would be compelled
to review the exercise of discretion on the part of the fiscals or prosecuting attorneys
each time they decide to file an information in court or dismiss a complaint by private
complainants.25
From the foregoing, it is crystal clear that we do not interfere with the Ombudsman's exercise of his
investigatory and prosecutory powers vested by the Constitution. In short, we do not review the
Ombudsman's exercise of discretion in prosecuting or dismissing a complaint except when the
exercise thereof is tainted with grave abuse of discretion.
By grave abuse of discretion is meant such capricious and whimsical exercise of judgment
tantamount to lack of jurisdiction. The abuse of discretion must be so patent and gross as to amount
to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all
in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by
reason of passion or hostility.26 In this regard, petitioners utterly failed to demonstrate the
Ombudsman's abuse, much less grave abuse, of discretion.
Apart from a blanket and general charge that remaining respondents herein, Gonzales and Garcia,
are officers of KBS/RPN and/or alter egos of Benedicto, petitioners' complaint-affidavits are bereft of
sufficient ground to engender a well-founded belief that crimes have been committed and the
respondents, namely, Gonzales and Garcia, are probably guilty thereof and should be held for
trial.27 Certainly, the Ombudsman did not commit grave abuse of discretion in dismissing petitioners'
complaint-affidavits.
From the entirety of the records, it is beyond cavil that petitioners seek to attach criminal liability to
an unequivocally civil undertaking gone awry. As pointed out by the Ombudsman, although the
petitioners may not have realized their expectations in entering into the June 8, 1973 letteragreement, such does not render their consent thereto defective.
The execution and validity of this letter-agreement is connected with respondents' culpability for the
felonies charged as these include the element of whether they had juridical possession of the ABSCBN properties. Essentially, petitioners claim they did not freely give their consent to the letteragreement. However, on more than one occasion, petitioners have invoked the letter-agreement's
provisions, and made claims thereunder.
First, petitioners met and discussed with respondents the fixing of the rental rate for the ABS-CBN
studios in Quezon City as provided in paragraph 2 of the letter-lease agreement. Next, petitioners'
counsel wrote a demand letter to respondents for the payment of rentals for the latter's occupation
and use of ABS-CBN properties pursuant to the letter-agreement. Last and most importantly,
petitioners have made a claim against the estate of Benedicto based on the same June 8, 1973
letter-agreement.
This action of petitioners clearly evinces their ratification of the letter-agreement. As previously
discussed, the civil liability of respondents Benedicto and Tan hinging on the charged criminal acts
herein was extinguished upon their death. But other civil liabilities founded on other sources of
obligations under Article 1157 of the Civil Code may still be prosecuted either against the estate of
the deceased if based on contract,28 or against the executors and administrators of the deceased's
estate if based on quasi-delict.29

As petitioners have ratified the letter-agreement, even after the lifting of martial law and the toppling
of the Marcos government, and advanced the validity of the letter-agreement in their claim against
the estate of Benedicto, they cannot, in the same breath, aver that respondents' actuations in the
execution of the letter-agreement were criminal in nature, or that the letter-agreement was more
ostensible than real and to insist on the prosecution of respondents for felonies supposedly
committed in connection with this ubiquitous letter-agreement.30
In fine, the Ombudsman did not abuse his discretion in determining that the allegations of petitioners
against respondents are civil in nature, bereft of criminal character. Perforce, he was correct in
dismissing petitioners' complaint-affidavits.
WHEREFORE, premises considered, the petition is hereby DISMISSED. Roberto S. Benedicto and
Salvador Tan are dropped as private respondents without prejudice to the filing of separate civil
actions against their respective estates. The assailed Joint Resolution and Order of the Ombudsman
in OMB-0-94-1109 are AFFIRMED.
SO ORDERED.

SEVERINO SALEN and ELENA SALBANERA vs. JOSE BALCE

G.R. No. L-14414. 27 April 1960.
Appeal from a judgment of the CFI of Camarines Norte.
Bautista Angelo, J.:
Facts: Plaintiffs are the legitimate parents of Carlos Salen who died from wounds caused by Gumersindo
Balce, a legitimate son of defendant who was then single, 18 yrs old and was living with defendant. As a
result of C. Salen's death, G. Balce was accused and convicted of homicide and was sentenced to
imprisonment and to pay the amount of P2,000.00. Plaintiffs brought this action against defendant
before CFI to recover the sum of P2,000.00, with legal interest. Defendant, in his answer, set up the
defense that the law upon which plaintiffs predicate their right to recover does not here apply for the
reason that law refers to quasi-delicts and not to criminal cases. CFI sustained the theory of defendant.
Issue: WON appellee can be held subsidiary liable to pay the indemnity in accordance with Art. 2180 of
the CC.
Ruling: Judgment reversed.
Art 2180 CC applies in the case at bar. To hold otherwise would result in the absurdity that while for an
act where mere negligence intervenes the father or mother may stand subsidiarily liable for the damage
caused by his or her son, no liability would attach if the damage is caused with criminal intent. Verily, the
void that apparently exists in the RPC (art.101) is subserved by this particular provision of our CC, as may
be gleaned from some recent decisions of the SC which cover equal or identical cases.

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 Certiorari3 under Rule 45 of the Rules of Court assails the April 2, 2008
Decision4 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 Account10 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
Account15 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. 03I25014,18 against respondent Rosales.19 Petitioner 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.32 While 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
Complaint44 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. 05-236103,53 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 Decision55 finding petitioner liable for damages for breach
of contract.56The 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.74Respondents 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.75Furthermore, 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, quasicontracts, delict, and quasi-delict. In this case, petitioner failed to show that respondents have an
obligation to it under any law, contract, quasi-contract, 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.

1wphi1

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 222985 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 220890 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.

SALUDAGA vs. FAR EASTERN UNIVERSITY

G.R. No. 179337 April 30, 2008
Facts:
Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern University
when he was shot by Alejandro Rosete, one of the security guards on duty at the school
premises on August 18, 1996. Rosete was brought to the police station where he explained that
the shooting was accidental. He was eventually released considering that no formal complaint
was filed against him.
Respondents, in turn, filed a Third-Party Complaint against Galaxy Development and
Management Corporation (Galaxy), the agency contracted by respondent FEU to provide security
services within its premises and Mariano D. Imperial (Galaxys President), to indemnify them for
whatever would be adjudged in favor of petitioner.
Petitioner is suing respondents for damages based on the alleged breach of student-school
contract for a safe and secure environment and an atmosphere conducive to learning.
Issue:
WON FEU was not negligent and such shooting was tantamount to a caso fortuito? NO, it was
negligent and such is not a fortuitous case.
Held:
When an academic institution accepts students for enrollment, there is established a contract
between them, resulting in bilateral obligations which both parties are bound to comply with.
For its part, the school undertakes to provide the student with an education that would
presumably suffice to equip him with the necessary tools and skills to pursue higher education
or a profession. On the other hand, the student covenants to abide by the schools academic
requirements and observe its rules and regulations.
Respondent FEU failed to discharge the burden of proving that they exercised due diligence in
providing a safe learning environment for their students. It failed to show that they undertook
steps to ascertain and confirm that the security guards assigned to them actually possess the

qualifications required in the Security Service Agreement. It was not proven that they examined
the clearances, psychiatric test results, 201 files, and other vital documents enumerated in its
contract with Galaxy. Total reliance on the security agency about these matters or failure to
check the papers stating the qualifications of the guards is negligence on the part of
respondents. A learning institution should not be allowed to completely relinquish or abdicate
security matters in its premises to the security agency it hired. To do so would result to
contracting away its inherent obligation to ensure a safe learning environment for its students.
Respondent FEU is liable to petitioner for damages.
FEU cannot be held liable for damages under Art. 2180 of the Civil Code because respondents
are not the employers of Rosete. The latter was employed by Galaxy. The instructions issued by
respondents Security Consultant to Galaxy and its security guards are ordinarily no more than
requests commonly envisaged in the contract for services entered into by a principal and a
security agency. They cannot be construed as the element of control as to treat respondents as
the employers of Rosete. It had no hand in selecting thesecurity guards. Thus, the duty to
observe the diligence of a good father of a family cannot be demanded from the said client
FALLO:
For these acts of negligence and for having supplied respondent FEU with an unqualified
security guard, which resulted to the latters breach of obligation to petitioner, it is proper to
hold Galaxy liable to respondent FEU for such damages equivalent to the above-mentioned
amounts awarded to petitioner. Unlike respondent De Jesus, we deem Imperial to be solidarily
liable with Galaxy for being grossly negligent in directing the affairs of the security agency.

G.R. No. 158911 : March 4, 2008 MANILA ELECTRIC COMPANY, Petitioner,

vs.
MATILDE MACABAGDAL RAMOY, BIENVENIDO RAMOY, ROMANA RAMOY-RAMOS,
ROSEMARIERAMOY, OFELIA DURIAN and CYRENE PANADO
,
Respondents
FACTS:
In the year 1987, the National Power Corporation (NPC) filed with the MTC Quezon City a case
for ejectment against several persons allegedly illegally occupying its properties in Baesa,
Quezon City. among the defendants in the ejectment case was Leoncio Ramoy, one of the
plaintiffs in the case at bar. On April 28, 1989 the MTC rendered judgment for MERALCO to
demolish or remove the building and structure they built on the land of the plaintiff and to vacate
the premises. On June 20, 1999 NPC wroteto MERALCO requesting the immediate
disconnection of electric power supply to all residential and commercial establishments beneath
the NPC transmission lines along Baesa, Quezon City. In a letter dated August 17, 1990
MERALCO requested NPC for a joint survey to determine all the establishments which are
considered under NPC property. In due time, the electric service connection of the plaintiffs was
disconnected. During the ocular inspection ordered by the Court, it was found out that the
residence of the plaintiffs-spouses was indeed outside the NPC property.
ISSUES: (1)
WON the Court of Appeals gravely erred when it found MERALCO negligent when it
disconnected the subject electric service of respondents.
(2)
WON the Court of Appeals gravely erred when it awarded moral and exemplary damages
and attorneys fees against MERALCO under the circumstances that the latter acted in good faith in
the disconnection of the electric services of the respondents.
RULING:
(1)
No. The Court agrees with the CA that under the factual milieu of the present case, MERALCO
failedto exercise the utmost degree of care and diligence required of it, pursuant to Articles 1170
& 1173 of the Civil Code. It was not enough for MERALCO to merely rely on the Decision of
the MTC withoutascertaining whether it had become final and executory. Verily, only upon
finality of the said Decisioncan it be said with conclusiveness that respondents have no right or
proper interest over the subjectproperty, thus, are not entitled to the services of MERALCO.
(2)
No. MERALCO willfully caused injury to Leoncio Ramoy by withholding from him and his
tenants thesupply of electricity to which they were entitled under the Service Contract. This is
contrary to publicpolicy because, MERALCO, being a vital public utility, is expected to exercise
utmost care and diligence in the performance of its obligation. Thus, MERALCOs failure to exercise utmost

care and diligence in the performance of its obligation to Leoncio Ramoy is tantamount to bad faith.
Leoncio Ramoy testified thathe suffered wounded feelings because of MERALCOs actions.
Furthermore, due to the lack of power supply, the lessees of his four apartments on subject lot left the
premises. Clearly, therefore LeoncioRamoy is entitled to moral damages in the amount awarded
by the CA. Nevertheless, Leoncio is the soleperson entitled to moral damages as he is the only
who testified on the witness stand of his wounded
feelings. Pursuant to Article 2232 of the Civil Code, exemplary damages cannot be awarded as
MERALCOs acts cannot be considered want on, fraudulent, reckless, oppressive or malevolent. Since
the Court does not deem it proper to award exemplary damages in this case then the CAs award of attorneys
fees should likewise be deleted, as pursuant to Article 2208 of the Civil Code of which the
grounds were not present.

CRUZ vs TUASON & CO. G.R. No. L-23749 April 29, 1977
FACTS:
As requested by the Deudors, the family of Telesforo Deudor who laid claim in question on the
strength of an informacion posesoria, Cruz made permanent improvements on the said land having
an area of more or less 20 quinones.
The improvements were valued at P30,400 and for which he incurred expenses amounting to
P7,781.74
In 1952, Tuason & Co. availed of Cruz services as an intermediary with the Deudors, to work for the
amicable settlement in a civil case. The said case involved 50 quiones of land, of which the 20
quiones of land mentioned formed part.
A compromise agreement between the Deudors and Tuason & Co. was entered into on 1963 which
was approved by court.
Cruz alleged that Tuason & Co. promised to convey him the 3,000 sq. meters of land occupied by
him which was part of the 20 quiones of land within 10 years from the date of signing of the
compromise agreement between the Deudors and the latter as consideration of his services. The
said land was not conveyed to him by Tuason & Co.
Cruz further alleged that Tuason & Co. was unjustly enriched at his expense since they enjoyed the
benefits of the improvements he made on the land acquired by the latter.
The trial court dismissed the case on the ground that there was no cause of action. Hence, this
appeal.
ISSUE: Whether or not a presumed quasi-contract be emerged as against one part when the subject
matter thereof is already covered by a contract with another party.

HELD: From the very language of this provision, it is obvious that a presumed qauasi-contract
cannot emerge as against one party when the subject mater thereof is already covered by an
existing contract with another party. Predicated on the principle that no one should be allowed to
unjustly enrich himself at the expense of another, Article 2124 creates the legal fiction of a quasicontract precisely because of the absence of any actual agreement between the parties concerned.
Corollarily, if the one who claims having enriched somebody has done so pursuant to a contract with
a third party, his cause of action should be against the latter, who in turn may, if there is any ground
therefor, seek relief against the party benefited. It is essential that the act by which the defendant is
benefited must have been voluntary and unilateral on the part of the plaintiff. As one distinguished
civilian puts it, "The act is voluntary. because the actor in quasi-contracts is not bound by any preexisting obligation to act. It is unilateral, because it arises from the sole will of the actor who is not
previously bound by any reciprocal or bilateral agreement. The reason why the law creates a
juridical relations and imposes certain obligation is to prevent a situation where a person is able to
benefit or take advantage of such lawful, voluntary and unilateral acts at the expense of said actor."
In the case at bar, since appellant has a clearer and more direct recourse against the Deudors with
whom he had entered into an agreement regarding the improvements and expenditures made by
him on the land of appellees. It Cannot be said, in the sense contemplated in Article 2142, that
appellees have been enriched at the expense of appellant.

Adille vs CA G.R. No. L-44546 January 29, 1988

FACTS:
The property in dispute was originally owned by Felisa Alzul who got married twice. Her child in the
first marriage was petitioner Rustico Adile and her children in the second marriage were respondents
Emetria Asejo et al.
During her lifetime, Felisa Alzul sodl the property in pacto de retro with a three-year repurchase
period.
Felisa died before she could repurchase the property.
During the redemption period, Rustico Adille repurchased the property by himself alone at his own
expense, and after that, he executed a deed of extra-judicial partition representing himself to be the
only heir and child of his mother Felisa. Consequently, he was able to secure title in his name alone.
His half-siblings, herein respondents, filed a case for partition and accounting claiming that Rustico
was only a trustee on an implied trust when he redeemed the property, and thus, he cannot claim
exclusive ownership of the entire property.
ISSUE:
Whether or not a co-owner may acquire exclusive ownership over the property held in common.
Whether or nor Rustico had constituted himself a negotiorum gestor

HELD: No. The right to repurchase may be exercised by a co-owner with respect to his share alone.
Although Rustico Adille redeemed the property in its entirety, shouldering the expenses did not make
him the owner of all of it.
Yes. The petitioner, in taking over the property, did so on behalf of his co-heirs, in which event, he
had constituted himself a negotiorum gestor under Art 2144 of the Civil Code, or for his exclusive
benefit, in which case, he is guilty of fraud, and must act as trustee, the respondents being the
beneficiaries, pursuant to Art 1456.

ANDRES VS MANTRUST G.R. NO. 82670 SEPTEMBER 15, 1989

FACTS:
Andres, using the business name Irenes Wearing Apparel was engaged in the manufacture of
ladies garments, childrens wear, mens apparel and linens for local and foreign buyers. Among its
foreign buyers was Facts of the United States.
Sometime in August 1980, Facts instructed the First National State Bank (FNSB) of New Jersey to
transfer $10,000 to Irenes Wearing Apparel via Philippine National Bank (PNB) Sta. Cruz, Manila
branch. FNSB instructed Manufacturers Hanover and Trust Corporation (Mantrust) to effect the
transfer by charging the amount to the account of FNSB with private respondent.
After Mantrust effected the transfer, the payment was not effected immediately because the payee
designated in the telex was only Wearing Apparel. Private respondent sent PNB another telex
stating that the payment was to be made to Irenes Wearing Apparel.
On August 28, 1980, petitioner received the remittance of $10,000.
After learning about the delay, Facets informed FNSB about the situation. Facts, unaware that
petitioner had already received the remittance, informed private respondent and amended its
instruction y asking it to effect the payment to Philippine Commercial and Industrial Bank (PCIB)
instead of PNB.
Private respondent, also unaware that petitioner had already received the remittance, instructed
PCIB to pay $10,000 to petitioner. Hence, petitioner received another $10,000 which was charged
again to the account of Facets with FNSB.
FNSB discovered that private respondent had made a duplication of remittance. Private respondent
asked petitioner to return the second remittance of $10,000 but the latter refused to do so
contending that the doctrine of solution indebiti does not apply because there was negligence on the
part of the respondents and that they were not unjustly enriched since Facets still has a balance of
$49,324.
ISSUE: Whether or not the private respondent has the right to recover the second $10,000
remittance it had delivered to petitioner

HELD: Yes. Art 2154 of the New Civil Code is applicable. For this article to apply, the following
requisites must concur: 1) that he who paid was not under obligation to do so; and 2) that payment
was made by reason of an essential mistake of fact.

There was a mistake, not negligence, in the second remittance. It was evident by the fact that both
remittances have the same reference invoice number.

G.R. No. L-1747

February 16, 1950

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
MANAUL KOMAYOG, defendant-appellant.
Ignacio Fernandez for appellant.
First Assistant Solicitor General Roberto A, Gianzon and Solicitor Ramon L. Avancea for appellee.
TUASON, J.:
Manaul Komayog was prosecuted in the Court of First Instance of Lanao, charged with murder
together with Mama Manaul, his son, who acquitted. The court found against Manaul Komayog and
sentenced him to reclusion perpetua, to indemnify the heirs of the deceased in the sum of P2,000,
and to pay one-half of the costs.
Kasan Bongcarawan was shot in the stomach as he was busy working on his farm, and died from
the effects of the wound. The prosecution says Manaul Komayog killed the now deceased; the
defense says Mama Manaul did.
Sambatara Malomalo, a school teacher, testifies that on June 22, 1946, as he was walking to the
market in Alog he heard "a firing"; he thinks he heard two shots. When he turned his head in the
direction where the shots came from, he saw Manaul Komayog eject empty shells from his rifle, and
flee with his companions, who were Mama Manaul, Pindugar Atoy, Malican Pagalad and
anotherman whose name he could not remember. They ran towards barrio Calantai where there was
a kota. When Kasan Bongcarawan was shot, Manaul Komayog was less than 200 meters from him
(witness), and the distance between him and Kasan Bongcarawan was less than 200 meters. He
hurried towards the injured man to help him and found a big wound on the right side of the stomach.
When he reach the place where Kasan fell, two men, he thinks, were already there, Arimao Tugaso
and Dimanang Dida-ogon.
Arimao Tugaso testifies that between 7 and 8 o'clock in the morning he was on his farm planting
rice. He saw Mama Manaul and Manaul Komayog walking along the river bank followed by there
other persons. When they reached the creek, Komayog fired twice at Kasan Bongcarawan. He,
witness, was about seven brazas from Manaul Komayog when the latter opened fire, while the
distance separating him and Kasan was more than ten brazas. He did not see anybody else shoot.
Mama Manaul, who was also carrying a firearm, was beside his father but the witness did not see
Mama use his gun. After shooting Kasan Bongcarawan, Manaul Komayog shouted, "Let us run

away. I hit," and Komayog and his companions sped away towards Calantai where there was a kota.
Witness and three others carried Kasan to his house.
Pitted against the preceding testimony is the following evidence for the defense:
Pendugar Ontong, mentioned by Malomalo as one of the men who was in the company of the
defendants and who was discharged on motion of the prosecution in the justice of the peace court,
said that on the morning of June 22, 1946, he was in Kilausan, in the house of Vice-Mayor Mendir,
where he lived. Asked what happened on that date, he answered, "The one who went to the scene
said that Kasan was killed by Mama Manaul."
Maulod Bongo, another of the men said to have been with defendants, was put on the stand but was
withdrawn when the fiscal admitted what the witness was going to say, namely, that the complaint
against him had been dismissed by the justice of peace on motion of the prosecuting officer.
Macapangkat Pasaulan testifies that he knew Manaul Komayog; that on June 22, 1946, in the
morning, he was in the market at Alog in company with Manaul Komayog, who, he said, had met him
on the way and told him, "Macapangkat, wait for me!"; that at the market, he and Komayog bought
"carabao" and tobacco; that when they were bargaining for carabao "a certain fellow arrived and
shouted that Mama Manaul, son of Manaul Komayog, killed somebody": that upon hearing the news,
he and Manaul Komayog, upon his suggestion, went home and "saw a group of people near our
home. So, we thought that perhaps it was true that Mama had killed someone."
Anter Anderike testifies that he was a tobacco dealer; that on Saturday, June 22, 1946, in the market
at Alog, he sold tobacco to Komayog and Macapangkat and heard people say that Mama had shot
Kasan.
Mama Manaul, 14 years old, testifies that he killed Kasan Bongcarawan with a revolver because
Bongcarawan approached him when he was working on the land of his father telling him, "You get
out, boy, from our land. Don't work there"; that Bongcarawan also said, "Are you not going to vacate
our land, or I will kill you?"; that he did not heed Bongcarawan's threat and the deceased fired at him
with a revolver; that he was not hit and he drew his own revolver and returned the fire; that he did
not know where he hit Bongcarawan because he ran away after firing at the deceased; that when he
ran h knew the revolver away because he was afraid; that Manaul Komayog was not with him,
having gone to the market at Alog.
Manaul Komayog testifies that Mama Manaul shot and killed Kasan Bongcarawan; that he was in
the market at Alog when that incident happened, having heard of it only in the market.
We are satisfied beyond doubt that Manaul Komayog was the killer. The three principal government
witnesses' testimony is cogent and convincing in its details. The crime was committed in broad
daylight and no question of mistaken identity or improper motive is involved. Neither of the two eyewitnesses for the government had any reason to pin the blame on the father instead of on his son if
the latter was really the author of the crime.
The cause of the trouble was the fact that Kasan was tilling the land Komayog claimed to be his
property. Barely 13 years old and single handed, Mama Manaul would not likely have challenged or
defied the deceased. It is admitted that the latter was peacefully working on his farm and did not
seek the fight. Furthermore, no firearm appears too have been found on Kasan's person or near him
after he was shot, and no question was asked the prosecution witnesses by the defense counsel
about such matter. The reason why Mama Manaul assumed full responsibility to the exclusion of his
father is easy to imagine. Being below 14 when the crime was committed, he could claim exemption

from criminal liability if pronounced to have acted without discernment. The alternative was
confinement in a reformatory school. This, Mama Manaul admitted in court, he understood.
The judgment of the lower court is affirmed with costs of this instance.

G.R. No. L-33171 May 31, 1979

PORFIRIO P. CINCO, petitioner-appellant,

vs.
HON. MATEO CANONOY, Presiding Judge of the Third Branch of the Court of First Instance
of Cebu, HON. LORENZO B. BARRIA City Judge of Mandaue City, Second Branch ROMEO
HILOT, VALERIANA PEPITO and CARLOS PEPITO, respondents-appellees.
Eriberto Seno for appellant.
Jose M. Mesina for appellees.
Laws Applicable: Rule 111, Section 3 of the Rules of Court, Art. 31 and Article 2176 of
the Civil Code
Lessons Applicable: Quasi-delict (Torts and Damages)

FACTS:

Porfirio P. Cinco filed a complaint against jeepney driven by Romeo Hilot and
operated by Valeriana Pepito and Carlos Pepito for a vehicular accident

At the pre-trial in the civil case, counsel for private respondents moved to suspend the civil action pending
the final determination of the criminal suit, invoking Rule 111, Section 3 (b) of the Rules of Court, which
provides:
(b) After a criminal action has been commenced. no civil action arising from the
same offense can be prosecuted, and the same shall be suspended, in whatever
stage it may be found, until final judgment in the criminal proceeding has been
rendered

City Court: ordered the suspension of the civil case

CFI by certiorari: dismissed

ISSUE: W/N there can be an independent civil action for damage to property during the
pendency of the criminal action

HELD: YES. granting the Writ of certiorari prayed for

nature and character of his action was quasi-delictual predicated principally on

Articles 2176 and 2180 of the Civil Code

Art. 2177. Responsibility for fault or negligence under the preceding article is
entirely separate and distinct from the civil liability arising from negligence under
the Penal Code. But the plaintiff cannot recover damages twice for the same act or
omission of the defendant

primary and direct responsibility of employers and their presumed negligence are
principles calculated to protect society

The separate and independent civil action for a quasi-delict is also clearly recognized
in section 3, Rule 111 of the Rules of Court:

SEC. 3. When civil action may proceed independently.In the cases provided in Articles 32, 33, 34 and 2176
of the Civil Code of the Philippines, the independent civil action may be brought by the offended party. It shall
proceed independently of the criminal action and shall require only a preponderance of evidence. In no case,
however, may the offended party recover damages twice for the same act or omission charged in the criminal
action.

Secs. 3(a) and 3(b) of Rule 111 of the Rules of Court, which should be suspended after the criminal action
has been instituted is that arising from the criminal offense not the civil action based on quasi-delict
Art. 31. When the civil action is based on an obligation not arising from the act or
omission complained of as a felony, such civil action may proceed independently of
the criminal proceedings and regardless of the result of the latter.
Article 2176 of the Civil Code (supra), is so broad that it includes not only injuries to
persons but also damage to property
word "damage" is used in two concepts: the "harm" done and "reparation" for the
harm done

NATIONAL POWER CORPORATION vs. THE COURT OF APPEALSG.R.

No. 124378. MARCH 8, 2005
FACTS:On 15 November 1973, the Office of the President of the Philippines issued
Memorandum Order No. 398 instructing the NPC to build the Agus Regulation Dam at the
mouth of Agus River in Lanao del Sur, at a normal maximum water level of Lake Lanao at
702meters elevation. Pursuant thereto, petitioner built and operated the said dam in 1978. Private
respondents Hadji Abdul Carim Abdullah, Caris Abdullah, Hadji Ali Langco and Diamael
Pangcatan own fishponds along the Lake Lanao shore. In October and November of 1986, all the
improvements were washed away when the water level of the lake escalated and the subject
lakeshore area was flooded. Private respondents blamed the inundation on the Agus Regulation
Dam built and operated by the NPC in 1978. They theorized that NPC failed to increase the out
flow of water even as the water level of the lake rose due to the heavy rains.
ISSUE:
Whether or not the Court of Appeals erred in affirming the trial courts verdict that petitioner
was legally answerable for the damages endured by the private respondents.
RULING:
Memorandum Order No. 398 clothes the NPC with the power to build the Agus Regulation Dam
and to operate it for the purpose of generating energy. Twin to such power are the duties: (1) to
maintain the normal maximum lake elevation at 702 meters, and (2) to build benchmarks to warn
the inhabitants in the area that cultivation of land below said elevation is forbidden. With respect
to its job to maintain the normal maximum level of the lake at 702 meters, the Court of Appeals,
echoing the trial court, observed with alacrity that when the water level rises due to the rainy
season, the NPC ought to release more water to the Agus River to avoid flooding and prevent the
water from going over the maximum level. And yet, petitioner failed to do so, resulting in the
inundation of the nearby estates. Consequently, even assuming that the fishponds were erected
below the 702-meter level, NPC must, nonetheless, bear the brunt for such damages inasmuch as
it has the duty to erect and maintain the benchmarks precisely to warn the owners of the
neighboring properties not to build fishponds below these marks. Without such points of
reference, the inhabitants in said areas are clueless whether or not their improvements are within
the prohibited area. Conversely, without such benchmarks, NPC has no way of telling if the
fishponds, subject matter of the present controversy, are indeed below the prescribed maximum
level of elevation. Due to NPCs negligence in the performance of its duties, it shall be held
liable for the resulting damages suffered by private respondents.