Instructions
Digests of Cases [Review Subjects]
Prof. Crisostomo A. Uribe
Cases decided by the Supreme Court this
Coverage year and prior year covered by Civil Law
Review 1, Civil Law Review 2 OR Civil
Law Review.
Printed. Legal-size bond paper. Font size:
11 or 12.
Form Not more than 2 pages per issue/case.
The Table of Contents must follow the
course outline/s. A case should be under
a specific topic like Legal Separation or
Novation.
Title should be complete including the
G.R. Number, date of promulgation and
the name of the ponente (state division or
en banc)
Substance Nature of the action:
Facts: Summary of facts relevant to the
issue
Issues: General issues; Controlling issues
Rulings: State first how the issue was
resolved. Do not rephrase the rulings.
Number and quality of digests.
Basis of the The grade will be treated as 1 or 2
Grade quizzes. It will replace the lowest
grade/grades in quizzes.
Date of 2 weeks before the last day of
Submission meeting/classes. Submit to the beadles.
ARELLANO UNIVERSITY-SCHOOL OF LAW
CIVIL LAW REVIEW II
ATTY. CRISOSTOMO A. URIBE
Instructions for FINAL Examination:
1. Alphabetically arranged; at least one (1) seat apart
with name on the chair including those absent;
2. Sign the attendance sheet. Submit permits arranged
per class list with respective class numbers (class
FIRST DIVISION
number must be written at the upper right corner of
the permit) before the start of the examination;
January 8, 2018
3. No one will be allowed to go out of the examination
venue unless he has submitted the test paper. Use
G.R. No. 210766
RED pen for shading the MCQ. No erasures.
4. Do not write anything on the questionnaire. You can
MARIA CONCEPCION N. SINGSON a.k.a. CONCEPCION N.
use the back page of the last page of your booklet as
SINGSON, Petitioner
a scratch paper.
vs.
5. Write your class number, name, and section (based
BENJAMIN L. SINGSON, Respondent
on class schedules) on both the booklet (front page)
and the MCQ answer sheet.
DECISION
Example: DEL CASTILLO, J.:
Class Number: 1
Name: Cruz, Pedro Assailed in this Petition for Review on Certiorari1 are the August
Section: Sunday 8:00-12:00 29, 2013 Decision2 of the Court of Appeals (CA) and its January
6, 2014 Resolution3 in CA-G.R. CV No. 96662, which reversed
and set aside the November 12, 2010 Decision4 of the Regional
6. ALL GADGETS (Mobile Phones/Tablets/Smart
Trial Court (RTC) of Parañaque City, Branch 260, in Civil Case
Watches/Apple Watches) should be out of your reach,
No. 07-0070.
turned off or on silent mode.
7. BOOKLETS and MCQ ANSWER SHEETS must stay on
Factual Antecedents
the armchair. Raising it while taking the examination
is prohibited.
On February 27, 2007, Maria Concepcion N. Singson a.k.a.
8. Insert the questionnaire and the MCQ answer sheet in
Concepcion N. Singson (petitioner) filed a Petition5 for
the examination booklet when you submit personally
declaration of nullity of marriage based on Article 36 of the
the test paper with the MCQ answer sheet on top of
Family Code of the Philippines6 (Family Code). This was
the questionnaire. DO NOT FOLD.
docketed as Civil Case No. 07-0070.
SUNDAY; MAY 21, 2017; 9:00-12:00 N.N.
It was alleged therein that on July 6, 1974, petitioner and
REVIEW ROOM
Benjamin L. Singson (respondent) were married before the Rev.
Fr. Alfonso L. Casteig at St. Francis Church, Mandaluyong, Rizal;
REMINDER: You should be inside the room at 8:30 A.M.
that said marriage produced four children, all of whom are now
of legal age; that when they started living together, petitioner
noticed that respondent was "dishonest, unreasonably
extravagant at the expense of the family's welfare, extremely
vain physically and spiritually,"7 and a compulsive gambler; that
respondent was immature, and was w1ab1e to perform his
paternal duties; that respondent was also irresponsible, an
easy-going man, and guilty of infidelity; that respondent's
abnormal behavior made him completely unable to render any
help, support, or assistance to her; and that because she could
expect no help or assistance at all from respondent she was
compelled to work doubly hard to support her family as the sole
breadwinner.
Petitioner also averred that at the time she filed this Petition,
respondent was confined at Metro Psych Facility,8 a
rehabilitation institution in Pasig City; and that respondent's
attending psychiatrist, Dr. Benita Sta. Ana-Ponio (Dr. Sta. Ana-
Ponio), made the following diagnosis on respondent:

Based on history, mental status examination and observation,
he is diagnosed to be suffering from Pathological Gambling as
manifested by:
a. preoccupation with gambling, thinking of ways to get money
with which to gamble as seen in his stealing and pawning
jewelries and appliances[;]
b. needs to gamble with increasing amounts of money in order
to achieve the desired effect[;]
c. lies to family members or others to conceal the extent of [his]
involvement with gambling[;]
d. committed illegal acts such as forging the signature of his
wife, issuing bouncing checks in order to finance his
gambling[;]
e. has jeopardized his relationship with his wife, lost the respect
of his children, lost a good career in banking because of
gambling[;]
f. [relies] on his parents, his wife, and siblings to provide money
to relieve a desperate fmancial situation caused by gambling[;]
While he apparently had Typhoid fever that resulted [in]
behavioral changes as a young boy, it would be difficult to say
that the psychotic episodes he manifested in 2003 and 2006
[are] etiologically related to the general medical condition that
occurred in his childhood.
Furthermore, [respondent] manifests an enduring pattern of
behavior that deviates markedly from the expectations of our
culture as manifested in the following areas:
a. his ways of perceiving and interpreting [his own] self, other
people, and events[;]
b. his emotional response[;]
c. his poor impulse control[;]
Such pattern is inflexible and pervasive and has led to
significant impairment in social, occupational and interpersonal
relationship. In [respondent's] case, this has persisted for
several years, and can be traced back [to] his adolescence since
he started gambling while in high school. He is therefore
diagnosed to be suffering from Personality Disorder.
All these[,] put together, [hinder respondent] from performing
his marital obligations.9
Petitioner moreover asserted that respondent came from a
"distraught" family and had a "dysfunctional" childhood;10 that
respondent had all the love, care, and protection of his parents
as the youngest child for some time; but that these parental
love, care and protection were, however, transferred to his
youngest brother who was born when respondent was almost
five years old; and that these factors caused respondent
emotional devastation from which he never recovered.
Petitioner added that unknown to her, respondent even as a
high school student, was already betting on jai alai. She also
claimed that she tried to adjust to respondent's personality
disorders, but that she did not attain her goal.
Finally, petitioner claimed that she and respondent did not enter
into any ante-nuptial agreement to govern their prope1ty
relations as husband and wife and that they had no conjugal
assets or debts.
On June 19, 2007, respondent filed his Answer.11
Traversing petitioner's allegations, respondent claimed that
"psychological incapacity" must be characterized by gravity,
juridical antecedence, and incurability, which are not present in
the instant case because petitioner's allegations are not
supported by facts.
Respondent further averred that it was not true that he failed to
render any help, support or assistance to petitioner and their
family; that the family home where petitioner and their children
are living was in fact his own capital property; that his
shortcomings as mentioned by petitioner do not pertain to the
most grave or serious cases of personality disorders that would
satisfy the standards required to obtain a decree of nullity of
marriage; that petitioner's complaint is nothing more than a
complaint of a woman with an unsatisfactory marriage who
wants to get out of it; that contrary to petitioner's claim that he
is a good-for-nothing fellow, he has a college degree in
business administration, and is a bank employee, and, that it
was money problem, and not his alleged personality disorder,
that is the wall that divided him and petitioner.
Respondent also claimed that petitioner failed to lay the basis
for the conclusions of the psychiatrist to the effect that he is
suffering from pathological gambling and personality disorder;
that petitioner's allegation that he came from a distraught
family and that he suffered emotional devastation is vague, and
bereft of particular details, and even slanderous; and that
assuming that he had not acted the way petitioner expected
him to conduct himself, his actions and behavior are not
psychological illnesses or personality disorders, but simply
physical illnesses of the body, akin to hypertension and allied
sicknesses, and that these physical illnesses are not at all
incurable psychiatric disorders that were present at the time of
his marriage with petitioner.
Respondent furthermore claimed that he and petitioner had
conjugal assets and debts; that the land where their family
home is built came from his earnings, hence the family home is
their conjugal property; that he and petitioner also have a
house and lot in Tagaytay City, as well as bank accounts that
are in petitioner's name only; and he and petitioner also have
investments in shares of stocks, cars, household appliances,
furniture, and jewelry; and that these are conjugal assets
because they came from petitioner's salaries and his
(respondent's) own inheritance money.
Respondent moreover alleged that before the filing of the
present Petition, petitioner had caused him to be admitted into
the Metro Psych Facility for treatment; that on account of his
confinement and treatment in this psychiatric facility, he has
incurred medical expenses and professional medical fees; and
that since it is petitioner who manages all their finances and
conjugal assets it stands to reason that he should be awarded
'"spousal support."
On July 25, 2007, the RTC issued its Pre-Trial Order.12
Trial thereafter ensued. Petitioner's witnesses included herself,
her son, Jose Angelo Singson (Jose), and Dr. Sta. Ana-Ponio.
On February 23, 2010, petitioner filed her Formal Offer of
Evidence which included a photocopy of the marriage contract;
the birth certificates of their four children; her son Jose’s
Judicial Affidavit dated April 2, 2008; a photocopy of Dr. Sta.
Ana-Ponio's Judicial Affidavit dated June 25, 2008; Clinical
Summary of respondent issued by Dr. Sta. Ana-Ponio dated
February 11, 2007 (Clinical Summary); her (petitioner's) own
Judicial Affidavit dated April 2, 2008; a photocopy of Transfer
Certificate of Title (TCT) No. 179751 registered in the names of
the parties' four children:, and a notarized document entitled
"Summary of Sources and Uses of Funds for tJ1e period
November 1999 to March 31, 2008" executed by petitioner and
described as a detailed summary of expenses paid for with the
proceeds of respondent's share in the sale of the latter's house
in Magallanes Village.13
Respondent filed his Comment thereon.14
On March 29, 2010, the RTC admitted petitioner’s exhibits.15
On May 13, 2010, respondent filed a Motion to Dismiss16 "on
the ground that the totality of evidence presented by petitioner
did not establish [his] psychological incapacity x x x to comply
with the essential martial obligations x x x".17 Petitioner filed
her Opposition18 thereto, and respondent tendered his
Comment thereon.19
On May 17, 2010, the RTC denied respondent’s Motion to
Dismiss and stood pat on its March 29, 2010 Order.20
During the September 30, 2010 hearing, respondent’s counsel
manifested that his client was waiving the right to present
countervailing evidence. Respondent’s counsel also moved that
the Petition at bar be submitted for decision on the basis of the
evidence already on the record. The RTC thus declared the case
submitted for decision.21
Ruling of the Regional Trial Court
In its Decision of November 12, 2010, the RTC granted the
Petition and declared the marriage between petitioner and
respondent void ab initio on the ground of the latter’s
psychological incapacity. The RTC disposed thus-
WHEREFORE, in view of the foregoing considerations, the
petition is GRANTED. Judgment is hereby rendered[:]
1. DECLARING null and void ab initio the marriage between
MARIA CONCEPCION v. SINGSON a.k.a. CONCEPCION N.
SINGSON and BENJAMIN L SINGSON solemnized on JULY 6,
1974 in Mandaluyong City or any other marriage between them
on the ground of psychological' incapacity of the respondent.
2. ORDERING the Local Civil Registrar of Mandaluyong City and
the National Statistics Office to cancel the marriage between the
petitioner and the respondent as appearing in the Registry of
Marriage.
There are no other issues in this case.
Let copies of this Decision be furnished the Local Civil Registrars
ofMandaluyong City and Parañaque City, the Office of the
Solicitor General, the Office of the Civil Register General
(National Statistics Office) and the Office of the City Prosecutor,
Parañaque City.
SO ORDERED.22
The RTC ruled that the requisites warranting a finding of
psychological incapacity under Article 36 of the family Code are
present in the instant case because the totality of evidence
showed that respondent is suffering from a psychological
condition that is grave, incurable, and has juridical antecedence.
The RTC also found that the combined testimonies of petitioner
and Dr. Sta. Ana-Ponio convincingly showed that respondent is
psychologically incapacitated to perform the essential marital
obligations; that respondent's inability to perform his marital
obligations as set out in Articles 68 to 71 of the Family Code,
was essentially due to a psychological abnormality arising from
a pathological and utterly irresistible urge to gamble.
The RTC cited "[Dr. Sta. Ana-Ponio's] findings [which] reveal
that respondent is suffering from Personality Disorder known as
Pathological Gambling."23 It ruled that it has been shown that
this personality disorder was present at the time of celebration
of marriage but became manifest only later; that because of
this personality disorder respondent had already jeopardized his
relationship with his family; and that respondent's psychological
disorder hinders the performance of his obligations as a
husband and as a father.
Lastly, the RTC found that the only property owned in common
by spouses was donated in favor of the parties' children as
evidenced by TCT No.
Respondent moved for reconsideration of this verdict.
But in its older dated January 6, 2011,24 the RTC denied
respondent's motion for reconsideration. It reiterated that the
expert witness had adequately established that respondent is
suffering from "Pathological Gambling Personality Disorder''
which is grave, permanent, and has juridical antecedence. On
February 4, 2011, respondent filed a Notice of Appeal25 which
was given due course by the RTC in its order26 dated February
28, 2011.
Ruling of the Court of Appeals
In its Decision of August 29, 2013, the CA overturned the RTC,
and disposed as follows:
WHEREFORE, the appeal is GRANTED. The Decision dated 12
November 2010 issued by the Regional Trial Court, Branch 260,
Parañaque City in Civil Case No. 07-0070, declaring the
marriage between Maria Concepcion N. Singson and Benjamin
L. Singson null and void ab initio, is REVERSED AND SET ASIDE.
Instead, the Petition for Declaration of Nullity of Marriage is
DISMISSED.
SO ORDERED.27
The CA held that the totality of evidence presented by petitioner
failed to establish respondent's alleged psychological incapacity
to perform the essential marital obligations, which in this case,
was not at all proven to be grave or serious, much less
incurable, and furthermore was not existing at the time of the
marriage. What is more, the CA declared that any doubt should
be resolved in favor of the existence and continuation of the
marriage, and against its dissolution and nullity, in obedience to
the mandate of the Constitution and statutory laws; and that in
this case, petitioner failed to discharge the burden of proving
that respondent is suffering from a serious or grave
psychological disorder that completely disables or incapacitates
him from understanding and discharging the essential
obligations of the marital union.
According to the CA, psychological incapacity is the downright
or utter incapacity or inability to take cognizance of and to
assume the basic marital obligations. The CA did not go along
with the RTC, which placed heavy reliance on Dr. Sta. Ana-
Ponio's finding that respondent was psychologically
incapacitated to perform the essential marital obligations due to
a personality disorder known as pathological gambling. The CA
held that, contrary to petitioner's claim that respondent's
pathological gambling was grave or serious, the evidence in fact
showed that the latter was truly capable of carrying out the
ordinary duties of a married man because he had a job, had
provided money for the family from the sale of his own
property, and he likewise provided the land on which the family
home was built, and he also lives in the family home with
petitioner and their children.
On top of these, the CA ruled that it is settled that mere
difficulty, refusal or neglect in the performance of marital
obligations, or ill will on the part of a spouse, is different from
incapacity rooted in some debilitating psychological condition or
illness; that the evidence at bar showed that respondent's
alleged pathological gambling arose after the marriage; that in
fact petitioner admitted that she was not aware of any gambling
by respondent before they got married; that petitioner
moreover acknowledged that respondent was a kind and a
caring person when he was courting her; that petitioner likewise
admitted that respondent also brought petitioner to the hospital
during all four instances when she gave birth to their four
children.
In other words, the CA found that respondent's purported
pathological gambling was not proven to be incurable or
permanent since respondent has been undergoing treatment
since 2003 and has been responding to the treatment.
Petitioner moved for reconsideration28 of the CA's Decision. But
her motion was denied by the CA in its Resolution of January 6,
2014.29
Issue
Hence, the instant recourse with petitioner raising the following
question –
[WHETHER] THE [CA] ERRED IN REVERSING THE DECISION
OF THE [RTC].30
Petitioner's Arguments
In praying for the reversal of the assailed CA Decision and
Resolution, and in asking for the reinstatement of the RTC
Decision, petitioner argues in her Petition,31 Reply,32 and
Memorandum33 that respondent's psychological incapacity had
been duly proved in court, including its juridical antecedence,
incurability, and gravity.
First, petitioner maintains that respondent failed to perform the
marital duties of mutual love, respect, and support; that Dr.
Sta. Ana-Ponio's expert findings are corroborated by the
testimonies of petitioner end her son Jose both of whom
demonstrated that respondent’s psychological incapacity is
grave or serious rendering him incapable to perform the
essential marital obligations; that for his pan, respondent had
adduced no proof that he (respondent) is capable of carrying
out the ordinary duties required in a marriage for the reason
that everything that the family had saved and built had been
squandered by respondent; and that respondent's confinement
at the rehabilitation facility is itself proof of the gravity or
seriousness of his psychological incapacity.

Second, petitioner contends that respondent’s psychological
incapacity preceded the marriage, as shown in Dr. Sta. Ana-
Ponio’s Clinical Summary, which pointed out that such
psychological incapacity, which included pathological gambling,
can be traced back when respondents was already betting on
jai alai even in high school, and this was not known to his
family; that the Clinical Summary was based on information
provided not only by petitioner, but by respondent’s sister, and
by respondent himself; that such juridical antecedence was
neither questioned nor overthrown by countervailing evidence;
and that the root cause could be traced back to respondent’s
flawed relationship with his parents which developed into a
psychological disorder that existed before the marriage.
Third, petitioner insists that this Court can take judicial notice of
the fact that personality disorders are generally incurable and
permanent, and must continuously be treated medically; that in
this case the Clinical Summary; had pointed out that
respondent's understanding of his gambling problem is only at
the surface level; and that in point of fact Dr. Sta. Ana-Ponio
had affirmed that personality disorders are incurable.
Respondent’s Arguments
In his Comment34 and Memorandum,35 respondent counters
that the assailed CA Decision should be affirmed. He argues
that the grounds cited by petitioner are the self-same grounds
raised by petitioner before the RTC and the CA; that petitioner's
evidence indeed failed to prove convincingly that he
(respondent) is psychologically incapacitated to comply with the
essential marital obligations, hence there is no basis to declare
the parties' marriage void ab initio.
Our Ruling
The Petition will not succeed.
It is axiomatic that the validity of marriage and the unity of the
family are enshrined in our Constitution and statutory laws,
hence any doubts attending the same are to be resolved in
favor of the continuance and validity of the marriage and that
the burden of proving the nullity of the same rests at all times
upon the petitioner.36 "The policy of the Constitution is to
protect and strengthen the family as the basic social institution,
and marriage as the foundation of the family. Because of this,
the Constitution decrees marriage as legally inviolable and
protects it from dissolution at the whim of the parties."37
Article 1 of the Family Code describes marriage as "a special
contract of permanent union between a man and a woman
entered into in accordance with law for the establishment of
conjugal and family life" and as "the foundation of the family
and an inviolable social institution."
In the instant case, petitioner impugns the inviolability of this
social institution by suing out pursuant to Article 36 of the
Family Code, which provides that:
Art. 36. A marriage contracted by any party who, at the time of
the celebration, was psychologically incapacitated to comply
with the essential marital obligations of marriage, shall likewise
be void even if such incapacity becomes manifest only after its
solemnization. (As amended by Executive Order 227)
Petitioner's case will thus be examined in light of the well-
entrenched case law rulings interpreting and construing the
quoted Article, to wit:
'Psychological incapacity,' as a ground to nullify a marriage
under Article 36 of the Family Code, should refer to no less than
a mental - not merely physical - incapacity that causes a party
to be truly incognitive of the basic marital covenants that
concomitantly must be assumed and discharged by the parties
to the marriage which, as so expressed in Article 68 of the
Family Code, among others, include their mutual obligations to
live together, observe love, respect and fidelity and render help
and support. There is hardly any doubt that the intendment of
the law has been to confine the meaning of 'psychological
incapacity' to the most serious cases of personality disorders
clearly demonstrative of an utter insensitivity or inability to give
meaning and significance to the marriage. In Santos v. CA
(Santos), the Court first declared that psychological incapacity
must be characterized by: (a) gravity (i.e., it must be grave and
serious such that the party would be incapable of carrying out
the ordinary duties required in a marriage); (b) juridical
antecedence (i.e., it must be rooted in the history of the party
antedating the marriage, although the overt manifestations may
emerge only after the marriage); and (c) incurability (i.e., it
must be incurable, or even if it were otherwise, the cure would
be beyond the means of the party involved). The Court laid
down more definitive guidelines in the interpretation and
application of Article 36 of the Family Code in Republic of the
Phils. v. CA, x x x [also known as the Molina guidelines]. These
guidelines incorporate the basic requirements that the Court
established in Santos.38
In setting aside the RTC's ruling, the CA in this case held that
petitioner failed to prove that respondent was psychologically
incapacitated to comply with the essential marital obligations
because she failed to establish that such incapacity was grave
and serious, and that it existed at the time of the marriage, and
that it is incurable. We agree.
At the outset, this Court is constrained to peruse the records
because of the conflicting findings between the trial court and
the appellate court.39 We thus did peruse and review the
records, and we are satisfied that the CA correctly found that
respondent has the capability and ability to perform his duties
as a husband and father as against the RTC' s rather general
statement that respondent's psychological or personality
disorder hinders the performance of his basic obligations as a
husband and a father.
We agree with the CA that the evidence on record does not
establish that respondent's psychological incapacity was grave
and serious as defined by jurisprudential parameters since
"[respondent] had a job; provided money for the family from
the sale of his property; provided the land where the family
home was built on; and lived in the family home with petitioner-
appellee and their children."40
Upon the other hand, petitioner herself testified that respondent
had a job as the latter "was working at a certain point."41 This
is consistent with the information in Dr. Sta. Ana-Ponio's Clinical
Summary and testimony, which were both included in
petitioner's formal offer of evidence, respecting the parties'
relationship history that petitioner and respondent met at the
bank where petitioner was applying for a job and where
respondent was employed as a credit investigator prior to their
courtship and their marriage.42
It is significant to note moreover that petitioner also submitted
as part of her evidence a notarized summary dated February
18, 2010 which enumerated expenses paid for by the proceeds
of respondent's share in the sale of his parents' home in
Magallanes, Makati City which amounted to around ₱2.9 million.
Although petitioner was insinuating that this amount was
insufficient to cover the family expenses from 1999 to 2008, we
note that she admitted under oath that the items for their
family budget, such as their children's education, the payments
for association dues, and for electric bills came from this
money.
And no less significant is petitioner's admission that respondent
provided the land upon which the family home was built, thus -
[Respondent's counsel to the witness, petitioner]
Q: Does [respondent] [own] any real property?
A: No.
Q: He does not [own] any real property?
A: No.
Q: Showing to you Transfer Certificate of Title No. 413513 of
the Register of Deeds of Rizal which has been transferred with
the Register of Deeds of Paranaque and is now re-numbered as
S-25470, which is in the name of [respondent], Filipino, of legal
age, single.
xxxx
[COURT to the witness, petitioner]
Q: Who owned this property?

A: Based on the document, it's Benjamin Singson.
Q: Where is this property located?
A: It is located in United Paranaque.
Q: Where in United Paranaque?
A: No. 2822 Daang Hari.
Q: Are you staying in that property?
A: We are staying in that property.
xxxx
[Respondent's counsel to the Witiress, petitioner]
Q: How about the house there, in the United Parañaque
[property], who owns it?
A: It was donated to the children.
xxxx
[COURT to the witness, petitioner]
Q: Based on the document, who is the registered owner?
A: It says there, [respondent], Your Honor.
Q: Who owns it now?
A: The children because it was donated [to them].43
What's more, petitioner and respondent likewise lived together
as husband and wife since their marriage on July 6, 1974 (and
in the company of their four children, too). In fact, shunting
aside the time that respondent was under treatment at the
Metro Psych Facility, petitioner did not allege any instance when
respondent failed to live with them.
To the foregoing, we ought to add the fact that petitioner
herself admitted, that respondent likewise brought her to the
hospital during all four instances that she gave birth to their
children.44
By contrast, petitioner did not proffer any convincing proof that
respondent’s mere confinement at the rehabilitation center
confirmed the gravity of the latter’s psychological incapacity.
Neither does petitioner’s bare claim that respondent is a
pathological gambler, is irresponsible, and is unable to keep a
job, necessarily translate into unassailable proof that
respondent is psychologically incapacitated to perform the
essential marital obligations. It is settled that "[p]sychological
incapacity under Article 36 of the Family Code contemplates an
incapacity or inability to take cognizance of and to assume basic
marital obligations, and is not merely the difficulty, refusal, or
neglect in the performance of marital obligations or ill will."45
"[I]t is not enough to prove that a spouse failed to meet his
responsibility and duty as a married person; it is essential that
he or she must be shown to be incapable of doing so because
of some psychological, not physical, illness."46
Nor can Dr. Sta. Ana-Ponio's testimony in open court and her
Clinical Summary be taken for gospel truth in regard to the
charge that respondent is afflicted with utter inability to
appreciate his marital obligations. That much is clear from the
following testimony –
[Petitioner's counsel to the witness, Dr. Sta. Ana-Ponio]
Q: Madam Witness, do you know the respondent in this case,
Benjamin Singson?
A: Yes. [S]ir, [respondent] has been my patient since 2003,
during his first admission and again [in] 2006, [S]ir.
Q: So, he was confined twice in your facility, [M]adam witness?
A: Yes, [S]ir.
Q: Why was he confined, Madam witness?
A: He was initially confined because of problems with gambling
and subsequently because of [behavioral] problem, [S]ir.
xxxx
Q: What was the cause of his second confinement, Madam
[W]itness?
A: Initially, he was able to cope after discharged. However, [in]
September of 2006, he knocked on the doors of the maids in
the middle of the night. And in one occasion, he got his car in
the garage and drove out bumping the car parked right across
the garage and he [also kept] takfr1g things out from his
cabinet. And if the maids would clean [these], he [would]
immediately take them out again. So, he was brought to the
facility in October because of his uncontrolled behavior, [S]ir.
xxxx
Q: So, what [were] your clinical findings on the state of the
respondent, Benjamin Singson, Madam witness?
A: Based on history, mental status examination and
observations during his stay, I found that [respondent] is
suffering from pathological gambling. Also, with his history of
typhoid fever when he was younger, it is difficult to attribute
the behavioral changes that he manifested in 2003 and 2006.
Aside from pathological gambling, [respondent] is suffering
from a personality disorder, [S]ir.
Q: What are the results or symptoms of this personality disorder
with [regard] to [respondent's dealings] with other people, with
his wife and his family, [M]adam witness?
A: Your Honor, may I read from my report to refresh my
memory.
COURT: Go ahead.
A: Because of his maladaptive behavior, [respondent] sees [sic]
his problems which [makes] his personal[,] family[,] and social
life[,] and even his vocational pleasure [suffer]. He was pre-
occupied with gambling, thinking of ways to get money with
which to gamble as seen in his stealing and pawning jewelries
and appliances. He needs to amble with increasing amounts of
money in order achieve his desired effects into gambling, [S]ir.
COURT: Your findings, Dr., are incorporated in your report?
A: Yes, Your Honor.
xxxx
[Cross-examination of Dr. Sta. Ana-Ponio by respondent’s
counsel]
Q: Who were the ones who made the examination, Madam
witness?
A: I made the examination, [S]ir, and also the psychologist did
the psychological testing, [S]ir.
Q: Now, in your opinion as an expert witness, Madam witness,
which we would like to request [from] this Honorable Court,
later on, that you present your credentials as expert witness,
you concluded that the respondent is suffering from personality
disorder?
A: Yes,[S]ir.
Q: What does this mean in layman’s language, [M]adam
witness?
A: Personality disorder is a maladaptive pattern of behavior that
has distracted his ability to perform his functions as a married
man to his wife as a father to his children and as a person who
is supposed to be employed productively, [S]ir.47
Futhermore, "[h]abitual drunkenness, gambling and failure to
find a job, [while undoubtedly negative traits are nowhere
nearly the equivalent of ‘psychological incapacity’], in the
absence of [incontrovertible] proof that these are
manifestations of an incapacity rooted in some debilitating
psychological condition or illness."48

We now turn to the second point. Again, in view of the
contrasting findings of the trial court and appellate court,49 we
take recourse to the records to assist us in evaluating the
perspective postures taken by the parties.
Here again, well-entrenched is the rule that "there must be
proof of a natal or supervening disabling factor that effectively
incapacitated the respondent spouse from complying with the
basic marital obligations x x x."50 "A cause has to be shown
and linked with the manifestations of the psychological
incapacity."51
Again we agree with the CA that the RTC did not clearly or
correctly lay down the bases or premises for this particular
finding relative to respondent's psychological incapacity, thus:
Second, there is also sufficient evidence to prove that the
respondent's inabilities to perform his marital obligations was a
result of not mere intentional refusal on his part but are caused
by psychological abnormality. Such psychological incapacity of
the respondent has been shown as already present at the time
of celebration of marriage but became manifest only after the
solemnization. x x x.52
As heretofore mentioned, the medical basis or evidence
adverted to by the RTC did not specifically identify the root
cause of respondent's alleged psychological incapacity. In fact,
Dr. Sta. Ana-Ponio did not point to a definite or a definitive
cause, viz. "with his history of typhoid fever when he was
younger, it is difficult to attribute the behavioral changes that
he manifested in 2003 and 2006."53 Besides, Dr. Sta. Ana-
Ponio admitted that it was not she herself, but another
psychologist who conducted the tests.54 And this psychologist
was not presented by petitioner. More than that, Dr. Sta. Ana-
Ponio's testimony regarding respondent's alleged admission that
he was allegedly betting on jai alai when he was still in high
school is essentially hearsay as no witness having personal
knowledge of that fact was called to the witness stand. And,
although Dr. Sta. Ana-Ponio claimed to have interviewed
respondent's sister in connection therewith, the latter did testify
in court. And we are taught that "[t]he stringency by which the
Court assesses the sufficiency of psychological evaluation
reports is necessitated by the pronouncement in our
Constitution that marriage is an inviolable institution protected
by the State."55
Equally bereft of merit is petitioner's claim that respondent's
alleged psychological incapacity could be attributed to the
latter's family or childhood, which are circumstances prior to the
parties' marriage; no evidence has been adduced to
substantiate this fact. Nor is there basis for upholding
petitioner's contention that respondent's family was "distraught"
and that respondent's conduct was "dysfunctional"; again, there
is no evidence to attest to this. These are very serious charges
which must be substantiated by clear evidence which,
unfortunately, petitioner did not at all adduce. Indeed, Dr. Sta.
Ana-Ponio did not make a specific finding that this was the
origin of respondent's alleged inability to appreciate marital
obligations.
Needless to say, petitioner cannot lean upon her son Jose's
testimony that his father's psychological incapacity existed
before or at the time of marriage.1âwphi1 It has been held that
the parties' child is not a very reliable witness in an Article 36
case as "he could not have been there when the spouses were
married and could not have been expected to know what was
happening between his parents until long after his birth."56
To support her Article 36 petition, petitioner ought to have
adduced convincing, competent and trustworthy evidence to
establish the cause of respondent's alleged psychological
incapacity and that the same antedated their marriage.57 If
anything, petitioner failed to successfully dispute the CA's
finding that she was not aware of any gan1b1ing by respondent
before they got married and that respondent was a kind and
caring person when he was courting her.58
Against this backdrop, we must uphold the CA's declaration that
petitioner failed to prove that respondents alleged psychological
incapacity is serious or grave and that it is incurable or
permanent.
To be sure, this Court cannot take judicial notice of petitioner's
assertion that "personality disorders are generally incurable" as
this is not a matter that courts are mandated to take judicial
notice under Section 1, Rule 129 of the Rules of Court.59
"'Unless the evidence presented clearly reveals a situation
where the parties or one of them, by reason of a grave and
incurable psychological illness existing at the time the marriage
was celebrated, was incapacitated to fulfill the obligations of
marital life (and thus could not then have validly entered into a
marriage), then we are compelled to uphold the indissolubility
of the marital tie."60 This is the situation here.
WHEREFORE, the Petition is DENIED. The August 29, 2013
Decision and January 6, 2014 Resolution of the Court of Appeals
in CA-G.R. CV No. 96662 are AFFIRMED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:
MARIA LOURDES P.A. SERENO
Chief Justice
Chairperson
TERESITA J. LEONARDO-DE CASTRO
Associate Justice FRANCIS H. JARDELEZA
Associate Justice
NOEL GIMENEZ TIJAM
Associate Justice
CERTIFICATION
Pursuant to the Section 13, Article VIII of the Constitution, I
certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
MARIA LOURDES P.A. SERENO
Chief Justice
THIRD DIVISION
January 10, 2018
G.R. No. 192971
FLORO MERCENE, Petitioner
vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, Respondent
DECISION
MARTIRES, J.:
This petition for review on certiorari seeks to reverse and set
aside the 29 April 2010 Decision1 and 20 July 2010 Resolution2
of the Court of Appeals (CA) in CA-G.R. CV No. 86615 which
reversed the 15 September 2005 Decision3 of the Regional Trial
Court, Branch 220, Quezon City (RTC).
THE FACTS
On 19 January 1965, petitioner Floro Mercene (Mercene)
obtained a loan from respondent Government Service Insurance
System (GSIS) in the amount of ₱29,500.00. As security, a real
estate mortgage was executed over Mercene's property in
Quezon City, registered under Transfer Certificate of Title No.
90535. The mortgage was registered and annotated on the title
on 24 March 1965.4
On 14 May 1968, Mercene contracted another loan with GSIS
for the amount of ₱14,500.00. The loan was likewise secured by
a real estate mortgage on the same parcel of land. The
following day, the loan was registered and duly annotated on
the title.5
On 11 June 2004, Mercene opted to file a complaint for
Quieting of Title6 against GSIS. He alleged that: since 1968
until the time the complaint was filed, GSIS never exercised its
rights as a mortgagee; the real estate mortgage over his
property constituted a cloud on the title; GSIS' right to foreclose
had prescribed. In its answer,7 GSIS assailed that the complaint
failed to state a cause of action and that prescription does not
run against it because it is a government entity.
During the pre-trial conference, Mercene manifested that he
would file a motion for judgment on the pleadings. There being
no objection, the RTC granted the motion for judgment on the
pleadings.8
The RTC Decision
In its 15 September 2005 decision, the RTC granted Mercene's
complaint and ordered the cancellation of the mortgages
annotated on the title. It ruled that the real estate mortgages
annotated on the title constituted a cloud thereto, because the
annotations appeared to be valid but was ineffective and
prejudicial to the title. The trial court opined that GSIS' right as
a mortgagee had prescribed because more than ten (10) years
had lapsed from the time the cause of action had accrued. The
R TC stated that prescription ran against GSIS because it is a
juridical person with a separate personality, and with the power
to sue and be sued. The dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby
rendered:
1) Declaring the Real Estate Mortgage dated January 19, 1965,
registered on March 24, 1965 and Real Estate Mortgage dated
May 14, 1965 registered on May 15, 1968, both annotated at
the back of Transfer Certificate of Title No. 90435 of the
Registry of Deeds of Quezon City, registered in the name of
plaintiff Floro Mercene married to Felisa Mercene, to be
ineffective.
2) Ordering the Registry of Deeds of Quezon City to cancel the
following entries annotated on the subject title 1) Entry No.
4148/90535: mortgage to GSIS and; 2) Entry No. 4815/90535:
mortgage to GSIS.
3) The other claims and counter-claims are hereby denied for
lack of merit.9
Aggrieved, GSIS appealed before the CA.
The CA Ruling
In its 30 January 2015 decision, the CA reversed the RTC
decision. The appellate court posited that the trial court erred in
declaring that GSIS' right to foreclose the mortgaged properties
had prescribed. It highlighted that Mercene's complaint neither
alleged the maturity date of the loans, nor the fact that a
demand for payment was made. The CA explained that
prescription commences only upon the accrual of the cause of
action, and that a cause of action in a written contract accrues
only when there is an actual breach or violation. Thus, the
appellate court surmised that no prescription had set in against
GSIS because it has not made a demand to Mercene. It ruled:
WHEREFORE, the appeal is GRANTED. The decision appealed
from is REVERSED and SET ASIDE. The complaint for Quieting
of Title is hereby DISMISSED.10
Mercene moved for reconsideration, but the same was denied
by the CA in its assailed 7 April 2011 resolution.
Hence, this present petition raising the following:
ISSUES
I the present, more than thirty-five (35) years have already
WHETHER THE COURT OF APPEALS ERRED IN CONSIDERING
ISSUES NOT RAISED BEFORE THE TRIAL COURT;
II
WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING
THE JUDICIAL ADMISSION ALLEGEDLY MADE BY GSIS; AND
III
WHETHER THE COURT OF APPEALS ERRED IN RULING THAT
THE REAL ESTATE MORTGAGES HAD YET TO PRESCRIBE.
THE COURTS RULING
The petition has no merit.
Related issues addressed by the trial courts
Mercene assails the CA decision for entertaining issues that
were not addressed by the trial court. He claims that for the
first time on appeal, GSIS raised the issue on whether the loans
were still effective in view of his nonpayment. A reading of the
CA decision, however, reveals that the appellate court did not
dwell on the issue of nonpayment, but instead ruled that
prescription had not commenced because the cause of action
had not yet accrued. Hence, it concluded that the complaint
failed to state a cause of action. The appellate court did not
focus on the question of payment precisely because it was
raised for the first time on appeal. It is noteworthy that, in its
answer, GSIS raised the affirmative defense that Mercene's
complaint failed to state a cause of action.
Only ultimate facts need be specifically denied
Further, Mercene insists that GSIS had judicially admitted that
its right to foreclose the mortgage had prescribed. He assails
that GSIS failed to specifically deny the allegations in his
complaint, particularly paragraphs 11.1 and 11.2 which read:
11.1. The right of the defendant GSIS, to institute the necessary
action in court, to enforce its right as a mortgagee, under Real
Estate Mortgages dated January 19, 1965 and May 14, 1968,
respectively, by filing a complaint for judicial foreclosure of Real
Estate Mortgage, with the Regional Trial Court of Quezon City,
against the plaintiff, as the mortgagor, pursuant to Rule 68 of
the 1997 Rules of Civil Procedures (Rules, for brevity); or by
filing a petition for extra-judicial foreclosure of real estate
mortgage, under Act. 3135, as amended, with the Sheriff, or
with the Notary Public, of the place where the subject property
is situated, for the purpose of collecting the loan secured by the
said real estate mortgages, or in lieu thereof, for the purpose of
consolidating title to the parcel of land xxx in the name of the
defendant GSIS, has already prescribed, after ten (10) years
from May 15, 1968. More particularly, since May 15, 1968, up to
elapsed, without the mortgagee defendant GSIS, having
instituted a mortgage action[s] against the herein plaintiff-
mortgagor.
xxx
11.2. Since the defendant GSIS has not brought any action to
foreclose either the first or the second real estate mortgage on
the subject real property, so as to collect the loan secured by
the said real estate mortgages, or in lieu thereof, to consolidate
title to the said parcel of land, covered by the documents
entitled, first and second real estate mortgages, in the name of
the defendant GSIS, notwithstanding the lapse of ten (10) years
from the time the cause of action accrued, either then (10)
years after May 15, 1968, or after the alleged violation by the
plaintiff of the terms and conditions of his real estate
mortgages, therefore, the said defendant GSIS, has lost its
aforesaid mortgagee's right, not only by virtue of Article 1142,
N.C.C., but also under Article 476, N.C.C., which expressly
provides that there may also be an action to quiet title, or
remove a cloud therefrom, when the contract, instrument or
other obligation has been extinguished or has terminated, or
has been barred by extinctive prescription;11
The Court agrees with Mercene that material averments not
specifically denied are deemed admitted.12 Nonetheless, his
conclusion that GSIS judicially admitted that its right to
foreclose had prescribed is erroneous. It must be remembered
that conclusions of fact and law stated in the complaint are not
deemed admitted by the failure to make a specific denial.13
This is true considering that only ultimate facts must be alleged
in any pleading and only material allegation of facts need to be
specifically denied.14
A conclusion of law is a legal inference on a question of law
made as a result of a factual showing where no further
evidence is required.15 The allegation of prescription in
Mercene's complaint is a mere conclusion of law. In Abad v.
Court of First Instance of Pangasinan, 16 the Court ruled that
the characterization of a contract as void or voidable is a
conclusion of law, to wit:
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. General allegations
that a contract is valid or legal, or is just, fair and reasonable,
are mere conclusions of law. Likewise, allegations that a
contract is void, voidable, invalid, illegal, ultra vires, or against
public policy, without stating facts showing its invalidity, are
mere conclusions of law.
In the same vein, labelling-an obligation to have prescribed
without specifying the circumstances behind it is a mere
conclusion of law. As would be discussed further, the fact that
GSIS had not instituted any action within ten (10) years after
the loan had been contracted is insufficient to hold that
prescription had set in. Thus, even if GSIS' denial would not be
considered as a specific denial, only the fact that GSIS had not
commenced any action, would be deemed admitted at the
most. This is true considering that the circumstances to
establish prescription against GSIS have not been alleged with
particularity.
Commencement of the prescriptive period for real estate
mortgages material in determining cause of action
In its answer, GSIS raised the affirmative defense, among
others, that the complaint failed to state a cause of
action.1âwphi1 In turn, the CA ruled that Mercene's complaint
did not state a cause of action because the maturity date of the
loans, or the demand for the satisfaction of the obligation, was
never alleged.
In order for cause of action to arise, the following elements
must be present: (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not
to violate such right; and (3) an act or omission on the part of
such defendant violative of the right of the plaintiff or
constituting a breach of obligation of the defendant to the
plaintiff.17
In University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas,
et al., 18 the Court clarified that prescription runs in mortgage
contract from the time the cause of action arose and not from
the time of its execution, to wit:
The prescriptive period neither runs from the date of the
execution of a contract nor does the prescriptive period
necessarily run on the date when the loan becomes due and
demandable. Prescriptive period runs from the date of demand,
subject to certain exceptions.
In other words, ten (10) years may lapse from the date of the
execution of contract, without barring a cause of action on the
mortgage when there is a gap between the period of execution
of the contract and the due date or between the due date and
the demand date in cases when demand is necessary.
The mortgage contracts in this case were executed by Saturnino
Petalcorin in 1982. The maturity dates of FISLAI's loans were
repeatedly extended until the loans became due and
demandable only in 1990. Respondent informed petitioner of its
decision to foreclose its properties and demanded payment in
1999.
The running of the prescriptive period of respondent's action on
the mortgages did not start when it executed the mortgage
contracts with Saturnino Petalcorin in 1982.1âwphi1
The prescriptive period for filing an action may run either (1)
from 1990 when the loan became due, if the obligation was
covered by the exceptions under Article 1169 of the Civil Code;
(2) or from 1999 when respondent demanded payment, if the
obligation was not covered by the exceptions under Article
116919 of the Civil Code. [emphasis supplied]
In Maybank Philippines, Inc. v. Spouses Tarrosa, 20 the Court
explained that the right to foreclose prescribes after ten (10)
years from the time a demand for payment is made, or when
then loan becomes due and demandable in cases where
demand is unnecessary, viz:
An action to enforce a right arising from a mortgage should be
enforced within ten (10) years from the time the right of action
accrues, i.e., when the mortgagor defaults in the payment of
his obligation to the mortgagee; otherwise, it will be barred by
prescription and the mortgagee will lose his rights under the
mortgage. However, mere delinquency in payment does not
necessarily mean delay in the legal concept. To be in default is
different from mere delay in the 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:
(a) the obligation be demandable and already liquidated; (b)
the debtor delays performance; and (c) the creditor requires the
performance judicially or extrajudicially, unless demand is not
necessary - i.e., when there is an express stipulation to that
effect; where the law so provides; when the period is the
controlling motive or the principal inducement for the creation
of the obligation; and where demand would be useless.
Moreover, it is not sufficient that the law or obligation fixes a
date for performance; it must further state expressly that after
the period lapses, default will commence. Thus, it is only when
demand to pay is unnecessary in case of the aforementioned
circumstances, or when required, such demand is made and
subsequently refused that the mortgagor can be considered in
default and the mortgagee obtains the right to file an action to
collect the debt or foreclose the mortgage.
Thus, applying the pronouncements of the Court regarding
prescription on the right to foreclose mortgages, the Court finds
that the CA did not err in concluding that Mercene's complaint
failed to state a cause of action. It is undisputed that his
complaint merely stated the dates when the loan was
contracted and when the mortgages were annotated on the title
of the lot used as a security. Conspicuously lacking were
allegations concerning: the maturity date of the loan contracted
and whether demand was necessary under the terms and
conditions of the loan.
As such, the RTC erred in ruling that GSIS' right to foreclose
had prescribed because the allegations in Mercene's complaint
were insufficient to establish prescription against GSIS. The only
information the trial court had were the dates of the execution
of the loan, and the annotation of the mortgages on the title. As
elucidated in the above-mentioned decisions, prescription of the
right to foreclose mortgages is not reckoned from the date of
execution of the contract. Rather, prescription commences from
the time the cause of action accrues; in other words, from the
time the obligation becomes due and demandable, or upon
demand by the creditor/mortgagor, as the case may be.
In addition, there was no judicial admission on the part of GSIS
with regard to prescription because treating the obligation as
prescribed, was merely a conclusion of law. It would have been
different if Mercene's complaint alleged details necessary to
determine when GSIS' right to foreclose arose, i.e., date of
maturity and whether demand was necessary.
WHEREFORE, the petition is DENIED. The 29 April 2010
Decision and 20 July 2010 Resolution of the Court of Appeals
(CA) in CAG. R. CV No. 86615 are AFFIRMED in toto.
SO ORDERED.
SAMUEL R. MARTIRES
Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson
LUCAS P. BERSAMIN
Associate Justice MARVIC M.V.F. LEONEN
Associate Justice
ALEXANDER G. GESMUNDO
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decisionhad been
reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
PRESBITERO J. VELASCO
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to the Section 13, Article VIII of the Constitution and
the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
MARIA LOURDES P.A. SERENO
Chief Justice
THIRD DIVISION
January 10, 2018
G.R. No. 195887
BEN LINE AGENCIES PHILIPPINES, INC., rep. by RICARDO J.
JAMANDRE, Petitioner
vs.
CHARLES M.C. MADSON AND ALFREDO P. AMORADO,
Respondents
DECISION
MARTIRES, J.:
This petition for review on certiorari seeks to reverse and set
aside the 14 December 2010 Decision1 and 25 February 2011
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
115492 which affirmed the 15 February 20103 and 11 June
20104 Resolution of the Department of Justice (DOJ) in LS. No.
O8B-02516.
THE FACTS
Petitioner Ben Line Agencies Philippines, Inc. (Ben Line) is a
domestic corporation engaged in maritime business. On 19
September 2006, the vessel M/V Ho Feng 7, owned and
operated by Ben Line's foreign principal, had to discharge
shipment consigned to La Farge Cement Services Philippines,
Inc. (La Farge). As such, it needed to hire a crane capable of
lifting heavy shipment of approximately 70 metric tons.5
Ben Line inquired with AAL TAFIL Incorporated whether the
latter had the necessary machinery to handle the unloading of
the former's shipment. Through its president, respondent
Charles M.C. Madson (Madson), AAL T AFIL offered its 300-ton
crane and stated that it was capable of lifting the shipment from
M/V Ho Feng 7. The equipment was initially offered for
₱1,150,000.00.6
On 25 September 2006, Ben Line confirmed with AAL T AFIL its
intention to hire the crane. Madson, however, informed that the
equipment had been leased to ACE Logistics, Inc. Due to the
urgency of the situation, Ben Line contacted respondent Aflredo
Amorado (Amorado), president of ACE Logistics, who said that
the crane was available for sub-leasing for the amount of
₱l,995,000.00 with an additional ₱400,000.00 to be paid directly
to AAL T AFIL should the radius be more than 16 meters. Thus,
a crane rental contract was executed between Ben Line and
ACE Logistics, and the former paid the full amount of
₱2,395,000.00 in consonance with the payment terms agreed
upon.7
When Ben Line informed Madson that it had another small piece
of cargo to be lifted, the latter demanded an additional
₱200,000.00 because the previously agreed amount covered
only the lifting of a single heavy cargo. Thus, the total
consideration for the use of the crane amounted to
₱2,595,000.00: ₱l,995,000.00 was paid to ACE Logistics and
₱600,000.00 was paid directly to AALTAFIL.8
On 1 October 2006, the vessel was ready to discharge the
cargo. Due to problems with the crane operator and the crane
itself, however, Ben Line was constrained to look for their
substitutes. It hired Renato Escarpe of Asian Terminals, Inc.
(ATI) as a crane operator and it leased ATI's floating crane
barge.9
Thereafter, Ben Line repeatedly made demands for a refund
from AALTAFIL and ACE Logistics but respondents refused to do
so. Believing it was deceived into renting a less worthy crane,
Ben Line filed a complaint-affidavit against respondents before
the National Bureau of Investigation (NBI). On 11 January
2008, the NBI issued a resolution recommending the
prosecution of respondents for estafa under Article 315(2) of
the Revised Penal Code.10 The case was forwarded to the
Office of the Prosecutor (OCP) of Manila.
Proceedings before the OCP and the DOJ
In its 23 May 2008 Resolution,11 the OCP issued a resolution
recommending the dismissal of the complaint for insufficiency of
evidence. It opined that there was no misrepresentation in
Madson's claim that AALTAFIL owned the required crane. In
addition, the OCP found that respondents neither conspired nor
employed machinations against Ben Line in increasing the
amount the latter would have to pay to lease its desired
equipment. The resolution reads:
Wherefore, from the foregoing the undersigned respectfully
recommends the dismissal of the instant case due to
insufficiency of evidence.12
Aggrieved, Ben Line filed a petition for review before the DOJ.
In its 25 February 2010 resolution, the DOJ denied Ben Line's
petition for review. It noted that the petition for review failed to
attach clear copies of the assailed resolution. It opined that Ben
Line lost its right to appeal because of its failure to comply with
the prevailing rules. The resolution reads:
WHEREFORE, the petition for review is hereby DISMISSED.13
Ben Line moved for reconsideration but it was denied by the
DOJ in its 11 June 2010 resolution. Undeterred, it filed a
petition for certiorari before the CA.
The CA Ruling
In its 14 December 2015 decision, the CA dismissed Ben Line's
petition for certiorari. The appellate court explained that the
DOJ did not act with grave abuse of discretion because it
merely applied the rules when it dismissed Ben Line's petition.
It noted that Ben Line failed to comply with Sections 5 and 6 of
the 2000 NPS Rules on Appeal after failing to attach clear and
legible copies of the resolutions sought to be reviewed. The CA
posited that the circumstances did not warrant the relaxation of
the rules of procedure. It ruled:
ACCORDINGLY, the petition is DISMISSED for lack of merit.14
Ben Line moved for reconsideration, but the same was denied
by the CA in its assailed 25 February 2011 resolution.
Hence, this present petition raising the following:
ISSUES
I
WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN DISMISSING THE PETITION FOR CERTIORARI
DATED 20 AUGUST 2010 AND IN DENYING THE MOTION FOR
RECONSIDERATION DATED 6 JANUARY 2011 OF PETITIONER
BEN LINE AGENCIES PHILIPPINES, INC.; AND
II
WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN RULING THAT THE PETITION FOR REVIEW DATED
26 MARCH 2009 IS NOT MERITORIOUS ON ITS FACE.15
OUR RULING
The petition is meritorious.
Principally, the issues under the present petition for review
before the Court are whether the DOJ acted with grave abuse
of discretion in dismissing Ben Line's appeal only on procedural
grounds.
Relevant to the issue is Section 5 of the 2000 NPS Rule on
Appeal, which reads:
Section 5. Contents of the petition. - The petition shall contain
or state: (a) the names and addresses of the parties; (b) the
investigation Slip Number (I.S. No.) and criminal case number,
if any, and title of the case, including the offense charged in the
complaint; (c) the venue of the preliminary investigation; (d)
the specific material dates showing that it was filed on time; (e)
a clear and concise statement of the facts, the assignment of
errors, and the reasons or arguments relied upon for the
allowance of the appeal; and (f) proof of service of a copy of
the petition to the adverse party and the Prosecution Office
concerned.
The petition shall be accompanied by legible duplicate original
or certified true copies of the complaint, affidavit/sworn
statements and other evidence submitted by the parties during
the preliminary investigation/reinvestigation.
In the case at bar, it is undisputed that Ben Line initially failed
to submit clear and legible copies of the resolutions of the OCP
when it filed its petition for review before the DOJ. Under
Section 6 of the 2000 NPS rules, failure to comply with the
requirements of Section 5 constitutes sufficient ground to
dismiss the petition. Thus, the DOJ decided to dismiss Ben
Line's complaint for failure to comply with Section 5.
It must be remembered, however, that rules of procedure are
designed to facilitate the attainment of justice and that their
rigid application resulting in techinicalities tending to delay or
frustrate rather than promote substantial justice must be
avoided.16 In other words, procedural rules are set in place to
ensure that the proceedings are in order and to avoid
unnecessary delays, but are never intended to prevent tribunals
or administrative agencies from resolving the substantive issues
at hand.
In Air Philippines Corporation v. Zamora (Air Philippines), 17 the
Court elucidated that mere failure to attach legible copies does
not ipso facto warrant the dismissal of a complaint or a
petititon, to wit:
As a general rule, a petition lacking copies of essential pleadings
and portions of the case record may be dismissed.1âwphi1 This
rule, however, is not petrified. As the exact nature of the
pleadings and parts of the case record which must accompany a
petition is not specified, much discretion is left to the appellate
court to determine the necessity for copies of pleading and
other documents. There are, however, guideposts it must
follow.
First, not all pleadings and parts of case records are required to
be attached to the petition. Only those which are relevant and
pertinent must accompany it. The test of relevancy is whether
the document in question will support the material allegations in
the petition, whether said document will make out a prima facie
case of grave abuse of discretion as to convince the court to
give due course to the petition.
Second, even if a document is relevant and pertinent to the
petition, it need not be appended if it is shown that the
contents thereof can also be found in another document already
attached to the petition. Thus, if the material allegations in a
position paper are summarized in a questioned judgment, it will
suffice that only a certified true copy of the judgment is
attached.
Third, a petition lacking an essential pleading or part of the case
record may still be given due course or reinstated (if earlier
dismissed) upon showing that petitioner later submitted the
documents required, or that it will serve the higher interests of
justice that the case be decided on the merits. [emphases and
underscoring supplied]
Lest it be misunderstood, the Court does not belittle the
compliance with the rules of procedure. It recognizes that
zealous observance of the rules is still the general course of
action as it serves to guarantee the orderly, just, and speedy
dispensation of cases.18 Nevertheless, the Court finds that the
CA erred when it did not find the DOJ to have acted with grave
abuse of discretion in dismissing Ben Line's petition for review.
Initially, the DOJ correctly acted when it dismissed Ben Line's
petition for failure to attach clear and legible copies of the
appealed resolution of the OCP. However, it was remiss in its
duty to ensure that cases before it should be resolved on its
merits when it denied Ben Line's motion for reconsideration. In
accordance with the pronouncements of the Court in Air
Philippines and in order that the subtantial issues of the case be
fully ventilated, the DOJ should have reinstated Ben Line's
petition for review. It is noteworthy that in its motion, Ben Line
had already attached clear and legible copies of the resolutions
appealed from. Further, it pointed out that the copies it initially
attached in its petition for review before the DOJ were provided
by the OCP.
The present case is comparable with Manila Electric Company v.
Atilano (MERALCO)19 where the Court ruled:
In dismissing MERALCO's petition for review of the resolution of
the Office of the City Prosecutor of Pasig City, the Secretary of
Justice ruled that after carefully examining the petition and its
attachments, no error on the part of the handling prosecutor
was found to have been committed which would warrant a
reversal of the challenged resolution. Thus, the December 17,
2002 DOJ resolution concluded that the challenged resolution
was in accord with the evidence and the law on the matter.
xxx
We rule, therefore, that the DOJ resolution satisfactorily
complied with constitutional and legal requirements when it
stated its legal basis for denying MERALCO's petition for review
which is Section 7 of Department Circular No. 70, which
authorizes the Secretary of Justice to dismiss a petition outright
if he finds it to be patently without merit or manifestly intended
for delay, or when the issues raised therein are too insubstantial
to require consideration. IaHCAD
The DOJ resolution noted that MERALCO failed to submit a
legible true copy of the confirmation of sale dated May 30, 2000
and considered the omission in violation of Section 5 of
Department Circular No. 70. MERALCO assails the dismissal on
this ground as an overly technical application of the rules and
claims that it frustrated the ends of substantial justice. We note,
however, that the failure to attach the document was not the
sole reason of the DOJ's denial of MERALCO's petition for
review. As mentioned, the DOJ resolution dismissed the petition
primarily because the prosecutor's resolution is in accord with
the evidence and the law on the matter. [Emphases and
underscoring supplied]
In MERALCO, the DOJ did not only dismiss the petition for
review on purely technical grounds but also found that the
resolution of the prosecution were in accord with the evidence
and the law. As such, the issues in the said case were fully
ventilated at the DOJ level because not only did it rule on
procedural grounds, but it likewise adressed subtantive matters.
In the case at bar, however, the DOJ imprudently dismissed
Ben Line's petition for review merely on procedural or technical
grounds. It did not resolve the substantive or factual matters
even after Ben Line had substantially complied with the rule on
appeal when it filed its motion for reconsideration.
Nonetheless, respondents assail that the ruling of the Court in
Lao v. Co, et al. (Lao) 20 should be applied in this case. They
highlight that the circumstances are similar in Lao where the
Court upheld the dismissal by the CA of the petition for
certiorari filed therein for failure of the petitioner to attach clear
and legible duplicate original or certified true copy of the
judgment, order, resolution or ruling subject thereof.
A closer scrutiny of Lao, however, reveals that its factual
circumstances are not at par with the present controversy. In
the case relied upon by respondents, there was no showing that
petitioner attempted to remedy its failure to attach clear and
legible copies of the required documents. In contrast, Ben Line
attached clear and legible copies of the assailed OCP resolution
after its petition for review was initially dismissed by the DOJ.
Thus, the guidelines outlined in Air Philippines are more
applicable in that a petition dismissed earlier, due to lack of an
essential pleading or part of the case record, may still be given
due course or reinstated upon showing that petitioner had later
submitted the documents required, i.e., when such documents
required are part of a subsequent motion for reconsideration.
In finding for herein petitioner, the Court does not necessarily
rule on whether its version of events or legal arguments
deserve more consideration than that of the respondents. It
simply corrects the DOJ's inordinate dismissal of Ben Line's
petition for review where precisely these issues could have been
adequately and appropriately resolved.
WHEREFORE, the petition is GRANTED. The 14 December 2010
Decision and 25 February 2011 Resolution of the Court of
Appeals in CAG. R. SP No. 115492 are REVERSED and SET
ASIDE. The case is REMANDED to the Department of Justice for
further review.
 This petition for review on certiorari seeks to reverse and set
SO ORDERED. aside the 23 May 2012 Decision1 and the 18 October 2012
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
SAMUEL R. MARTIRES 118534 which affirmed with modification the 24 March 2010
Associate Justice Decision3 of the Office of the President (OP).
WE CONCUR: THE FACTS
PRESBITERO J. VELASCO, JR. Prime Town Property Group, Inc. (PPGI) and E. Ganzon Inc.
Associate Justice were the joint developers of the Kiener Hills Mactan
Chairperson Condominium Project (Kiener Hills). In 1997, spouses Walter
and Lily Uy (respondents) entered into a Contract to Sell with
LUCAS P. BERSAMIN PPGI for a unit in Kiener Hills. The total contract price
Associate Justice MARVIC M.V.F. LEONEN amounted to ₱1, 151,718. 7 5 payable according to the
Associate Justice following terms: (a) ₱l00,000.00 as down payment; and (b) the
ALEXANDER G. GESMUNDO balance paid in 40 monthly installments at ₱26,297.97 from 16
Associate Justice January 1997 to 16 April 2000.4
ATTESTATION On 23 April 1998, PPGI and petitioner United Coconut Planters
Bank (UCPB) executed the following: Memorandum of
I attest that the conclusions in the above Decisionhad been Agreement (MOA),5 and Sale of Receivables and Assignment of
reached in consultation before the case was assigned to the Rights and Interests.6 By virtue of the said agreements, PPGI
writer of the opinion of the Court’s Division. transferred the right to collect the receivables of the buyers,
which included respondents, of units in Kiener Hills. The parties
PRESBITERO J. VELASCO, JR. entered into the said agreement as PPGI's partial settlement of
Associate Justice its ₱l,814,500,000.00 loan with UCPB.7
Chairperson, Third Division
On 17 April 2006, the Housing and Land Use Regulatory Board
CERTIFICATION Regional Office (HLURB Regional Office) received respondents'
complaint for sum of money and damages against PPGI and
Pursuant to the Section 13, Article VIII of the Constitution and UCPB. They claimed that in spite of their full payment of the
the Division Chairperson’s Attestation, I certify that the purchase price, PPGI failed to complete the construction of their
conclusions in the above Decision had been reached in units in Kiener Hills.8
consultation before the case was assigned to the writer of the
opinion of the Court’s Division. The HLURB Regional Office Decision
MARIA LOURDES P.A. SERENO In its 29 November 2006 decision,9 the HLURB Regional Office
Chief Justice found that respondents were entitled to a refund in view of
PPGI' s failure to complete the construction of their units.
Nonetheless, it found that UCPB cannot be solidarily liable with
PPGI because only the accounts receivables were conveyed to
UCPB and not the entire condominium project. The HLURB
THIRD DIVISION Regional Office suspended the proceedings as to PPGI on
account of its being in corporate rehabilitation. The dispositive
January 10, 2018 portion reads:
G.R. No. 204039 WHEREFORE, premises considered, decision is hereby rendered
suspending the proceedings of the present case. The
UNITED COCONUT PLANTERS BANK, Petitioner complainants are therefore directed to file their claim before the
vs. Rehabilitation Receiver.
SPOUSES WALTER UY AND LILY UY, Respondents
No judgment as to cost.10
DECISION
Unsatisfied, respondents appealed before the HLURB-Board of
MARTIRES, J.: Commissioners (HLURB Board).
The HLURB Board Decision
In its 17 September 2007 decision,11 the HLURB Board
reversed and set aside the HL URB Regional Office decision. It
agreed that the proceedings against PPGI should be suspended
on account of its corporate rehabilitation. Nevertheless, the
HLURB Board found UCPB solidarily liable with PPGI because it
stepped into the latter's shoes insofar as Kiener Hills is
concerned pursuant to the MOA between them. It noted that
UCPB was PPGI's successor-in-interest, such that the delay in
the completion of the condominium project could be
attributable to it and subject it to liability. The HLURB Board
ruled that as PPGI's assignee, UCPB was bound to refund the
payments made, without prejudice to its right of action against
PPGI. Thus, it pronounced:
WHEREFORE, premises considered, the appeal is GRANTED and
the decision of the Regional Office is SET ASIDE and a new one
is entered as follows:
1. Respondent UCPB is hereby ordered to refund to the
complainant the amount of ₱l,151,718.75 with interest at the
legal rate of 6% per annum reckoned from the date of
extrajudicial demand on May 24, 2005 until fully paid without
prejudice to whatever claims UCPB may have against PPGI; and
2. Respondent UCPB and PPGI, jointly and severally, are
declared liable to the complainant for payment of exemplary
damages in the amount of ₱30,000.00; and attorney's fees in
the amount of ₱30,000.00:12
Aggrieved, UCPB appealed before the OP.
The OP Decision
In its 24 March 2010 decision, the OP affirmed the decision of
the HLURB Board. It explained that the agreement between
PPGI and UCPB clearly transferred all rights, titles, interests,
and participations over Kiener Hills to the latter. It concluded
that as successor-in-interest, UCPB now had the obligations
relating to Kiener Hills, including the reimbursement of
payments to respondents. The OP added that benefit of
suspension of actions only attached to PPGI and not to UCPB.
Thus:
WHEREFORE, based on the foregoing, the decision appealed
from is hereby AFFIRMED.13
Undeterred, UCPB appealed before the CA.
The CA Ruling
In its assailed 23 May 2012 decision, the CA affirmed with
modification the OP decision. While the appellate court agreed
that respondents are entitled to a full refund of the payments
they may have made, it ruled that UCPB is not solidarily liable
with PPGI, and as such cannot be held liable for the full
satisfaction of respondents' payments. It limited UCPB's liability
to the amount respondents have paid upon the former's
assumption as the party entitled to receive payments or on 23
April 1998 when the MOA and AIR Agreement were made
between UCPB and PPGI.
In addition, the appellate court noted the pronouncements of
the CA in United Coconut Planters Bank v. O'Halloran
(O'Halloran). 14 It explained that it involved similar facts and
issues where the CA ruled that the assignment of the
receivables did not make UCPB the developer of Kiener Hills it
being merely the assignee of the receivables under the contract
to sell and, as such, UCPB cannot be deemed as the debtor with
respect to the construction, development, and delivery of the
subject condominium units. Thus, the CA ruled:
WHEREFORE, in view of all the foregoing, the instant Petition
for Review is PARTIALLY GRANTED. The promulgated Decision
dated 24 March 2010 and Resolution dated 16 February 2011
are hereby AFFIRMED with MODIFICATION, as follows:
1) UCPB is ordered to pay Spouses Uy the amount of
₱552,152.34, with legal interest at 6% per annum from the
filing of the complaint until fully paid without prejudice to
whatever claims U CPB may have against Primetown; and
2) Without prejudice to a separate action Spouses Uy may file
against Primetown, Primetown is liable to pay Spouses Uy the
amount of ₱599,566.41 with legal interest at 6% per annum
from the filing of the complaint until fully paid.15
UCPB moved for reconsideration but it was denied by the CA in
its assailed 18 October 2012 resolution.
Hence, this appeal raising the following:
ISSUES
I render it incapable of correcting patent errors committed by the
[WHETHER] THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED WHEN IT MISCONSTRUED THE
APPLICABILITY TO THE INSTANT CASE OF THE FINAL AND
EXECUTORY DECISION IN UNITED COCONUT PLANTERS BANK
V. JOHN P. O'HALLORAN AND JOSEFINA O'HALLORAN (CA-G.R.
SP NO. 101699, 23 JULY 1999) UNDER THE PRINCIPLE OF
STARE DECISIS; AND
II
[WHETHER] THE HONORABLE COURT OF APPEALS
GRIEVOUSLY ERRED IN RULING THAT UCPB IS LIABLE TO THE
RESPONDENTS FOR THE AMOUNT THE RESPONDENTS DID
NOT PAY THE BANK AND WHICH UCPB DID NOT RECEIVE.16
OUR RULING
The petition is meritorious.
Issues that may be raised on appeal
Respondents assailed that the CA erred in applying O'Halloran
because the circumstances were different, notably the issue
that estoppel did not arise in the said case. In addition, they
argued that 0 'Halloran and the other cases cited by UCPB are
not binding pursuant to the doctrine of stare decisis because
they were decided by the CA and not by this Court. As such,
respondents posited that only decisions of the Court, excluding
all other courts such as the CA, form part of the legal system.
On the other hand, UCPB countered that the only issue to be
resolved in the present petition is the actual amount of its
liability. It explained that the assailed CA decision had become
final and executory after respondents failed to appeal the same.
UCPB pointed out that the issues respondents raised were
already ventilated before the appellate court. It believed that
respondents should have filed their own appeal to assail the
issues they found questionable.
It must be remembered that when a case is appealed, the
appellate court has the power to review the case in its
entirety.17 In Heirs of Alcaraz v. Republic of the Phils., 18 the
Court explained that an appellate court is empowered to make
its own judgment as it deems to be a just determination of the
case, to wit:
In any event, when petitioners interposed an appeal to the
Court of Appeals, the appealed case was thereby thrown wide
open for review by that court, which is thus necessarily
empowered to come out with a judgment as it thinks would be
a just determination of the controversy. Given this power, the
appellate court has the authority to either affirm, reverse or
modify the appealed decision of the trial court. To withhold
from the appellate court its power to render an entirely new
decision would violate its power of review and would, in effect,
lower courts.19
Thus, when UCPB appealed the present controversy before the
Court, it was not merely limited to determine whether the CA
accurately set UCPB's liability against respondents. It is also
empowered to determine whether the appellate court's
determination of liability was correct in the first place. This is
especially true considering that the issue of the nature of
UCPB's liability is closely intertwined and inseparable from the
determination of the amount of its actual liability.
Stare Decisis applies only to cases decided by the Supreme
Court
As above-mentioned, respondents bewail the reliance of the CA
on 0 'Halloran arguing that it was not a binding precedent since
it was not issued by this Court. In De Mesa v. Pepsi-Cola
Products Phils. Inc., 20 the Court explained that the doctrine of
stare decisis deems decisions of this Court binding on the lower
courts, to wit:
The principle of stare decisis et non quieta movere is
entrenched in Article 8 of the Civil Code, to wit:
xxxx
It enjoins adherence to judicial precedents. It requires our
courts to follow a rule already established in a final decision of
the Supreme Court. That decision becomes a judicial precedent
to be followed in subsequent cases by all courts in the land. The
doctrine of stare decisis is based on the principle that once a
question of law has been examined and decided, it should be
deemed settled and closed to further argument.21 (emphasis
and underscoring supplied)
In other words, the doctrine of stare decisis becomes operative
only when judicial precedents are set by pronouncements of
this Court to the exclusion of lower courts. It is true regardless
whether the decisions of the lower courts are logically or legally
sound as only decisions issued by this Court become part of the
legal system. At the most, decisions of lower courts only have a
persuasive effect. Thus, respondents are correct in contesting
the application of the doctrine of stare decisis when the CA
relied on decisions it had issued.
UCPB only jointly liable to PPGI in reimbursing unitowners of
Kiener Hills
With that said, the Court still finds that the CA did not err in
ruling that UCPB was only jointly, and not solidarily liable to
PPGI against respondents. In Spouses Choi v. UCPB (Spouses
Choi), 22 the Court had definitely ruled on UCPB 's liability to
the purchasers of Kiener Hills, viz:
The primordial issue to be resolved is whether, under the
Agreement between Primetown and UCPB, UCPB assumed the
liabilities and obligations of Primetown under its contract to sell
with Spouses Choi.
An assignment of credit has been defined as an agreement by
virtue of which the owner of a credit, known as the assignor, by
a legal cause - such as sale, dation in payment or exchange or
donation - and without need of the debtor's consent, transfers
that credit and its accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same
extent as the assignor could have enforced it against the
debtor. In every case, the obligations between assignor and
assignee will depend upon the judicial relation which is the
basis of the assignment. An assignment will be construed in
accordance with the rules of construction governing contracts
generally, the primary object being always to ascertain and
carry out the intention of the parties. This intention is to be
derived from a consideration of the whole instrument, all parts
of which should be given effect, and is to be sought in the
words and language employed.

In the present case, the Agreement between Primetown and
UCPB provided that Primetown, in consideration of
₱748,000,000.00, "assigned, transferred, conveyed and set over
unto [UCPB] all Accounts Receivables accruing from
[Primetown's Kiener] ... together with the assignment of all its
rights, titles, interests and participation over the units covered
by or arising from the Contracts to Sell from which the Accounts
Receivables have arisen."
The Agreement further stipulated that "x x x this
sale/assignment is limited to the Receivables accruing to
[Primetown] from the [b]uyers of the condominium units in x x
x [Kiener] and the corresponding Assignment of Rights and
Interests arising from the pertinent Contract to Sell and does
not include except for the amount not exceeding
30,000,000.00, Philippine currency, either singly or cumulatively
any and all liabilities which [Primetown] may have assumed
under the individual Contract to Sell." (emphasis omitted)
The Agreement conveys the straightforward intention of
Primetown to "sell, assign, transfer, convey and set over" to
UCPB the receivables, rights, titles, interests and participation
over the units covered by the contracts to sell. It explicitly
excluded any and all liabilities and obligations, which Primetown
assumed under the contracts to sell. The intention to exclude
Primetown's liabilities and obligations is further shown by
Primetown's subsequent letters to the buyers, which stated that
"this payment arrangement shall in no way cause any
amendment of the other terms and conditions, nor the
cancellation of the Contract to Sell you have executed with
[Primetown]." x x x (emphasis and underlining supplied)
xxxx
The intention to merely assign the receivables and rights of
Primetown to UCPB is even bolstered by the CA decisions in the
cases of UCPB v. O'Halloran and UCPB v. Ho.
In UCPB v. O'Halloran, docketed as CA-G.R. SP No. 101699,
respondent O'Halloran's accounts with Primetown were also
assigned by Primetown to UCPB, under the same Agreement as
in this case. Since Primetown failed to deliver the condominium
units upon full payment of the purchase price, O'Halloran
likewise sued both Primetown and UCPB for cancellation of the
contracts to sell, and the case eventually reached the CA. The
CA held UCPB liable to refund the amount it actually received
from O'Halloran. The CA held that there is no legal, statutory or
contractual basis to hold UCPB solidarily liable with Primetown
for the full reimbursement of the payments made by O'Halloran.
The CA found that based on the Agreement, UCPB is merely the
assignee of the receivables under the contracts to sell to the
extent that the assignment is a manner adopted by which
Primetown can pay its loan to the bank. The CA held that the
assignment of receivables did not make UCPB the owner or
developer of the unfinished project to make it solidarily liable
with Primetown. The CA decision dated 23 July 2009 in CA-G.R.
SP No. 101699 became final and executory upon Entry of
Judgment on 17 August 2009 for O'Halloran and 18 August
2009 for UCPB.
In UCPB v. Ho, docketed as CA-G.R. SP No. 113446, respondent
Ho was similarly situated with O'Halloran and Spouses Choi.
Upon reaching the CA, the CA considered the Agreement
between UCPB and Primetown as an assignment of credit,
because: 1) the parties entered into the Agreement without the
consent of the debtor; 2) UCPB's obligation "to deliver to the
buyer the title over the condominium unit upon their full
payment" signifies that the title to the condominium unit
remained with Primetown; 3) UCPB's prerogative "to rescind the
contract to sell and transfer the title of condominium unit to its
name upon failure of the buyer to pay the full purchase price"
indicates that UCPB was merely given the right to transfer title
in its name to apply the property as partial payment of
Primetown's obligation; and 4) the Agreement clearly states
that the assignment is limited to the receivables and does not
include "any and all liabilities which [Primetown] may have
assumed under the individual contract to sell." Thus, the CA
ruled that UCPB was a mere assignee of the right of Primetown
to collect on its contract to sell with Ho. The CA, then, applied
the ruling in UCPB v. O'Halloran in finding UCPB jointly liable
with Primetown only for the payments UCPB had actually
received from Ho.
On 4 December 2013, this Court issued a Resolution denying
Ho's petition for review for failure to show any reversible error
on the part of the CA. On 2 April 2014, this Court likewise
denied the motion for reconsideration with finality. Thus, the 9
May 2013 Decision of the Special Fifteenth Division of the CA in
CA-G.R. SP No. 113446 became final and executory. (emphasis
omitted)
Considering that UCPB is a mere assignee of the rights and
receivables under the Agreement, UCPB did not assume the
obligations and liabilities of Primetown under its contract to sell
with Spouses Choi.
xxxx
Contrary to Spouses Choi's argument that UCPB was estopped,
we find that estoppel would not lie since UCPB's letters to the
buyers only assured them of the completion of their units by the
developer. UCPB did not represent to be the new owner of
Kiener or that UCPB itself would complete Kiener.23 (emphases
and underlining supplied)
In Liam v. UCPB (Liam), 24 the Court maintained its position
that the transaction between PPGI and UCPB was merely an
assignment of credit. Hence, what was transferred to UCPB was
only the right to collect PPGI's receivables from the purchases
of Kiener Hills and not the obligation to complete the said
condominium project. Thus:
The terms of the MOA and Deed of Sale/Assignment between
PPGI and UCPB unequivocally show that the parties intended an
assignment of PPG l's credit in favor of UCPB.
xxxx
The provisions of the foregoing agreements between PPGI and
UCPB are clear, explicit and unambiguous as to leave no doubt
about their objective of executing an assignment of credit
instead of subrogation. The MOA and the Deed of
Sale/Assignment clearly state that UCPB became an assignee of
PPGI's outstanding receivables of its condominium buyers. The
Court perceives no proviso or any extraneous factor that incites
a contrary interpretation. Even the simultaneous and
subsequent acts of the parties accentuate their intention to
treat their agreements as assignment of credit.
xxxx
The last paragraph of the letter also confirms that UCPB's
acquisition of PPGI's receivables did not involve any changes in
the Contract to Sell between PPGI and Liam; neither did it vary
the rights and the obligations of the parties therein. Thus, no
novation by subrogation could have taken place.
The CA was therefore correct in ruling that the agreement
between PPGI and UCPB was an assignment of credit. UCPB
acquired PPGI's right to demand, collect and receive Liam's
outstanding balance; UCPB was not subrogated into PPGI's
place as developer under the Contract to Sen.25 (emphases and
underlining supplied)
It is noteworthy that the circumstances and issues in Choi and
Liam fall squarely with the case at bar. First, PPGI and UCPB
were prominent parties in the cited cases. Second, it involved
the same documents and agreement between PPGI and UCPB
whereby the right to collect the receivables were assigned to
the latter. Third, the controversy arose from the complaints of
disgruntled unit owners to recover the amount they had paid
from PPGI or UCPB after Kiener Hills was not completed.
In addition, the issue on estoppel was addressed in Spouses
Choi. There, the Court ruled that the demand letters UCPB sent
to the buyers, including herein respondents, only assured the
completion of the condominium project. Nevertheless, there
was no representation on the part of the UCPB that it would
continue the construction of Kiener Hills or that it was the new
owner thereof. Guided by the previous pronouncements of this
Court, it is settled that UCPB is only jointly liable with PPGI to
the disgruntled purchasers of Kiener Hills, including
respondents. Thus, UCPB is only bound to refund the amount it
had unquestionably received from respondents.
Only questions of law may he raised in a petition for review
under Rule 45; exceptions
In the present petition, UCPB does not contest the CA's
conclusion that it is jointly liable with PPGI to the unit owners of
Kiener Hills.1âwphi1 It, however, assails that the CA erred in
computing its actual liability because it was only bound to
refund the amount it had actually received. Meanwhile,
respondents contest that the resolution of the correct amount of
UCPB's liability is a question of fact, which is beyond the ambit
of a petition for review under Rule 45.
It is axiomatic that, as a rule, only questions of law may be
raised under a petition for review under Rule 45 because the
Court is not a trier of facts and the factual findings of lower
courts are final, binding or conclusive on the parties and to the
Court.26 As with every rule, however, it admits certain
exceptions. Among the recognized exceptions are when the
conclusion of the lower court is one grounded entirely on
speculation, surmises or conjectures or when the judgment is
based on a misapprehension of facts.27
The Court finds that the exceptions are present to warrant a
review of the factual matters.
Jurisprudence has settled UCPB's liability to unit owners to
refund the amount it indubitably received from the purchasers
of Kiener Hills. In this case, the CA determined UCPB's actual
liability of ₱552,152.34 by subtracting the amounts already paid
to PPGI from the total purchase price of ₱l,151,718.75.28
Such computation of the appellate court, however, merely
assumes that the said balance was actually paid by respondents
and received by UCPB. A closer scrutiny of the records,
nonetheless, shows that the said amount is not supported by
the evidence at hand. The only document that identifies the
amount respondents had paid to UCPB is the demand letter it
sent to the former. It is noteworthy that the said demand letter
was materially reproduced in respondents' complaint29 before
the HLURB Regional Office. In the said letter, the amount UCPB
received from respondents is only ₱157,757.82.
While respondents alleged that they had paid in full the
purchase price of the condominium units, only ₱157,757.82 was
sufficiently substantiated to have been actually received by
UCPB. Thus, UCPB should only be held liable for ₱157,757.82
because it was the only amount which was unequivocally shown
it had received. This is especially true considering that one who
pleads payment has the burden of proving the fact of
payment.30
Thus, it was incumbent upon respondents to prove the actual
amount UCPB had unquestionably received.
WHEREFORE, the 23 May 2012 Decision of the Court of Appeals
m CA-G.R. SP No. 118534 is AFFIRMED with MODIFICATION.
Petitioner United Coconut Planters Bank shall pay the amount of
₱157,757.82 to Spouses Walter and Lily Uy, with legal interest
at six percent (6%) per annum, without prejudice to any action
which the parties may have against Prime Town Property
Group, Inc. This petition for review on certiorari seeks to reverse and set
aside the 30 January 2009 Decision1 and 18 October 2010
SO ORDERED. Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
77040 which affirmed the 12 May 2003 Judgment3 of the
SAMUEL R. MARTIRES Regional Trial Court, Branch 5, Iligan City (RTC).
Associate Justice
THE FACTS
WE CONCUR:
Petitioner Marilou Punongbayan-Visitacion (Visitacion) was the
PRESBITERO J. VELASCO, JR. corporate secretary and assistant treasurer of St. Peter's College
Associate Justice of Iligan City. On 26 July 1999, acting on the advice of her
Chairperson counsel, she wrote a letter to private respondent Carmelita P.
Punongbayan (Punongbayan). The correspondence substantially
LUCAS P. BERSAMIN read:
Associate Justice MARVIC M.V.F. LEONEN
Associate Justice Upon advise of our legal counsel which I had been instructed to
ALEXANDER G. GESMUNDO hereunder quote this should answer the concerns you embodied
Associate Justice in the July 19 memo to Security Bank as well as the July 23,
memo to the office of the treasurer to wit:
ATTESTATION
A. You had been preening (sic) as the school's validly
I attest that the conclusions in the above Decisionhad been appointed/designated president when such is not the fact. The
reached in consultation before the case was assigned to the validity of the alleged March 10 meeting of the management is
writer of the opinion of the Court’s Division. still the subject of an on-going determination by the SEC and
your misrepresentation as the school's President has no basis in
PRESBTERO J. VELASCO, JR. law and in fact.
Associate Justice
Chairperson, Third Division B. Even as Officer-in-Charge, your actions on school matters
need prior consultation and ratification of the management
CERTIFICATION committees. No such consultation/ratification was had on these
matters.
Pursuant to the Section 13, Article VIII of the Constitution and
the Division Chairperson’s Attestation, I certify that the C. You KNOWINGLY COMMITTED ACTS OF FALSIFICATION
conclusions in the above Decision had been reached in when you misrepresented to the bank that your signature is
consultation before the case was assigned to the writer of the essentially required in disbursements above ₱5,000.00. Your
opinion of the Court’s Division. inordinate desire to poke into the school's finances could be the
byproduct of an erroneous advice from some defrocked
MARIA LOURDES P.A. SERENO members of the committee. Otherwise, there would have been
Chief Justice need to calibrate amounts in the checks vis-a-vis the signatories
thereto.4
Insulted, Punongbayan filed a Complaint for Libel against
THIRD DIVISION Visitacion. On 25 October 1999, the Office of the City
Prosecutor of Iligan City issued a resolution approving the filing
January 10, 2018 of a case for libel against Visitacion.5
G.R. No. 194214 The RTC Ruling
MARILOU PUNONGBAYAN-VISITACION, Petitioner In its 12 May 2003 judgment, the RTC convicted Visitacion of
vs. libel. The trial court disregarded Visitacion's defense of good
PEOPLE OF THE PHILIPPINES AND CARMELITA P. faith finding that her act of writing the disputed letter was
PUNONGBAYAN, Respondents motivated by hostility or malice. It opined that if it was true that
Visitacion merely wanted to safeguard the corporation funds,
DECISION her resort to an uncivil and confrontational manner was
unwarranted. The RTC highlighted that the letter belittled,
MARTIRES, J.:
disparaged, and willfully hurt Punongbayan's sensibilities. It
ruled:
WHEREFORE, premises considered, the Court perceives that the
evidence on record is not only adequate to prove the guilt of
accused beyond reasonable doubt, but overwhelming that she
has committed the crime of libel, hence judgment of conviction
is hereby rendered, the terms of which provide:
a. Since there is no aggravating nor mitigating circumstance
accused is condemned to suffer a straight prison term of one
(1) year; and
b. Considering that the malicious imputation of a crime referred
to in the libelous letter had caused private complainant to be
subjected to public contempt and ridicule, and this had caused
the latter to underwent (sic) sleepless nights and moral
sufferings, additionally, and in accordance with Article 104 of
the Revised Penal Code, accused is adjudged to pay by way of
civil liability, moral damages to the tune of Three Million Pesos
(₱3,000,000.00), and the costs of the suit.6
Aggrieved, Visitacion filed a petition for certiorari with a prayer
for Temporary Restraining Order and/or Writ of Preliminary
injunction before the CA.
The CA Ruling
In its 30 January 2009, the CA dismissed Visitacion's petition.
The appellate court posited that the promulgation of the
judgment despite Visitacion's absence was proper. It explained
that under Rule 120, Section 6 of the Rules of Court, trial in
absentia is permitted should the accused fail to appear during
the date of promulgation despite due notice. The CA noted that
Visitacion was notified of the scheduled promulgation through
her previous counsel and was in fact able to file a motion to
defer promulgation of judgment. Further, the appellate court
pointed out that the sheriff visited Visitacion at her house on
several occasions but she was conveniently not around during
those times. Thus, it believed that her excuse for her absence
was specious.
In addition, the CA expounded that Visitacion should have filed
an appeal and not a petition for certiorari. The appellate court
opined that it should have been through an appeal where she
could have raised the issues in the present petition for
certiorari. It noted that at the time Visitacion filed her petition,
the period to file an appeal had yet to expire. Thus, the CA
elucidated that the use of an erroneous mode of appeal is cause
for dismissal of the petition for certiorari because it is not a
substitute for a lost appeal. It ruled:
ACCORDINGLY, the Petition is DISMISSED.7
Visitacion moved for reconsideration but it was denied by the
CA in its 18 October 2010 resolution.
Hence, this present petition raising the following:
ISSUES
I available, certiorari will not prosper, even if the ground therefor
[WHETHER] THE COURT OF APPEALS ACTED CONTRARY TO
LAW WHEN IT, IN EFFECT, BRUSHED ASIDE PETITIONER'S
ALTERNATIVE PLEA FOR THE APPLICATION OF PREFERENCE
OF FINE OVER IMPRISONMENT AS PENAL TY FOR LIBEL;
II
[WHETHER] THE COURT OF APPEALS ACTED CONTRARY TO
LAW WHEN IT, IN EFFECT, AFFIRMED THE COURT A QUO'S
IMPOSITION OF MORAL DAMAGES UPON PETITIONER IN THE
EXCESSIVE AMOUNT OF THREE MILLION PESOS
(₱3,000,000.00); AND
III
[WHETHER] THE COURT OF APPEALS ACTED CONTRARY TO
LAW IN NOT TREATING PETITIONER'S PETITION FOR
CERTIORARI AS APPEAL, NOTWITHSTANDING THE FACT THAT
SUCH PETITION WAS FILED WITHIN THE REGLEMENTARY
PERIOD OF TIME TO FILE AN APPEAL AND DESPITE
EXISTENCE OF VALID REASONS TO TREAT IT AS AN APPEAL.8
OUR RULING
Before proceeding to the merits of the case, we resolve certain
procedural matters.
Petition for certiorari treated as an appeal
Visitacion assails that her petition for certiorari should have
been treated as an appeal. On the other hand, both public and
private respondents counter that the CA correctly dismissed
Visitacion's petition for certiorari because it cannot be a
substitute for a lost appeal and that a wrong mode of appeal is
dismissible.
In Madrigal Transport, Inc. v. Lapanday Holdings Corporation, 9
the Court had extensively differentiated an appeal from
certiorari. Thus, it is settled that appeal and certiorari are two
different remedies, which .are generally not interchangeable,
available to litigants. In Butuan Development Corporation v. CA,
10 the Court held that the special civil action of certiorari is not
a substitute for an appeal:
A party cannot substitute the special civil action of certiorari
under Rule 65 of the Rules of Court for the remedy of appeal.
The existence and availability of the right of appeal are
antithetical to the availability of the special civil action of
certiorari. Remedies of appeal (including petitions for review)
and certiorari are mutually exclusive, not alternative or
successive. Hence, certiorari is not and cannot be a substitute
for an appeal, especially if one's own negligence or error in
one's choice of remedy occasioned such loss or lapse. One of
the requisites of certiorari is that there be no available appeal or
any plain, speedy and adequate remedy. Where an appeal is
is grave abuse of discretion.
Nevertheless, the general rule that an appeal and a certiorari
are not interchangeable admits exceptions. In Department of
Education v. Cuanan, 11 the Court exercised liberality and
considered the petition for certiorari filed therein as an appeal:
The remedy of an aggrieved party from a resolution issued by
the CSC is to file a petition for review thereof under Rule 43 of
the Rules of Court within fifteen days from notice of the
resolution. Recourse to a petition for certiorari under Rule 65
renders the petition dismissible for being the wrong remedy.
Nonetheless, there are exceptions to this rule, to wit: (a) when
public welfare and the advancement of public policy dictates;
(b) when the broader interest of justice so requires; (c) when
the writs issued are null and void; or (d) when the questioned
order amounts to an oppressive exercise of judicial authority. As
will be shown forthwith, exception (c) applies to the present
case.
Furthermore, while a motion for reconsideration is a condition
precedent to the filing of a petition for certiorari, immediate
recourse to the extraordinary remedy of certiorari is warranted
where the order is a patent nullity, as where the court a quo
has no jurisdiction; where petitioner was deprived of due
process and there is extreme urgency for relief; where the
proceedings in the lower court are a nullity for lack of due
process; where the proceeding was ex parte or one in which the
petitioner had no opportunity to object. These exceptions find
application to Cuanan's petition for certiorari in the CA.
At any rate, Cuanan's petition for certiorari before the CA could
be treated as a petition for review, the petition having been
filed on November 22, 2004, or thirteen (13) days from receipt
on November 9, 2004 of CSC Resolution No. 041147, clearly
within the 15-day reglementary period for the filing of a petition
for review. Such move would be in accordance with the liberal
spirit pervading the Rules of Court and in the interest of
substantial justice.12 (emphases and underslining supplied)
In the case at bar, the Court finds that the interest of
substantial justice warrants the relaxation of the rules and
treats Visitacion's petition for certiorari as an appeal. This is
especially true considering that the same was filed within the
reglementary period to file an appeal. It is noteworthy that in
the litany of cases13 where the Court did not consider certiorari
as an appeal, the former remedy was filed beyond the 15-day
period to interpose an appeal.
Issues raised for the first time on appeal; exceptions
The Office of the Solicitor General (OSG) argues that Visitacion
merely raised the issue of the correctness of the penalties and
liabilities imposed in her supplemental motion for
reconsideration before the CA. It bewails that in her petition for
certiorari, she merely questioned the propriety of the denial of
her motion to inhibit before the R TC; the exclusion of some of
her exhibits; and the alleged lack of personal service of the
notice of the promulgation of judgment. Thus, the OSG laments
that the issues put forth in Visitacion's petition for review before
the Court were raised for the first time on appeal.
It is axiomatic that issues raised for the first time on appeal will
not be entertained because to do so would be anathema to the
rudiments of fairness and due process.14 Nonetheless, there
are also exceptions to the said rule. In Del Rosario v. Bonga, 15
the Court explained that there are instances that issues raised
for the first time on appeal may be entertained, viz:
Indeed, there are exceptions to the aforecited rule that no
question may be raised for the first time on appeal. Though not
raised below, the issue of lack of jurisdiction over the subject
matter may be considered by the reviewing court, as it may be
raised at any stage. The said court may also consider an issue
not properly raised during trial when there is plain error.
Likewise, it may entertain such arguments when there are
jurisprudential developments affecting the issues, or when the
issues raised present a matter of public policy.
Further, the matters raised in the present petition warrant the
relaxation of the rules concerning issues raised for the first time
on appeal especially considering the jurisprudential
developments since the RTC decision and the needs for
substantial justice. In liberally applying the rules in the case at
bar, the Court does not wish to brush aside its importance;
rather, it emphasizes the nature of the said rules as tools to
facilitate the attainment of substantial justice.16
Having settled procedural matters, the Court finds the petition
meritorious.
Penalty imposed for libel
In her present petition for review on certiorari,17 Visitacion no
longer questions her conviction for the crime of libel. Rather,
she assails the decisions of the courts a quo in sentencing her
to one (1) year imprisonment and to pay Punongbayan
₱3,000,000.00 as moral damages.
Relevant is Administrative Circular (A. C.) No. 08-0818 which
provides for guidelines in the imposition of penalties in libel
cases. The pertinent portion thereof reads:
The foregoing cases indicate an emergent rule of preference for
the imposition of fine only rather than imprisonment in libel
cases under the circumstances therein specified.
All courts and judges concerned should henceforth take note of
the foregoing rule of preference set by the Supreme Court on
the matter of the imposition of penalties for the crime of libel
bearing in mind the following principles:
1. This Administrative Circular does not remove imprisonment
as an alternative penalty for the crime of libel under Article 355
of the Revised Penal Code;
2. The Judges concerned may, in the exercise of sound
discretion, and taking into consideration the peculiar
circumstances of each case, determine whether the imposition
of a fine alone would best serve the interests of justice or
whether forbearing to impose imprisonment would depreciate
the seriousness of the offense, work violence on the social
order, or otherwise be contrary to the imperatives of justice;
3. Should only a fine be imposed and the accused be unable to
pay the fine, there is no legal obstacle to the application of the
Revised Penal Code provisions on subsidiary imprisonment.
A review of A.C. No. 08-08 reveals that it was issued to embody
the Court's preference, as espoused in previous jurisprudence,
to impose only a fine for conviction of libel. The said circular,
however, does not remove the discretion of courts to sentence
to imprisonment the accused in libel cases should the
circumstances warrant. In other words, judicial policy states a
fine alone is generally acceptable as a penalty for libel.
Nevertheless, the courts may impose imprisonment as a penalty
if, under the circumstances, a fine is insufficient to meet the
demands of substantial justice or would depreciate the
seriousness of the offense.
Thus, pursuant to the policy in A.C. No. 08-08, the Court finds
that the imposition of a fine, instead of imprisonment, is
sufficient in the present case. It is noteworthy that Visitacion is
a first-time offender with no other criminal record under her
name. Further, the degree of publication is not that widespread
considering that the libelous letter was circulated only to a few
individuals.
Moral damages in libel cases
Visitacion likewise assails the award of moral damages. She
does not question the basis for the award of moral damages per
se but bewails the unjust amount set by the trial court.
Moral damages is the amount awarded to a person to have
suffered physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury.19 It is given to ease the
victim's grief and suffering, and should reasonably approximate
the extent of the hurt caused and the gravity of the wrong
done.20
The RTC found Punongbayan entitled to moral damages
because Visitacion's libelous act caused her to suffer ridicule,
sleepless nights, and moral damage. In Tulfo v. People,21 the
Court explained that moral damages can be recovered in cases
of libel or slander, viz:
It was the articles of Tulfo that caused injury to Atty. So, and
for that Atty. So deserves the award of moral damages.
Justification for the award of moral damages is found in Art.
2219 (7) of the Civil Code, which states that moral damages
may be recovered in cases of libel, slander, or any other form of
defamation. As the cases involved are criminal cases of libel,
they fall squarely within the ambit of Art. 2219 (7).
Moral damages can be awarded even in the absence of actual
or compensatory damages. The fact that no actual or
compensatory damage was proven before the trial court does
not adversely affect the offended party's right to recover moral
damages.22 (emphasis supplied)
For moral damages to be awarded, proof of pecuniary loss is
unnecessary but the factual basis of damages and its causal
connection to the defendant's acts must be satisfactorily
established.23 In short, the complainant's injury should have
been due to the actions of the offending party.
Here, the evidence on record justify the award of moral
damages to Punongbayan. She was a high-ranking officer of an
educational institution whom Visitacion accused of criminal or
improper conduct. Such accusations were not made known only
to the victim but also to other persons such as her staff and
employees of a bank the school had transactions with. Thus,
Punongbayan's reputation was besmirched and she was
humiliated before her subordinates and other people. Clearly,
her reputation was tarnished after being accused of unsavory
and questionable behavior, primarily attributable to Visitacion's
act of circulating the letter imputing wrongdoing of
Punongbayan.
In addition, it is noteworthy that in her present petition for
review on certiorari before the Court, Visitacion simply
challenges the unreasonable amount of moral damages
awarded and prays for its reduction. By inference, she admits
she had caused Punongbayan injury, thus, the issue remains to
be the amount of moral damages warranted under the
circumstances.
In Yuchengco v. The Manila Chronicle Publishing Corporation,24
the Court explained that in awarding moral damages, the
surrounding circumstances are controlling factors but should
always be commensurate to the perceived injury:
While there is no hard-and-fast rule in determining what would
be a fair and reasonable amount of moral damages, the same
should not be palpably and scandalously excessive. Moral
damages are not intended to impose a penalty to the
wrongdoer, neither to enrich the claimant at the expense of the
defendant.
Even petitioner, in his Comment dated June 21, 2010, agree
that moral damages "are not awarded in order to punish the
respondents or to make the petitioner any richer than he
already is, but to enable the latter to find some cure for the
moral anguish and distress he has undergone by reason of the
defamatory and damaging articles which the respondents wrote
and published." Further, petitioner cites as sufficient basis for
the award of damages the plain reason that he had to "go
through the ordeal of defending himself everytime someone
approached him to ask whether or not the statements in the
defamatory article are true."
In Philippine Journalists, Inc. (People's Journal) v. Thoenen,
citing Guevarra v. Almario, We noted that the damages in a libel
case must depend upon the facts of the particular case and the
sound discretion of the court, although appellate courts were
"more likely to reduce damages for libel than to increase them."
So it must be in this case.
Moral damages are not a bonanza. They are given to ease the
defendant's grief and suffering. Moral damages should be
reasonably approximate to the extent of the hurt caused and
the gravity of the wrong done. The Court, therefore, finds the
award of moral damages in the first and second cause of action
in the amount of ₱2,000,000.00 and ₱25,000,000.00,
respectively, to be too excessive and holds that an award of
₱1,000,000.00 and ₱10,000,000.00, respectively, as moral
damages are more reasonable.25 (emphases supplied)
With this in mind, the Court finds the award of ₱3,000,000.00
as moral damages to be unwarranted.1âwphi1 Such exorbitant
amount is contrary to the essence of moral damages, which is
simply a reasonable recompense to the injury suffered by the
one claiming it. It was neither meant to punish the offender nor
enrich the offended party. Thus, to conform with the present
circumstances, the moral damages awarded should be equitably
reduced to ₱500,000.00.
WHEREFORE, the petition is GRANTED. The 12 May 2003
Judgment of the Regional Trial Court, Branch 5, Iligan City, in
Criminal Case No. 7939 is AFFIRMED with MODIFICATION.
Petitioner Marilou Punongbayan-Visitacion is sentenced to pay a
fine in the amount of Six Thousand Pesos (₱6,000.00), with
subsidiary imprisonment in case of insolvency, and to pay
private respondent Carmelita P. Punongbayan ₱500,000.00 as
moral damages.
SO ORDERED.
SAMUEL R. MARTIRES
Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson
This case stemmed from a Complaint5 for sum of money and
LUCAS P. BERSAMIN damages filed by Germo against MRII – a domestic corporation
Associate Justice engaged in supplying water, selling industrial maintenance
MARVIC M.V.F. LEONEN chemicals, and water treatment and chemical cleaning services6
Associate Justice – and its President/Chief Executive Officer (CEO), Tompar. The
complaint alleged that on September 21, 2004, MRII, through
ALEXANDER G. GESMUNDO Tompar, entered into a Technical Consultancy Agreement
Associate Justice (TCA)7 with Germo, whereby the parties agreed, inter alia, that:
(a) Germo shall stand as MRII's marketing consultant who shall
ATTESTATION take charge of negotiating, perfecting sales, orders, contracts,
or services of MRII, but there shall be no employer-employee
I attest that the conclusions in the above Decisionhad been relationship between them; and (b) Germo shall be paid on a
reached in consultation before the case was assigned to the purely commission basis, including a monthly allowance of
writer of the opinion of the Court’s Division. P5,000.00.8
PRESBITERO J. VELASCO, JR. On May 2, 2006 and during the effectivity of the TCA, Germo
Associate Justice successfully negotiated and closed with International Container
Chairperson, Third Division Terminal Services, Inc. (ICTSI) a supply contract of 700 cubic
meters of purified water per day. Accordingly, MRII commenced
CERTIFICATION supplying water to ICTSI on February 22, 2007, and in tum,
the latter religiously paid MRII the corresponding monthly
Pursuant to the Section 13, Article VIII of the Constitution and fees.9 Despite the foregoing, MRII allegedly never paid Germo
the Division Chairperson’s Attestation, I certify that the his rightful commissions amounting to P2,225,969.56 as of
conclusions in the above Decision had been reached in December 2009, inclusive of interest.10 Initially, Germo filed a
consultation before the case was assigned to the writer of the complaint before the National Labor Relations Commission
opinion of the Court’s Division. (NLRC), but the same was dismissed for lack of jurisdiction due
to the absence of employer-employee relationship between him
MARIA LOURDES P.A. SERENO and MRII. He then filed a civil case before the Regional Trial
Chief Justice Court of Muntinlupa, Branch 256, but the same was dismissed
without prejudice to its re-filing due to his counsel's failure to
mark all his documentary evidence at the pre-trial
conference.11 Hence, Germo filed the instant complaint praying
SECOND DIVISION that MRII and Tompar be made to pay him the amounts of
P2,225,969.56 as unpaid commissions with legal interest from
G.R. No. 228799, January 10, 2018 the time they were due until fully paid, P1,000,000.00 as moral
damages, P1,000,000.00 as exemplary damages, and the costs
MACTAN ROCK INDUSTRIES, INC. AND ANTONIO TOMPAR, of suit.12
Petitioners, v. BENFREI S. GERMO, Respondent.
In their Answer,13 MRII and Tompar averred, among others,
DECISION that: (a) there was no employer-employee relationship between
MRII and Germo as the latter was hired as a mere consultant;
PERLAS-BERNABE, J.: (b) Germo failed to prove that the ICTSI account materialized
through his efforts as he did not submit the required periodic
Assailed in this petition for review on certiorari1 are the reports of his negotiations with prospective clients; and (c)
Decision2 dated August 8, 2016 and the Resolution3 dated ICTSI became MRII's client through the efforts of a certain Ed
October 14, 2016 of the Court of Appeals (CA) in CA-G.R. CV Fornes.14 Further, MRII and Tompar claimed that Germo
No. 104431, which affirmed the Decision4 dated January 14, should be made to pay them litigation expenses and attorney's
2015 of the Regional Trial Court of Muntinlupa City, Branch 276 fees as they were compelled to litigate and engage the services
(RTC) in Civil Case No. 11-029, finding petitioners Mactan Rock of counsel to protect their interest.15
Industries, Inc. (MRII) and Antonio Tompar (Tompar) solidarily
liable to pay respondent Benfrei S. Germo (Germo) the amount Due to MRII, Tompar, and their counsel's multiple absences at
of P4,499,412.84 plus interest, damages, and attorney's fees. the various schedules for pre-trial conference, the RTC
considered them as "in default," thereby allowing Germo to
present his evidence ex-parte.16
The Facts
The RTC Ruling

In a Decision17 dated January 14, 2015, the RTC ruled in
Germo's favor, and accordingly, ordered MRII and Tompar to
solidarily pay him the amounts of: (a) P4,499,412.84
representing Germo's unpaid commissions from February 2007
until March 2012 with legal interest from judicial demand until
fully satisfied; (b) P100,000.00 as moral damages; (c)
P100,000.00 as exemplary damages; and (d) P50,000.00 as
attorney's fees.18
The RTC found that MRII and Germo validly entered into a TCA
whereby the latter shall act as the former's marketing
consultant, to be paid on a commission basis.19 It also found
that MRII's contract with ICTSI was made possible through
Germo's negotiation and marketing skills, and as such, the latter
should be paid the commissions due to him. In this regard,
Germo presented various sales invoices spanning the period of
February 2007 to March 2012, wherein he should have been
paid commissions in the amount of P4,499,412.84.20 Further,
based on the evidence presented and in order to deter those
who intend to negate the fulfillment of an obligation to the
prejudice of another, the RTC found it appropriate to award
Germo moral damages, exemplary damages, and attorney's
fees in the foregoing amounts.21 Finally, the RTC imposed a
lien equivalent to the appropriate legal fees on the monetary
awards in Germo's favor, noting that the latter litigated the
instant suit as an indigent.22
Aggrieved, MRII and Tompar appealed23 to the CA, this time
claiming, among others, that: (a) the jurisdiction over the case
lies before the NLRC as the same is a monetary dispute arising
from an employer-employee relationship; and (b) Germo had no
legal personality to pursue the instant case since he only signed
the TCA as a representative of another entity.24
The CA Ruling
In a Decision25 dated August 8, 2016, the CA affirmed the RTC
ruling.26 It held that Germo had sufficiently proven through the
required quantum of evidence that: (a) he and MRII, through
Tompar, entered into a TCA and thus, the provisions thereof are
binding between them; (b) MRII's contract with ICTSI was
realized through Germo's efforts; and (c) MRII failed to pay
Germo the commissions due to him pursuant to the TCA and
the ICTSI contract.27
Anent MRII and Tompar's additional arguments, the CA held
that the same constitutes a new case theory, which cannot be
introduced for the first time on appeal. The CA further pointed
out that such new theory is directly contradictory to the judicial
admissions they made in their Answer,28 which are already
binding on them.29
Undaunted, MRII and Tompar moved for reconsideration,30 but
the same was denied in a Resolution31 dated October 14, 2016;
hence, this petition.32
The Issue Before the Court
The issue for the Court's resolution is whether or not the CA
correctly upheld MRII and Tompar's solidary liability to Germo.
The Court's Ruling
The petition is partly meritorious.
In the instant petition, MRII and Tompar insist, among others
that: (a) the regular courts have no jurisdiction over the case as
the present dispute involves an employment dispute cognizable
by the NLRC; and (b) Germo had no legal personality to pursue
the case as he signed the TCA not in his personal capacity, but
as a representative of another entity.33
Such insistence is untenable.
As aptly pointed out by the CA, the foregoing constitutes a new
theory raised for the first time on appeal, considering that in
their Answer34 before the RTC, MRII and Tompar admitted,
inter alia, the: (a) lack of employer-employee relationship
between MRII and Germo as the latter was hired as a mere
consultant; and (b) genuineness, authenticity, and due
execution of the TCA, among other documents proving Germo's
claims.35 "As a rule, a party who deliberately adopts a certain
theory upon which the case is tried and decided by the lower
court, will not be permitted to change theory on appeal. Points
of law, theories, issues and arguments not brought to the
attention of the lower court need not be, and ordinarily will not
be, considered by a reviewing court, as these cannot be raised
for the first time at such late stage. It would be unfair to the
adverse party who would have no opportunity to present further
evidence material to the new theory, which it could have done
had it been aware of it at the time of the hearing before the
trial court."36 While this rule admits of an exception,37 such is
not applicable in this case.
More importantly, MRII and Tompar's statements in their
Answer constitute judicial admissions,38 which are legally
binding on them.39 Case law instructs that even if such judicial
admissions place a party at a disadvantageous position, he may
not be allowed to rescind them unilaterally and that he must
assume the consequences of such disadvantage,40 as in this
case.
As to the merits of the case, the courts a quo correctly found
that: (a) Germo entered into a valid and binding TCA with MRII
where he was engaged as a marketing consultant; (b) aside
from the P5,000.00 monthly allowance, Germo was going to be
paid on a purely commission basis; (c) during the effectivity of
the TCA and in the performance of his duties as marketing
consultant of MRII, Germo successfully brokered MRII's contract
of services with ICTSI, obviously resulting in revenues in MRII's
favor; (d) despite the foregoing and demands from Germo,
MRII refused to pay Germo's rightful commission fees; and (e)
MRII's refusal to pay Germo resulted – or at the very least,
contributed to – Germo's financial hardships. In light of the
foregoing, the courts a quo correctly found MRII liable to Germo
for the various monetary obligations as stated in their
respective rulings. Time and again, it has been consistently held
that the factual findings of the trial court, especially when
affirmed by the CA, deserve great weight and respect and will
not be disturbed on appeal unless it appears that there are facts
of weight and substance that were overlooked or misinterpreted
and that would materially affect the disposition of the case;41
none of which are present insofar as this matter is concerned.
Be that as it may, the Court finds that the courts a quo erred in
concluding that Tompar, in his capacity as then-President/CEO
of MRII, should be held solidarily liable with MRII for the latter's
obligations to Germo. It is a basic rule that a corporation is a
juridical entity which is vested with legal and personality
separate and distinct from those acting for and in behalf of, and
from the people comprising it. As a general rule, directors,
officers, or employees of a corporation cannot be held
personally liable for the obligations incurred by the corporation,
unless it can be shown that such director/officer/employee is
guilty of negligence or bad faith, and that the same was clearly
and convincingly proven. Thus, before a director or officer of a
corporation can be held personally liable for corporate
obligations, the following requisites must concur: (1) the
complainant must allege in the complaint that the director or
officer assented to patently unlawful acts of the corporation, or
that the officer was guilty of gross negligence or bad faith; and
(2) the complainant must clearly and convincingly prove such
unlawful acts, negligence or bad faith.42 In this case, Tompar's
assent to patently unlawful acts of the MRII or that his acts
were tainted by gross negligence or bad faith was not alleged in
Germo's complaint, much less proven in the course of trial.
Therefore, the deletion of Tompar's solidary liability with MRII is
in order.
Further, the Court deems it proper to adjust the interests
imposed on the monetary awards in Germo's favor. To
recapitulate, he was awarded the amounts of P4,499,412.84
representing his unpaid commissions from February 2007 to
March 2012, P100,000.00 as moral damages, P100,000.00 as
exemplary damages, and P50,000.00 as attorney's fees.
Pursuant to prevailing jurisprudence, his unpaid commissions
shall earn legal interest at the rate of twelve percent (12%) per
annum from judicial demand, i.e., the filing of the complaint on
February 28, 2011 until June 30, 2013, and thereafter, at the
rate of six percent (6%) per annum from July 1, 2013 until the
finality of this Decision. Thereafter, all monetary awards due to
him shall then earn legal interest at the rate of six percent (6%)
per annum from the finality of this ruling until fully paid.43
Finally, since Germo litigated the instant suit as an indigent
party as defined in Section 21, Rule 344 of the Rules of Court, it
is only proper that the appropriate filing fees be considered as a
lien on the monetary awards due to him, pursuant to the
second paragraph of Section 19, Rule 14145 of the same Rules.
WHEREFORE, the petition is PARTLY GRANTED. The Decision
dated August 8, 2016 and the Resolution dated October 14,
2016 of the Court of Appeals in CA-G.R. CV No. 104431 are
hereby AFFIRMED with MODIFICATION, DELETING petitioner
Antonio Tompar's solidary liability with petitioner Mactan Rock
Industries, Inc. (MRII). Accordingly, MRII is solely liable to
respondent Benfrei S. Germo (Germo) for the following
amounts: (a) P4,499,412.84 representing his unpaid
commissions from February 2007 to March 2012 with legal
interest at the rate of twelve percent (12%) per annum from
judicial demand, i.e., the filing of the complaint on February 28,
2011 until June 30, 2013, and thereafter, at the rate of six
percent (6%) per annum from July 1, 2013 until the finality of
this Decision; (b) P100,000.00 as moral damages; (c)
P100,000.00 as exemplary damages; and (d) P50,000.00 as
attorney's fees. The total monetary awards shall then earn legal
interest at the rate of six percent (6%) per annum from the
finality of this ruling until fully paid.
Finally, let the appropriate filing fees be considered as a lien on
the monetary awards due to Germo, who litigated the instant
case as an indigent party, in accordance with Section 19, Rule
141 of the Rules of Court.
SO ORDERED.
Carpio, (Chairperson), Peralta, and Caguioa, JJ., concur.
Reyes, Jr., J., on leave.
SECOND DIVISION
G.R. No. 228799, January 10, 2018
MACTAN ROCK INDUSTRIES, INC. AND ANTONIO TOMPAR,
Petitioners, v. BENFREI S. GERMO, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated August 8, 2016 and the Resolution3 dated
October 14, 2016 of the Court of Appeals (CA) in CA-G.R. CV
No. 104431, which affirmed the Decision4 dated January 14,
2015 of the Regional Trial Court of Muntinlupa City, Branch 276
(RTC) in Civil Case No. 11-029, finding petitioners Mactan Rock
Industries, Inc. (MRII) and Antonio Tompar (Tompar) solidarily
liable to pay respondent Benfrei S. Germo (Germo) the amount
of P4,499,412.84 plus interest, damages, and attorney's fees.
The Facts
This case stemmed from a Complaint5 for sum of money and
damages filed by Germo against MRII – a domestic corporation
engaged in supplying water, selling industrial maintenance
chemicals, and water treatment and chemical cleaning services6
– and its President/Chief Executive Officer (CEO), Tompar. The
complaint alleged that on September 21, 2004, MRII, through
Tompar, entered into a Technical Consultancy Agreement
(TCA)7 with Germo, whereby the parties agreed, inter alia, that:
(a) Germo shall stand as MRII's marketing consultant who shall
take charge of negotiating, perfecting sales, orders, contracts,
or services of MRII, but there shall be no employer-employee
relationship between them; and (b) Germo shall be paid on a
purely commission basis, including a monthly allowance of
P5,000.00.8
On May 2, 2006 and during the effectivity of the TCA, Germo
successfully negotiated and closed with International Container
Terminal Services, Inc. (ICTSI) a supply contract of 700 cubic
meters of purified water per day. Accordingly, MRII commenced
supplying water to ICTSI on February 22, 2007, and in tum,
the latter religiously paid MRII the corresponding monthly
fees.9 Despite the foregoing, MRII allegedly never paid Germo
his rightful commissions amounting to P2,225,969.56 as of
December 2009, inclusive of interest.10 Initially, Germo filed a
complaint before the National Labor Relations Commission
(NLRC), but the same was dismissed for lack of jurisdiction due
to the absence of employer-employee relationship between him
and MRII. He then filed a civil case before the Regional Trial
Court of Muntinlupa, Branch 256, but the same was dismissed
without prejudice to its re-filing due to his counsel's failure to
mark all his documentary evidence at the pre-trial
conference.11 Hence, Germo filed the instant complaint praying
that MRII and Tompar be made to pay him the amounts of
P2,225,969.56 as unpaid commissions with legal interest from
the time they were due until fully paid, P1,000,000.00 as moral
damages, P1,000,000.00 as exemplary damages, and the costs
of suit.12
In their Answer,13 MRII and Tompar averred, among others,
that: (a) there was no employer-employee relationship between
MRII and Germo as the latter was hired as a mere consultant;
(b) Germo failed to prove that the ICTSI account materialized
through his efforts as he did not submit the required periodic
reports of his negotiations with prospective clients; and (c)
ICTSI became MRII's client through the efforts of a certain Ed
Fornes.14 Further, MRII and Tompar claimed that Germo
should be made to pay them litigation expenses and attorney's
fees as they were compelled to litigate and engage the services
of counsel to protect their interest.15
Due to MRII, Tompar, and their counsel's multiple absences at
the various schedules for pre-trial conference, the RTC
considered them as "in default," thereby allowing Germo to
present his evidence ex-parte.16
The RTC Ruling
In a Decision17 dated January 14, 2015, the RTC ruled in
Germo's favor, and accordingly, ordered MRII and Tompar to
solidarily pay him the amounts of: (a) P4,499,412.84
representing Germo's unpaid commissions from February 2007
until March 2012 with legal interest from judicial demand until
fully satisfied; (b) P100,000.00 as moral damages; (c)
P100,000.00 as exemplary damages; and (d) P50,000.00 as
attorney's fees.18
The RTC found that MRII and Germo validly entered into a TCA
whereby the latter shall act as the former's marketing
consultant, to be paid on a commission basis.19 It also found
that MRII's contract with ICTSI was made possible through
Germo's negotiation and marketing skills, and as such, the latter
should be paid the commissions due to him. In this regard,
Germo presented various sales invoices spanning the period of
February 2007 to March 2012, wherein he should have been
paid commissions in the amount of P4,499,412.84.20 Further,
based on the evidence presented and in order to deter those
who intend to negate the fulfillment of an obligation to the
prejudice of another, the RTC found it appropriate to award
Germo moral damages, exemplary damages, and attorney's
fees in the foregoing amounts.21 Finally, the RTC imposed a
lien equivalent to the appropriate legal fees on the monetary
awards in Germo's favor, noting that the latter litigated the
instant suit as an indigent.22
Aggrieved, MRII and Tompar appealed23 to the CA, this time
claiming, among others, that: (a) the jurisdiction over the case
lies before the NLRC as the same is a monetary dispute arising
from an employer-employee relationship; and (b) Germo had no
legal personality to pursue the instant case since he only signed
the TCA as a representative of another entity.24
The CA Ruling
In a Decision25 dated August 8, 2016, the CA affirmed the RTC
ruling.26 It held that Germo had sufficiently proven through the
required quantum of evidence that: (a) he and MRII, through
Tompar, entered into a TCA and thus, the provisions thereof are
binding between them; (b) MRII's contract with ICTSI was
realized through Germo's efforts; and (c) MRII failed to pay
Germo the commissions due to him pursuant to the TCA and
the ICTSI contract.27
Anent MRII and Tompar's additional arguments, the CA held
that the same constitutes a new case theory, which cannot be
introduced for the first time on appeal. The CA further pointed
out that such new theory is directly contradictory to the judicial
admissions they made in their Answer,28 which are already
binding on them.29
Undaunted, MRII and Tompar moved for reconsideration,30 but
the same was denied in a Resolution31 dated October 14, 2016;
hence, this petition.32
The Issue Before the Court
The issue for the Court's resolution is whether or not the CA
correctly upheld MRII and Tompar's solidary liability to Germo.
The Court's Ruling
The petition is partly meritorious.
In the instant petition, MRII and Tompar insist, among others
that: (a) the regular courts have no jurisdiction over the case as
the present dispute involves an employment dispute cognizable
by the NLRC; and (b) Germo had no legal personality to pursue
the case as he signed the TCA not in his personal capacity, but
as a representative of another entity.33
Such insistence is untenable.
As aptly pointed out by the CA, the foregoing constitutes a new
theory raised for the first time on appeal, considering that in
their Answer34 before the RTC, MRII and Tompar admitted,
inter alia, the: (a) lack of employer-employee relationship
between MRII and Germo as the latter was hired as a mere
consultant; and (b) genuineness, authenticity, and due
execution of the TCA, among other documents proving Germo's
claims.35 "As a rule, a party who deliberately adopts a certain
theory upon which the case is tried and decided by the lower
court, will not be permitted to change theory on appeal. Points
of law, theories, issues and arguments not brought to the
attention of the lower court need not be, and ordinarily will not
be, considered by a reviewing court, as these cannot be raised
for the first time at such late stage. It would be unfair to the
adverse party who would have no opportunity to present further
evidence material to the new theory, which it could have done
had it been aware of it at the time of the hearing before the
trial court."36 While this rule admits of an exception,37 such is
not applicable in this case.
More importantly, MRII and Tompar's statements in their
Answer constitute judicial admissions,38 which are legally
binding on them.39 Case law instructs that even if such judicial
admissions place a party at a disadvantageous position, he may
not be allowed to rescind them unilaterally and that he must
assume the consequences of such disadvantage,40 as in this
case.
As to the merits of the case, the courts a quo correctly found
that: (a) Germo entered into a valid and binding TCA with MRII
where he was engaged as a marketing consultant; (b) aside
from the P5,000.00 monthly allowance, Germo was going to be
paid on a purely commission basis; (c) during the effectivity of
the TCA and in the performance of his duties as marketing
consultant of MRII, Germo successfully brokered MRII's contract
of services with ICTSI, obviously resulting in revenues in MRII's
favor; (d) despite the foregoing and demands from Germo,
MRII refused to pay Germo's rightful commission fees; and (e)
MRII's refusal to pay Germo resulted – or at the very least,
contributed to – Germo's financial hardships. In light of the
foregoing, the courts a quo correctly found MRII liable to Germo
for the various monetary obligations as stated in their
respective rulings. Time and again, it has been consistently held
that the factual findings of the trial court, especially when
affirmed by the CA, deserve great weight and respect and will
not be disturbed on appeal unless it appears that there are facts
of weight and substance that were overlooked or misinterpreted
and that would materially affect the disposition of the case;41
none of which are present insofar as this matter is concerned.
Be that as it may, the Court finds that the courts a quo erred in
concluding that Tompar, in his capacity as then-President/CEO
of MRII, should be held solidarily liable with MRII for the latter's
obligations to Germo. It is a basic rule that a corporation is a
juridical entity which is vested with legal and personality
separate and distinct from those acting for and in behalf of, and
from the people comprising it. As a general rule, directors,
officers, or employees of a corporation cannot be held
personally liable for the obligations incurred by the corporation,
unless it can be shown that such director/officer/employee is
guilty of negligence or bad faith, and that the same was clearly
and convincingly proven. Thus, before a director or officer of a
corporation can be held personally liable for corporate
obligations, the following requisites must concur: (1) the
complainant must allege in the complaint that the director or
officer assented to patently unlawful acts of the corporation, or
that the officer was guilty of gross negligence or bad faith; and
(2) the complainant must clearly and convincingly prove such
unlawful acts, negligence or bad faith.42 In this case, Tompar's
assent to patently unlawful acts of the MRII or that his acts
were tainted by gross negligence or bad faith was not alleged in
Germo's complaint, much less proven in the course of trial.
Therefore, the deletion of Tompar's solidary liability with MRII is
in order.
Further, the Court deems it proper to adjust the interests
imposed on the monetary awards in Germo's favor. To
recapitulate, he was awarded the amounts of P4,499,412.84
representing his unpaid commissions from February 2007 to
March 2012, P100,000.00 as moral damages, P100,000.00 as
exemplary damages, and P50,000.00 as attorney's fees.
Pursuant to prevailing jurisprudence, his unpaid commissions
shall earn legal interest at the rate of twelve percent (12%) per
annum from judicial demand, i.e., the filing of the complaint on
February 28, 2011 until June 30, 2013, and thereafter, at the
rate of six percent (6%) per annum from July 1, 2013 until the
finality of this Decision. Thereafter, all monetary awards due to
him shall then earn legal interest at the rate of six percent (6%)
per annum from the finality of this ruling until fully paid.43
Finally, since Germo litigated the instant suit as an indigent
party as defined in Section 21, Rule 344 of the Rules of Court, it
is only proper that the appropriate filing fees be considered as a
lien on the monetary awards due to him, pursuant to the
second paragraph of Section 19, Rule 14145 of the same Rules.
WHEREFORE, the petition is PARTLY GRANTED. The Decision
dated August 8, 2016 and the Resolution dated October 14,
2016 of the Court of Appeals in CA-G.R. CV No. 104431 are
hereby AFFIRMED with MODIFICATION, DELETING petitioner
Antonio Tompar's solidary liability with petitioner Mactan Rock
Industries, Inc. (MRII). Accordingly, MRII is solely liable to
respondent Benfrei S. Germo (Germo) for the following
amounts: (a) P4,499,412.84 representing his unpaid
commissions from February 2007 to March 2012 with legal
interest at the rate of twelve percent (12%) per annum from
judicial demand, i.e., the filing of the complaint on February 28,
2011 until June 30, 2013, and thereafter, at the rate of six
percent (6%) per annum from July 1, 2013 until the finality of
this Decision; (b) P100,000.00 as moral damages; (c)
P100,000.00 as exemplary damages; and (d) P50,000.00 as
attorney's fees. The total monetary awards shall then earn legal
interest at the rate of six percent (6%) per annum from the
finality of this ruling until fully paid.
Finally, let the appropriate filing fees be considered as a lien on
the monetary awards due to Germo, who litigated the instant
case as an indigent party, in accordance with Section 19, Rule
141 of the Rules of Court.
SO ORDERED.
Carpio, (Chairperson), Peralta, and Caguioa, JJ., concur.
Reyes, Jr., J., on leave.
FIRST DIVISION
January 11, 2018
G.R. No. 190286
RAMON E. REYES and CLARA R. PASTOR, Petitioners
vs.
BANCOM DEVELOPMENT CORP., Respondent
DECISION
SERENO, CJ.:
Before this Court is a Petition for Review on Certiorari1 filed by
Ramon E. Reyes and Clara R. Pastor seeking to reverse the
Decision2 and the Resolution3 of the Court of Appeals (CA) in
CA-G.R. CV No. 45959. The CA affirmed the ruling of the
Regional Trial Court (RTC) holding petitioners jointly and
severally liable to respondent Bancom Development Corporation
(Bancom) as guarantors of certain loans obtained by Marbella
Realty, Inc. (Marbella).

FACTS
The dispute in this case originated from a Continuing Guaranty4
executed in favor of respondent Bancom by Angel E. Reyes, Sr.,
Florencio
Reyes, Jr., Rosario R. Du, Olivia Arevalo, and the two
petitioners herein, Ramon E. Reyes and Clara R. Pastor (the
Reyes Group). In the instrument, the Reyes Group agreed to
guarantee the full and due payment of obligations incurred by
Marbella under an Underwriting Agreement with Bancom. These
obligations included certain Promissory Notes5 issued by
Marbella in favor of Bancom on 24 May 1979 for the aggregate
amount of ₱2,828,140.32.
It appears from the records that Marbella was unable to pay
back the notes at the time of their maturity. Consequently, it
issued a set of replacement Promissory Notes6 on 22 August
1979, this time for the increased amount of ₱2,901,466.48. It
again defaulted on the payment of this second set of notes,
leading to the execution of a third set7 for the total amount of
₱3,002,333.84, and finally a fourth set8 for the same amount.
Because of Marbella's continued failure to pay back the loan
despite repeated demands, Bancom filed a Complaint for Sum
of Money with a prayer for damages before the RTC of Makati
on 7 July 1981.9 The case, which sought payment of the total
sum of ₱4,300,247.35, was instituted against (a) Marbella as
principal debtor; and (b) the individuals comprising the Reyes
Group as guarantors of the loan.
In their defense, Marbella and the Reyes Group argued that
they had been forced to execute the Promissory Notes and the
Continuing Guaranty against their will.10 They also alleged that
the foregoing instruments should be interpreted in relation to
earlier contracts pertaining to the development of a
condominium project known as Marbella II.11
The Marbella II contracts were entered into by Bancom; the
Reyes Group, as owners of the parcel of land to be utilized for
the condominium project along Roxas Boulevard; and Fereit
Realty Development Corporation (Fereit), a sister company of
Bancom, as the construction developer and project manager.12
This venture, however, soon encountered financial difficulties.
As a result, the Reyes Group was allegedly forced to enter into
a Memorandum of Agreement to take on part of the loans
obtained by Fereit from Bancom for the development of the
project. Marbella, for its part, was supposedly compelled to
assume Fereit's obligation to cause the release of ₱2.8 million in
receivables then assigned to State Financing;13 and
subsequently to obtain additional financing from Bancom in the
same amount for that purpose.14
The above developments were cited by Marbella and the Reyes
group in support of the allegation that Bancom took advantage
of their resultant financial distress. Bancom allegedly demanded
the execution of Promissory Notes and the Continuing Guaranty
from the Reyes Group,15 despite the fact that additional
financing became necessary only because of the failure of Fereit
(Bancom's sister company) to comply with its obligation.16
To bolster its claim that the promissory notes were issued in
connection with Fereit's obligations, Marbella, together with the
Reyes Group, also presented a document entitled Amendment
of Memorandum of Agreement.17 In this instrument, Fereit
undertook to reimburse Marbella for the ₱2.8 million the latter
had paid, and for all penalties, fees, and charges incurred to
obtain additional financing.
THE RTC RULING
In a Decision dated 8 April 1991, the RTC held Marbella and the
Reyes Group solidarily liable to Bancom. The trial court ordered
them to pay the amounts indicated on the Promissory Notes
dated 28 February 1980 in the total amount of ₱4,300,247.35
plus interest computed from 19 May 1981, the date of demand;
and to pay penalties and attorney's fees as well.18
PROCEEDINGS BEFORE THE CA
Marbella and the Reyes Group appealed the RTC ruling to the
CA.19 They asserted that the trial court erred in disregarding
the terms of the earlier agreements they had entered into with
Bancom and Fere it.20 The former also reiterated that the
amounts covered by the Promissory Notes represented
additional financing secured from Bancom to fulfill Fereit's
obligations. Hence, they said they cannot be held liable for the
payment of those amounts.21
In the course of the proceedings before the CA, Abella
Concepcion Regala & Cruz moved to withdraw its appearance in
the case as counsel for Bancom.22 The law firm asserted that it
had "totally lost contact" with its client despite serious efforts on
the part of the former to get in touch with its officers.23 The
law firm also alleged that it had "received reports that the client
has undergone a merger with another entity," thereby making
its authority to represent the corporation subject to doubt.24
In a Resolution dated l June 2004,25 the CA granted the motion
after noting that the copy of a resolution sent to Bancom had
been returned to the appellate court unclaimed. The CA held
that this failure of service supported the claim of Abella
Concepcion Regala & Cruz that the latter had lost all contact
with its client.
THE CA RULING
In a Decision dated 25 June 2009,26 the CA denied the appeal
citing the undisputed fact that Marbella and the Reyes Group
had failed to comply with their obligations under the Promissory
Notes and the guaranty. The appellate court rejected the
assertion that noncompliance was justified by the earlier
agreements entered into by the parties. The CA explained:
In this case, it is worth to note that it is an undisputed fact that
defendants-appellants failed to make good their alleged
obligations under the Promissory Notes and Continuing
Guaranty which they issued in favor of BAN[C]OM. [The
instruments'] genuineness and due execution are likewise
undisputed.
Defendants-appellants' only defense rests on the allegation that
their non-payment of such obligations is justified taking into
consideration the terms of the Memorandum of Agreement
entered into by and among the plaintiff-appellee and
defendants-appellants herein particularly paragraph 13 thereof.
Said the appellants in support hereof, since Bancom [which was
in full control of the financial affairs of Fereit] failed to cause
the release of the aforesaid receivables (₱2,800,000) to State
Financing by Fereit, Bancom should necessarily suffer the
consequences thereof - not the defendants-appellants.
Apparently, the thrust of defendants-appellants' defense points
to Fereit's non-compliance with paragraph 13 of the
"Memorandum of Agreement." However, records show that
defendants-appellants did nothing to formally [assert] their
rights against Fereit. Truly, this Court agrees with the trial
court's pronouncement that defendants-appellants' failure to
avail of the remedies provided by law, such as the filing of a
third-party complaint against Fereit, necessarily indicates that
they themselves did not seriously consider Fereit's non-
compliance as affecting their own liability to BANCOM. This can
be done for after all, Fereit is still a different entity with distinct
and separate corporate existence from that of BANCOM even
granting that BANCOM is in full control of the financial affairs of
Fereit.
xxxx
Besides, the terms of the promissory notes and "Continuing
Guaranty" xxx are clear and unequivocal, leaving no room [for]
interpretation. For not being contrary to law, morals, good
customs, public order and public policy, defendants' obligation
has the force of law and should be complied with in good
faith.27
Of the individuals comprising the Reyes Group, only petitioners
filed a Motion for Reconsideration of the CA Decision.28 They
reiterated their argument that the Promissory Notes were not
meant to be binding, given that the funds released to Marbella
by Bancom were not loans, but merely additional financing.
Petitioners also contended that the action must be considered
abated pursuant to Section 122 of the Corporation Code. They
pointed out that the Certificate of Registration issued to Bancom
had been revoked by the Securities and Exchange Commission
(SEC) on 31 May 2004, and that no trustee or receiver had
been appointed to continue the suit; in fact, even Bancom's
former counsel was compelled to withdraw its appearance from
the case, as it could no longer contact the corporation.
On 23 July 2009, petitioners filed a Supplement to their Motion
for Reconsideration.29 In support of their argument on the
abatement of the suit, they attached a Certificate of Corporate
Filing/Information issued by the SEC. The latter confirmed that
Bancom's Certificate of Registration30 had been revoked on 26
May 2003 for noncompliance with the SEC's reportorial
requirements.
In a Resolution31 dated 9 November 2009, the CA denied the
Motion for Reconsideration, since the points raised therein had
already been passed upon in its earlier ruling.
PROCEEDINGS BEFORE THIS COURT
On 27 November 2009, petitioners filed the instant Petition for
Review. They assert that the CA committed a grievous error in
refusing to declare the suit abated despite the obvious fact that
Bancom no longer exists. They likewise contend that the
appellate court had incorrectly relied upon the Promissory Notes
and the Continuing Guaranty. It allegedly failed to take into
account the parties' earlier related agreements that showed that
petitioners could not be held liable for the debt.
In a Resolution32 dated 17 February 2010, we ordered Bancom
to comment on the Petition for Review. The copy of the
Resolution served at Bancom's address on record was, however,
returned unserved with the postal notation "RTS - non-existent
address."33 For this reason, we deemed the filing of a comment
waived.34
ISSUES
The following issues are presented to the Court for resolution:
1. Whether the present suit should be deemed abated by the
revocation by the SEC of the Certificate of Registration issued to
Bancom
2. Whether the CA correctly ruled that petitioners are liable to
Bancom for (a) the payment of the loan amounts indicated on
the Promissory Notes issued by Marbella; and (b) attorney's
fees
OUR RULING
We DENY the Petition.
The revocation of Bancom's Certificate of Registration does not
justify the abatement of these proceedings.
Section 12235 of the Corporation Code provides that a
corporation whose charter is annulled, or whose corporate
existence is otherwise terminated, may continue as a body
corporate for a limited period of three years, but only for certain
specific purposes enumerated by law. These include the
prosecution and defense of suits by or against the corporation,
and other objectives relating to the settlement and closure of
corporate affairs.
Based on the provision, a defunct corporation loses the right to
sue and be sued in its name upon the expiration of the three-
year period provided by law.36 Jurisprudence, however, has
carved out an exception to this rule. In several cases, this Court
has ruled that an appointed receiver,37 an assignee,38 or a
trustee39 may institute suits or continue pending actions on
behalf of the corporation, even after the winding-up period. The
rule was first enunciated in the 1939 case Sumera v.
Valencia,40 in which we declared:
[I]f the corporation carries out the liquidation of its assets
through its own officers and continues and defends the actions
brought by or against it, its existence shall terminate at the end
of three years from the time of dissolution; but if a receiver or
assignee is appointed, as has been done in the present case,
with or without a transfer of its properties within three years,
the legal interest passes to the assignee, the beneficial interest
remaining in the members, stockholders, creditors and other
interested persons; and said assignee may bring an action,
prosecute that which has already been commenced for the
benefit of the corporation, or defend the latter against any
other action already instituted or which may be instituted even
outside of the period of three years fixed for the officers of the
corporation.
For the foregoing considerations, we are of the opinion and so
hold that when a corporation is dissolved and the liquidation of
its assets is placed in the hands of a receiver or assignee, the
period of three years prescribed by section 77 of Act No. 1459
known as the Corporation Law is not applicable, and the
assignee may institute all actions leading to the liquidation of
the assets of the corporation even after the expiration of three
years.
In subsequent cases, the Court further clarified that a receiver
or an assignee need not even be appointed for the purpose of
bringing suits or continuing those that are pending.41 In Gelano
v. Court of Appeals, 42 we declared that in the absence of a
receiver or an assignee, suits may be instituted or continued by
a trustee specifically designated for a particular matter, such as
a lawyer representing the corporation in a certain case. We also
ruled in Clemente v. Court of Appeals43 that the board of
directors of the corporation may be considered trustees by legal
implication for the purpose of winding up its affairs.
Here, it appears that the SEC revoked the Certificate of
Registration issued to Bancom on 26 May 2003.44 Despite this
revocation, however, Bancom does not seem to have conveyed
its assets to trustees or to its stockholders and creditors. The
corporation has also failed to appoint a new counsel after the
law firm formerly representing it was allowed to withdraw its
appearance on 1 June 2004. Citing these circumstances,
petitioners assert that these proceedings should be considered
abated.
We disagree.
It is evident from the foregoing discussion of law and
jurisprudence that the mere revocation of the charter of a
corporation does not result in the abatement of proceedings.
Since its directors are considered trustees by legal
implication,45 the fact that Bancom did not convey its assets to
a receiver or assignee was of no consequence. It must also be
emphasized that the dissolution of a creditor-corporation does
not extinguish any right or remedy in its favor. Section 145 of
the Corporation Code is explicit on this point:
Sec. 145. Amendment or repeal. - No right or remedy in favor
of or against any corporation, its stockholders, members,
directors, trustees, or officers, nor any liability incurred by any
such corporation, stockholders, members, directors, trustees, or
officers, shall be removed or impaired either by the subsequent
dissolution of said corporation or by any subsequent
amendment or repeal of this Code or of any part thereof.
(Emphasis supplied)
As a necessary consequence of the above rule, the
corresponding liability of the debtors of a dissolved corporation
must also be deemed subsisting. To rule otherwise would be to
sanction the unjust enrichment of the debtor at the expense of
the corporation.46
As guarantors of the loans of Marbella, petitioners are liable to
Bancom.
On the merits of the claim, we affirm the finding of the CA on
the liability of petitioners. Having executed a Continuing
Guaranty in favor of Bancom, petitioners are solidarily liable
with Marbella for the payment of the amounts indicated on the
Promissory Notes.
As the appellate court observed,47 petitioners did not challenge
the genuineness and due execution of the promissory notes.
Neither did they deny their nonpayment of Marbella's loans or
the fact that these obligations were covered by the guaranty.
Their sole defense was that the promissory notes in question
were not binding, because the funds released to Marbella by
Bancom were not loans but merely additional financing. This
financial accommodation was supposedly meant to allow
Marbella to rectify the failure of Fereit to cause the release of
receivables assigned to another entity. In support of their
allegations, petitioners cite certain provisions of the
Memorandum of Agreement dated 16 August 197748 and its
Amendment.49
We reject these contentions.
The obligations of Marbella and the Reyes Group under the
Promissory Notes and the Continuing Guaranty, respectively,
are plain and unqualified.1âwphi1 Under the notes, Marbella
promised to pay Bancom the amounts stated on the maturity
dates indicated.50 The Reyes Group, on the other hand, agreed
to become liable if any of Marbella's guaranteed obligations
were not duly paid on the due date.51 There is absolutely no
support for the assertion that these agreements were not
meant to be binding.
We also note that even if the other agreements referred to by
petitioners are taken into account, the result would be the
same. They would still be deemed liable, since the two
contracts they cited only establish the following premises: (a)
Fereit took on the responsibility of causing the release of certain
receivables from State Financing; (b) Marbella assumed the
performance of the obligation of Fereit after the latter failed to
fulfill its duty; (c) Bancom would grant Marbella additional
financing for that purpose, with the obligation to be paid within
three years; and (d) Fereit would reimburse Marbella for the
expenses the latter would incur as a result of this assumption of
the obligation. Specifically on the duty of Marbella to pay back
the additional financing, the Amendment states:
1. Bancom hereby agrees to grant the additional financing
requested by Marbella II in the principal amount of TWO
MILLION EIGHT HUNDRED TWENTY EIGHT THOUSAND ONE
HUNDRED FORTY & 32/100 (₱2,828,140.32), Philippine
Currency, payable by Marbella II within three (3) years, under
such terms and conditions as may be mutually agreed upon by
Bancom and Marbella II. The additional financing herein
requested by Marbella II shall be payable by Marbella II
irrespective of whether Marbella II realizes a net profit after tax
on its Marbella II Condominium Project.
2. In lieu of the obligations of Fereit under Paragraph 9 and 13
of the Memorandum of Agreement, Fereit hereby agrees to
reimburse Marbella II the principal sum of ₱2,828,140.32 plus
interest, fees and other charges which Marbella II shall pay to
Bancom in the settlement and/or liquidation of the additional
financing. However, penalties, fees and other charges resulting
from the default of Marbella II with respect to the additional
financing shall be borne by Marbella II.
It is evident from the foregoing provisions that Bancom
extended additional financing to Marbella on the condition that
the loan would be paid upon maturity. It is equally clear that
the latter obligated itself to pay the stated amount to Bancom
without any condition. The unconditional tenor of the obligation
of Marbella to pay Bancom for the loan amount, plus interest
and penalties, is likewise reflected in the Promissory Notes
issued in favor of the latter.52 Marbella, in turn, was granted
the right to collect reimbursement from Fereit, an entirely
distinct entity. While it was averred that Bancom had complete
control of Fereit's assets and activities, we note that no
sufficient evidence was presented in support of this assertion.
As to petitioners, the Continuing Guaranty evidently binds them
to pay Bancom the amounts indicated on the original set of
Promissory Notes, as well as any and all instruments issued
upon the renewal, extension, amendment or novation
thereof.53 The Court notes that the final set of Promissory
Notes issued by Marbella in this case reflect the total amount of
₱3,002,333.84.54 The CA and the RTC thus ordered the
payment of ₱4,300,247.35, which represents the principal
amount and all interest and penalty charges as of 19 May 1981,
or the date of demand.
We affirm this ruling with the modification that petitioners are
liable to pay Bancom the following amounts: (a) ₱4,300,247.35;
(b) interest accruing on the principal sum of ₱3,002,333.84 (and
not the entire amount of ₱4,300,247.35), from 19 May 1981,
the date of demand, at the rates identified below;55 and (c)
penalties accrued in relation thereto, with legal interest from
maturity date until fully paid.
Needless to state, the clear terms of these agreements cannot
be negated and deemed non-binding simply on the basis of the
self-serving testimony of Angel Reyes, one of the guarantors of
the loan. The CA therefore correctly rejected the attempt of
petitioners to renege on their obligations. We also find the
award of ₱500,000 for attorney's fees in order, pursuant to the
stipulation in the Promissory Notes allowing the recovery
thereof. Nevertheless, in the interest of equity and considering
that petitioners are already liable for penalties, we deem it
proper to modify the stipulated rate of interest to conform to
the legal interest rates under prevailing jurisprudence.
WHEREFORE, the Petition for Review is hereby DENIED, and
the Decision dated 25 June 2009 and the Resolution dated 9
November 2009 issued by the Court of Appeals in CA-G.R. CV
No. 45959 are AFFIRMED with MODIFICATION.
Petitioners Ramon E. Reyes and Clara R. Pastor are jointly and
severally liable with Marbella Manila Realty, Inc., Angel E.
Reyes, Sr., Florencio Reyes, Jr., Rosario R. Du and Olivia
Arevalo for the following amounts:
(a) ₱4,300,247.35, representing the principal sum and all
interest and penalty charges as of 19 May 1981;
(b) legal interest on the principal sum of P3,002,333.84 at the
rate of 12% per annum from 19 May 1981, the date of demand,
until 30 June 2013, and at the rate of 6% per annum from 1
July 2013, until this Decision becomes final and executory;
(c) penalties equivalent to 20% of the obligation;
(d) legal interest on the penalty amount at the rate of 12% per
annum from 19 May 1981, the date of demand, until 30 June
2013, and at the rate of 6% per annum from 1 July 2013, until
this Decision becomes final and executory;
(e) attorney's fees in the amount of ₱500,000; and
(f) legal interest of 6% per annum on all the foregoing
monetary awards from date of finality of this Decision until full
payment thereof.
SO ORDERED.
MARIA LOURDES P.A. SERENO
Chief Justice
FIRST DIVISION
January 11, 2018
G.R. No. 212472
SPECIFIED CONTRACTORS & DEVELOPMENT, INC., AND
SPOUSES ARCHITECT ENRIQUE O. OLONAN AND CECILIA R.
OLONAN, Petitioners
vs.
JOSE A. POBOCAN , Respondent
DECISION
TIJAM, J.:
This Petition for Review on Certiorari1under Rule 45 urges this
Court to reverse and set aside the November 27, 2013
Decision2 and April 28, 2014 Resolution3 of the Court of
Appeals (CA) in CA-G.R. CV No. 99994, and to affirm instead
the June 4, 2012 Order4 of the Regional Trial Court (RTC) of
Quezon City, Branch 92, in Civil Case No. Q-11-70338. The
court a quo had granted the Motion to Dismiss5 of Specified
Contractors & Development Inc. (Specified Contractors), and
Spouses Architect Enrique O. Olonan and Cecilia R. Olonan
(collectively referred to as petitioners), thereby dismissing the
action for specific performance filed by respondent Jose A.
Pobocan. The dismissal of the case was subsequently set aside
by the CA in the assailed decision and resolution.
It is undisputed that respondent was in the employ of Specified
Contractors until his retirement sometime in March
2011.1âwphi1 His last position was president of Specified
Contractors and its subsidiary, Starland Properties Inc., as well
as executive assistant of its other subsidiaries and affiliates.
Architect Olonan allegedly6 agreed to give respondent one (1)
unit for every building Specified Contractors were able to
construct as part of respondent's compensation package to
entice him to stay with the company. Two (2) of these projects
that Specified Contractors and respondent were· able to build
were the Xavierville Square Condominium in Quezon City and
the Sunrise 1-foliday Mansion Bldg. I in Alfonso, Cavite.
Pursuant to the alleged oral agreement, SpeCified Contractors
supposedly ceded, assigned and transferred Unit 708 of
Xavlerville Square Condominium and Unit 208 of Sunrise Holiday
Mansion Bldg. I (subject units) in favor of respondent.
In a March 14, 2011 letter7 addressed to petitioner Architect
Enrique Olonan as chairman of Specified Contractors,
respondent requested the execution of Deeds of Assignment or
Deeds of Sale over the subject units in his favor, along with
various other beriefits, in view of his impending retirement on
March 19, 2011.
When respondent's demand was unheeded, he filed a
Complaint8 on November 21, 2011 before the RTC of Quezon
City praying that petitioners be ordered to execute and deliver
the appropriate deeds of conveyance and to pay moral and
exemplary damages, as well as attorney's fees.
On January 17, 2012, petitioners, instead of filing an answer,
interposed a Motion to Dismiss9 denying the existence of the
alleged oral agreement. They argued that, even assuming
arguendo that there was such an oral agreement, the alleged
contract is unenforceable for being in violation of the statute of
frauds, nor was there any written document, note or
memorandum showing that the subject units have in fact been
ceded, assigned or transferred to respondent. Moreover,
assuming again that said agreement existed, the cause of
action had long prescribed because the alleged agreements
were supposedly entered into in 1994 and 1999 as indicated in
respondent's March 14, 2011 demand letter, supra, annexed to
the complaint.
The RTC, in granting10 the motion, dismissed the respondent's
complaint in its June 4, 2012 Order. While the RTC disagreed
with petitioners that the action had already prescribed under
Articles 114411 and 114512 of the New Civil Code, by reasoning
that the complaint is in the· nature of a real action which
prescribes after 30 years conformably with Article 114113, it
nonetheless agreed that the alleged agreement should have
been put into writing, and that such written note, memorandum
or agreement should have been attached as actionable
documents to respondent's complaint.
On appeal, the CA reversed14 the RTC's June 4, 2012 Order,
reasoning that the dismissal of respondent's complaint,
anchored on the violation of the statute of frauds, is
unwarranted since the rule applies only to executory and not to
completed or partially consummated contracts. According to the
CA, there was allegedly partial performance of the alleged
obligation based on: (1) the respondent's possession of the
subject units; (2) the respondent's payment of condominium
dues and realty tax for Unit 708 Xavierville Square
Condominium; (3) the endorsement by petitioners of
furniture/equipment for Unit 208 Sunrise Holiday Mansion I;
and (4) that shares on the rental from Unit 208 Sunrise Holiday
Mansion I were allegedly received by the respondent and-
deducted from his monthly balance on the furniture/equipment
account.
Petitioners countered that while there is no dispute that
respondent had been occupying Unit 708 - previously Unit 803 -
of Xavierville Square Condominium, this was merely out of
tolerance in view of respondent's then position as president of
the company and without surrender of ownership. Petitioners
also insisted that Unit 208 of Sunrise Holiday Mansion I
continues to be under their possession and control. Thus,
finding that the motion to dismiss was predicated on disputable
grounds, the CA declared in its assailed decision that a trial on
the merits is necessary to determine once and for all the nature
of the respondent's possession of the subject units.
Aggrieved, petitioners sought reconsideration of the CA
decision, but were unsuccessful. Hence, the present petition
raising three issues:
1. Whether or not the RTC had jurisdiction over the
respondent's complaint considering that the allegations therein
invoked a right over the subject condominium units as part of
his compensation package, thus a claim arising out of an
employer-employee relationship cognizable by the labor
arbiter;15
2. Whether or not the respondent's cause of action had already
Prescribed;16 and,
3. Whether or not the action was barred by the statute of
frauds.17
Resolution of the foregoing issues calls for an examination of
the allegations in the complaint and the nature of the action
instituted by' respondent. As will be discussed later, there is
merit in petitioners' insistence that respondent's right of action
was already barred by the statute of limitations.
What determines the nature of the action and which court has
jurisdiction over it are the allegations in the complaint and the
character of the relief sought.18 In his complaint, respondent
claimed that petitioners promised to convey to him the subject
units to entice him to stay with their company. From this,
respondent prayed that petitioners be compelled to perform
their part of the alleged oral agreement. The objective of the
suit is to compel petitioners to perform an act, specifically, to
execute written instruments pursuant to a previous oral
contract. Notably, the respondent does not claim ownership of,
nor title to, the subject properties.
Not all actions involving real property are real actions. In
Spouses Saraza, et al. v. Francisco19 , it was clarified that:
x x x Although the end result of the respondent's claim was the
transfer of the subject property to his name, the suit was still
essentially for specific performance, a personal action, because
it sought Fernando's execution of a deed of absolute sale based
on a contract which he had previously made.
Similarly, that the end result would be the transfer of the
subject units to respondent's name in the event that his suit is
decided in his favor is "an anticipated consequence and beyond
the cause for which the action [for specific performance with
damages] was instituted."20 Had respondent's action proceeded
to trial, the crux of the controversy would have been the
existence or non-existence of the alleged oral contract from
which would flow respondent's alleged right to compel
petitioners to execute deeds of conveyance. The transfer of
property sought by respondent is but incidental to or an
offshoot of the determination of whether or not there is indeed,
to begin with, an agreement to convey the properties in
exchange for services rendered.
Cabutihan v. Landcenter Construction & Development
Corporation21explains thus:
A close scrutiny of National Steel and Ruiz reveals that the
prayers for the execution of a Deed of Sale were not in any way
connected to a contract, like the Undertaking in this case.
Hence, even if there were prayers for the execution of a deed of
sale, the actions filed in the said cases were not for specific
performance.
In the present case, petitioner seeks payment of her services in
accordance with the undertaking the parties signed.
It is axiomatic that jurisdiction over the subject matter of a case
is conferred by law and is determined by the allegations in the
complaint and the character of the relief sought, irrespective of
whether the plaintiff is entitled to all or some of the claims
asserted therein.22 We therefore find that respondent correctly
designated his complaint as one for specific performance
consistent with his allegations and prayer therein. Accordingly,
respondent's suit is one that is incapable of pecuniary
estimation and indeed cognizable by the RTC of Quezon City
where both parties reside. As stated in Surviving Heirs of
Alfredo R. Bautista v. Lindo:23
Settled jurisprudence considers some civil actions as incapable
of pecuniary estimation, viz:
1. Actions for specific performance;
While the lack of jurisdiction of a court may be raised at any
stage of an action, nevertheless, the party raising such question
may be estopped if he has actively taken part in the very
proceedings which he questions and he only objects to the
court's jurisdiction because the judgment or the order
subsequently rendered is adverse to him.24 In this case,
petitioners' Motion to Dismiss, Reply25 to the opposition on the
motion, and Sur-rejoinder26 only invoked the defenses of
statute of frauds and prescription before the RTC. It was only
after the CA reversed the RTC's grant of the motion to dismiss
that petitioners raised for the first time the issue of jurisdiction
in their Motion for Reconsideration.27 Clearly, petitioners are
estopped from raising this issue after actively taking part in the
proceedings before the RTC, obtaining a favorable ruling, and
then making an issue of it only after the CA reversed the RTC's
order.
Even if this Court were to entertain the petitioners' belated
assertion that jurisdiction belongs to the labor arbiter as this
case involves a claim arising from an employer-employee
relationship, reliance by petitioners on Domondon v. NLRC28is
misplaced. In Domondon, the existence of the agreement on
the transfer of car-ownership was not in issue but rather, the
entitlement of a former employee to his entire monetary claims
against a former employer, considering that the said employee
had not paid the balance of the purchase price of a company
car which the employee opted to retain. In the present case,
the existence of the alleged oral agreement, from which would
flow the right to compel performance, is in issue.
As the Court has ascertained that the present suit is essentially
for specific performance - a personal action - over which the
court a quo had jurisdiction, it was therefore erroneous for it to
have treated the complaint as a real action which prescribes
after 30 years under Article 1141 of the New Civil Code. In a
personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract, or the recovery of
damages.29 Real actions, on the other hand, are those affecting
title to or possession of real property, or interest therein.30 As a
personal action based upon an oral contract, Article 1145
providing a prescriptive period of six years applies in this case
instead. The shorter period provided by law to institute an
action based on an oral contract is due to the frailty of human
memory. Nothing prevented the parties from reducing the
alleged oral agreement into writing, stipulating the same in a
contract of employment or partnership, or even mentioning the
same in an office memorandum early on.
While the respondent's complaint was ingeniously silent as to
when the alleged oral agreement came about, his March 14,
2011 demand letter annexed to his complaint categorically cites
the year 1994 as when he and Architect Olonan allegedly had
an oral agreement to become "industrial partners" for which he
would be given a unit from every building they constructed.
From this, Unit 208 of Sunrise Holiday Mansion I was allegedly
assigned to him. Then he went on to cite his resignation in
October of 1997 and his re-employment with the company on
December 1, 1999 for which he was allegedly given Unit 803 of
the Xavierville Square Condominium, substituted later on by
Unit 708 thereof.
The complaint for specific performance was instituted on
November. 21, 2011, or 17 years from the oral agreement of
1994 and almost 12 years after the December 1, 1999 oral
agreement. Thus, the respondent's action upon an oral contract
was filed beyond the six-year period within which he should
have instituted the same.
Respondent argued that the prescriptive period should not be
counted from 1994 because the condominium units were not
yet in existence at that time, and that the obligation would have
arisen after the units were completed and ready for occupancy.
Article 134731 of the New Civil Code is, however, clear that
future things may be the object of a contract. This is the reason
why real estate developers engage in pre-selling activities. But
even if we were to entertain respondent's view, his right of
action would still be barred by the statute of limitations.
Condominium Certificate of Title (CCT) No. N-1834 732 for Unit
708 of Xavierville Square Condominium, copy of which was
annexed to the complaint, was issued on September 11, 1997
or more than 13 years before· respondent's March 14, 2011
demand letter.CCT No. CT-61333 for Unit 208 of Sunrise
Holiday Mansion Building I; also annexed to the complaint, was
issued on March 12, 1996 or 14 years before respondent's
March 14, 2011 demand letter. Indubitably, in view of the
instant suit for specific performance being a personal action
founded upon an oral contract which must be brought within six
years from the accrual of the right, prescription had already set
in.
Inasmuch as the complaint should have been dismissed by the
RTC on the ground of prescription, which fact is apparent from
the complaint and its annexes, it is no longer necessary to delve
into the applicability of the statute of frauds.
WHEREFORE, the petition is GRANTED. Accordingly, the Court
of Appeals' November 27, 2013 Decision and April 28, 2014
Resolution in CA-G.R. CV No. 99994 are REVERSED and SET
ASIDE. We sustain the dismissal of Civil Case No. Q-11-70338,
but on the ground that the action for specific performance had
already prescribed.
SO ORDERED.
NOEL GIMENEZ TIJAM
Associate Justice
THIRD DIVISION
G.R. No. 202612, January 17, 2018
TEODORO C. TORTONA, RODRIGO C. TORTONA, PEDRO C.
TORTONA, ERNESTO C. TORTONA, AND PATRICIO C.
TORTONA, Petitioners, v. JULIAN C. GREGORIO, FLORENTINO
GREGORIO, JR., ISAGANI C. GREGORIO, CELEDONIA G.
IGNACIO, TEODOCIA G. CHAN, LEONILA G. CAAMPUED,
CONCORDIA G. MIJARES, ROMEO C. GREGORIO, EDNA S. TAN,
NELIA S. REYES, CECILIA S. FRIEDMAN, LAMBERTO SUANTE,
JULIUS SUANTE, CORAZON YASAY-GREGORIO, DONALDO Y.
GREGORIO, ELMER Y. GREGORIO, AND ROY JOHN Y.
GREGORIO, Respondents.
DECISION
LEONEN, J.:
Documents acknowledged before a notary public are presumed
to have been duly executed. This presumption may be
contradicted by clear and convincing evidence. A notarized
Deed of Absolute Sale where the thumbmark of a party is
shown to be a forgery is void.
This resolves a Petition for Review on Certiorari1 under Rule 45
of the 1997 Rules of Civil Procedure praying that the assailed
Court of Appeals July 9, 2012 Decision2 in CA-G.R. CV No.
91767 be reversed and set aside. This assailed Decision
reversed and set aside the May 31, 2005 Decision3 of the
Regional Trial Court of Bacoor, Cavite, which ruled in favor of
then plaintiffs, now petitioners, in their action for recovery of
real property with damages against then defendants, now
respondents.
This case is an offshoot of a Deed of Absolute Sale allegedly
entered into by sisters Rufina Casimiro (Rufina), the purported
seller, and Rafaela Casimiro (Rafaela), the purported buyer.
Petitioners are the heirs of Rufina, while respondents are the
heirs of Rafaela.4
During their lifetime, Rufina and Rafaela co-owned with their
other siblings two (2) parcels of land.5 They shared in equal,
undivided 1/10 shares of a parcel located in Longos, Bacoor,
Cavite, covered by Original Certificate of Title (OCT) No. O-923.
They also shared in equal, undivided 1/5 shares of a second
parcel in Talaba, Bacoor, Cavite, covered by Transfer Certificate
of Title (TCT) No. T-10058.6
When Rufina was still alive, she regularly collected her
respective 1/10 and 1/5 shares in the income of the two (2)
properties. After her death, petitioners continued to collect and
receive their mother's share.7
Sometime in 1997, petitioners filed a complaint for recovery of
real property with damages. They alleged that their cousin
Emilio Casimiro (Emilio) offered them a balato8 of P50,000.00
for the sale of the first parcel to the Department of Public Works
and Highways. Surprised, they asked why they were not instead
given their 1/10 share in the proceeds of the sale. To this,
Emilio allegedly replied that according to respondents,9 the two
(2) properties had already been sold by Rufina to Rafaela
during their lifetime.10
Petitioners proceeded to the Office of the Registry of Deeds to
verify the supposed sale. They learned that OCT No. O-923,
covering the first parcel, had already been cancelled on account
of a Deed of Absolute Sale allegedly executed by Rufina and
Rafaela on February 14, 1974. It appeared that Rufina also sold
her 1/5 share over the second parcel covered by TCT No. T-
10058. It also became apparent that some time after the sales
of the two (2) parcels, respondents executed a Declaration of
Heirship and Extrajudicial Partition. Consequently, Rufina's 1/10
and 1/5 shares in the first and second parcels were added to
the shares of the respondents, as Rafaela's heirs, thereby
increasing their shares to 2/10 and 2/5, respectively.11
Petitioners underscored that their mother was illiterate, not
even knowing how to write her own name. They alleged that
she only affixed her thumbmark on documents, and whenever
she did so, she was always assisted by at least one (1) of her
children. Thus, they asserted that if the sales to Rafaela were
genuine, they should have known about them.12
In support of their allegations, they presented during trial some
documents,13 collectively identified as the standard documents,
supposedly bearing the authentic thumbmarks of their mother.
These standard documents also showed that at least one (1) of
them assisted her in executing each document.14
Petitioners likewise presented as witness National Bureau of
Investigation fingerprint examiner Eriberto B. Gomez, Jr.
(Gomez), who conducted an examination to determine the
genuineness of the questioned thumbmarks in the Deed of
Absolute Sale.15 He noted that he compared the questioned
thumbmarks with the genuine thumbmarks of Rufina in the
standard documents. In his Technical
Investigation/Identification Report FP Case No. 2000-182-A
dated July 13, 2000 (First Report),16 Gomez noted that "the
purported thumbmarks of Rufina Casimiro in the alleged Deed
of Absolute Sale ... [were] not identical with her standard
thumbmarks in [the standard documents]" and concluded that
"the thumbmarks appearing in the ... Deed of Absolute Sale ...
were not impressed by Rufina Casimiro."17
In another report dated May 2, 2001 (Second Report), Gomez
observed that the thumbmarks on the standard documents
appeared to be "faint, blurred and lacking the necessary ridge
characteristics to warrant positive identification."18 During a
subsequent hearing, however, he clarified that "while the
standard thumbmarks lack the 'necessary ridge characteristics
to warrant positive identification,['] 'all the standard are all in
the same finger print pattern' and 'they are also in agreement
of the flow of ridges of all the standard."'19
In its May 31, 2005 Decision,20 the Regional Trial Court
concluded that the Deed of Absolute Sale was a forgery and
ruled in favor of the petitioners. It found as credible the First
Report, which positively showed that the questioned
thumbmarks in the Deed of Absolute Sale were not Rufina's:
This Court has examined the said thumbmarks and is convinced
and satisfied that they are very different from her standard
thurnbmarks in the documents Exhibits "F", "G", and "H". This
difference is further enhanced in the enlarged photographs of
these thumbmarks (Exhibit "J"). It is clear by the naked eyes
that Rufina's thurnbmarks in the questioned Deed of Absolute
Sale (Exhibit "D") are really the "circle type" while those of the
standard thurnbmarks in Exhibits "F", "G" and "H" are the loop
type as the NBI expert technically described them. As the
Supreme Court ruled in People vs. Abatayo, 87 Phil. 794, 798,
"Thumbmarks never lie". "A comparison of both the differences
and similarities in the questioned thurnbmarks (signatures)
should have been made to satisfy the demands of evidence"
(Licarte vs. CA, G.R. No. 128899; June 8, 1995).21
The dispositive portion of its Decision read:
WHEREFORE, premises considered, judgment is hereby
rendered:
1. Declaring the thumbmarks of Rufina Casimiro in the Deed of
Absolute Sale dated February 14, 1974, Doc. No. 73, Page 16,
Book 1, Series of 1974 of the notarial registry of Atty. Arcadio
Espiritu of Bacoor, Cavite (Exhibit "D") as forged and hence, null
and void and inexistent.
2. Declaring the Deed of Declaration of Heirship and
Extrajudicial Partition dated August 15, 1996 (Exhibit "E") null
and void insofar as the adjudication of the one-tenth (1/10)
share of Rufina Casimiro over the lot situated in Longos,
Bacoor, Cavite, covered by OCT No. O-923; and the one-fifths
(1/5) share of Rufina Casimiro in the lot situated in Talaba,
Bacoor, Cavite, covered by TCT No. T-10058 both of the
Registry of Deeds for the Province of Cavite (Exhibits "A" and
"B"), both in favor of the Heirs of Rafaela Casimiro.
3. The Register of Deeds of the Province of Cavite is hereby
ordered to cancel TCT No. T-741726, and to revert to the
cancelled OCT No. O-923 and to cancel Entry No. 8449-75
appearing on TCT No. T-10058, which is the annotation of the
questioned Deed of Absolute Sale (Exhibit "D") that has been
declared herein as null and void and inexistent.
The claim for damages is hereby DENIED for lack of merit.
SO ORDERED.22
The Court of Appeals reversed and set aside the ruling of the
Regional Trial Court.23 It found that the Deed of Absolute Sale
was a notarized document and had in its favor the presumption
of regularity. It also emphasized Gomez's second examination,
which appeared to indicate that the thumbmarks in the
standard documents prevent "positive identification."24 Thus,
according to the Court of Appeals, the Regional Trial Court's
conclusions were suspect. It held that, ultimately, petitioners
failed to prove "by clear and convincing evidence" that the
thumbmarks found on the Deed of Absolute Sale were
forged.25
The Heirs of Rufina then filed the present Petition.
For resolution is the sole issue of whether or not the Deed of
Absolute Sale allegedly executed by Rufina Casimiro, as seller,
and Rafaela Casimiro, as buyer, is void, as Rufina Casimiro
never consented to it and with her apparent thumbmarks on it
being fake.
The Court of Appeals gravely erred in reversing the ruling of the
Regional Trial Court. The Petition must be granted and the
Regional Trial Court May 31, 2005 Decision must be reinstated.
I
The matter of the authenticity of Rufina Casimiro's thumbmarks
is a factual issue resting on the evidence presented during trial.
Factual issues are normally improper in Rule 45 petitions as,
under Rule 45 of the 1997 Rules of Civil Procedure,26 only
questions of law may be raised in a petition for review on
certiorari. However, the rule admits of exceptions. In Pascual v.
Burgos:27
The Rules of Court require that only questions of law should be
raised in petitions filed under Rule 45. This court is not a trier of
facts. It will not entertain questions of fact as the factual
findings of the appellate courts are "final, binding[,] or
conclusive on the parties and upon this [c]ourt" when supported
by substantial evidence. Factual findings of the appellate courts
will not be reviewed nor disturbed on appeal to this court.
However, these rules do admit exceptions. Over time, the
exceptions to these rules have expanded. At present, there are
10 recognized exceptions that were first listed in Medina v.
Mayor Asistio, Jr.:
(1) When the conclusion is a finding grounded entirely on
speculation, surmises or conjectures; (2) When the inference
made is manifestly mistaken, absurd or impossible; (3) Where
there is a grave abuse of discretion; (4) When the judgment is
based on a misapprehension of facts; (5) When the findings of
fact are conflicting; (6) When the Court of Appeals, in making
its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee; (7)
The findings of the Court of Appeals are contrary to those of the
trial court; (8) When the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) When
the facts set forth in the petition as well as in the petitioner's
main and reply briefs are not disputed by the respondents; and
(10) The finding of fact of the Court of Appeals is premised on
the supposed absence of evidence and is contradicted by the
evidence on record.
These exceptions similarly apply in petitions for review filed
before this court involving civil, labor, tax, or criminal cases.28
(Citations omitted)
Several exceptions exist in this case. Most evident is how the
findings and conclusions of the Court of Appeals conflict with
those of the Regional Trial Court. More significant than these
conflicting findings, this Court finds the Court of Appeals'
appreciation of evidence to be grossly misguided. Contrary to
the Court of Appeals' findings, a more circumspect consideration
of the evidence sustains the conclusion that Rufina's purported
thumbmarks were false and merely simulated to make it appear
that she had consented to the alleged sale to her sister,
Rafaela.
II
Notarization enables a notary public to ascertain the
voluntariness of the party's act and to verify the genuineness of
his or her signature.29 Through notarization, the public and the
courts may rely on the face of the instrument, without need of
further examining its authenticity and due execution. It is an act
that is imbued with public interest. In Nunga v. Atty. Viray:30
[N]otarization is not an empty, meaningless, routinary act. It is
invested with substantive public interest, such that only those
who are qualified or authorized may act as notaries public. The
protection of that interest necessarily requires that those not
qualified or authorized to act must be prevented from imposing
upon the public, the courts, and the administrative offices in
general. It must be underscored that the notarization by a
notary public converts a private document into a public
document making that document admissible in evidence without
further proof of the authenticity thereof. A notarial document is
by law entitled to full faith and credit upon its face. For this
reason, notaries public must observe with utmost care the basic
requirements in the performance of their duties.31
Notarized documents enjoy the presumption of regularity. They
are accorded evidentiary weight as regards their due execution:
Generally, a notarized document carries the evidentiary weight
conferred upon it with respect to its due execution, and
documents acknowledged before a notary public have in their
favor the presumption of regularity.32
However, any such presumption is disputable. It can be refuted
by clear and convincing evidence to the contrary:
It is true that notarized documents are accorded evidentiary
weight as regards their due execution. Nevertheless, while
notarized documents enjoy the presumption of regularity, this
presumption is disputable. They can be contradicted by
evidence that is clear, convincing, and more than merely
preponderant.33 (Citations omitted)
The contentious Deed of Absolute Sale in this case is a
notarized document.34 Thus, it benefits from the presumption
of regularity. The burden of proving that thumbmarks affixed on
it by an ostensible party is false and simulated lies on the party
assailing its execution.35 It is then incumbent upon petitioners
to prove by clear and convincing evidence that the seller's
thumbmarks, as appearing on the Deed of Absolute Sale, are
forged and are not their mother's.
Petitioners successfully discharged this burden.
With the aid of an expert witness, they contrasted Rufina's
apparent thumbmarks on the Deed of Absolute Sale with
specimen thumbmarks on authentic documents. They
demonstrated disparities that lead to no other conclusion than
that the thumbmarks on the contentious Deed of Absolute Sale
are forged. In contrast, respondents merely harped on a
disputable presumption, and sought to affirm this presumption
through the self-serving testimony of the notary public, whose
very act of notarizing the Deed of Absolute Sale is the bone of
contention, whose credibility was shown to be wanting, and
who is himself potentially liable for notarizing a simulated
document. They also endeavored to undermine petitioners'
expert witness by dismissively characterizing him as "just an
ordinary employee."36
III
Rule 130, Section 49 of the Revised Rules on Evidence specifies
that courts may admit the testimonies of expert witnesses or of
individuals possessing "special knowledge, skill, experience or
training":
Section 49. Opinion of expert witness. — The opinion of a
witness on a matter requiring special knowledge, skill,
experience or training which he is shown to possess, may be
received in evidence.
Testimonies of expert witnesses are not absolutely binding on
courts. However, courts exercise a wide latitude of discretion in
giving weight to expert testimonies, taking into consideration
the factual circumstances of the case:
Although courts are not ordinarily bound by expert testimonies,
they may place whatever weight they choose upon such
testimonies in accordance with the facts of the case. The
relative weight and sufficiency of expert testimony is peculiarly
within the province of the trial court to decide, considering the
ability and character of the witness, his actions upon the
witness stand, the weight and process of the reasoning by
which he has supported his opinion, his possible bias in favor of
the side for whom he testifies, the fact that he is a paid witness,
the relative opportunities for study or observation of the
matters about which he testifies, and any other matters which
serve to illuminate his statements. The opinion of the expert
may not be arbitrarily rejected; it is to be considered by the
court in view of all the facts and circumstances in the case and
when common knowledge utterly fails, the expert opinion may
be given controlling effect (20 Am. Jur., 1056-1058). The
problem of the credibility of the expert witness and the
evaluation of his testimony is left to the discretion of the trial
court whose ruling thereupon is not reviewable in the absence
of an abuse of that discretion.37 (Emphasis supplied)
This analysis applies in the examination of forged documents:
Due to the technicality of the procedure involved in the
examination of forged documents, the expertise of questioned
document examiners is usually helpful. These handwriting
experts can help determine fundamental, significant differences
in writing characteristics between the questioned and the
standard or sample specimen signatures, as well as the
movement and manner of execution strokes.38
Respondents here assail the qualification of National Bureau of
Investigation fingerprint examiner Gomez, pejoratively branding
him as "just an ordinary employee."39 In support of this
dismissive casting of Gomez, respondents noted that he
performed such functions as securing fingerprints from
applicants for National Bureau of Investigation clearances and
taking fingerprints of people involved in crimes.40
Evidence is concerned with "ascertaining . . . the truth
respecting a matter of fact."41 It is concerned with what can be
objectively established and relies on verifiable actualities.
Opinions are, by definition, subjective. They proceed from
impressions, depend on perception, and are products of
personal interpretation and belief. Hence, opinions are generally
inadmissible as evidence.42
Opinions, when admissible, must have proper factual basis.
They must be supported by facts or circumstances from which
they draw logical inferences. An opinion bereft of factual basis
merits no probative value. People v. Malejana43 stated the
following regarding expert opinions:
The probative force of the testimony of an expert does not lie in
a mere statement of the theory or opinion of the expert, but
rather in the aid that he can render to the courts in showing the
facts which serve as a basis for his criterion and the reasons
upon which the logic of his conclusion is founded.44 (Emphasis
supplied, citation omitted)
The witness rendering an opinion must be credible,45 in
addition to possessing all the qualifications and none of the
disqualifications specified in the Revised Rules on Evidence.46
In the case of an expert witness, he or she must be shown to
possess knowledge, skill, experience, or training on the subject
matter of his or her testimony.47 On the other hand, an
ordinary witness may give an opinion on matters which are
within his or her knowledge or with which he or she has
sufficient familiarity.48
The testimony, too, must be credible in itself. In Borguilla v.
Court of Appeals,49 this Court said:
Evidence to be believed must not only proceed from the mouth
of a credible witness, it must be credible in itself — such as the
common experience and observation of mankind can approve
as probable under the circumstances. We have no test of the
truth of human testimony, except its conformity to our
knowledge, observation and experience. Whatever is repugnant
to these belongs to the miraculous and is outside of judicial
cognizance.50
The availability of direct evidence affects the viability of
opinions. If there is a direct evidence to prove the fact in issue,
an opinion may be rendered unnecessary. For instance, in Cebu
Shipyard and Engineering Works, Inc. v. William Lines,51 where
the origin of a fire was at issue, this Court held that there was
no need for the judge to consider expert opinion:
 After having thorough examination, comparison and analysis,
[T]here is no need for the judge to resort to expert opinion the thumbmark appearing on the [Pacto] de Retro and the right Q:
evidence. In the case under consideration, the testimonies of thumbmark appearing on the original copy of PC/INP You mean to say you were provided with the standard
the fire experts were not the only available evidence on the Fingerprint form taken by SPO3 Marcelo Quintin Sosing were fingerprint of the subject?
probable cause and origin of the fire. There were witnesses who impressed by one and the same person. A:
were actually on board the vessel when the fire occurred. .... Yes, sir.
Between the testimonies of the fire experts who merely based ....
their findings and opinions on interviews and the testimonies of Q:
those present during the fire, the latter are of more probative How do you go about this comparison to determine whether COURT:
value.52 that thumbmark [was] impressed by the same person?
A: Q:
Contrary to respondents' dismissiveness towards Gomez, his We must locate the three elements of comparing, the number 1 Now, with this photograph blown-up, you have here 13 points,
performance of such tasks as taking fingerprints, even if, for a is type of fingerprint pattern. will you please explain to the court how these 13 points agree
time it was his main duty, does not, per se, discount .... from that standard to that questioned document?
competence. A history of performing this function does not A:
negate any "special knowledge, skill, experience or training" A: I found 2x4 bifurcation, it means that single rage splitting into
that Gomez possesses. Despite respondents' protestations, it There are three elements, after knowing the fingerprint pattern two branches.
remains that Gomez personally scrutinized and compared and they are of the same fingerprint the next step is to know
Rufina's disputed thumbmarks in the contested Deed of the flow of the rages of the fingerprint pattern or the shape. Q:
Absolute Sale with her authentic thumbmarks in the standard .... You pointed out?
documents and detailed his findings in the First Report to which A:
he testified before the Regional Trial Court. He expounded on Q: I found the bifurcation on the standard that corresponds exactly
his findings in the Second Report and clarified, contrary to what Then what is next? to the bifurcation which I marked number 1 in both
respondents and the Court of Appeals harp on, that the findings A: photograph[s].
detailed in it are not in conflict with or otherwise discount the After number 2, the last is the most important one because you
conclusions stated in the First Report. must locate the number of ridges of characteristics and their Q:
relationship with each other because it is the basis of From the center?
Incidentally, this case is not the first instance that this Court identification of the fingerprint. A:
sustained Gomez's competence and credibility. In Rojales v. As to the number and location with respect to the core, I found
Dime,53 this Court relied on the examination conducted by Q: that both questioned and standard coincide.
Gomez to determine the genuineness of the thumbmark Meaning the description of the ridges? ....
appearing on the pacto de retro subject of that case. Rojales' A:
demonstration of Gomez's competence and credibility is worth Yes, sir, the identification features appearing on the fingerprint. Q:
reproducing at length: Now, but the layer does not change in point 1, how many layer
Q: from the core?
Petitioner avers that the [Court of Appeals] erred in relying on What did you see? A:
the NBI Fingerprint Examination. She alleges that the opinion of A: From the core, there are 4 intervening layers from number 1 to
one claiming to be an expert is not binding upon the court. I found that there were 13 identical points to warrant the number 2 and it appears also the questioned 4 intervening
positive identification. layers between number 1 and number 2, so, the intervening
There is nothing on record that would compel this Court to rages between ends of th[ese] characteristics are all both in
believe that said witness, Fingerprint Examiner Gomez, has Q: agreement.
improper motive to falsely testify against the petitioner nor was [Those] 13 points [are] more than enough to determine ....
his testimony not very certain. His testimony is worthy of full whether those thumbmark[s] [are] done by one and the same
faith and credit in the absence of evidence of an improper person? ATTY. SALANGUIT:
motive. His straightforward and consistent testimonies bear the A:
earmarks of credibility. Yes, sir. Q:
.... Can you say that based on the questioned thumbmark, you
Gomez testified during direct and cross examination, the would be able to arrive an accurate evaluation between the
process of examination of the fingerprints and his conclusion: Q: questioned thumbmark and standard thumbmark?
Where did you base your conclusion that the thumbprint on the A:
ATTY: BELMI: Pacto de Retro Sale over and above the name Juana Vda. de Yes, [ma'am].
Rojales is genuine thumbprint of the same person?
Q: A: Q:
Will you kindly tell the court what was the result of your Well, we only respon[d]ed to the request of the court to Even if the questioned thumbmark is a little bit blurred as to the
examination? compare with the thumbprint appearing on the Pacto de Retro standard thumbmark?
A: Sale to that of the fingerprint appearing on the thumbprint A:
form.
[Even though] the questioned thumbmark is a little bit blurred
but still the ridge characteristics [are] still discernible.
Q:
You are telling us that among many people here in the world,
nobody have the same thumbmark as another person and that
include the thumbmark of a twins?
A:
A: Yes, [ma'am].54
This Court finds no reason to favorably consider respondents'
attempt at undermining Gomez's competence.
The credibility of an expert witness does not inhere in his or her
person. Rather, he or she must be shown to possess
knowledge, skill, experience, or training on the subject matter
of his or her testimony.55 In First Nationwide Assurance Corp.
v. Court of Appeals,56 where the identity of the vehicle in
question was in issue, this Court considered these factors in
assessing the credibility of the expert witness:
We note that Sergeant Agadulin is a police officer who has
adequate knowledge, training and experience to perform
macro-etching examinations. His assertions on this technical
matter are, as the [Court of Appeals] noted, in the nature of
expert testimony. Additionally, as a public officer, he is
presumed to have regularly performed his duty. In the absence
of controverting evidence, his testimony is entitled to great
weight and credence.57 (Citation omitted)
Standards outlined in American jurisprudence illustrate
frameworks and standards for appraising expert testimonies.
In the 1923 case of Frye v. United States,58 James Alfonso Frye
was convicted of second-degree murder by the lower court after
he was disallowed to introduce expert testimony relating to the
results of systolic blood pressure deception test. The United
States Supreme Court, in sustaining the lower court, explained:
The rule is that the opinions of experts or skilled witnesses are
admissible in evidence in those cases in which the matter of
inquiry is such that inexperienced persons are unlikely to prove
capable of forming a correct judgment upon it, for the reason
that the subject-matter so far partakes of a science, art, or
trade as to require a previous habit or experience or study in it,
in order to acquire a knowledge of it. When the question
involved does not lie within the range of common experience or
common knowledge, but requires special experience or special
knowledge, then the opinions of witnesses skilled in that
particular science, art, or trade to which the question relates are
admissible in evidence.
Numerous cases are cited in support of this rule. Just when a
scientific principle or discovery crosses the line between the
experimental and demonstrable stages is difficult to define.
Somewhere in this twilight zone the evidential force of the
principle must be recognized, and while courts will go a long
way in admitting expert testimony deduced from a well-
recognized scientific principle or discovery, the thing from which
the deduction is made must be sufficiently established to have
gained general acceptance in the particular field in which it
belongs.
We think the systolic blood pressure deception test has not yet
gained such standing and scientific recognition among
physiological and psychological authorities as would justify the
courts in admitting expert testimony deduced from the
discovery, development, and experiments thus far made.59
(Emphasis supplied)
In 1993, the United States Supreme Court in Daubert v. Merrell
Dow Pharmaceuticals, Inc. departed from the Frye standard and
articulated a new framework for assessing the admission of
expert testimony.60 In that case, plaintiffs Jason Daubert and
Eric Schuller attributed their serious birth defects to the drug
Bendectin, manufactured by defendant Dow Chemical
Company. They submitted expert testimonies on animal studies
showing a link between Bendectin and malformations,
pharmacological studies, and reanalysis of previously published
epidemiological studies. The district court ruled in favor of the
defendant and stated that scientific evidence is admissible only
if the principle upon which it is based is "sufficiently established
to have general acceptance in the field to which it belongs."61
The Ninth Circuit Court affirmed this Decision after finding that
the plaintiffs' evidence had not yet been accepted as reliable
technique by scientists who had an opportunity to scrutinize and
verify the methods.
However, the United States Supreme Court remanded the case
after finding the Frye standard to be mooted by the adoption of
the Federal Rules of Evidence, Ru1e 702, which stated:
If scientific, technical, or other specialized knowledge will assist
the trier of fact to understand the evidence or to determine a
fact in issue, a witness qualified as an expert by knowledge,
skill, experience, training, or education, may testify thereto in
the form of an opinion or otherwise.
The United States Supreme Court observed that Rule 702 did
not require "general acceptance" of the Frye standard before
expert testimony is admitted. Instead of following the strict Frye
standard, it placed on the judge the duty to act as "gatekeeper"
when faced with a proffer of expert scientific testimony. Thus,
the judge must make a preliminary determination of whether or
not the offered testimony is scientific knowledge and whether or
not it will assist the trier of fact to understand or determine a
fact in issue. The following are the standards that should be
considered by the judge:
Many considerations will bear on the inquiry, including whether
the theory or technique in question can be (and has been)
tested, whether it has been subjected to peer review and
publication, its known or potential error rate, and the existence
and maintenance of standards controlling its operation, and
whether it has attracted widespread acceptance within a
relevant scientific community.62
However, the standards are not exclusive:
The inquiry is a flexible one, and its focus must be solely on
principles and methodology, not on the conclusions that they
generate. Throughout, the judge should also be mindful of
other applicable Rules.63
Thus, the United States Supreme Court remanded the case for
the application of its enumerated standards.
In this case, the Regional Trial Court's May 31, 2005 Decision
detailed the circumstances leading to the National Bureau of
Investigation's examination of the contentious Deed of Absolute
Sale, respondents' incessant attempts at preventing the
examination, and how Gomez took the witness stand and
presented his findings. The Regional Trial Court's recollection
indicates, most notably, that Gomez was not handpicked by
petitioners. Rather, following petitioners' request, Gomez
appeared to have been designated by the National Bureau of
Investigation itself to conduct the examination. Thus, any such
determination of Gomez's expertise was not borne by
petitioners' innate preference for him or of their insistence upon
him, but by the National Bureau of Investigation's own
confidence in him. This institutional reposition of confidence can
only bolster Gomez's credibility:
To prove that their mother's thumbmarks on the disputed deed
of absolute sale were forged, plaintiffs filed a motion to refer
the questioned document to the National Bureau of
Investigation (NBI) for examination. An Order was issued by
this Court directing the Office of the Registry of Deeds for the
Province of Cavite to submit to this Court the original copy of
the said title and upon receipt of the same ordered the Branch
Clerk of Court to transmit the same to the NBI. An Omnibus
Motion was filed by the defendants informing this Court that the
questioned document was already lost and/or missing pursuant
to the Certification dated April 5, 2000 issued by the Office of
the Registry of Deeds for the Province of Cavite (Exh. 8).
Hence, the order to transmit the questioned document became
unavailing and academic. That notwithstanding, the Branch
Clerk of Court transmitted the questioned document to the NBI.
Defendants insinuated that the original questioned document
came from an illegitimate and spurious source. However, it was
explained by a representative of the registry, Mr. Agusto
Vasquez, that the registrar asked him to bring the questioned
document to the Court and the same was received by one of
the employees of the Court. Further, the said issue has been
resolved by this Court in its Order dated August 14, 2000,
pertinent portion of which states that:
"Therefore, the allegations (sic) of the defendants that the said
document came from a spurious [source] is without any basis.
This Court assures the defendants and/or any litigant for that
matter that this Court will not allow spurious document[s] to be
admitted by this Court.
WHEREFORE, the Omnibus Motion filed by the defendants is
hereby DENIED for lack of merit."
As basis of the comparison[,] plaintiffs presented, the Kasulatan
sa Bilihan ng Lote dated February 19, 1979 (Exhibit "F");
Kasulatang Paghahati sa Labas ng Hukuman na may Lakip na
Bilihan ng Lupa dated March 31, 1982 (Exhibit "G"); and the
Residence Certificate of Rufina Casimiro dated July 21, 1971
(Exhibit "H") and a receipt issued by the Rural Bank of Zapote
(Exhibit "H-1"), which documents contained the genuine
thumbmarks of Rufina Casimiro.
A fingerprint examiner of the NBI, Eriberto B. Gomez, Jr., took
the witness stand. He testified that pursuant to the order of this
Court he conducted an examination to determine the
genuineness of Rufina Casimiro's thumbmarks on the
questioned Deed of Absolute Sale by comparing them with her
genuine thumbmarks as appearing on Exhibits "F", "G" and "H".
These documents, containing the genuine thumb marks of
Rufina Casimiro were executed on the dates prior to and after
the execution of the questioned documents. Mr. Gomez
prepared enlarged photographs of the questioned and standard
thumbmarks of Rufina Casimiro for better examination and
comparison (Exhibit "J"). After examining these thumbmarks,
Mr. Gomez concluded in his Technical
Investigation/Identification Report FP Case No. 2000-182-A
(Exh. "I") that the purported thumbmarks of Rufina Casimiro in
the alleged Deed of Absolute Sale (Exhibit "D") are not identical
with her standard thumbmarks in Exhibits "F", "G" and "H" and
that the thumbmarks appearing in the said Deed of Absolute
Sale (Exhibit "D") were not impressed by Rufina Casimiro.64
IV
Heirs of Gregorio v. Court of Appeals,65 outlined standards for
establishing forgery:
As a rule, forgery cannot be presumed and must be proved by
clear, positive and convincing evidence and the burden of proof
lies on the party alleging forgery. The best evidence of a forged
signature in an instrument is the instrument itself reflecting the
alleged forged signature. The fact of forgery can only be
established by a comparison between the alleged forged
signature and the authentic and genuine signature of the
person whose signature is theorized upon to have been forged.
Without the original document containing the alleged forged
signature, one cannot make a definitive comparison which
would establish forgery. A comparison based on a mere xerox
copy or reproduction of the document under controversy cannot
produce reliable results.66 (Citation omitted)
Here, petitioners submitted for comparison three (3) standard
documents bearing the genuine thumbmarks of Rufina: (1)
Kasulatan sa Bilihan ng Lote (Exhibit "F"); (2) Kasulatang
Paghahati sa Labas ng Hukuman na may Lakip na Bilihan ng
Lupa (Exhibit "G"); and (3) the Residence Certificate of Rufina
(Exhibit "H").67 After examination, Gomez submitted to the
Regional Trial Court his Technical Investigation/Identification
Report FP Case No. 2000-182 dated July 13, 2000:
6. RESULT OF EXAMINATION: After having a thorough
examination, comparison and analysis, questioned thumbmarks
mentioned in item nos. 5A and 5B are found not identical with
the standard thumbmarks mentioned in item nos. 5C, 5D[,] and
5E.
7. OPINION: In view of the foregoing result of the examination,
questioned thumbmark mentioned in item nos. 5A and 5B were
not impressed by Rufina Casimiro.68
This Report could not be any clearer. The questioned
thumbmarks on the Deed of Absolute Sale do not belong to
Rufina. The questioned thumbmarks were of the "circle type"
while the genuine thumbmarks of Rufina were of the "loop
type."69
Upon personally perusing the documents, Regional Trial Court
Judge Novato T. Cajigal (Judge Cajigal) reached a similar
conclusion:
This Court has examined the said thumbmarks and is convinced
and satisfied that they are very different from her standard
thumbmarks in the documents Exhibits "F", "G"[,] and "H". This
difference is further enhanced in the enlarged photographs of
these thumbmarks (Exhibit "J"). It is clear by the naked eyes
that Rufina's thumbmarks in the questioned Deed of Absolute
Sale (Exhibit "D") are really the "circle type" while those of the
standard thumbmarks in Exhibits "F", "G"[,] and "H" are the
loop type as the NBI expert technically described them. As the
Supreme Court ruled in People vs. Abatayo, 87 Phil. 794, 798,
"Thumbmarks never lie". "A comparison of both the differences
and similarities in the questioned thumbmarks (signatures)
should have been made to satisfy the demands of evidence"
(Licarte vs, CA, G.R. No. 128899; June 8, 1995).70
Judge Cajigal's observations and conclusions are in keeping with
the settled principle that judges exercise independent judgment
in appraising the authenticity of a signature, or of a fingerprint
placed in a signature's stead:
A judge must therefore conduct an independent examination of
the signature itself in order to arrive at a reasonable conclusion
as to its authenticity and this cannot be done without the
original copy being produced in court.71
V
In reversing the Regional Trial Court, the Court of Appeals
emphasized Gomez's Second Report, which indicated that faint
and blurred features of the thumbmarks appearing on the
standard documents prevented "positive identification."72 Thus,
it concluded that "no comparison may be made between the
thumbmarks found in the Deed [Absolute of Sale] and those
found in the standard documents."73
However, the Court of Appeals failed to consider that Gomez
clarified that all the requisites for comparing the thumbmarks—
(1) fingerprint patterns, (2) flow of ridges, and (3) location and
relationship of their characteristics—had been satisfied. He
specifically stated that first, "[a]ll the standard [thumbmarks]
are all in the same fingerprint pattern";74 second, "they are
also in agreement [as to] the flow [of] ridges";75 and third,
there is no discrepancy as to their ridge characteristics76:
ATTY. CORTEZ
Q Can you tell us, Mr. Witness, the requirements before you can
render an opinion in the identity of the standard thumbmark?
WITNESS
A Well, in comparing the prints there are three requirements,
(1) to determine the type of the finger prints pattern; (2) the
flow of the ridges; (3) the location of each characteristics and
their relationship to each other, sir.
ATTY. CORTEZ
Q Now with respect to the first requirements (sic) that you
mentioned "the general pattern"?
....
ATTY. CORTEZ
Q Would you say that this standard thumbmark, what can you
say about the general pattern of the thumbmark?
WITNESS
A All the standard are all in the same finger print pattern, sir.
ATTY. CORTEZ
Q How about the second requirements (sic) which is the flow of
the ridges, what can you say about this standard?
WITNESS
A Well, they are also in agreement of the flow [of] ridges of all
the standard, sir.
ATTY. CORTEZ
Q And how about the third requirements, the number of ridge
characteristics?
WITNESS
A The number of the ridge characteristics because [of:] the
none clarity (sic) of th[ese] characteristics. I only locate[d] one
or two points and it is not sufficient for positive identification. I
must locate seven or more ridge characteristics to warrant
positive identification, sir.
ATTY. CORTEZ
Q But will you agree, Mr. Witness that with respect to this point,
there is no discrepancy among the standard thumbmark?
WITNESS
A Well, if I have not meet (sic) all the requirements then I
cannot make an opinion regarding the identification of the
standard finger print, sir.
ATTY. CORTEZ
Q My question is not about the identity. My question is
pertaining to any discrepancy or any disagreement?
WITNESS
A There is none, sir.77 (Emphasis supplied)
The faint and blurred features of the thumbmarks appearing on
the standard documents may have made them less than ideal.
Still, Gomez explained that they remained to be sufficiently
consistent, and therefore, suitable for a comparison with the
thumbmarks appearing on the disputed Deed of Absolute Sale.
Gomez, too, was particular in rejecting respondents' counsel's
suggestion that the Second Report should "supersede"78 the
First Report:
ATTY. DELA CUEVA
Q Mr. Witness, this document now marked as Exh. "K" which
we are adopting as our Exh. "6" was prepared by you
subsequently to a previous report which is now marked as Exh.
"I", does this report supersede your previous report, Mr.
Witness?
WITNESS
A No, Sir.79
Thus, Gomez was steadfast on the findings he detailed in his
First Report. The First Report already established that the
questioned thumbmarks appearing on the Deed of Absolute
Sale were not Rufina's, as their genuineness is belied by
thumbmarks appearing on the authentic, standard documents.
Despite the flaws in the thumbmarks appearing in the standard
documents, the inherent deficiencies of the thumbmarks affixed
in the Deed of Absolute Sale remain.
VI
Respondents' lone witness was Atty. Arcadia Espiritu (Atty.
Espiritu), the notary public who notarized the Deed of Absolute
Sale.80 Atty. Espiritu asserted that the parties to the Deed of
Absolute Sale personally appeared before him and that Rufina
affixed her thumbmarks in his presence.81
However, Atty. Espiritu's credibility is highly questionable. It
was established during trial that he notarized an Affidavit of
Self-Adjudication in favor of a certain Victor Guinto (Guinto),
where Guinto declared that he was the sole heir of his deceased
sister, to the exclusion of their other siblings.82 This was
despite Atty. Espiritu's personal knowledge, as a longtime
neighbor of Guinto's family, that there were other brothers and
sisters.83 During trial, he even admitted that "he was not
'concerned about the truth and falsities of entries in the
document."'84
The Regional Trial Court's observations are on point. It was
right to not lend credence to Atty. Espiritu's testimony:
Thus, the presumption of regularity in the execution of notarial
documents [cannot] apply in this case, despite the testimony of
the notary public who notarized the said Deed of Absolute Sale,
whose credibility is in itself doubtful considering his admission
that he prepared and notarized an affidavit of self-adjudication
of inherited properties from a deceased sister (Exhibit "M")
inspite (sic) of his personal knowledge that the affiant was not
the sole heir of the said deceased, who has other surviving
brothers and sisters as they were once his neighbors in Zapote,
Bacoor, Cavite. No amount of testimonial evidence could ever
alter or detract from the cold physical fact that the questioned
thumbmarks are not identical with the standard thumbmarks.
Testimonial evidence cannot prevail over physical facts.85
VII
Petitioners were able to discharge their burden of proving
forgery by clear and convincing evidence. Petitioners
themselves recounted in a straightforward manner that their
mother, being illiterate, never dealt with her properties without
the assistance of any of her children.86 To attest to this, they
presented documents bearing the thumbmarks of their mother,
where it appeared that at least one (1) of them was present to
assist her.87 These same documents, when compared with the
contentious Deed of Absolute Sale, demonstrated the falsity of
the thumbmarks appearing on the latter. Respondents' cause
may have been supported by the general presumption that
notarized documents were duly executed; however, this
presumption must crumble in light of the significantly more
compelling evidence presented by petitioners. As against
petitioners' evidence, all that respondents presented was the
testimony of the notarizing lawyer, whose own acts are clouded
with suspicion.
WHEREFORE, the Petition for Review on Certiorari is GRANTED.
The July 9, 2012 Decision of the Court of Appeals in CA-G.R. CV
No. 91767 is REVERSED and SET ASIDE. The May 31, 2005
Decision of the Regional Trial Court, Branch 19, Bacoor, Cavite
in Civil Case No. BCV 97- 183 is REINSTATED.
SO ORDERED.
Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo,
JJ., concur.
THIRD DIVISION
G.R. No. 200401, January 17, 2018
METRO RAIL TRANSIT DEVELOPMENT CORPORATION,
Petitioner, v. GAMMON PHILIPPINES, INC., Respondent.
DECISION
LEONEN, J.:
This resolves a Petition for Review on Certiorari1 assailing the
Court of Appeals October 14, 2011 Decision2 and January 25,
2012 Resolution3 in CA-GR. SP No. 98569. The assailed
Decision affirmed the Construction Industry Arbitration
Commission (CIAC) Decision,4 which awarded Gammon
Philippines, Inc. (Gammon) its monetary claims for lost profits
and reimbursements for engineering services, design work, and
site de--watering and clean up, due to breach of contract.5 The
assailed Resolution denied Metro Rail Transit Development
Corporation's (MRT) Motion for Reconsideration.6
This case involves MRT's MRT-3 North Triangle Description
Project (Project), covering 54 hectares of land, out of which 16
hectares were allotted for a commercial center. Half of the
commercial center would be used for a podium structure
(Podium), which was meant to provide the structure for the
Project's Leasable Retail Development and to serve as the
maintenance depot of the rail transit system.7
Parsons Interpro JV (Parsons) was the Management Team
authorized to oversee the construction’s execution.8
On April 30, 1997, Gammon received from Parsons an invitation
to bid for the complete concrete works of the Podium. The
scope of the work involved supplying the necessary materials,
labor, plants, tools, equipment, facilities, supervision, and
services for the construction of Level 1 to Level 4 of the
Podium. 9
On May 30, 1997, Gammon submitted three (3) separate bids
and several clarifications on certain provisions of the Instruction
to Bidders and the General Conditions of Contract.10
Gammon won the bid. On August 27, 1997, Parsons issued a
Letter of Award and Notice to Proceed (First Notice to Proceed)
to Gammon.11 It was accompanied by the formal contract
documents. The First Notice to Proceed stated:
We are pleased to inform [you] that you have been awarded
the work on the construction of the Podium Structure for the
MRT-3 EDSA-North Triangle Development Project. The formal
contract document, which is the product of a series of
discussions and negotiation[,] is herewith attached for your
signature.
The Work includes the furnishing of labor, supervision,
materials, plant, equipment and other facilities and
appurtenances necessary to perform all the works in accordance
with contract document, approved drawings, specifications and
your over-all Breakdown of Lump Sum Bid (marked Exhibit ''A")
amounting to ONE BILLION FOUR HUNDRED ONE MILLION SIX
HUNDRED SEVENTY[-]TWO THOUSAND NINETY[-] FIVE PESOS
(P1,401,672,095.00). It is understood that due to the existing
squatters in the Area, the work shall be divided in two (2)
separate geographical areas designated as Phase I and Phase II
- but shall be treated as one contract and still totaling to
P1,401,672,095.00. Further, this award is predicated on the
commitments contained in the attached comfort letter (marked
Exhibit "B") issued by Gammon Construction Limited, your
associate company overseas and receipt of the duly signed
letter from the Chief Executive of Gammon Construction Limited
that is expected within seven days from the date hereof.
....
You may, therefore, proceed with the work at Phase I starting
seven (7) days from receipt of this Notice or from the time that
Site is dewatered and cleaned up, whichever is the later. It is
further understood that Gammon agrees to continue Phase II at
the price stated above and the starting time thereof will depend
on the completion by others of the footings in time to allow
construction of the superstructure in accordance with
Gammon's Tender Programme dated 13 August 1997.
....
Please signify your concurrence by signing the appropriate
space below and in the accompanying contract documents and
return to Parsons-Interpro the originals. We will send to you a
complete set of documents as soon as it is signed by the
Owner.12
In a Letter dated September 2, 1997 (First Letter), Gammon
signed and returned the First Notice to Proceed without the
contract documents.13 The First Letter stated:
MRT 3 North Triangle Development
Superstructure Contract
Letter of Award/Notice to Proceed
We return herewith the original copy of the above[-]mentioned
letter which we have countersigned dated 28 August '97.
(Please note that Mr. Salagdo's signature is missing).
The contract documentation submitted under cover of your
letter is being reviewed now, and should be signed and
returned to you tomorrow. The Letter of Comfort has now been
signed by the Chief Executive of Gammon Construction Ltd.,
and is being returned this week.
We confirm that we mobilised resources to site on Friday, 29
August '97 to pump out floodwater. Cleaning up of mud and
debris will follow on this week.
During this mobilisation phase, our Site Manager is Mr.
Ferdinand Fabro who we introduced to you during the
Preconstruction meeting last Thursday, 28 August '97.
We enclose herewith a copy of our Mobilisation Programme
dated 1 September '97 (4 x A3 sheets) which includes Design
activities, Mobilisation activities, initial Construction activities,
key plant and formwork items.
Our Design Team have now relocated to our office in Makati,
and are continuing with preparation of shop drawings of all
slabs.
We will submit a project organisation chart shortly but in the
meantime, we confirm that the following senior [Gammon
Philippines, Inc.] staff are now allocated to the project:
....
As soon as layout of temporary facilities has been agreed with
you, establishment will commence in the very limited space
allocated ...
We have today received ... drawings marked "For Construction",
and unless we hear from you to the contrary, we will proceed to
procure materials for, plan and construct walls and columns
based on these drawings. However, please note that the 3
sheets of construction notes have not been issued. We
therefore request issue of these drawings. In addition, there are
fifteen 'Requests for Information' (RFIs) which were forwarded
to you yesterday - these cover queries which affect both design
of slabs and construction of walls, columns and beams. In
particular, we urgently need instructions to clarify the
reinforcement specification generally, and connectors/splicing of
column reinforcement.
Finally, our Performance Bond and Advance Payment Bond are
being prepared now - we hope to submit these by end of this
week.14
In a Letter dated September 3, 1997 (Second Letter), Gammon
transmitted to Parsons a signed Letter of Comfort to guarantee
its obligations in the Project.15
However, in a Letter dated September 8, 1997, MRT wrote
Gammon that it would need one (1) or two (2) weeks before it
could issue the latter the Formal Notice to Proceed:16
Re: Contract for LRT3 North Triangle Podium Structure
Gentlemen:
Due to current developments in the Philippines' foreign
exchange rate and the concomitant soaring interest rates, Metro
Rail Transit Development Corp. (MRTDC) will need a week or
two to estimate the possible effects and repercussions on the
above[-]mentioned project before MRTDC, through the
Chairman of the Board, will issue the formal Notice to proceed
to your company. When these possible effects and
repercussions are analysed and decided upon by our Board,
hopefully within the week, we shall notify you at once.17
On September 9, 1997, Gammon transmitted the contract
documents to Parsons.18
In a facsimile transmission sent on the same day, Parsons
directed Gammon "to hold any further mobilization activities."19
In a Letter dated September 10, 1997, Gammon stated:
''A NOTICE OF AWARD & NOTICE TO PROCEED addressed to
Gammon Philippines Inc. (GPI) was issued by your Project
Managers, Parsons Interpro JV dated 27th August 1997 and has
been signed, accepted and an original returned to them by our
authorised people, therefore a contract exists between MTRDC
and GPI.
The formal contract document has been issued to us for final
review and has been signed and returned to your Project
Managers.
In accordance with the NOA & NTP Gammon Construction Ltd.
have provided you with the required letter of guarantee in
respect of fulfillment by GCL of GPI's obligations under the
Contract in the event of GPI's insolvency.
By the [Notice of Award] & [Notice to Proceed] [Gammon] were
(sic) required to proceed with the work starting seven days
from receipt of that Notice and it was agreed we would
commence dewatering of the flooded site and clean up
immediately, under a Change Order, and that the construction
period would run from the date of achieving the clean up of the
site. It was anticipated that these clean up works would take 11
days.
We are therefore bound by these commitments."20
On September 11, 1997, Gammon sent Parsons a facsimile to
confirm if all requirements in the contract documents were
temporarily suspended pending the clarification of the scope
and programming of the Project.21
In a facsimile transmission dated September 12, 1997, Parsons
confirmed "the temporary suspension of all [the] requirements
under the contract except the re-design of the project floor
slabs and the site de-watering and clean up."22
Thereafter, MRT decided to downscale the Podium's
construction and to proceed with the Project's conceptual
redesign.23
Upon Parson's request order, Gammon studied and discussed
with MRT the best option to phase the work.24
On November 7, 1997, Gammon presented to MRT the
sequencing and phasing of the work.25
MRT decided to adopt Gammon's reccomendation to construct
the Podium up to Level 2 only. 26
Due to these revisions on the scope of work, MRT also decided
to re- design the Level 2 slab, which it perceived would be
exposed to more load stresses from prolonged exposure to
elements and the weight of heavy construction equipment. MRT
asked Gammon to re-design.27
On February 18, 1998, Parsons issued Gammon a Notice of
Award and Notice to Proceed (Second Notice to Proceed) for
the engineering services based on the redesigned plan.28 The
Second Notice to Proceed stated:
This Notice to Proceed is for the work to be rolled-in into a
Lump Sum Contract. In the event that this contract will not be
finalized in the near future, any and all expenses that are
necessary and directly incurred by you in connection therewith
shall be reimbursed based on actual cost plus a negotiated
fee.29
Gammon signed the Second Notice to Proceed on March 11,
1998 with qualification:
The Contractor refers to the Notice of Award and Notice to
Proceed dated 27 August 1997, and understands that this
Notice to Proceed effectively lifts the suspension of work
notified in MRTDC letter dated 8 September 1997, in respect of
the design activities only for all of the Level 2 slab and that part
of the Level 3 slab over the Depot Maintenance Shop and office
area . . . ; and that the existing Notice of Award dated 27
August 1997 is still valid.30
On March 3, 1998, Gammon submitted to Parsons a Revised
Lump Sum Price Proposal of P1,044,055,102.0031 for the
construction of the Podium up to Level 2, including the design
of the floor slab at Level 2.32 At this time, Gammon had already
started its engineering services pursuant to the Second Notice
to Proceed.33
In its Letter dated March 6, 1998, Gammon sent Parsons a
breakdown of the Revised Extra Contract Expenses it allegedly
incurred in connection with the works' suspension amounting to
P17,241,505.16. 34
In its Letter dated March 11, 1998, Gammon notified Parsons of
its revised Breakdown of Lump Sum Price worth
P1,062,986,607.00.35
On April 2, 1998, MRT issued in favor of Gammon another
Notice of Award and Notice to Proceed (Third Notice to
Proceed).36
In its Letter dated April 8, 1998, Gammon acknowledged receipt
of the Third Notice to Proceed and requested clarification of
certain items.37
On April 22, 1998, Parsons wrote Gammon, stating that "since
the building ha[d] been revised . . . structural changes [would]
be needed and quantities may change."38
On April 29, 1998, Gammon wrote Parsons, confirming its
readiness to start mobilization and requesting clarification of
"urgent issues requiring resolution."39
In its Letter dated May 7, 1998, Parsons informed Gammon that
MRT was temporarily rescinding the Third Notice to Proceed,
noting that it remained unaccepted by Gammon.40
On June 11, 1998, Gammon received from Parsons the Contract
for the Construction and Development of the Superstructure,
MRT-3 North Triangle - Amended Notice to Proceed dated June
10, 1998 (Fourth Notice to Proceed).41
The terms of the Fourth Notice to Proceed were different from
those of the First and the Third Notices to Proceed. The Fourth
Notice to Proceed also expressly cancelled the First and Third
Notices to Proceed.42
On June 19, 1998, Gammon qualifiedly accepted the Fourth
Notice to Proceed.43
MRT treated Gammon's qualified acceptance as a new offer. In
a Letter dated June 22, 1998, MRT rejected Gammon's qualified
acceptance and informed Gammon that the contract would be
awarded instead to Filsystems if Gammon would not accept the
Fourth Notice to Proceed within five (5) days.44
In a Letter dated July 8, 1998, Gammon wrote MRT,
acknowledging the latter's intent to grant the Fourth Notice to
Proceed to another party despite having granted the First Notice
to Proceed to Gammon. Thus, it notified MRT of its claims for
reimbursement for costs, losses, charges, damages, and
expenses it had incurred due to the rapid mobilization program
in response to MRT's additional work instructions, suspension
order, ongoing discussions, and the consequences of its award
to another party.45
In a Letter dated July 15, 1998, MRT expressed its
disagreement with Gammon and its amenability to discussing
claims for reimbursement.46
In a Letter dated July 23, 1998, Gammon notified Parsons of its
claim for payment of all costs, damages, and expenses due to
MRT's suspension order and the consequences of its award of
the contract to another party.47
In a Letter dated August 7, 1998, MRT informed Gammon that
it was willing to reimburse Gammon for its cost in participating
in the bid amounting to about 5% of Gammon's total claim of
more or less P121,000,000.00.48
In a Letter dated August 11, 1998, Gammon replied that MRT's
offer was not enough to cover the expenses it had incurred for
the Project and that it was willing to send MRT additional
information necessary for the evaluation of its claims.49
In a Letter dated August 24, 1998, Parsons requested Gammon
for additional supporting documents to its claims.50
Gammon wrote several communications to MRT to follow up on
its evaluation request.51
On July 1, 1999, Gammon filed a Notice of Claim before CIAC
against MRT.52
On August 18, 1999, CIAC issued an Order directing MRT to file
its Answer and submit the names of its nominees to the Arbitral
Tribunal.53
MRT filed a Motion to Dismiss, arguing that CIAC had no
jurisdiction to arbitrate the dispute. This Motion was denied and
this matter was elevated to this Court.54 In Gammon v. Metro
Rail Transit Development Corporation,55 this Court held that
CIAC had jurisdiction over the case.56
Thus, on October 19, 2006, MRT filed its Answer with
Compulsory Counterclaim,57 paragraph 77 of which read:
77. To begin with, MRTDC is willing to pay GAMMON the total
amount of P5,493,639.27 representing the sum of
P4,821,261.91 and P672,377.36, which comprise GAMMON's
claim for cost of the engineering and design services and site
de-watering and clean-up works, respectively.58
On November 2, 2006, the Arbital Tribunal was formed. On
December 11, 2006, a preliminary conference was set to finalize
the Terms of Reference, which would regulate the conduct of
the proceedings. The parties agreed that they would
simultaneously submit their witnesses' affidavits on January 19,
2007.59
On March 27, 2007, CIAC ruled:60
WHEREFORE, judgment is hereby rendered and AWARD is
made on the monetary claims of Claimant as follows:
P4,821,261.9
for Engineering services design work
672,377.36
for site de-watering and clean up
P5,493,639.27
Total claim under issue #1
P53,149,330.35 as a reasonable estimate of the profit it had lost
by reason of Respondent's breach of contract in awarding the
construction to a different contractor.
P58,642,969.62 - TOTAL DUE THE CLAIMANT
SO ORDERED.61
MRT assailed the CIAC Decision before the Court of Appeals.
However, the Court of Appeals affirmed the CIAC Decision:
WHEREFORE, premises considered, the instant petition IS
DENIED. The assailed order of the CIAC dated March 8, 2007 is
AFFIRMED.62
Thus, MRT filed the instant Petition for Review.63 It argues that
Gammon was not entitled to CIAC's award considering that
there is no perfected contract between MRT and Gammon64
and that Gammon's claim for lost profits was based only on an
unsubstantiated and self-serving assertion of its employee.65
Additionally, it contends that the claim for reimbursements for
engineering services, design work, site de-watering, and clean-
up was not supported by official receipts. It also avers that it is
not estopped from contradicting its alleged judicial admission of
liability for reimbursements in the amount of P5,493,639.27,66
and further states that it is entitled to attorney's fees.67
Gammon filed its Comment,68 insisting that there is a perfected
contract between them.69 It argues that this Court determined
the perfection of the contract in Gammon v. Metro Rail Transit
Development Corporation,70 and thus, the doctrine of the law
of the case applies. 71 Gammon asserts that its claim for lost
profits was sufficiently substantiated72 and that it has proven
its entitlement to the reimbursements.73 It avers that damages
may be proved not only by official receipts, but also through
other documentary evidence, such as invoices and debit
notes.74
Gammon further claims that MRT is bound by its implied
admission of its liability for the reimbursements in its Answer
with Compulsory Counterclaim. It points out that MRT
mentioned the exact amount it was willing to pay and that it did
not state that it would pay only the proved amount.75 It argues
that MRT is raising factual issues and that CIAC's factual
findings on the existence of the contract and the amount of
damages ought to be respected.76
In its Reply,77 MRT argues that the doctrine of the law of the
case does not apply as the issue in Gammon was CIAC's
jurisdiction and not the existence of the contract.78 It reiterates
that no contract was perfected because MRT withdrew its offer
to Gammon before Gammon returned the contract
documents.79 Thus, Gammon's acceptance only came after the
offer had been withdrawn and nothing that could have been
accepted remained.80
MRT reasons that the loss of profits was not proven with a
reasonable degree of certainty because Gammon's witness is
not an expert witness.81 Moreover, it emphasizes that the
finding in National Housing Authority v. First Limited
Construction Corporation82 of 10% profit as the standard
practice in the construction industry is merely obiter dictum,
and thus, cannot operate as a precedent for construction-
related cases.83
MRT further claims that invoices and debit memos are not
sufficient proof of payment to entitle Gammon to
reimbursements because an invoice is a mere detailed
statement of the items and their prices and charges, while a
debit memo is only an advice to the receiver of an outstanding
debt.84
MRT avers that the alleged admission in its Answer with
Compulsory Counterclaim should be construed as extending
only to those "supported by official receipts."85 It reiterates
that "[j]udicial admissions cannot supplant the requirements of
law ... that actual or compensatory damages ... must be duly
proven."86 Moreover, MRT asserts that its offer to pay is not an
admission of liability but only "an attempt to settle the issue and
avoid litigation." 87 It argues that the exact amount of
P5,493,639.27 was mentioned in the Answer with Compulsory
Counterclaim as it was the amount claimed by Gammon, which
MRT offered to pay, if proven.88
It further asserts that the findings of CIAC and of the Court of
Appeals are all contrary to evidence on record or are premised
on speculation, surmises, and conjectures, and thus, are serious
errors of law properly re-examinable by this Court.89
For this Court's resolution are the following issues:
First, whether or not there is a perfected contract between
petitioner Metro Rail Transit Development Corporation and
respondent Gammon Philippines, Inc.;
Second, whether the doctrine of the law of the case in Gammon
v. Metro Rail Transit Development Corporation90 applies;
Third, whether or not petitioner Metro Rail Transit Development
Corporation is bound by its allegation in its Answer with
Compulsory Counterclaim that it was "willing to pay GAMMON
the total amount of P5,493,639.27 representing the sum of
P4,821,261.91 and P672,377.36, which comprise GAMMON's
claim for cost of the engineering and design services and site
de-watering and clean-up works, respectively";91 and
Finally, whether or not respondent Gammon Philippines, Inc.'s
claims for actual damages, reimbursement of amounts, and lost
profits were sufficiently proven.
This Court denies the Petition.
CIAC was created under Executive Order No. 100892 to
establish an arbitral machinery that will settle expeditiously
problems arising from, or connected with, contracts in the
construction industry.93
Its jurisdiction includes construction disputes between or among
parties to an arbitration agreement, or those who are otherwise
bound by the latter, directly or by reference.94 Thus, any
project owner, contractor, subcontractor, fabricator, or project
manager of a construction project who is bound by an
arbitration agreement in a construction contract is under CIAC's
jurisdiction in case of any dispute.95
CIAC is a quasi-judicial body exercising quasi-judicial powers.
A quasi-judicial agency is a government body, not part of the
judiciary or the legislative branch, which adjudicates disputes
and creates rules which affect private parties' rights.96 It is
created by an enabling statute, and thus, its existence
continues beyond the resolution of a dispute and is independent
from the will of the parties. Its powers are limited to those
expressly granted or necessarily implied in the enabling law.97
Quasi-judicial or administrative adjudicatory power has been
defined as the power: "(1) to hear and determine questions of
fact to which legislative policy is to apply, and (2) to decide in
accordance with the standards laid down by the law itself in
enforcing and administering the same law."98
Arbitration under a quasi-judicial body is similar to commercial
arbitration in that its factual findings are generally accorded
respect and finality.
However, commercial arbitration is conducted by ad-hoc bodies
created by stipulation of parties for the purpose of settling
disputes concerning their private or proprietary interests. In
general, the findings in commercial arbitration are respected to
uphold the autonomy of arbitral awards.99
On the other hand, quasi-judicial agencies were created for a
speedier resolution of controversies on matters of state interest
that require specialized knowledge and expertise.100
CIAC exercises quasi-judicial powers over arbitration disputes
concerning construction contracts. Thus, its findings are
accorded respect because it comes with the presumption that
CIAC is technically proficient in efficiently and speedily resolving
conflicts in the construction industry.
Thus, under the Construction Industry Arbitration Law, arbitral
awards are binding and shall be final and unappealable, except
on pure questions of law:
Section 19. Finality of Awards. — The arbitral award shall be
binding upon the parties. It shall be final and inappealable
except on questions of law which shall be appealable to the
Supreme Court.
Initially, CIAC decisions are appealable only to this Court.
However, when the Rules of Court were enacted, appeals from
CIAC decisions became appealable to the Court of Appeals
under Rule 43:101
Section 1. Scope. — This Rule shall apply to appeals from
judgments or final orders of the Court of Tax Appeals and from
awards, judgments, final orders or resolutions of or authorized
by any quasi-judicial agency in the exercise of its quasi-judicial
functions. Among these agencies are the Civil Service
Commission, Central Board of Assessment Appeals, Securities
and Exchange Commission, Office of the President, Land
Registration Authority, Social Security Commission, Civil
Aeronautics Board, Bureau of Patents, Trademarks and
Technology Transfer, National Electrification Administration,
Energy Regulatory Board, National Telecommunications
Commission, Department of Agrarian Reform under Republic Act
No. 6657, Government Service Insurance System, Employees
Compensation Commission, Agricultural Inventions Board,
Insurance Commission, Philippine Atomic Energy Commission,
Board of Investments, Construction Industry Arbitration
Commission, and voluntary arbitrators authorized by law.
Section 2. Cases Not Covered. — This Rule shall not apply to
judgments or final orders issued under the Labor Code of the
Philippines.
While Rule 43 petitions may pertain to questions of fact,
questions of law, or both questions of law and fact, it has been
established that factual findings of CIAC may not be reviewed
on appeal.102 In CE Construction v. Araneta,103 this Court
explained that appeals from CIAC may only raise questions of
law:
This is not to say that factual findings of CIAC arbitral tribunals
may now be assailed before the Court of Appeals. Section 3's
statement "whether the appeal involves questions of fact, of
law, or mixed questions of fact and law" merely recognizes
variances in the disparate modes of appeal that Rule 43
standardizes: that there were those that enabled questions of
fact, there were those that enabled questions of law, and there
were those that enabled mixed questions fact and law. Rule 43
emphasizes that though there may have been variances, all
appeals under its scope are to be brought before the Court of
Appeals. However, in keeping with the Construction Industry
Arbitration Law, any appeal from CIAC Arbitral Tribunals must
remain limited to questions of law.
Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.
explained the wisdom underlying the limitation of appeals to
pure questions of law:
Section 19 makes it crystal clear that questions of fact cannot
be raised in proceedings before the Supreme Court — which is
not a trier of facts — in respect of an arbitral award rendered
under the aegis of the CIAC. Consideration of the animating
purpose of voluntary arbitration in general, and arbitration
under the aegis of the CIAC in particular, requires us to apply
rigorously the above principle embodied in Section 19 that the
Arbitral Tribunal's findings of fact shall be final and
unappealable.
Voluntary arbitration involves the reference of a dispute to an
impartial body, the members of which are chosen by the parties
themselves, which parties freely consent in advance to abide by
the arbitral award issued after proceedings where both parties
had the opportunity to be heard. The basic objective is to
provide a speedy and inexpensive method of settling disputes
by allowing the parties to avoid the formalities, delay, expense
and aggravation which commonly accompany ordinary litigation,
especially litigation which goes through the entire hierarchy of
courts. [The Construction Industry Arbitration Law] created an
arbitration facility to which the construction industry in the
Philippines can have recourse. The [Construction Industry
Arbitration Law] was enacted to encourage the early and
expeditious settlement of disputes in the construction industry,
a public policy the implementation of which is necessary and
important for the realization of national development goals.
Consistent with this restrictive approach, this Court is duty-
bound to be extremely watchful and to ensure that an appeal
does not become an ingenious means for undermining the
integrity of arbitration or for conveniently setting aside the
conclusions arbitral processes make. An appeal is not an artifice
for the parties to undermine the process they voluntarily elected
to engage in. To prevent this Court from being a party to such
perversion, this Court's primordial inclination must be to uphold
the factual findings of arbitral tribunals:
Aware of the objective of voluntary arbitration in the labor field,
in the construction industry, and in any other area for that
matter, the Court will not assist one or the other or even both
parties in any effort to subvert or defeat that objective for their
private purposes. The Court will not review the factual findings
of an arbitral tribunal upon the artful allegation that such body
had "misapprehended the facts" and will not pass upon issues
which are, at bottom, issues of fact, no matter how cleverly
disguised they might be as "legal questions." The parties here
had recourse to arbitration and chose the arbitrators
themselves; they must have had confidence in such arbitrators.
The Court will not, therefore, permit the parties to relitigate
before it the issues of facts previously presented and argued
before the Arbitral Tribunal, save only where a very clear
showing is made that, in reaching its factual conclusions, the
Arbitral Tribunal committed an error so egregious and hurtful to
one party as to constitute a grave abuse of discretion resulting
in lack or loss of jurisdiction. Prototypical examples would be
factual conclusions of the Tribunal which resulted in deprivation
of one or the other party of a fair opportunity to present its
position before the Arbitral Tribunal, and an award obtained
through fraud or the corruption of arbitrators. Any other, more
relaxed, rule would result in setting at naught the basic
objective of a voluntary arbitration and would reduce arbitration
to a largely inutile institution.
Thus, even as exceptions to the highly restrictive nature of
appeals may be contemplated, these exceptions are only on the
narrowest of grounds. Factual findings of CIAC arbitral tribunals
may be revisited not merely because arbitral tribunals may have
erred, not even on the already exceptional grounds traditionally
available in Rule 45 Petitions. Rather, factual findings may be
reviewed only in cases where the CIAC arbitral tribunals
conducted their affairs in a haphazard, immodest manner that
the most basic integrity of the arbitral process was
imperiled.104 (Emphasis in the original, citations omitted)
Thus, CIAC's factual findings on construction disputes are final,
conclusive, and not reviewable by this Court on appeal. The
only exceptions are when:
(1) [T]he award was procured by corruption, fraud or other
undue means; (2) there was evident partiality or corruption of
the arbitrators or of any of them; (3) the arbitrators were guilty
of misconduct in refusing to postpone the hearing upon
sufficient cause shown, or in refusing to hear evidence pertinent
and material to the controversy; (4) one or more of the
arbitrators were disqualified to act as such under section nine of
Republic Act No. 876 and willfully refrained from disclosing such
disqualifications or of any other misbehavior by which the rights
of any party have been materially prejudiced; or (5) the
arbitrators exceeded their powers, or so imperfectly executed
them, that a mutual, final and definite award upon the subject
matter submitted to them was not made.105 (Citation omitted)
Necessarily, before petitioner may raise any question of fact, it
must prove that the above circumstances exist in the case at
bar.
I
This Court rules that there is a perfected contract between MRT
and Gammon.
MRT argues that there was no perfected contract between the
parties as Gammon only accepted MRT's offer after MRT had
already revoked it.106 MRT claims that it withdrew its offer to
Gammon in its September 8, 1997 Letter, when it suspended
the Project to review the foreign exchange rates and interest
rates.107 It emphasizes that while Gammon had already then
returned the First Notice to Proceed, it did not return the
contract documents until September 12, 1997.108 By then, MRT
had already withdrawn the First Notice to Proceed, and the
parties were already renegotiating the contract's cause and
object.109
On the other hand, Gammon maintains that there was a
perfected contract between the parties. It insists that MRT did
not withdraw or modify its offer before Gammon signed and
returned the First Notice to Proceed and the contract
documents. It claims that the contract was not cancelled and
was only temporarily and partially suspended, and this did not
affect its perfection. 110
The Court of Appeals affirmed CIAC 's finding that the contract
was perfected when the contract documents were returned to
MRT on September 9, 1997. It found that the contract was
merely suspended and not terminated when MRT was studying
the effects of the foreign exchange rates and interests on the
Project.111 Moreover, it noted that MRT found it necessary to
expressly cancel the First Notice to Proceed, implying that a
contract was perfected.112
This Court rules that there is a perfected contract between the
parties. Article 1305 of the Civil Code states:
Article 1305. A contract 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.
Article 1315. Contracts are perfected by mere consent, and
from that moment the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all
the consequences which, according to their nature, may be in
keeping with good faith, usage and law.
The requisites of a valid contract are provided for in Article
1318 of the Civil Code:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
A contract is perfected when both parties have consented to the
object and cause of the contract. There is consent when the
offer of one party is absolutely accepted by the other party.113
The acceptance of the other party may be express or
implied.114 However, the offering party may impose the time,
place, and manner of acceptance by the other party, and the
other party must comply.115
Thus, there are three (3) stages in a contract: negotiation,
perfection, and consummation.
Negotiation refers to the time the parties signify interest in the
contract up until the time the parties agree on its terms and
conditions. The perfection of the contract occurs when there is
a meeting of the minds of the parties such that there is a
concurrence of offer and acceptance, and all the essential
elements of the contract—consent, object and cause—are
present. The consummation of the contract covers the period
when the parties perform their obligations in the contract until it
is finished or extinguished.116
To determine when the contract was perfected, the acceptance
of the offer must be unqualified, unconditional, and made
known to the offeror.117 Before knowing of the acceptance, the
offeror may withdraw the offer.118 Moreover, if the offeror
imposes the manner of acceptance to be done by the offerree,
the offerree must accept it in that manner for the contract to be
binding.119 If the offeree accepts the offer in a different
manner, it is not effective, but constitutes a counter-offer,
which the offeror may accept or reject.120 Thus, in Malbarosa
v. Court of Appeals:121
Under Article 1319 of the New Civil Code, the consent by a
party is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to
constitute the contract. An offer may be reached at any time
until it is accepted. An offer that is not accepted does not give
rise to a consent. The contract does not come into existence. To
produce a contract, there must be acceptance of the offer
which may be express or implied but must not qualify the terms
of the offer. The acceptance must be absolute, unconditional
and without variance of any sort from the offer.
The acceptance of an offer must be made known to the offeror.
Unless the offeror knows of the acceptance, there is no meeting
of the minds of the parties, no real concurrence of offer and
acceptance. The offeror may withdraw its offer and revoke the
same before acceptance thereof by the offeree. The contract is
perfected only from the time an acceptance of an offer is made
known to the offeror. If an offeror prescribes the exclusive
manner in which acceptance of his offer shall be indicated by
the offeree, an acceptance of the offer in the manner
prescribed will bind the offeror. On the other hand, an attempt
on the part of the offeree to accept the offer in a different
manner does not bind the offeror as the absence of the meeting
of the minds on the altered type of acceptance. An offer made
inter praesentes must be accepted immediately. If the parties
intended that there should be an express acceptance, the
contract will be perfected only upon knowledge by the offeror of
the express acceptance by the offeree of the offer. An
acceptance which is not made in the manner prescribed by the
offeror is not effective but constitutes a counter-offer which the
offeror may accept or reject. The contract is not perfected if the
offeror revokes or withdraws its offer and the revocation or
withdrawal of the offeror is the first to reach the offeree. The
acceptance by the offeree of the offer after knowledge of the
revocation or withdrawal of the offer is inefficacious. The
termination of the contract when the negotiations of the parties
terminate and the offer and acceptance concur, is largely a
question of fact to be determined by the trial court.122
(Citations omitted)
In bidding contracts, this Court has ruled that the award of the
contract to the bidder is an acceptance of the bidder's offer. Its
effect is to perfect a contract between the bidder and the
contractor upon notice of the award to the bidder.123 Thus, in
Valencia v. Rehabilitation Finance Corp.:124
With respect to the first argument, it is worthy of notice that
the proposal submitted by petitioner consisted of several items,
among which are: (a) one for P389,980, for the "complete
construction of the office building" in question, ... ; (b) another
for P358,480, for the "complete construction of the office
building only", . .. ; (c) a third one for P18,900, for the
"electrical installations only", . . . ; and (d) a fourth item for
P12,600, for the "plumbing installations only" ...
Each one of these items was complete in itself, and, as such, it
was distinct, separate and independent from the other items.
The award in favor of petitioner herein, implied, therefore,
neither a modification of his offer nor a partial acceptance
thereof It was an unqualified acceptance of the fourth item of
his bid, which item constituted a complete offer or proposal on
the part of petitioner herein. The effect of said acceptance was
to perfect a contract, upon notice of the award to petitioner
herein.125 (Emphasis supplied)
Likewise, in Central Bank of the Philippines v. Court of
Appeals:126
As We see it then, contrary to the contention of the Bank, the
provision it is citing may not be considered as determinative of
the perfection of the contract here in question. Said provision
only means that as regards the violation of any particular term
or condition to be contained in the formal contract, the
corresponding action therefor cannot arise until after the writing
has been fully executed. Thus, after the Proposal of respondent
was accepted by the Bank thru its telegram and letter both
dated December 10, 1965 and respondent in turn accepted the
award by its letter of December 15, 1965, both parties became
bound to proceed with the subsequent steps needed to
formalize and consummate their agreement. Failure on the part
of either of them to do so, entitles the other to compensation
for the resulting damages. To such effect was the ruling of this
Court in Valencia vs. RFC 103 Phil. 444. We held therein that
the award of a contract to a bidder constitutes an acceptance of
said bidder's proposal and that "the effect of said acceptance
was to perfect a contract, upon notice of the award to (the
bidder)" . .. We further held therein that the bidder's "failure to
(sign the corresponding contract) did not relieve him of the
obligation arising from the unqualified acceptance of his offer.
Much less did it affect the existence of a contract between him
and respondent" . . .
It is neither just nor equitable that Valencia should be construed
to have sanctioned a one-sided view of the perfection of
contracts in the sense that the acceptance of a bid by a duly
authorized official of a government-owned corporation,
financially and otherwise autonomous both from the National
Government and the Bureau of Public Works, insofar as its
construction contracts are concerned, binds only the bidder and
not the corporation until the formal execution of the
corresponding written contract.127 (Emphasis supplied)
Thus, the award of a contract to a bidder perfects the contract.
128 Failure to sign the physical contract does not affect the
contract's existence or the obligations arising from it. 129
Applying this principle to the case at bar, this Court finds that
there is a perfected contract between the parties. MRT has
already awarded the contract to Gammon, and Gammon's
acceptance of the award was communicated to MRT before
MRT rescinded the contract.
The Invitation to Bid issued to Gammon stated that MRT "will
select the Bidder that [MRT] judges to be the most suitable,
most qualified, most responsible and responsive, and with the
most attractive Price and will enter into earnest negotiations to
finalize and execute the Contract."130
On May 30, 1997, Gammon tendered its bids.131
In a Letter dated July 14, 1997, Gammon submitted another
offer to MRT in response to the latter's invitation to submit a
final offer considering the fluctuation in foreign exchange rates
and an odd-and-even vehicle restriction plan.132
Parsons thereafter issued the First Notice to Proceed,133 which
stated:
We are pleased to inform [you] that you have been awarded
the work on the construction of the Podium Structure for the
MRT-3 EDSA- North Triangle Development Project. The formal
contract document, which is the product of a series of
discussions and negotiation is herewith attached for your
signature.
The Work includes the furnishing of labor, supervision,
materials, plant, equipment and other facilities and
appurtenances necessary to perform all the works in accordance
with contract document, approved drawings, specifications and
your over-all Breakdown of Lump Sum Bid (marked Exhibit "A")
amounting to ONE BILLION FOUR HUNDRED ONE MILLION SIX
HUNDRED SEVENTY[-]TWO THOUSAND NINETY[-]FIVE PESOS
(P1,401,672,095.00). It is understood that due to the existing
squatters in the Area, the work shall be dvided in two (2)
separate geographical areas designated as Phase I and Phase II
- but shall be treated as one contract and still totalling to
P1,401,672,095.00. Further, this award is predicated on the
commitments contained in the attached comfort letter (marked
Exhibit "B'') issued by Gammon Construction Limited, your
associate company overseas and receipt of the duly signed
letter from the Chief Executive of Gammon Construction Limited
that is expected within seven days from the date hereof.
....
You may, therefore, proceed with the work at Phase I starting
seven (7) days from receipt of this Notice or from the time that
Site is dewatered and cleaned up, whichever is later. It is
further understood that Gammon agrees to continue Phase II at
the price stated above and the starting time thereof will depend
on the completion by others of the footings in time to allow
construction of the superstructure in accordance with
Gammon's Tender Programme dated 13 August 1997.
....
Please signify your concurrence by signing the appropriate
space below and in the accompanying contract documents and
return to Parsons-Interpro the originals. We will send to you a
complete set of documents as soon as it is signed by the
Owner.134 (Emphasis supplied)
In its First Letter, Gammon signed and returned the First Notice
to Proceed to signify its consent to its prestations.135
In its Second Letter, Gammon transmitted to Parsons the signed
Letter of Comfort to guarantee its obligations in the Project.136
On September 9, 1997, Gammon returned to Parsons the
contract documents.137
MRT argues that the return of the contract documents occurred
after it had already revoked its offer, i.e., after it sent its
September 8, 1997 Letter, which stated:
Re: Contract for LRT3 North Triangle Podium Structure
Gentlemen:
Due to current developments in the Philippines' foreign
exchange rate and the concomitant soaring interest rates, Metro
Rail Transit Development Corp. (MRTDC) will need a week or
two to estimate the possible effects and repercussions on the
above[-]mentioned project before MRTDC, through the
Chairman of the Board, will issue the formal Notice to proceed
to your company. When these possible effects and
repercussions are analysed and decided upon by our Board,
hopefully within the week, we shall notify you at once.138
However, MRT had already accepted the offered bid of
Gammon and had made known to Gammon its acceptance
when it awarded the contract and issued it the First Notice to
Proceed on August 27, 1997.
The First Notice to Proceed clearly laid out the object and the
cause of the contract. In exchange for P1,401,672,095.00,
Gammon was to furnish "labor, supervision, materials, plant,
equipment and other facilities and appurtenances necessary to
perform all the works in accordance with [its bid]."139
This acceptance is also manifested in the First Notice to Proceed
when it authorized Gammon to proceed with the work seven (7)
days from its receipt or from the time the site is de-watered and
cleaned up.
Thus, Gammon's receipt of the First Notice to Proceed
constitutes the acceptance that is necessary to perfect the
contract.
The First Notice to Proceed stated that the award "is predicated
on the commitments contained in the ... comfort letter ... issued
by Gammon Construction Limited," Gammon's associate
company overseas.140 It also required that Gammon signify its
concurrence by signing and returning the First Notice to
Proceed and the accompanying contract documents. 141
Assuming that this constitutes a counter-offer from MRT, this
Court rules that Gammon sufficiently complied with these
requirements such that the perfection of the contract cannot be
affected. Gammon returned the signed First Notice to Proceed
on September 2, 1997. It transmitted to Parsons the signed
Letter of Comfort to guarantee its obligations in the Project on
September 3, 1997.142 The signed contract documents were
returned on September 9, 1997.143
Gammon manifested its unqualified acceptance of the First
Notice to Proceed on September 2, 1997 in its First Letter:
MRT 3 North Triangle Development
Superstructure Contract
Letter of Award/Notice to Proceed
We return herewith the original copy of the above mentioned
letter which we have countersigned dated 28 August '97.
(Please note that Mr. Salagdo 's signature is missing).
The contract documentation submitted under cover of your
letter is being reviewed now, and should be signed and
returned to you tomorrow. The Letter of Comfort has now been
signed by the Chief Executive of Gammon Construction Ltd.,
and is being returned this week.
We confirm that we mobilised resources to site on Friday, 29
August '97 to pump out floodwater. Cleaning up of mud and
debris will follow on this week.
During this mobilisation phase, our Site Manager is Mr.
Ferdinand Fabro who we introduced to you during the
Preconstruction Meeting last Thursday, 28 August '97.
We enclose herewith a copy of our Mobilisation programme
dated 1 September '97 (4 x A3 sheets) which includes Design
activities, Mobilisation activities, initial Construction activities,
key plant and formwork items.
Our Design Team have now relocated to our office in Makati,
and are continuing with preparation of shop drawings of all
slabs.
We will submit a project organisation chart shortly but in the
meantime, we confirm that the following senior [Gammon
Philippines, Inc.] staff are now allocated to the project:
....
As soon as layout of temporary facilities has been agreed with
you, establishment will commence in the very limited space
allocated ...
We have today received ... drawings marked "For Construction",
and unless we hear from you to the contrary, we will proceed to
procure materials for, plan and construct walls and columns
based on these drawings. However, please note that the 3
sheets of construction notes have not been issued. We
therefore request issue of these drawings. In addition, there are
fifteen 'Requests for Information' (RFIs) which were forwarded
to you yesterday these cover queries which affect both design
of slabs and construction of walls, columns and beams. In
particular, we urgently need instructions to clarify the
reinforcement specification generally, and connectors/splicing of
column reinforcement.
Finally, our Performance Bond and Advance Payment Bond are
being prepared now - we hope to submit these by the end of
the week.144
This First Letter shows that Gammon fully consented to the
contents and accepted the prestations of the First Notice to
Proceed. Gammon's acceptance is also manifested in its
undertakings to mobilize resources, to prepare the Performance
and Advance Payment Bonds, and to procure materials
necessary for the Project. All that remained was the formality of
returning the contract documents and the Letter of Comfort,
which eventually was complied with by Gammon. Thus, there is
already mutual consent on the object of the contract and its
consideration, and an absolute acceptance of the offer.
In any case, this Court has ruled that the meeting of the minds
need not always be put in writing, and the fact that the
documents have not yet been signed or notarized does not
mean that the contract has not been perfected.145 A binding
contract may exist even if the signatures have not yet been
affixed because acceptance may be express or implied.146
Thus, the parties have become bound to consummate the
contract such that the failure by one party to comply with its
obligations under the contract entitles the other party to
damages. Clearly, Gammon was expected to comply with the
award when it signified its concurrence. Thus, it is not just or
equitable for the perfection of the contract to be one (1)-sided
such that the contract only binds Gammon but not MRT just
because the contract documents were not yet returned before
MRT suspended the contract.147
Moreover, this Court rules that MRT did not revoke its offer
when it temporarily suspended the First Notice to Proceed.
MRT's September 8, 1997 Letter stated, thus:
Due to current developments in the Philippines' foreign
exchange rate and the concomitant soaring interest rates, Metro
Rail Transit Development Corp. (MRTDC) will need a week or
two to estimate the possible effects and repercussions on the
above[-]mentioned project before MRTDC, through the
Chairman of the Board, will issue the formal Notice to Proceed
to your company. When these possible effects and
repercussions are analysed and decided upon by our Board,
hopefully within the week, we shall notify you at once.148
Thereafter, Parsons directed Gammon to hold any further
mobilization activities in a facsimile transmission dated
September 9, 1997. 149
On September 11, 1997, Gammon sent Parsons a facsimile to
confirm if all requirements in the contract documents were
temporarily suspended pending the clarification of the scope
and programming of the Project.150
In a facsimile transmission dated September 12, 1997, Parsons
confirmed "the temporary suspension of all the requirements
under the contract except the re-design of the project floor
slabs and the site de- watering and clean up":151
With reference to your fax of September 11, 1997 this will
confirm the temporary suspension of all requirements under the
terms of the contract until such time as clarification of scope
has been received from the owner. The only exception to this
suspension is the re-design of the project[']s floor slabs and the
site de-watering and clean up.152 (Emphasis supplied)
The wording of these communications indicates that the
contract is still binding though on hold. Gammon was informed
that the contract was temporarily suspended. When a contract
is suspended temporarily, it provisionally ceases to be operative
until the occurrence of a condition or situation that warrants the
lifting of the suspension of the contract.153
It is different from a cancellation of a contract which terminates
the contract such that it does not become operative again.
The usage of the words "temporary suspension" is clear. It is a
settled rule that when the words in a contract are clear and
leave no doubt on the parties' intentions, the literal meaning
shall control.154 Thus, the above communications cannot be
interpreted to mean that the contract has been cancelled or
rescinded.
This is bolstered by MRT's express cancellation of the contract
on June 10, 1998 in its Fourth Notice to Proceed:
This notice formally cancels documents referred to as Notice of
Award, Notice to Proceed issued on August 27, 1997, which was
received by [Gammon Philippines, Inc.] on August 28, 1997 and
April 2, 1998, which was received by [Gammon Philippines,
Inc.] on April 8, 1998.155
It can be implied that prior to the Fourth Notice to Proceed, the
First and Third Notices to Proceed were not cancelled and were
still valid and subsisting.
Furthermore, MRT's Second Notice to Proceed issued on
February 18, 1998 for engineering services based on the
redesigned plan was signed by Gammon on March 11, 1998
with a qualification:156
The Contractor refers to the 'Notice of Award' and 'Notice to
Proceed' dated 27 August 1997, and understands that this
'Notice to Proceed' effectively lifts the suspension of work
notified in Metro Rail Transit Development Corporation letter
dated 8 September 1997, in respect of the design activities only
for all of the Level 2 slab and that part of the Level 3 slab over
the Depot Maintenance Shop and office area . . . ; and that the
existing 'Notice of Award' dated 27 August 1997 is still valid.157
(Emphasis supplied)
MRT did not contest Gammon's notice of receipt of the First
Notice to Proceed, expressing that it was still valid and was not
cancelled.
Additionally, when the parties were discussing the change of
plans, MRT did not mention that no contract was executed
between them. Instead, it sought to modify its terms and
conditions. Thus, Gammon was made to believe that the First
Notice to Proceed was in force and effect, albeit temporarily
suspended.
Given these circumstances, it cannot be said that no contract
was perfected between the parties.
II
The parties argue on the application of Gammon v. Metro Rail
Transit Development Corporation158 on the contract's
perfection.
MRT claims that this Court's ruling in Gammon did not
determine that a contract was perfected as to warrant the
application of the doctrine of the law of the case.159 It argues
that the issue in Gammon was CIAC's jurisdiction over the
Notice of Claim, not the existence of the contract.160 MRT
insists that the ruling was limited only to the preliminary
question of whether or not there is an arbitration agreement
between the parties to give CIAC jurisdiction over the
dispute.161 It was a preliminary finding supported by limited
evidence and not the result of an actual trial.162
However, Gammon claims that Gammon already determined
that there is a perfected contract, and thus, the doctrine of the
law of the case applies. It insists that without the perfected
contract, which contains the provision for arbitration, CIAC
would not have acquired jurisdiction over the case. This is
shown in that the existence of a contract between the parties
was not an issue submitted by the parties in the arbitration
proceedings. Thus, CIAC could not have ruled on it.163
The Court of Appeals affirmed that there was a perfected
contract because MRT alleged in Gammon that the contract was
novated or abandoned. It found that this was an implied
admission that the contract was perfected considering that
there was nothing to novate or abandon if there had been no
perfected contract. The perfection of the contract was further
confirmed by this Court's ruling in Gammon that the contract
was merely modified.164
In Gammon v. Metro Rail Transit Development Corporation,165
this Court held:
Although there is considerable disagreement concerning the
foregoing facts, specifically whether Gammon undertook certain
works on the Project and whether a re-bidding for the
downgraded podium structure was indeed conducted, the Court
does not need to make its own factual findings before it can
resolve the main question of whether the CIAC's jurisdiction
was properly invoked. The resolution of this question
necessarily involves a two-pronged analysis, first, of the
requisites for invoking the jurisdiction of the CIAC, and second,
of the scope of arbitrable issues covered by CIAC's jurisdiction.
EO 1008 expressly vests in the CIAC original and exclusive
jurisdiction over disputes arising from or connected with
construction contracts entered into by parties that have agreed
to submit their dispute to voluntary arbitration . . .
....
In this case, the parties submitted themselves to the jurisdiction
of the CIAC by virtue of the arbitration clause in the [General
Conditions of Contract], which provides:
....
MRTDC, however, contends that the contract between the
parties was novated by subsequent [Notices of Award]/[Notices
to Proceed] which changed the design of the podium structure
and reduced the contract price.
We do not agree. Novation is defined as the extinguishment of
an obligation by the substitution or change of the obligation by
a subsequent one which terminates the first, either by changing
the object or principal conditions; substituting the person of the
debtor; or subrogating a third person in the rights of the
creditor. In order tha[t] an obligation may be extinguished by
another which substitutes the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.
Novation cannot be presumed. The animus novandi, whether
partial or total, must appear by the express agreement of the
parties, or by their acts that are too clear and unequivocal to be
mistaken. Further, novation may either be extinctive or
modificatory. It is extinctive when an old obligation is
terminated by the creation of a new one that takes the place of
the former. It is merely modificatory when the old obligation
subsists to the extent that it remains compatible with the
amendatory agreement.
We have carefully gone over the records of this case and are
convinced that the redesign of the podium structure and the
reduction in the contract price merely modified the contract.
These modifications were even anticipated by the [General
Conditions of Contract] as it expressly states that changes may
be made on the works without invalidating the contract, thus:
....
By these terms, the parties evidently agreed that should
changes need to be made on the Project plans, such changes
shall not annul or extinguish the contract. Thus, it can fairly be
concluded that the revisions in the design of the Project and the
reduction of the contract price were intended to merely modify
the agreement and not to supplant the same.
Parenthetically, while the [Notices of Award]/[Notices to
Proceed] adverted to the execution of a formal contract for the
Project, no such formal contract appears to have been
executed. Instead, the [Notices of Award]/[Notices to Proceed]
issued by MRTDC in favor of Gammon denominated the
agreement as "Contract No. 4.251.001 for the Construction and
Development of the Superstructure MRT 3 North Triangle'' and
consistently referred to the [General Conditions of Contract] as
one of the controlling documents with regard to the transaction.
In fact, as mentioned by the CIAC in its assailed Order dated
August 18, 1999, the [Notice of Award]/[Notice to Proceed]
dated June 10, 1998 makes reference to the [General
Conditions of Contract]. The June 10, 1998 [Notice of
Award]/[Notice to Proceed] states:
A formal contract for the Work is in process and will be available
for signature as soon as possible. Pending the execution of the
contract, the General conditions, and the Drawings and
Specifications included with the Bid Documents (as originally
issued and only as applicable to the current scope of work), all
of which are incorporated herein by this reference, shall apply in
this Notice ...
A similar reference to the [General Conditions of Contract]
appears in the April 2, 1998 [Notice of Award]/[Notice to
Proceed]. Thus, even granting that, as the Court of Appeals
ruled, the August 27, 1997 [Notice of Award]/[Notice to
Proceed] had been novated by the April 2, 1998 [Notice of
Award]/[Notice to Proceed] and that, in turn, the latter was
rescinded by MRTDC, the arbitration clause in the [General
Conditions of Contract] remained in force.
At any rate, the termination of the contract prior to a demand
for arbitration will generally have no effect on such demand,
provided that the dispute in question either arose out of the
terms of the contract or arose when a broad contractual
arbitration clause was still in effect. The Court of Appeals,
therefore, erred in ruling that there must be a subsisting
contract before the jurisdiction of the CIAC may properly be
invoked. The jurisdiction of the CIAC is not over the contract
but the disputes which arose therefrom, or are connected
thereto, whether such disputes arose before or after the
completion of the contract, or after the abandonment or breach
thereof.
It may even be added that issues regarding the rescission or
termination of a construction contract are themselves
considered arbitrable issues under Sec. 2, Art. IV of the Rules of
Procedure Governing Construction Arbitration, the Rules which
were in force at the time the present controversy arose. . . .
This brings us to the question of whether the dispute in this
case falls within the scope of the arbitration clause.
....
The arbitration clause in the [General Conditions of Contract]
submits to the jurisdiction of the CIAC all disputes, claims or
questions subject to arbitration under the contract. The
language employed in the arbitration clause is such as to
indicate the intent to include all controversies that may arise
from the agreement as determined by the CIAC Rules. It is
broad enough to encompass all issues save only those which EO
1008 itself excludes, i.e., employer-employee relationship
issues. Under these Rules, the amount of damages and
penalties is a general category of arbitrable issues under which
Gammon's claims may fall.166 (Emphasis supplied, citations
omitted)
This Court rules that the doctrine of the law of the case applies
in this case.
There is a distinction between the agreement to arbitrate and
the contract which may be the subject matter of the dispute
between the parties. While the agreement to arbitrate may be
in the same subject matter contract, it is a separate agreement
in itself.
Under the Construction Industry Arbitration Law, CIAC acquires
jurisdiction when the parties agree to submit the matter to
voluntary arbitration.
Section 4. Jurisdiction. — The CIAC shall have original and
exclusive jurisdiction over disputes arising from, or connected
with, contracts entered into by parties involved in construction
in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach
thereof. These disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the parties to a
dispute must agree to submit the same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to
violation of specifications for materials and workmanship;
violation of the terms of agreement; interpretation and/or
application of contractual time and delays; maintenance and
defects; payment, default of employer or contractor and
changes in contract cost.
Excluded from the coverage of this law are disputes arising
from employer-employee relationships which shall continue to
be covered by the Labor Code of the Philippines. (Emphasis
supplied)
In Ormoc Sugarcane Planters' Association, Inc. v. Court of
Appeals,167 this Court discussed that "an agreement to
arbitrate is a contract" in itself:
Except where a compulsory arbitration is provided by statute,
the first step toward the settlement of a difference by
arbitration is the entry by the parties into a valid agreement to
arbitrate. An agreement to arbitrate is a contract, the relation of
the parties is contractual, and the rights and liabilities of the
parties are controlled by the law of contracts. In an agreement
for arbitration, the ordinary elements of a valid contract must
appear, including an agreement to arbitrate some specific thing,
and an agreement to abide by the award, either in express
language or by implication. (Citation omitted)
Thus, in Gammon v. Metro Rail Transit Development
Corporation,168 this Court ruled that CIAC does not have
jurisdiction over construction contracts. Rather, it has
jurisdiction over the dispute arising from or connected to
construction contracts, such that it still acquires jurisdiction
even if the contract has been breached, abandoned,
terminated, or rescinded.169
On the basis of this ruling, this Court concluded that CIAC has
jurisdiction over the dispute between MRT and Gammon. Their
contract need not be valid or in force before CIAC may arbitrate
the matter, so long as there is an agreement to arbitrate.
Thus, the agreement to arbitrate is separate from the
construction contract entered into by parties.
Nonetheless, the doctrine of the law of the case applies in the
case at bar. While Gammon did not expressly state that the
contract was perfected, it concluded that both the construction
contract and the arbitration contract existed between the
parties.
The doctrine of the law of the case applies when in a particular
case, an appeal to a court of last resort has resulted in a
determination of a question of law. The determined issue will be
deemed to be the law of the case such that it will govern a case
through all its subsequent stages.170 Thus, after ruling on the
legal issue and remanding the case to a lower court for further
proceedings, the determined legal issue can no longer be
passed upon and determined differently in another appeal in
the same case.
In Presidential Decree No. 1271 Committee v. De Guzman:171
The doctrine of the "law of the case" provides that questions of
law previously determined by a court will generally govern a
case through all its subsequent stages where "the determination
has already been made on a prior appeal to a court of last
resort." In People v. Olarte:
Suffice it to say that our ruling in Case L-13027, rendered on
the first appeal, constitutes the law of the case, and, even if
erroneous, it may no longer be disturbed or modified since it
has become final long ago. A subsequent reinterpretation of the
law may be applied to new cases but certainly not to an old one
finally and conclusively determined.
'Law of the case' has been defined as the opinion delivered on a
former appeal. More specifically, it means that whatever is once
irrevocably established as the controlling legal rule of decision
between the same parties in the same case continues to be the
law of the case, whether correct on general principles or not, so
long as the facts on which such decision was predicated
continue to be the facts of the case before the court.
As a general rule a decision on a prior appeal of the same case
is held to be the law of the case whether that decision is right
or wrong, the remedy of the party being to seek a rehearing.
....
It is thus clear that posterior changes in the doctrine of this
Court [cannot] retroactively be applied to nullify a prior final
ruling in the same proceeding where the prior adjudication was
had, whether the case should be civil or criminal in nature.
If an appellate court has determined a legal issue and has
remanded it to the lower court for further proceedings, another
appeal in that same case should no longer differently determine
the legal issue previously passed upon. Similar to res judicata, it
is a refusal to reopen what has already been decided.172
(Citations omitted)
The legal issue determined in Gammon is the jurisdiction of
CIAC. However, this determination was arrived at after this
Court found that the parties entered into a construction contract
with an agreement to arbitrate.
This is indicated when Gammon determined that there is no
novation of the contract between MRT and Gammon as to
deprive CIAC of jurisdiction. It ruled that there is merely a
modification, not an annulment or extinguishment, of the
contract; thus:
We have carefully gone over the records of this case and are
convinced that the redesign of the podium structure and the
reduction in the contract price merely modified the contract.
These modifications were even anticipated by the [General
Conditions of Contract] as it expressly states that changes may
be made on the works without invalidating the contract, thus:
....
By these terms, the parties evidently agreed that should
changes need to be made on the Project plans, such changes
shall not annul or extinguish the contract. Thus, it can fairly be
concluded that the revisions in the design of the Project and the
reduction of the contract price were intended to merely modify
the agreement and not to supplant the same.173 (Emphasis
supplied)
While this Court's determination on the perfection of the
contract is not categorical and its finding that the CIAC's
jurisdiction is not over the contract but rather over the disputes
that arise from it, the existence of a contract, albeit terminated
or rescinded, is still contemplated:
At any rate, the termination of the contract prior to a demand
for arbitration will generally have no effect on such demand,
provided that the dispute in question either arose out of the
terms of the contract or arose when a broad contractual
arbitration clause was still in effect. The Court of Appeals,
therefore, erred in ruling that there must be a subsisting
contract before the jurisdiction of the CIAC may properly be
invoked. The jurisdiction of the CIAC is not over the contract
but the disputes which arose therefrom, or are connected
thereto, whether such disputes arose before or after the
completion of the contract, or after the abandonment or breach
thereof.
It may even be added that issues regarding the rescission or
termination of a construction contract are themselves
considered arbitrable issues under Sec. 2, Art. IV of the Rules of
Procedure Governing Construction Arbitration, the Rules which
were in force at the time the present controversy arose. . . .
174 (Emphasis supplied, citations omitted)
Thus, the doctrine of the law of the case applies. The current
appeal can no longer bring the existence of the contract into
issue.
III
MRT seeks to question the award of lost profits and
reimbursements in favor of Gammon.
As to the reimbursement award for engineering services, design
work, site de-watering, and clean-up, CIAC awarded the
reimbursement claims on account of MRT's allegation in
paragraph 77 of its Answer with Compulsory Counterclaim,
thus:
77. To begin with, MRTDC is willing to pay GAMMON the total
amount of P5,493,639.27 representing the sum of
P4,821,261.91 and P672,377.36, which comprise GAMMON's
claim for cost of the engineering and design services and site
de-watering and clean-up works, respectively.175
CIAC ruled that as MRT had already admitted its liability for the
claims, it was bound by this admission.176 This finding was also
affirmed by the Court of Appeals, which ruled that there was no
showing that the admission was made by palpable mistake. It
also noted that MRT did not amend its Answer.177
MRT argues that while it expressed its willingness to pay
Gammon the reimbursements, it only applies to those supported
by official receipts.178 Gammon was allegedly aware that it had
to substantiate its claims, as proven by its inclusion of the
reimbursement amount in the issues to be resolved by CIAC in
the Terms of Reference and its presentation of proof for its
claims.179 MRT also insists that its judicial admission is not
conclusive because an answer is a mere statement of fact that
the filing party is expected to prove; it is not evidence.180 The
trial court is still given leeway to consider evidence especially
when the parties agreed to submit the issue for the court's
resolution.181
MRT avers that judicial admissions cannot supplant the
requirement that actual damages must be duly proven. It
further asserts that an offer to pay is not an admission of
liability under Rule 130, Section 27 of the Rules of Court. The
admission was made only as an attempt to settle the issue and
to avoid litigation. It explains that the exact amount of
P5,493,639.27 was mentioned in the Answer with Compulsory
Counterclaim because it was the amount Gammon was claiming
and which MRT offered to pay, if proven.182
On the other hand, Gammon claims that MRT is bound by its
allegation in its Answer with Compulsory Counterclaim. It
argues that MRT failed to show that its admission was made by
palpable mistake.183 MRT even mentioned the exact amount it
was willing to pay. It did not state that it would pay only the
amount proved or present any evidence to contradict its
admission.184 Gammon asserts that although the amount was
included as an issue in the Terms of Reference, this only meant
that MRT can present contrary evidence without needing to
prove that the admissions were made through palpable
mistake.185
This Court rules that MRT is bound by its judicial admission.
Rule 129, Section 4 of the Revised Rules of Court provides:
Section 4. Judicial admissions. An admission, verbal or written,
made by a party in the course of the proceedings in the same
case, does not require proof. The admission may be
contradicted only by showing that it was made through palpable
mistake or that no such admission was made.
Judicial admissions may be made by a party in his or her
pleadings, during the trial, through verbal or written
manifestations, or in other stages of the judicial proceeding.
186 They are binding such that no matter how much the party
rationalizes it, the party making the admission cannot contradict
himself or herself unless it is shown that the admission was
made through a palpable mistake.187
In this case, MRT alleges that it is willing to pay Gammon the
total amount of P5,493,639.27, which comprises the latter's
claim for cost of engineering and design services, and de-
watering and clean-up works.188
MRT's allegation was not qualified. It neither stated that
Gammon must first present proof of its claims for the cost of
engineering and design services, and of de-watering and clean-
up works nor amended the Answer with Compulsory
Counterclaim to either correct this allegation or to qualify that
Gammon must first present official receipts. Thus, CIAC
correctly held that MRT is bound by this admission and is
estopped from denying its representation.
IV.A
MRT is likewise asserting that the evidence presented by
Gammon to prove its entitlement to actual damages is not
sufficient.
Actual damages are provided for under Article 2199 of the Civil
Code:
Article 2199. Except as provided by law or by stipulation, one is
entitled to an adequate compensation only for such pecuniary
loss suffered by him as he has duly proved. Such compensation
is referred to as actual or compensatory damages.
Actual damages constitute compensation for sustained
measurable losses.189 It must be proven "with a reasonable
degree of certainty, premised upon competent proof or the best
evidence obtainable."190 It is never presumed or based on
personal knowledge of the court.191
In International Container Terminal Services, Inc. v. Chua:192
"Actual damages are compensation for an injury that will put
the injured party in the position where it was before the injury.
They pertain to such injuries or losses that are actually
sustained and susceptible of measurement.... Basic is the rule
that to recover actual damages, not only must the amount of
loss be capable of proof; it must also be actually proven with a
reasonable degree of certainty, premised upon competent proof
or the best evidence obtainable."
....
This Court has, time and again, emphasized that actual
damages cannot be presumed and courts, in making an award,
must point out specific facts which could afford a basis for
measuring whatever compensatory or actual damages are
borne. An award of actual damages is "dependent upon
competent proof of the damages suffered and the actual
amount thereof. The award must be based on the evidence
presented, not on the personal knowledge of the court; and
certainly not on flimsy, remote, speculative and unsubstantial
proof." 193 (Emphasis in the original, citations omitted)
Although official receipts are the best evidence of payment, this
Court has acknowledged that actual damages may be proved by
other forms of documentary evidence, including invoices.
In MCC Industrial Sales Corporation v. Ssangayong
Corporation,194 this Court did not award actual damages
because the claimant failed to substantiate its claims with
official receipts.195
In G.Q. Garments, Inc. v. Miranda,196 this Court held that an
allegation of a witness must be supported by receipts or other
documentary proofs to prove the claim of actual damages.197
In Gonzales v. Camarines Sur II Electric Cooperative, Inc.,198
this Court noted that petitioners did not back up its claims of
actual damages by documentary proof such as a receipt or an
invoice.199
For lost profits, Article 2200 of the Civil Code provides:
Article 2200. Indemnification for damages shall comprehend not
only the value of the loss suffered, but also that of the profits
which the obligee failed to obtain.
This Court has ruled that the award of unrealized profits cannot
be based on the sole testimony of the party claiming it. In
Producers Bank of the Philippines v. Court of Appeals:200
In the case at bar, actual damages in the form of unrealized
profits were awarded on the basis of the sole testimony of
private respondent Salvador Chua, to wit:
....
However, other than the testimony of Salvador Chua, private
respondents failed to present documentary evidence which is
necessary to substantiate their claim for actual or compensatory
damages. In order to recover this kind of damages, the injured
party must prove his case, thus:
When the existence of a loss is established, absolute certainty
as to its amount is not required. The benefit to be derived from
a contract which one of the parties has absolutely failed to
perform is of necessity to some extent, a matter of speculation,
but the injured party is not to be denied for that reason alone.
He must produce the best evidence of which his case is
susceptible and if that evidence warrants the inference that he
has been damaged by the loss of profits which he might with
reasonable certainty have anticipated but for the defendant's
wrongful act, he is entitled to recover. (Cerreno vs. Tan Chuco,
28 Phil. 312 [1914] quoted in Central Bank of the Philippines vs.
Court of Appeals, 63 SCRA 431 [1975])
Applying the foregoing test to the instant case, the Court finds
the evidence of private respondents •insufficient to be
considered within the purview of "best evidence." The bare
assertion of private respondent Salvador Chua that he lost an
average of P18,000.00 per month is inadequate if not
speculative and should be admitted with extreme caution
especially because it is not supported by independent evidence.
Private respondents could have presented such evidence as
reports on the average actual profits earned by their gasoline
business, their financial statements, and other evidence of
profitability which could aid the court in arriving with reasonable
certainty at the amount of profits which private respondents
failed to earn. Private respondents did not even present any
instrument or deed evidencing their claim that they have
transferred their right to operate their gasoline station to their
relatives. We cannot, therefore, sustain the award of
P18,000.00 a month as unrealized profits commencing from
October 16, 1984 because this amount is not amply justified by
the evidence on record.201
IV.B
As to the reimbursement award for engineering services, design
work, site de-watering, and clean-up, MRT argues that it was
not supported by sufficient documentary evidence as only 2%
of the claims have official receipts.202 It argues that invoice,
debit notes, and summaries are not proof of payment. An
invoice is a mere detailed statement of the items, price, and
charges of the things invoiced203 while a debit memo is merely
an advice to the receiver of an outstanding debt.204
Gammon nonetheless insists that it was able to prove its
entitlement to the reimbursements.205 It avers that official
receipts are not the only documentary evidence to prove the
claim of damages. Invoices and debit notes are allowed. Debit
notes do not require an official receipt as additional
documentation.206
The Court of Appeals found that there are sufficient bases for
the award of Gammon's reimbursement claims.207 It ruled that
MRT failed to prove that the evidence was insufficient and that
Gammon's computations were erroneous.208 It found that
Gammon provided the best available documentary evidence,
through invoices, debit notes, and official receipts.209
IV.C
MRT likewise questions the award of lost profits in favor of
Gammon.
Gammon presented evidence of its claim for lost profits by
presenting as witness Francisco Delos Santos (Delos Santos),
the Planning and Estimating Engineer of Gammon since 1996.
He was responsible for the preparation of proposals,
"negotiations, mobilization, and meetings with and among the
parties involved in the Project."210
Delos Santos testified that "the average competitive percentage
of profit in the construction industry, in Gammon's experience,
[was] 5% and [that] the Net Cost Estimate was properly set at
P65,194,050.93."211
CIAC granted the award of lost profits based on Delos Santos'
testimony.212 The Court of Appeals affirmed this finding and
found that the award for lost profits was not grounded on pure
speculation as "documentary evidence is not absolutely
necessary ... to prove a claim for lost profit."213 It found that
Delos Santos was competent to testify on the matter.214 In any
case, it ruled that CIAC shall act without regard to technicalities
or legal forms, in accordance with justice and equity and the
merits of the case.215 It also noted CIAC's finding that this
Court upheld as reasonable 18% as expected profit
estimate.216
MRT contests this finding and argues that Delos Santos is not
an expert witness.217 It claims that Delos Santos' testimony
was not sufficient because there is no proof of his experience,
and his functions consist only of preparing project proposals,
negotiations, mobilization, and meetings with and among the
parties in the Project.218 It holds that Delos Santos' testimony
was bare, insufficient, self-serving, and unsubstantiated by
independent evidence, like audited financial statements or other
reports on past projects.219
MRT also avers that the 5% lost profits should not be based on
the last net estimate of the contract cost because it must be
based on the contract price agreed upon. It argues that basing
it on the revised scope of work and a greatly increased foreign
exchange rate would unjustly enrich Gammon.220
On the other hand, Gammon insists that its claim for lost profits
was sufficiently substantiated. It asserts that there need not be
absolute certainty in its amount to be able to recover lost
profits.221 It argues that "lost profits cannot be denied in a
construction contract on the ground of business
uncertainty."222 It also holds that loss of profits can be proven
on the basis of experience and the industry standard by which it
can be calculated, if there is any.223
Gammon asserts that MRT did not refute the 5% amount given
by Delos Santos or quantify how much Gammon is actually
entitled to. It notes that MRT presented no evidence contrary to
what was testified and that this Court has accepted. 10% profit
as the standard industry practice in the construction
business.224
This Court affirms the findings of CIAC and of the Court of
Appeals.
MRT is raising questions of fact. Questions of fact are not
proper in a Petition for Review under Rule 45. This Court can no
longer entertain factual issues, unless there are compelling and
cogent reasons, as when the findings were ''drawn from a
vacuum or arbitrarily reached, or are grounded entirely on
speculation or conjectures, are conflicting or are premised on
the supposed evidence and contradicted by the evidence on
record or when the inference made is manifestly mistaken or
absurd."225
The findings of fact in the case at bar was arrived at by CIAC, a
quasi-judicial body, the jurisdiction of which is confined to
construction disputes. "[F]indings of fact of administrative
agencies and quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific
matters, are generally accorded not only respect, but finality
when affirmed by the Court of Appeals."226
Moreover, arbitration proceedings are not bound by the
technical rules of evidence in judicial proceedings. Arbitrators
are to ascertain the facts in each case by all reasonable means
without regard to technicalities of law or procedure.227
Thus, under Section 13.5 of the CIAC Revised Rules of
Procedure Governing Construction Arbitration:
Section 13.5 Evidence. — The parties may offer such evidence
as they desire and shall produce such additional documents and
witnesses as the Arbitral Tribunal may deem necessary to clear
understanding of facts issues for a judicious determination of
the dispute(s). The Arbitral Tribunal shall act according to
justice and equity and merits of the case, without regard to
technicalities or legal forms and need not be bound by any
technical rule of evidence. Evidence shall be taken in the
presence of the Arbitral Tribunal and all of the parties, except
where any of the parties is absent, or has waived his right to be
present.
13.5.1
Order to produce documentary evidence. Upon motion of either
or both of the parties, or on its own initiative, the Arbitral
Tribunal may direct any person, board, body, tribunal, or
government office, agency or instrumentality, or corporation to
produce real or documentary evidences necessary for the
proper adjudication of the issues.
13.5.2
Order to give testimony. The Arbitral Tribunal may, likewise,
direct any person to give testimony at any proceedings for
arbitration.
Thus, the findings of fact of CIAC are binding, respected, and
final. They are not reviewable by this Court, especially when
affirmed by the Court of Appeals.228 "A review of the CIAC's
findings of fact would have had the effect of 'setting at naught
the basic objective of a voluntary arbitration and would reduce
arbitration to a largely inutile institution."'229
The only exceptions subject to this rule were laid out in Uniwide
Sales Realty and Resources Corp. v. Titan-Ikeda Construction
and Development Corporation:230
As a rule, findings of fact of administrative agencies and quasi-
judicial bodies, which have acquired expertise because their
jurisdiction is confined to specific matters, are generally
accorded not only respect, but also finality, especially when
affirmed by the Court of Appeals. In particular, factual findings
of construction arbitrators are final and conclusive and not
reviewable by this Court on appeal. This rule, however admits
of certain exceptions.
In David v. Construction Industry and Arbitration Commission,
we ruled that, as exceptions, factual findings of construction
arbitrators may be reviewed by this Court when the petitioner
proves affirmatively that: (1) the award was procured by
corruption, fraud or other undue means; (2) there was evident
partiality or corruption of the arbitrators or of any of them; (3)
the arbitrators were guilty of misconduct in refusing to hear
evidence pertinent and material to the controversy; (4) one or
more of the arbitrators were disqualified to act as such under
Section nine of Republic Act No. 876 and willfully refrained from
disclosing such disqualifications or of any other misbehavior by
which the rights of any party have been materially prejudiced;
or (5) the arbitrators exceeded their powers, or so imperfectly
executed them, that a mutual, final and definite award upon the
subject matter submitted to them was not made.
Other recognized exceptions are as follows: (1) when there is a
very clear showing of grave abuse of discretion resulting in lack
or loss of jurisdiction as when a party was deprived of a fair
opportunity to present its position before the Arbitral Tribunal or
when an award is obtained through fraud or the corruption of
arbitrators, (2) when the findings of the Court of Appeals are
contrary to those of the CIAC, and (3) when a party is deprived
of administrative due process.231 (Citations omitted)
However, petitioner failed to prove that any of these exceptions
are present in the case at bar. Thus, this Court will no longer
disturb CIAC's factual findings, which were affirmed by the
Court of Appeals.
WHEREFORE, the petition is DENIED. The Court of Appeals
October 14, 2011 Decision and January 25, 2012 Resolution in
CA-G.R. SP No. 98569 are hereby AFFIRMED.
SO ORDERED.
Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, 00579411
JJ., concur. 10/02/95
P922,614.15
127341312
11/22/95
FIRST DIVISION P169,287.00
Unfortunately, the checks were all dishonored by the DBP upon
G.R. Nos. 206841-42, January 19, 2018 presentment for payment with the reason "Account Under
Garnished" stamped at the back of the checks and as shown by
ARMANDO GO, Petitioner, v. EAST OCEANIC LEASING AND the check return slips.13 East Oceanic duly informed Go of the
FINANCE CORPORATION, Respondent. dishonor of said checks and demanded that he make good or
pay the same, but the latter failed to do so.14
DECISION
By reason of the dishonored checks, Go's Joan became due and
DEL CASTILLO, J.: demandable with an outstanding balance of P2,814,054.84,
excluding interest and other charges, based on a Statement of
We resolve the Petition for Review on Certiorari under Rule 45 Account15 dated January 24, 1996.16
of the Rules of Court, assailing the July 16, 2012 Decision1 and
the April 8, 2013 Order2 of the Regional Trial Court (RTC), Thus, on February 7, 1996, East Oceanic filed a Complaint17
Branch 23, Cebu City in Civil Case Nos. CEB-18366 and CEB- against Go before the RTC for collection of a sum of money with
21918. prayer for preliminary attachment. The case was docketed as
Civil Case No. CEB-18366 (collection case).
The Antecedent Facts
In his Answer with Counterclaim,18 Go argued that the
On March 22, 1995, petitioner Armando Go (Go) obtained a Promissory Note is void, given that it had "failed to comply with
loan from respondent East Oceanic Leasing and Finance the mandatory requirements set up by the Bangko Sentral ng
Corporation (East Oceanic) in the amount of P14,062,888.00,3 Pilipinas and the decisions of the Supreme Court applying and
payable in monthly instalments of P169,287.00 until fully paid, interpreting the same. Hence, the interests and charges
as evidenced by a Promissory Note4 that Go executed on the contained therein are null and void."19 He thus requested for a
same day. proper accounting of his loan in order to determine the amount
that he actually owed from East Oceanic.20
Notably, Go's loan application was approved on the basis of the
report and recommendation of Theodore Sy (Sy), then East While the collection case was pending, East Oceanic filed a
Oceanic's Managing Director, which specified that the purpose Complaint for Damages21 dated April 14, 1998 with the RTC
of the loan was for the upgrading of the bus fleet and against Sy, alleging that the corporation suffered a loss in the
replacement of old units of Oriental Bus Lines, a bus company amount of P3,000,000.00 due to the latter's false report and
owned by Go.5 recommendation pertaining to the real purpose of Go's loan
application, i.e., to pay off an existing loan to Sto. Niño de Cebu
Go subsequently issued six post-dated checks in favor of East Finance Corporation, as well as his financial status.22 The case
Oceanic, all drawn from his account at the Development Bank was docketed as Civil Case No. CEB-21918 (damages case).23
of the Philippines - Ormoc Branch (DBP):6
Upon East Oceanic's motion,24 and finding the evidence
Check No. adduced in the collection case to be likewise pertinent to the
Date damages case, the RTC ordered the cases to be consolidated.25
Amount
12734087 The Regional Trial Court Ruling
06/22/95
P169,287.00 In its Decision dated July 16, 2012, the RTC rendered judgment
12734098 as follows:
07/22/95
P169,287.00 1) Ordering defendant Theodore Sy to pay plaintiff the
12734109 following:
08/22/95
P169,287.00 a) P3,000,000.00 as actual damages with 6% interest computed
127341210 from the time of the filing of the case;
10/22/95 b) P300,000.00 as attorney's fees; and,
P169,287.00 c) P30,000.00 as x x x litigation expenses.

2) Ordering defendant Armando Go to pay plaintiff the sum of
P2,814,054.84 plus 6% interest to be computed from the time
of the filing of the complaint.
So Ordered.26
Go moved for reconsideration,27 arguing that the RTC Decision
is contrary to law because it failed to cite any factual and/or
legal basis as to his civil liability to East Oceanic.28 The RTC,
however, denied the motion in its Order dated April 8, 2013.
As a consequence, Go filed the present Petition for Review on
Certiorari before the Court, assailing the RTC's July 16, 2012
Decision and April 8, 2013 Order.
Issue
Go raises the sole issue of whether the assailed RTC Decision is
void for having no basis in fact and in law as regards his civil
liability to East Oceanic.
The Court's Ruling
The Petition is impressed with merit.
The Constitution expressly provides that "'[n]o decision shall be
rendered by any court without expressing therein clearly and
distinctly the facts and the law on which it is based. No petition
for review or motion for reconsideration of a decision of the
court shall be refused due course or denied without stating the
basis therefor.”29
This constitutional mandate is reflected in Section 1, Rule 36 of
the Rules of Court which states that:
Sec 1. Rendition of judgments and final orders. - A judgment or
final order determining the merits of the case shall be in writing
personally and directly prepared by the judge, stating dearly
and distinctly the facts and the law on which it is based, signed
by him, and filed with the clerk of court.30
The Court, too, issued Administrative Circular No. 1 dated
January 28, 1988 which required all judges to make ''complete
findings of facts in their decisions, scrutinize closely the legal
aspects of the case in the light of the evidence presented, and
avoid the tendency to generalize and to form conclusions
without detailing the facts from which such conclusions are
deduced."31
In Yao v. Court of Appeals,32 the Court emphasized that "[t]he
parties to a litigation should be informed of how it was decided,
with an explanation of the factual and legal reasons that led to
the conclusions of the court,"33viz.:
Faithful adherence to the requirements of Section 14, Article
VIII of the Constitution is indisputably a paramount component
of due process and fair play. It is likewise demanded by the due
process clause of the Constitution. The parties to a litigation
should be informed of how it was decided, with an explanation
of the factual and legal reasons that led to the conclusions of
the court. The court cannot simply say that judgment is
rendered in favor of X and against Y and just leave it at that
without any justification whatsoever for its action. The losing
party is entitled to know why he lost, so he may appeal to the
higher court, if permitted, should he believe that the decision
should be reversed. A decision that does not clearly and
distinctly state the facts and the law on which it is based leaves
the parties in the dark as to how it was reached and is precisely
prejudicial to the losing party, who is unable to pinpoint the
possible errors of the court for review by a higher tribunal. x x
x34
In this case, a review of the records shows that the RTC had
failed to clearly and distinctly state the facts and the law on
which it based its ruling insofar as Go's civil liability to East
Oceanic is concerned. There is absolutely no discussion at all in
the assailed Decision as to the RTC's ruling in the collection
case, particularly, on how it arrived at its conclusion finding Go
liable to pay East Oceanic "the sum of P2,814,054.86 plus 6%
interest to be computed from the time of the filing of the
complaint."35
The RTC listed the issues to be resolved in the assailed Decision
as follows:
As agreed by the parties in the pre-trial hearing, the issues to
be resolved are:
Whether or not defendant Theodore Sy is liable to plaintiff for
damages as contained in the complaint;
Whether or not plaintiff is liable to defendant for damages as
contained in his counterclaim;
Whether or not plaintiff is guilty of forum shopping because it
filed a separate case against defendant Armando Go seeking to
recover the same amount that it is seeking to recover from
defendant Theodore Sy; and,
Whether or not plaintiff is liable to defendant Theodore Sy for
the payment of the amount of P600,000.00 representing the
cash dividend of defendant Theodore Sy as a stockholder of
plaintiff.36
In its lengthy 42-page Decision, the RTC concluded that Sy "did
not observe honesty and good faith and was therefore
dishonest and in bad faith in the performance of his duties and
is thus liable to plaintiff for damages."37 It also ruled that: a)
East Oceanic is not liable to Sy for damages as stated in his
counterclaim;38 b) East Oceanic is not guilty of forum
shopping;39 and c) East Oceanic is not liable to Sy for the
payment of P600,000.00 representing the latter's cash dividend
as a stockholder.40
To be sure, the RTC resolved all the issues that it had
enumerated in the assailed Decision. The only problem is that
the issues it resolved pertain exclusively to the damages case,
when it was tasked to decide all the issues in both the damages
case and the collection case. Simply put, the RTC failed to
include in its listing (and to resolve) the issues relating to the
collection case which are expressly provided in the Pre-Trial
Order,41viz.:
At the pre-trial conference, the parties agreed on the following:
ISSUES:
xxxx
2.
Whether or not plaintiff is entitled to its claim against the
defendant Armando Go as contained in the complaint in Civil
Case No. CEB-18366;
Defendant Armando Go in CEB-18366:
1.
Whether or not defendant Armando Go is liable to plaintiff for
damages as contained in the complaint;
2.
Whether or not plaintiff is entitled to the writ of attachment
prayed for;
3.
Whether or not plaintiff is liable to defendant Armando Go for
damages as contained in his counterclaim;42
Given these circumstances, we find that the assailed Decision is
void insofar as the collection case is concerned, as it contained
neither an analysis of the evidence of East Oceanic and Go as
regards the outstanding balance of the latter's loan obligation,
nor a reference to any legal basis in reaching its conclusion as
to Go's civil liability to East Oceanic.43 Clearly, the RTC failed to
meet the standard set forth in Section 14, Article VIII of the
Constitution, and in so doing, deprived Go of his right to due
process "since he was not accorded a fair opportunity to be
heard by a fair and responsible magistrate."44
It is significant to note that the present case involves an appeal
by certiorari from the RTC (which rendered the assailed
Decision and Order in the exercise of its original jurisdiction)
directly to the Supreme Court under Section 1,45 Rule 45 of the
Rules of Court. Since the Court's jurisdiction in this case is
limited to resolving only questions of law, or in particular, the
issue on the validity of the assailed RTC Decision and Order
insofar as the collection case is concerned, we cannot rule on
the amount of Go's liability to East Oceanic.
We thus deem it appropriate to remand the case to the RTC for
further proceedings to allow said court to come up with a
decision in Civil Case No. CEB-18366 that fully complies with
Section 14, Article VIII of the Constitution, taking into
consideration the evidence on record and its ruling in Civil Case
No. CEB-21918.
WHEREFORE, we GRANT the Petition for Review on Certiorari.
The Decision dated July 16, 2012 and the Order dated April 8,
2013 of the Regional Trial Court, Branch 23, Cebu City, insofar
as Civil Case No. CEB- 18366 is concerned, are REVERSED and
SET ASIDE. The records are hereby REMANDED to said
Regional Trial Court for further proceedings and for the
rendition of judgment in accordance with the mandate of
Section 14, Article VIII of the Constitution.
SO ORDERED.
Sereno, C.J., (Chairperson), Leonardo-De Castro, Jardeleza, and
Tijam, JJ., concur.
FIRST DIVISION
January 19, 2018
G.R. No. 225176
ESMERALDO GATCHALIAN, duly represented by SAMUEL
GATCHALIAN, Petitioner
vs.
CESAR FLORES, JOSE LUIS ARANETA, CORAZON QUING, and
CYNTHIA FLORES, Respondents
DECISION
TIJAM, J.:
Before Us is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court filed by Esmeraldo Gatchalian, represented
herein by Samuel C. Gatchalian (petitioner) assailing the
Amended Decision1 dated October 23, 2015 and Resolution2
dated June 15, 2016 of the Court of Appeals (CA) in CA-G.R. SP
No. 126530, which affirmed the Decision3 dated June 8, 2012
of the Regional Trial Court (RTC), Branch 196 of Parañaque City
in Civil Case No. 12-0050, dismissing the complaint for
ejectment filed by petitioners against Cesar Flores, Jose Paolo4
Araneta, Corazon Quing and Cynthia Flores (collectively as
respondents), which was originally filed in the Metropolitan Trial
Court (Me TC), Branch 77 of Parañaque City, in Civil Case No.
2011-49.
The pertinent facts as found by the CA are as follows:
Petitioner is one of the co-owners of a parcel of land (Road Lot
23) covered by Transfer Certificate of Title No. 79180 located at
Brgy. Vitalez, Parañaque City. Road Lot 23 is registered under
the name of petitioner's parents, spouses Sixto Gatchalian and
Liceria Gatchalian. On June 2, 2011, petitioner filed a Complaint
for Ejectment with Damages against respondents Cesar Flores,
Jose Paolo Araneta (sic), Corazon Quing and Cynthia Flores
(respondents) with the Metropolitan Trial Court (MeTC) of
Parafiaque City, Branch 77 and docketed as Civil Case No. 2011-
49.
The survey conducted on the property established that the lot
of Segundo Mendoza encroached a portion of Road Lot 23
which the Gatchalian's had tolerated. But after several years,
the lot of Segundo Mendoza was sold and 'subdivided among
the new owners including herein respondents. When the latter
demonstrated acts of gross ingratitude to the Gatchalian family,
petitioner and his family were constrained to withdraw their
tolerated possession, use and occupation of the portion of Road
Lot 23. Verbal and written demands to vacate were then served
upon them but remained unheeded. Their dispute reached the
Lupong Tagapamayapa but all in vain. Hence, the filing of the
ejectment case against the respondents.
For their part, respondents denied that they usurped the
property of petitioner. In fact, it was the Gatchalians who have
encroached on Road Lot 23 when they put up a fence in their
(respondents) property. They insisted that Road Lot 23 is a
public road and is now known as "Don Juan Street Cat-
Mendoza". In the subdivision plan of the GAT Mendoza Housing
area, Road Lot 23 is constituted as a right of way. Respondents
believed that petitioner has no cause of action against them and
has no authority to file the instant case because it is the City
Government of Parañaque which has the right to do so.5
On December 9, 2011, the MeTC rendered a Decision6 ordering
respondents to vacate Road Lot 23, thus:
WHEREFORE, premises considered, judgment is hereby
rendered as follows ordering the defendants CESAR FLORES,
JOSE PAOLO ARANETA, CORAZON QUING AND CYNTHIA
FLORES and all persons claiming rights under them, to wit:
1) to vacate the 140.50 square meter portion of the Road (Lot
23) encroached by them which is covered by TCT No. 79180
and located at Don Juan St., Barangay Vitalez, Paranaque City;
2) to pay reasonable amount of rental in the amount of
₱20,000.00 a month plus legal rate of interest reckoned from
June 2, 2011 until the defendants shall have fully vacated the
encroached portion of the Road (Lot 23);
3) ₱20,000.00 as and (sic) for Attorney's fees;
4) Cost of suit.
SO ORDERED.7
Respondents appealed the same to the RTC, which reversed the
ruling of the MeTC in its Decision8 dated June 8, 2012, to wit:
WHEREFORE, premises considered, the appealed Decision dated
December 9, 2011 by Branch 78 of the Metropolitan Trial Court
of Parañaque docketed under Civil Case No. 2011-49 is
REVERSED and the Complaint dated June 2, 2011 is herewith
DISMISSED for lack of merit. SO ORDERED.9
Aggrieved, petitioner appealed to the CA. The latter in its
Decision10 dated March 13, 2015, reversed the RTC and
reinstated the ruling of the MeTC. However, upon
reconsideration, the CA reversed itself and affirmed the RTC,
thus:
WHEREFORE, respondent's Motion for Reconsideration is hereby
GRANTED. Accordingly, we REVERSE and SET ASIDE our
findings in our Decision dated March 13, 2015. The instant
petition fore review is hereby DISMISSED and the Decision
dated June 8, 2012 of the Regional Trial Court of Parafiaque
City, Branch 196 in Civil Case No. 12- 0050 is UPHELD.
SO ORDERED.11
Hence, this petition.
Petitioner claimed that the CA committed grave error in ruling
that the private character of Road Lot 23 has been stripped by
Municipal Ordinance No. 88-04, series of 1988 constituting the
said road lot as a public right-of-way. Petitioner also claimed
that the CA erred in stating that by virtue of laches, the road lot
has been converted to public property of the municipality.
Petitioner further alleged that the road lot is still private
property it being covered by TCT No. 79180 under the name of
Spouses Sixto Gatchalian and Liceria Gatchalian. The mere
usage by the public of the road lot does not make it public
property. To convert the same to public property, it must be
expropriated by the government or the registered owner must
donate or sell the same to the government.
The petition is granted.
At the outset, petitioner filed before the MeTC an action for
ejectment against the respondents. It is settled that in
ejectment proceedings, the only issue for the Court's resolution
is, who between the parties is entitled to the physical or
material possession of the subject property. Issues as to
ownership are not involved, except only for the purpose of
determining the issue of possession.12
In the instant case, petitioner asserts that he is entitled to the
possession of the road lot being one of the co-owners of the
same since it is registered under the name of petitioner's
parents. While respondents do not claim ownership of the
subject lot, they argued that the road lot is now public property
because of Ordinance No. 88-04, series of 1988 constituting it
as "Don Juan St. Gat-Mendoza". As such, petitioner cannot evict
respondents.

It is undisputed that the road lot is registered under the name
of petitioner's parents. Even the respondents did not dispute
this fact. It is also undisputed that the municipal government
has not undertaken any expropriation proceedings to acquire
the subject property neither did the petitioner donate or sell the
same to the municipal government.1âwphi1 Therefore, absent
any expropriation proceedings and without any evidence that
the petitioner donated or sold the subject property to the
municipal government, the same is still private property.
In the case of Woodridge School, Inc. v. ARB Construction Co.,
Inc. 13, this Court held that:
In the case of Abellana, Sr. v. Court of Appeals, the Court held
that "the road lots in a private subdivision are private property,
hence, the local government should first acquire them by
donation, purchase or expropriation, if they are to be utilized as
a public road." Otherwise, they remain to be private properties
of the owner-developer.
Contrary to the position of petitioners, the use of the
subdivision roads by the general public does not strip it of its
private character. The road is not converted into public property
by mere tolerance of the subdivision owner of the public's
passage through it. To repeat, "the local government should
first acquire them by donation, purchase or expropriation, if
they are to be utilized as a public road."14
As reiterated in the recent case of Republic of the Philippines,
represented by the Department of Public Works and Highways
(DPWH) v. Sps. Llamas15, this Court held that:
As there is no such thing as an automatic cessation to [the]
government of subdivision road lots, an actual transfer must
first be effected by the subdivision owner: "subdivision streets
belonged to the owner until donated to the government or until
expropriated upon payment of just compensation."16
Since the local government of Parañaque has not purchased nor
undertaken any expropriation proceedings, neither did the
petitioner and his siblings donate the subject property, the
latter is still a private property and Ordinance No. 88-04 did not
convert the same to public property.
As to the CA's finding that by virtue of laches the subject
property has been converted into public property, We do not
agree.
It is well-settled that an "owner of [a] registered land does not
lose his rights over a property on the ground of laches as long
as the opposing claimant's possession was merely tolerated by
the owner."17
A torrens title is irrevocable and its validity can only be
challenged in a direct proceeding.18 A torrens title is an
indefeasible and impresciptible title to a property in favor of the
person in whose name the title appears. The owner is entitled
to all the attributes of ownership of the property, including
possession. The person who has a torrens title over a land is
entitled to possession thereof. As such, petitioner can file an
ejectment case against herein respondents who encroached
upon a portion of petitioner's property.
WHEREFORE, premises considered, the petition is GRANTED.
The Amended Decision dated October 23, 2015 and Resolution
dated June 15, 2016 of the Court of Appeals in CA-G.R. SP No.
126530 are hereby REVERSED and SET ASIDE. The Decision
dated December 9, 2011 of the Metropolitan Trial Court in Civil
Case No. 2011-49 is REINSTATED.
SO ORDERED.
NOEL GIMENEZ TIJAM
Associate Justice
THIRD DIVISION
January 22, 2018
G.R. No. 230144
THE MANILA BANKING CORPORATION, Petitioner
vs.
BASES CONVERSION AND DEVELOPMENT AUTHORITY,
Respondent
DECISION
VELASCO, JR., J.:
The Case
Before the Court is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court assailing the Decision1 dated
October 26, 2016 and the Resolution2 dated February 22, 2017
of the Court of Appeals (CA) in CAG. R. CV No. 104234, which
reversed and set aside the Order dated August 28, 2014 of
Branch 60, Regional Trial Court (RTC) of Angeles City,
Pampanga, in Civil Case No. 03-11226.
The Facts
Respondent Bases Conversion and Development Authority
("BCDA") was created as a government corporation on March
13, 1992 by virtue of Republic Act No. 7227 (RA 7227). It is
tasked mainly to manage the Clark and Subic military
reservations/camps and their extensions and to adopt and
implement a comprehensive development plan for their
conversion into productive uses, with a view to promoting the
economic and social development of the country (Section 4, RA
7227). Among the powers expressly granted to it is the power
to exercise the right of eminent domain (Section 5[k]).3
On November 21, 2003, BCDA filed a complaint against herein
petitioner The Manila Banking Corporation ("TMBC") and
Bangko Sentral ng Pilipinas ("BSP"), seeking to expropriate a
parcel of land covered by Transfer Certificate of Title (TCT) No.
308513-R of the Registry of Deeds of Pampanga, registered in
the name of TMBC with a total area of Ten Million Two Hundred
Forty Thousand square meters (10,240,000 sq.m.) situated in
Barangay Dolores, Municipality of Porac, Province of Pampanga
("Subject Property"). The area to be affected by expropriation
was estimated to be One Hundred Eighty-Six Thousand Three
Hundred Fifty-Five square meters (186,355 sq.m.), more or
less.4 BCDA also alleged that the subject property was classified
as agricultural land and had the zonal value of P30 per square
meter at the time of filing of the complaint.5
According to BCDA, the subject property was being expropriated
to pave the way for the implementation of the Subic-Clark-
Tarlac Expressway (SCTEX) Project of the national government.
The SCTEX Project was supposed to provide the shortest, direct
and efficient link among vital development areas in Central
Luzon, more specifically among three prime economic zones
(Subic Bay Special Economic Zone in Zambales, Clark Special
Economic Zone in Pampanga and the Hacienda Luisita Industrial
Park in Tarlac) and significantly alleviate the worsening traffic
condition of the North Luzon Expressway. BCDA further claimed
that "the government will suffer immense and irreparable
damage if this project will not proceed as scheduled by reason
of the failure to negotiate with supposed owner after diligent
efforts to do so."6
BCDA prayed for the issuance of a writ of possession upon
payment to the landowner of an amount equivalent to 100% of
the value of the subject property based on the current zonal
valuation, pursuant to Section 4(a) of RA 7227, and thereafter,
an order of expropriation requiring the defendants to answer
within the time specified in the summons and authorizing BCDA
to take the property sought to be expropriated for public
purpose as stated in the complaint.7
Prior to the filing of the complaint on June 21, 1999, it appears
that the property was the subject of a Dacion En Pago Con
Pacto de Retro agreement between TMBC and the Central Bank
Board of Liquidators ("CB-BOL"). Pursuant to a revised
repayment plan, TMBC delivered several properties in
settlement of the balance of its debt to CB-BOL amounting to
₱2,265,953,378.83. On December 20, 2000, CB-BOL assigned
all its rights and interests under the Dacion agreement in favor
of the BSP. Thus, BSP sought the release of 100% of the value
of the property based on the current zonal valuation of the
Bureau of Internal Revenue ("BIR"), in accordance with Section
2, Rule 67 of the 1997 Rules of Procedure. TMBC opposed the
motion and the issue was submitted for resolution at the trial
during the pre-trial conference.8
Records also reveal that a Final Offer to Buy dated October 9,
2003 was sent by BCDA to TMBC, whereby BCDA offered the
price of P75 per square meter for the subject property.9
On January 22, 2004, BCDA deposited the amount of Five
Million Five Hundred Ninety Thousand and Six Hundred Fifty
Pesos (₱5,590,650) before the Office of the Clerk of Court of
Angeles, Pampanga. This amount was equivalent to the value of
the actual affected area of the subject property based on the
then current zonal valuation provided by the BIR.10
The trial court issued a writ of possession on March 11, 2004
and the subject property was placed in the possession of BCDA
on June 10, 2004.11
BCDA filed a Motion to Admit Supplemental Complaint,
manifesting the reduction of the area to be taken from the
original 186,355 sq.m. to One Hundred Sixty-Six Thousand
Three Hundred Fifty-Five square meters (166,355 sq.m.) due to
the realignment of the expressway. On April 11, 2007, BCDA
further amended its complaint by adding an area of Six
Thousand Seven Hundred Forty-Four square meters (6,744
sq.m.), making the total affected area of the subject property
as One Hundred Seventy-Three Thousand Fifty-Nine square
meters (173,059 sq.m.).12
In its Answer, TMBC contended that the offered price of ₱30 per
square meter is way below the fair market value of the subject
property. It pointed out that the subject property's value lies in
the fact that it is the only remaining compact area of its size
and nature within the Province of Pampanga; the proposed
project would cut the property into two by the construction of
fences on both sides thereby rendering inaccessible one side to
the other and its value would substantially depreciate. Just
compensation should, thus, include expected depreciation of the
remaining areas.13
In its Order dated April 29, 2005, the RTC declared that BCDA
has clearly established its lawful right to take the property
sought to be expropriated for public use or purpose described in
the complaint upon the payment of just compensation. After
termination of pre-trial, the parties were ordered to submit their
nominations for the commissioners who will assist the trial court
in arriving at the just compensation for the subject property.14
Meanwhile, TMBC filed a motion to release payment which was
opposed by BSP. Subsequently, they agreed for the release of
the entire amount (initial payment of BCDA) to TMBC to be
deposited by the latter in an escrow account with BSP, without
prejudice to the eventual determination of the just
compensation, and who between BSP and TMBC is entitled to
the expropriation proceeds. On June 19, 2008, the RTC denied
TMBC's motion for release of payment for being premature as
there is still a need to determine who between TMBC and BSP is
entitled to the proceeds of the property. However, pursuant to
the RTC's Order dated March 12, 2009, TMBC's motion for
reconsideration was granted and the amount of Five Million
Three Hundred Sixty-Six Thousand and Ten Pesos
(Php5,366,010.00) was released in favor of TMBC and was
thereafter deposited in an escrow account with BSP pursuant to
their compromise agreement.15
On August 14, 2009, the RTC conducted an ocular inspection of
the subject property in the presence of counsels for TMBC and
BCDA, and the nominee-appraiser of BCDA, Mr. Alberto Murillo,
Jr. ("Mr. Murillo"), then City Assessor of Angeles City,
Pampanga. On September 24, 2009, TMBC filed a motion to set
a second ocular inspection stating that the joint nominee of
TMBC and BSP, Engr. Jose L. Ocampo ("Engr. Ocampo"), was
unable to attend the ocular inspection. Said motion was granted
by the trial court and a second ocular inspection was conducted
on December 3, 2009, this time attended by counsels for BCDA
and Manila Bank, and Engr. Ocampo.16
Mr. Murillo submitted to the court his report on August 19,
2009. TMBC moved to set aside the said report on grounds that
it was filed even before he took his oath of office and that he
failed to notify TMBC and BSP, nor were there hearings
conducted for reception of evidence to aid him in reaching a
fair, unbiased and comprehensive report on the fair market
value of the property. In its comment, BCDA manifested that
another report will just be submitted, adding that there is no
necessity for Mr. Murillo to conduct any hearing since what was
submitted is his individual report and TMBC's commissioner
should submit his own recommendation and the matter of just
compensation will be left to the discretion of the court. TMBC
insisted that an order directing Mr. Murillo to re-submit his
Commissioner's Report would be greatly prejudicial as he had
already shown bias in this case, failed to apply any basic
standards of his office, and never accorded the parties an equal
opportunity to be heard.17
Meanwhile, Engr. Ocampo requested to withdraw as
commissioner on account of his deteriorating health. He was
replaced by Engr. Roger F. Tolosa, Jr. ("Engr. Tolosa"), who
was nominated by both TMBC and BSP. In its Order dated June
30, 2011, the RTC resolved to: (1) set aside Mr. Murillo's report
dated August 18, 2009; (2) appoint Engr. Tolosa as
Commissioner vice Engr. Ocampo; (3) appoint the Municipal
Assessor of Porac, Pampanga as Commissioner in this case; (4)
direct Engr. Tolosa and the Municipal Assessor to take their
oath of office; and (5) direct the three Commissioners, parties
and their counsels to conduct an ocular inspection on August 9,
2011 and submit their respective reports within 30 days.
Municipal Assessor Myrna V. Lumanlan declined her
appointment and instead recommended Engr. Glen I.
Lansangan ("Engr. Lansangan"), Municipal Planning and
Development Officer of Porac, Pampanga.18
The final group of Commissioners consisted of Mr. Murillo, Engr.
Tolosa, and Engr. Lansangan. On October 6, 2011, they took
their respective oaths of office.19
On October 6, 2011, the scheduled ocular inspection proceeded
with the attendance of the counsel/representative from BCDA,
TMBC, BSP, and the three Commissioners. As directed, the
parties submitted their respective documentary evidence to the
Commissioners.20
The Commissioners did not come up with a group report, but
made individual reports after their ocular inspection and they
received the documents submitted by the parties.21
Engr. Tolosa submitted his Report dated November 2, 2011
where he concluded that:
Based on our investigation and analysis of all relevant facts and
as supported by the accompanying narrative report, it is our
opinion that the Market Value (for Just Compensation) of the
land appraised as of October 6, 2011 is Php388 per square
meter and is represented in the amount of SIXTY-SEVEN
MILLION, ONE HUNDRED FORTY-SIX THOUSAND EIGHT
HUNDRED NINETY-TWO (PhP67,146,892) PESOS subject to the
attached limiting conditions.22
For his part, Engr. Lansangan made this recommendation in his
Report:
Inspection and Valuation
We have personally inspected the property on October 6, 2011
and arriving at a reasonable valuation, I have researched price
information from reputable sources and also giving
consideration to the:
a. Highest and best use at the property; and
b. Zoning and current land usage in the locality
In view of the foregoing, it is of the opinion of the
Commissioner that the Fair Market Value of the affected
property is Three Hundred Fifty Pesos (Php 350.00) per square
meter.23
On the other hand, the Report of Mr. Murillo dated October 24,
2011 stated that-
Still I maintained my appraisal at Thirty Pesos per square meter
(₱30.00/sq.m.) based at the time of taking. It is my honest
opinion that the Thirty Pesos per square meter (₱30.00/sq.m.)
be paid as just compensation to the owner. It is reasonable and
fair enough to both parties concerned considering that they are
only agricultural lands which have a lower value than industrial
or commercial lots. Besides it is the general public who will
benefit from the use of the SCTEX and not the government.
It is therefore recommended that the appraised value of Thirty
Pesos per square meter (₱30.00/sq.m.) be approved as basis
for the payment of just compensation of the above mentioned
property owner.24

During the hearings, the three Commissioners testified and the
parties presented their respective evidence. After the formal
offer of evidence and submission of the parties' respective
memorandum, the case was submitted for decision.
Ruling of the Regional Trial Court
In a Decision25 dated September 4, 2012, the RTC ordered
respondent BCDA to pay petitioner TMBC the amount of ₱250
per square meter as just compensation for the property taken.
The dispositive portion of the RTC Decision reads:
WHEREFORE, the Court hereby renders judgment ordering the
plaintiff to pay the defendants, the amount of Two Hundred
Fifty Pesos Per Square Meter (Php. 250.00/ per sq. m.), or a
total of Thirty Seven Million Eight Hundred Ninety Eight
Thousand and Seven Hundred Forty Pesos (Php. 37,898,740.00)
representing the principal balance on the just compensation due
on the taking of a total affected area of One Hundred Seventy
Three Thousand Fifty Nine Square Meters (173,059 sq. m.) that
is covered by TCT 671482- R and TCT 671484- R; both derived
from the mother title- TCT 308513- R in the name of Manila
Banking Corporation; plus twelve [percent] (12%) interest per
annum, from November 21, 2003 until fully paid.
SO ORDERED.26
Respondent BCDA filed a Motion for Reconsideration27 dated
November 21, 2012. However, petitioner pointed out that BCDA
failed to put a notice of hearing in its motion. In an attempt to
remedy this procedural infirmity, BCDA file a Manifestation and
Motion on January 3, 2013, praying that the motion be heard.
This was opposed by TMBC in a Comment/Opposition dated
January 17, 2013.28
Nevertheless, the RTC issued an Order dated July 26, 2013,
reopening the case and requiring the parties to submit judicial
affidavits to hear the case anew. TMBC moved for the
reconsideration of the July 26, 2013 Order and for the
declaration that the trial court's September 4, 2012 Decision be
declared final and executory.29
Without acting on TMBC' s motion for reconsideration, the R TC
granted BCDA's motion for reconsideration in an Order30 dated
August 28, 2014 fixing the just compensation at ₱190 per sq.m.
The dispositive portion of the August 28, 2014 Order reads:
WHEREFORE, PREMISES CONSIDERED, the motion for
reconsideration is given due course, the decision dated
September 4, 2012 is hereby reconsidered[.] Judgment is
hereby rendered fixing the just compensation of the subject lot
at ₱190.00 per square meter or a total of thirty two million eight
hundred eighty one thousand and two hundred ten pesos
(Php32,881,210.00)[.] Considering that five million three
hundred sixty six thousand and ten pesos (Php5,366,010) had
been deposited as a condition for the issuance of writ of
possession on March 3, 2004, the plaintiff Bases Conversion
Development Authority is directed to pay the balance of twenty
seven million five hundred fifteen thousand and two hundred
ten pesos (Php27,515,210.00) to defendant the Manila Banking
Corporation which shall earn interest at the rate of 12% per
annum or the prevailing rate of interest whichever is lower from
the time of actual taking on November 23, 2003[.]
SO ORDERED.31
Respondent BCDA elevated the case to the CA, seeking to
reverse the RTC's determination of just compensation and
imposition of 12% interest rate for the unpaid balance of the
just compensation.
Ruling of the Court of Appeals
Pursuant to the Resolution dated July 18, 2016 issued by the
CA, BSP was dropped as a party from the title of the case after
submitting proof of the "Release and Cancellation" executed by
BSP in favor of TMBC concerning the subject property.32
On October 26, 2016, the CA rendered the assailed Decision,
giving due course to the petition and ruling in favor of
respondent BCDA. The dispositive portion of the assailed
Decision reads:
WHEREFORE, the appeal is GRANTED. The Order dated August
28, 2014 of the Regional Trial Court of Angeles City, Pampanga,
Branch 60 in Civil Case No. 03-11226 is hereby REVERSED and
SET ASIDE.
Just compensation for the portions of the property of The
Manila Banking Corporation consisting of 173,059 square
meters, expropriated by BCDA for the SCTEX Project, is hereby
fixed at Php75.00 per square meter, or a total of Twelve Million
Nine Hundred Seventy Nine Thousand Four Hundred Twenty
Five Pesos (Php12,979,425.00). Since BCDA already deposited
the amount of Five Million Three Hundred Sixty Six Thousand
and Ten Pesos (Php5,366,010.00), BCDA is DIRECTED to pay to
TMBC the balance of Seven Million Six Hundred Thirteen
Thousand Four Hundred Fifteen Pesos (Php7,613,415.00),
which shall earn interest at the rate of 12% per annum from
November 21, 2003 up to June 30, 2013, and 6% per annum
from July 1, 2013 until fully paid. Said amount shall further earn
interest at 6% per annum from the date of the finality of this
Decision until full payment.
SO ORDERED.33
Petitioner TMBC's Motion for Reconsideration was denied in the
assailed Resolution dated February 22, 2017.34
Hence, this petition.
The Petition
Petitioner TMBC claims that the CA's Decision and Resolution
are contrary to law and prevailing jurisprudence.
First, the trial court's determination of just compensation in its
September 4, 2012 Decision and August 28, 2014 Order had
legal and factual basis which were existing at the time of the
taking of the property, contrary to the pronouncement of the
CA. TMBC reiterated the pertinent portions of the RTC's
September 4, 2012 Decision, which relied on factors such as
character and utility of the property, sales and holding prices of
similar land within the immediate vicinity, and the highest and
best use of the property, in determining that P250 per square
meter was the appropriate just compensation for the subject
property at the time of its taking. TMBC also argued that the
August 28, 2014 Decision of the RTC was based on clear and
unequivocal reasons and used the comparative approach in
fixing the just compensation at ₱190 per square meter.35
Second, TMBC asserts that the CA failed to make a ruling on
whether the September 4, 2012 Decision of the RTC was
already final and executory, considering that the motion for
reconsideration filed by BCDA was defective as it did not contain
any notice of hearing. Since the motion for reconsideration was
a mere scrap of paper which did not toll the running of the
period to appeal, then the RTC's September 4, 2012 Decision
had become final and executory.36
Third, TMBC argues that contrary to the CA's observation, the
RTC did not merely "solely and primarily rely on the valuation
made by the DPWH Provincial Appraisal Committee." It also
finds error in the CA's pronouncement that the trial court
"should have given weight to the actual and reliable data
consisting of the tax declarations, zonal valuation and
documentary evidence in the sales of the SCTEX Project" since
there are other factors which must also be considered under the
law in determining Just compensation.37
TMBC cited Section 5 of Republic Act No. 897438 (RA 8974)
which included the standards for the courts to use in the
determination of just compensation. It argued that the CA erred
in fixing the just compensation based on the selling prices in
deeds of absolute sale of similarly affected landowners in the
vicinity for the SCTEX project and in disregarding factors such
as size of the property and the "highest and best use of the
land," as well as the appraisal of a similar property in the area
made by the Provincial Appraisa1 Committee.39
Finally, TMBC finds error in the CA's pronouncement that the
award of interest of 6% per annum should be reckoned from
July 1, 2013. Instead, it argues that considering the case is not
yet final and executory as the case is still pending appeal, then
the 12% interest should continue to accrue, and the 6%
interest should only begin to accrue upon the finality of
judgment of this case.40
In compliance with this Court's July 3, 2017 Resolution,41
respondent BCDA filed its Comment42 dated August 29, 2017.
It argued that the CA was correct in finding that the RTC did
not have factual and legal bases in determining just
compensation at ₱190. BCDA asserts that the CA considered all
applicable factors to this case in its determination of just
compensation.43 It further contends that there was no need for
the CA to decide on the validity of its motion for reconsideration
since it was already rendered moot and academic by the trial
court's action on the same.44
BCDA also refutes TMBC's argument that the CA erred in not
factoring in the "highest and best use of the land," citing
Republic of the Philippines represented by the DPWH v. Spouses
Tan Song Bok, et al. 45 (Tan Song Bok case). It pointed out
that unlike in the Tan Song Bok case where there were no
relevant evidence for the court to determine just
compensation except for the highest and best use of the land,
BCDA presented other pieces of evidence which were properly
taken into consideration by the CA, specifically, the deeds of
absolute sale executed with landowners in Porac, Pampanga
indicating a value of P60 to P7 5 for parcels of land adjacent
and contiguous to the subject property and similarly acquired
for the SCTEX Project.
BCDA further noted that the Tan Song Bok case had already
been superseded by the case of Secretary of Public Works and
Highways, et al. v. Spouses Tecson46 (Tecson case), where this
Court ruled that just compensation is determined by considering
the value of the property at the time of actual taking.47
Relying on the Tecson case, BCDA argued that the CA correctly
ruled on the rate of interest to be applied where the interest
rate shall be 12% for the period beginning November 21, 2003
until June 30, 2013, and 6% from July 1, 2013 until fully
paid.48
The Issues
Petitioner TMBC raised the following issues:
1. Whether respondent BCDA's Motion for Reconsideration of
the September 4, 2012 Decision of the RTC tolled the running
of the period to appeal the said decision.
2. Whether the CA erred in reversing and setting aside the
RTC's Decision and Order on its determination of just
compensation and interest.
3. Whether the CA erred in awarding just compensation at the
rate of ₱75 per square meter, instead of ₱250 per square meter
as originally ordered by the RTC in its September 4, 2012
Decision, or ₱190 per square meter as reconsidered by the RTC
in its August 28, 2014 Order.
4. Whether the CA was correct in imposing an interest rate of
12% per annum from November 21, 2003 up to June 30, 2013,
and 6% per annum from July 1, 2013 until full payment.
The Court's Ruling
The petition lacks merit.
Failure to include a notice of hearing in a motion for
reconsideration is not fatal where the other party was given the
opportunity to be heard
Rule 15, Section 4 of the Rules of Court requires every motion
to be set for hearing by the applicant and to give notice of such
hearing to the other party at least three days before the date of
the hearing. Section 5 of the same Rule mandates that the
notice of hearing should be addressed to all parties concerned
and should specify the time and date of the hearing which must
not be later than ten (10) days after the filing of the motion.
Where a motion has no notice of hearing, it is considered pro
forma and does not affect the reglementary period for the
appeal or the filing of the requisite pleading.49
Nevertheless, this Court has relaxed procedural rules when a
rigid application of these rules only hinders substantial
justice.50 The rules of procedure are mere tools designed to
facilitate the attainment of justice. Their strict and rigid
application especially on technical matters, which tends to
frustrate rather than promote substantial justice, must be
avoided. Even the Revised Rules of Court envisions this
liberality. Technicality, when it deserts its proper office as an aid
to justice and becomes its great hindrance and chief enemy,
deserves scant consideration from the courts.51 Yet, the
relaxation of its rules is subject to certain conditions and for
liberality to be applied, it must be assured that the adverse
party has been afforded the opportunity to be heard through
pleadings filed in opposition to the motion.52
In the present case, the records reveal that TMBC was given
the opportunity to be heard when it filed a comment/opposition
to the motion for reconsideration, assailing the same and raising
substantive arguments for its dismissal.53 Moreover, the R TC
went a step further and directed the parties to submit judicial
affidavits of their witnesses with documentary exhibits to
substantiate their respective positions.54 Clearly, the
requirements of procedural due process were substantially
complied with and such compliance justified a departure from a
literal application of the rule on notice of hearing.
The Court of Appeals was correct in reversing the trial court and
in fixing the just compensation at ₱75 per square meter
For the second and third issues raised by petitioner, the Court
shall discuss them jointly considering they are closely
interrelated.
In reversing and setting aside the trial court's determination of
just compensation, the CA reviewed the reports submitted by
the commissioners, as well as the trial court's September 4,
2012 Decision and the August 28, 2014 Order. The CA noted
that while the trial court based its first valuation on the
recommendations of the commissioners, it did not give any
explanation on how it arrived at the amount of ₱250 per square
meter. As for the second valuation of Pl90, the CA observed
that the trial court gave more weight to two documents
included in Engr. Tolosa's Report, specifically: 1) Resolution No.
12-2006 of the DPWH Provincial Appraisal Committee which
fixed the just compensation of an expropriated land for the
Porac Mancatian Dike Project at ₱190 per square meter; and 2)
Deed of Absolute Sale between TMBC and DPWH over the
property taken in the area for the price of ₱190 per square
meter.55
We agree with the findings of the appellate court.
Section 5 of RA 897 4 provides:
Section 5. Standards for the Assessment of the Value of the
Land Subject of Expropriation Proceedings or Negotiated Sale. -
In order to facilitate the determination of just compensation,
the court may consider, among other well-established factors,
the following relevant standards:
(a) The classification and use for which the property is suited;
(b) The developmental costs for improving the land;
(c) The value declared by the owners;
(d) The current selling price of similar lands in the vicinity;
(e) The reasonable disturbance compensation for the removal
and/or demolition of certain improvements on the land and for
the value of improvements thereon;
(f) The size, shape or location, tax declaration and zonal
valuation of the land;
(g) The price of the land as manifested in the ocular findings,
oral as well as documentary evidence presented; and
(h) Such facts and events as to enable the affected property
owners to have sufficient funds to acquire similarly-situated
lands of approximate areas as those required from them by the
government, and thereby rehabilitate themselves as early as
possible.
There is no question that at the time of taking of the subject
property, it was classified as agricultural land, based on the
records of the Municipal Assessor's Office of Porac,
Pampanga.56 As observed by Mr. Murillo in his Commissioner's
Report, the subject property consists of sugar land and sand
deposits. He further noted that while there were allegations that
the property was reclassified to industrial land, there was no
sign of industrial development at the time of the ocular
inspection except for the construction of the SCTEX project.57
We could not give any weight to Engr. Lansangan's Report since
he did not provide any explanation for arriving at his
recommendation of P350 per square meter as just
compensation for the subject property, except for his
declaration that he arrived at the same based on the price
information he had researched from reputable sources, as well
as the highest and best use of the property and the zoning and
current land usage in the locality.58
During his testimony, Engr. Lansangan clarified that his
recommendation was based on the reclassification of the
property to residential, commercial and industrial areas, the BIR
Zonal Valuation as industrial area with assessed value of ₱200
per square meter, and the value for residential area at ₱500 per
square meter, the average of which is ₱350 per square
meter.59 However, Engr. Lansangan's recommendation was
erroneous since it was established that the subject property was
not included in the area which was reclassified by the
province.60 Furthermore, the reclassification was made after
the time of taking of the subject property; thus, any change in
valuation as a result thereof would have no bearing on the
amount of just compensation.
As for Engr. Tolosa's Report, a review thereof shows that his
recommendation to set the just compensation for the subject
property at the amount of ₱388 per square meter was mostly
based on the market approach, where the value of the land is
based on sales and listings of comparable properties within the
vicinity.61 While this approach is an acceptable basis to
determine just compensation, We note that the data gathered
by Engr. Tolosa on which he relied his recommendation were
based on current market values at the time of the ocular
inspection which was on October 6, 2011- almost eight years
from the time of taking of the subject property m November
2003.
In arriving at the amount of ₱250 per square meter, the trial
court relied on the eight DPWH transactions of neighboring
properties as relevant market data on the actual value of the
subject property in November 2003.62 The R TC failed to
consider the nine Deeds of Absolute Sale between BCDA and
several landowners for the sale of properties situated in
Barangay Dolores, Porac, Pampanga with selling price ranging
from ₱60 to ₱75 per square meter, which were executed
between March 2004 and September 2008. The RTC reasoned
that the BCDA allegedly failed to establish the proximity of
these properties with the subject property.63
As correctly observed by the CA, however, the properties
subject of the nine deeds of absolute sale were directly
contiguous and adjacent to the subject property, to wit:
We hold that the RTC committed reversible error for it is plainly
obvious that the areas expropriated for the SCTEX project are
contiguous and adjacent properties.1âwphi1 Specifically, the
lands covered by no less than nine (9) Deeds of Absolute Sale
are all situated in Barangay Dolores, Municipality of Porac,
Province of Pampanga. BCDA' s offer to buy the subject
property at Php75.00 per square meter was the same selling
price of its neighboring properties affected by the same
infrastructure project. Such price is also based on the following
factual considerations: (1) the nature of the subject property as
agricultural land with no improvements ("no electricity, no road
outlet and not accessible to regular mode of transportation");
(2) the zonal valuation by the BIR (Php30.00 per square
meter); and (3) tax declarations ("Agricultural-Sugar")
indicating the total market value of the subject property at
Php27,400.92.64 (citations omitted)
Time and again, this Court has ruled that the determination of
just compensation must be based on reliable and actual data,
as explained in Republic of the Philippines v. C. C. Unson
Company, Inc.,65 to wit:
In Republic v. Asia Pacific Integrated Steel Corporation, the
Court defined just compensation "as the full and fair equivalent
of the property taken from its owner by the expropriator. The
measure is not the taker's gain, but the owner's loss. The word
'just' is used to intensify the meaning of the word
'compensation' and to convey thereby the idea that the
equivalent to be rendered for the property to be taken shall be
real, substantial, full, and ample. Such 'just'-ness of the
compensation can only be attained by using reliable and actual
data as bases in fixing the value of the condemned property.
Trial courts are required to be more circumspect in its
evaluation of just compensation due the property owner,
considering that eminent domain cases involve the expenditure
of public funds."
The Court further stated in National Power Corporation v.
Tuazon, that "[t]he determination of just compensation in
expropriation cases is a function addressed to the discretion of
the courts, and may not be usurped by any other branch or
official of the government. This judicial function has
constitutional raison d'etre; Article III of the 1987 Constitution
mandates that no private property shall be taken for public use
without payment of just compensation." Legislative enactments,
as well as executive issuances, fixing or providing for the
method of computing just compensation are tantamount to
impermissible encroachment on judicial prerogatives. They are
not binding on courts and, at best, are treated as mere
guidelines in ascertaining the amount of just compensation.
(citations omitted)
Based on the foregoing, We find that the CA committed no
reversible error in reversing and setting aside the trial court's
determination of just compensation and in fixing the just
compensation of the subject property at ₱75 per square meter.
The CA, guided by the standards set in RA 8974, took into
consideration the documentary evidence presented by the
parties to determine the appropriate value of the property at
the time it was taken in November 2003.
The Court of Appeals committed no reversible error in modifying
the interest rates to be imposed on the just compensation
For the final issue raised by petitioner, it argues that the award
of interest of 6% per annum as imposed under the BSP -
Monetary Board (BSP-MB) Circular No. 799, Series of 2013,
should only be reckoned from the date of finality of judgment
and not from July 1, 2013 as ruled by the CA.
Petitioner is mistaken.
In the landmark case of Eastern Shipping Lines, Inc. v. Court of
Appeals, the Court laid down the guidelines regarding the
manner of computing legal interest, particularly declaring that
when judgments of the court awarding a sum of money become
final and executory, the rate of legal interest shall be 12% per
annum from such finality until its satisfaction, since this interim
period is deemed to be by then an equivalent to a forbearance
of credit.66
With the issuance of BSP-MB Circular No. 799, Series of 2013,
however, which became effective on July 1, 2013, in the
absence of an express stipulation as to the rate of interest that
would govern the parties, the rate of legal interest for loans or
forbearance of any money, goods or credits and the rate
allowed in judgments shall no longer be twelve percent (12%)
per annum but shall now be six percent (6%) per annum
effective July 1, 2013. Consequently, the twelve percent (12%)
per annum legal interest shall apply only until June 30, 2013,
and from July 1, 2013 the new rate of six percent (6%) per
annum shall be the prevailing rate of interest when
applicable.67
In the recent case of Secretary of the Department of Public
Works and Highways v. Spouses Tecson,68 the Court explained:
Lastly, from finality of the Court's Resolution on reconsideration
until full payment, the total amount due to respondents-
movants shall earn a straight six percent (6%) legal interest,
pursuant to Circular No. 799 and the case of Nacar. Such
interest is imposed by reason of the Court's decision and takes
the nature of a judicial debt.
Clearly, the award of interest on the value of the land at the
time of taking in 1940 until full payment is adequate
compensation to respondents movants for the deprivation of
their property without the benefit of expropriation proceedings.
Such interest, however meager or enormous it may be, cannot
be inequitable and unconscionable because it resulted directly
from the application of law and jurisprdence-standards that
have taken into account fairness and equity in setting the
interest rates due for the use or forbearance of money. Thus,
adding the interest computed to the market value of the
property at the time of taking signifies the real, substantial, full
and ample value of the property. Verily, the same constitutes
due compliance with the constitutional mandate on eminent
domain and serves as a basic measure of fairness.

From the foregoing, it is clear that the CA was correct in
imposing an interest on the just compensation at the rate of
12% per annum from November 21, 2003 up to June 30, 2013,
and 6% per annum from July 1, 2013 until full payment.
WHEREFORE, the petition is DENIED. The Decision dated
October 26, 2016 and the Resolution dated February 22, 2017
of the Court of Appeals in CA-G.R. CV No. 104234 are hereby
AFFIRMED.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
FIRST DIVISION
G.R. No. 197920, January 22, 2018
DEMOSTHENES R. ARBILON, Petitioner, v. SOFRONIO
MANLANGIT, Respondent.
DECISION
TIJAM, J.:
Before Us is a petition for review on certiorari1 under Rule 45 of
the Rules of Court filed by Demosthenes R. Arbilon (petitioner)
assailing the Decision2 dated January 14, 2011 of the Court of
Appeals (CA) in CA-G.R. CV No. 00038, which reversed and set
aside the Decision3 dated May 5, 2003 of the Regional Trial
Court (RTC) of Davao City, Branch 33 in Civil Case No. 27,498-
99 dismissing the case filed by Sofronio Manlangit (respondent)
and ordering the return of the possession of the Atlas Copco
Compressor (compressor) to petitioner.
This case stemmed from a Complaint4 for recovery of
possession of personal properties with writ of replevin and/or
sum of money, with damages and attorney's fees filed by
respondent against petitioner.
In his complaint, respondent alleged that he purchased on
credit one (1) compressor and one (1) unit of Stainless Pump, 3
horsepower, single phase for P200,000.00 and P65,000.00,
respectively, from Davao Diamond Industrial Supply (Davao
Diamond). Respondent claimed that the compressor had been
in the possession of petitioner from November 1997 up to the
time of the filing of the complaint, that despite demand,
petitioner failed to return the same to respondent.5
In his Answer with Counterclaim,6 petitioner argued that the
respondent is not the owner of the compressor. Petitioner
alleged that the ownership of the compressor was never vested
to respondent since the latter failed to pay the purchase price of
P200,000.00. Petitioner alleged that he voluntarily assumed the
obligation to pay the compressor to Davao Diamond in four
installments as it was indispensable in the mining operations of
Double A.7
The RTC, upon posting of the bond, granted the writ of replevin
and the compressor was delivered to respondent.
During the trial, respondent alleged that he was once a
financier and operator of a gold mine in Davao del Norte but
when he ran out of funds, petitioner and Major Efren Alcuizar
(Alcuizar) took over the mining operations. When petitioner and
Alcuizar also ran out of funds, Lucia Sanchez Leanillo (Leanillo)
became the financier of the mining operations.8 It appears that
Leanillo paid for the installments of the compressor on account
of a separate contract of sale entered into by Davao Diamond
with her.
Ruling of the RTC
After trial on the merits, the RTC in its Decision9 dated May 5,
2003, ruled in favor of the petitioner, thus:
WHEREFORE, judgment is hereby rendered in favor of the
[petitioner] and against [respondent]:
dismissing the complaint for lack of cause of action;
dissolving the writ of seizure and declaring [respondent] to be
not entitled to the possession of the [compressor];
ordering the return of the possession of the [compressor] with
its accessories, if any, to [petitioner] and [Leanillo], and if this is
no longer possible for [respondent] and/or the surety company,
the Capital Insurance & Surety Company, Inc., to pay the value
of said [compressor], with interest at the legal rate from the
time [petitioner] was dispossessed of said compressor;
to pay [petitioner] the sum of P15,000.00 for and as attorney's
fees, plus P5,000.00 as litigation expenses; and
all other claims for damages are denied.
Costs of suit against [respondent].
SO ORDERED.10
The RTC in finding for the petitioner held that:
From all the foregoing, the following facts appears duly
established:
[Respondent] purchased on installment from [Davao Diamond]
on July 17, 1996, one (1) unit [compressor] and one (1) SS
Pump 3HP, among others;
He failed to pay the purchase price of these items;
He wrote [Davao Diamond] a letter on August 5, 1999,
voluntarily surrendering the compressor and the pump because
he could not pay for it[;]
Before he wrote the letter to [Davao Diamond], [Leanillo] had
already paid [Davao Diamond] the purchase price for the
compressor in four installments. Thus was evidenced by Cash
Vouchers all dated in 1998 x x x and the corresponding receipts
issued in behalf of [Davao Diamond] by Atty. George Cabebe x
x x, each for P50,000.00.
Thus, when [respondent] wrote the [Davao Diamond], that he
was voluntarily surrendering the compressor and the pump he
effectively surrendered whatever rights and interest he might
have on the compressor and the pump. He was aware that he is
no longer the owner of the compressor. No evidence was
adduced by [respondent] to prove that there was a prior
existing arrangement with him and Leanillo as far as the
payment of the account with [Davao Diamond] was concerned.
It is very strange indeed for him to have written the letter
despite knowing that it had been paid for by [Leanillo], unless it
was intended to pave the way for [Leanillo] to acquire full
ownership of the compressor and to ensure that [Davao
Diamond] will be free from legal liability in selling the
compressor to Leanillo. x x x.
xxxx
Thus, it is quite clear that as of August 5, 1999, [respondent]
has no more right and interest over the compressor and the
pump by reason of his voluntary surrender of these items to
[Davao Diamond]. x x x.11
Ruling of the CA
Upon appeal, the CA in its Decision12 dated January 14, 2011
reversed the RTC ruling and held that respondent is the owner
of the compressor, thus:
WHEREFORE, the assailed decision is SET ASIDE and a new one
rendered:
1. Declaring [respondent] the owner of the (1) unit
[compressor] with Serial No. ARP 695174 and thus entitled to
its possession;
2. Ordering [petitioner] to reimburse [respondent's] litigation
expenses in the amount of P2,250.60 and attorney's fee[s] in
the amount of P10,000.00.
SO ORDERED.13
The CA held that the transaction between respondent and
Davao Diamond was a contract to sell since the stipulation in
the Sales Invoice14 shows that the goods listed in the invoice
shall remain the property of the seller until fully paid by the
buyer. The CA further held that since Leanillo undisputedly paid
the installments on the compressor, the ownership over the
compressor was automatically vested on respondent. As such,
the owner of the compressor is respondent. Insofar as the
payment of Leanillo is concerned, the CA held that such
payment is considered as a payment made by a third party
without the knowledge of the respondent, as such, Leanillo can
recover the amount paid insofar as the same has been
beneficial to respondent. However, the CA ruled that there is
evidence to show that the payment made by Leanillo was taken
from the partnership share of respondent. Therefore,
respondent is no longer obligated to reimburse Leanillo of the
amount it paid for the compressor.
The Issues
Hence, petitioner filed the instant petition raising the following
issues to be resolved:
1) whether or not the CA erred when it ruled that respondent is
the owner of the compressor, hence entitled to its possession;
and 2) whether or not the money used by Leanillo to pay the
compressor came from respondent's partnership share.
While the case filed by respondent before the RTC was only for
recovery of possession of the compressor, the parties however
raised the issue of ownership during the trial in the RTC. Thus,
when they raised the issue of ownership, while this Court may
pass upon the issue of ownersip, the same is limited to the
determination of who between the parties has a better right to
possess the property. This adjudication, however, is not a final
and binding determination on the issue of ownership. Since the
determination of ownership is merely provisional, the same is
not a bar to an action between the same parties involving title
to the property.15
To determine who has the better right to possession of the
compressor, examination of the contract between respondent
and Davao Diamond is in order. The CA is of the opinion that
the contract between respondent and Davao Diamond is merely
a contract to sell, as such, mere delivery of the thing sold does
not result to the transfer of ownership to the buyer.
In a contract to sell, the seller explicitly reserves the transfer of
title to the buyer until the fulfillment of a condition, that is, the
full payment of the purchase price. Title to the property is
retained by the seller until the buyer fully paid the price of the
thing sold.
As found by the CA and undisputed by the respondent, the
Sales Invoice No. 8291116 covering the disputed compressor
contained the following stipulation:
Note: It is hereby agreed that the goods listed to this invoice
shall remain the property of the seller until fully paid by the
buyer. Failure of the buyer to pay the goods as agreed upon,
the seller may extra-judicially take possession of the goods and
dispose them accordingly.
While the sales invoice is not a formal contract to sell, the sales
invoice is nevertheless the best evidence of the transaction
between the respondent and Davao Diamond. Sales invoices are
commonly recognized in ordinary commercial transactions as
valid between the parties and, at the very least, they serve as
an acknowledgment that a business transaction has in fact
transpired. Thus, the moment respondent affixed his signature
thereon, he is bound by all the terms stipulated therein.17
The sales invoice contains the earmarks of a contract to sell
since the seller reserved the ownership of the thing sold until
the buyer fully paid the purchase price. We therefore agree with
the CA that the agreement between respondent and Davao
Diamond is a contract to sell. As such, the mere delivery of the
compressor to respondent does not make him the owner of the
same.
The next question now is whether the respondent has complied
with his obligation to fully pay the purchase price?
Leanillo claimed that she paid for the installments on the
compressor. However, she claimed that Davao Diamond
entered into an independent contract of sale with her while
respondent claimed that the money used by Leanillo to pay the
compressor came from his partnership share.
It is a settled doctrine in civil cases that he who alleges a fact
has the burden of proving it and a mere allegation is not
evidence.18 It is incumbent upon Leanillo to prove that Davao
Diamond sold the compressor to her independent of the
contract to sell with respondent.
Other than the self-serving statements of Leanillo, no other
evidence was presented to support her allegation that Davao
Diamond entered into a separate contract with her. In fact, at
the time Leanillo paid the compressor in 1998, there is no
evidence that Davao Diamond revoked, rescinded or cancelled
the contract to sell with respondent.
Moreover, it must be considered that in view of the existing
contract to sell between respondent and Davao Diamond, the
latter cannot simply sell the property to petitioner. A contact to
sell is a bilateral contract whereby the prospective seller, while
expressly reserving the ownership over the thing sold despite
the delivery thereof to the prospective buyer, binds himself to
sell the property exclusively to the prospective buyer upon full
payment of the purchase price.19 Thus, in the absence of any
revocation or cancellation of the contract to sell with
respondent, Davao Diamond cannot legally sell the compressor
to petitioner.
Nevertheless, the records of the case show that Leanillo paid
the compressor in behalf of respondent.
The answer of petitioner to the complaint of respondent stated
that the former voluntarily assumed paying the compressor
since the same was beneficial to the mining operations of
Double A.20 Further, the receipts21 issued by Davao Diamond
to Leanillo state that the same is "in partial payment of the
existing account incurred by respondent" and is "in partial
payment of respondent's account with Davao Diamond relative
to one (1) unit compressor."
The above-mentioned circumstances indubitably show that
Leanillo paid the compressor not in her own right but in behalf
of respondent. If indeed Davao Diamond sold the compressor to
Leanillo and that the latter paid the compressor in accordance
with her separate contract with Davao Diamond, such fact
would have appeared in the receipts. Sadly, that is not the case.
There is nothing in the records that would compel Us to declare
that there is an independent contract of sale between Leanillo
and Davao Diamond.
Having ruled that Leanillo paid the compressor in behalf of
respondent, the latter has therefore complied with his obligation
to fully pay the compressor. Ownership of the compressor can
now legally pass to respondent. As such, the latter has the right
to possess the compressor since possession is an attribute of
ownership.
What becomes of Leanillo's payment? Is the respondent obliged
to reimburse to Leanillo the price of the compressor?
Respondent claimed that there is nothing to be reimbursed
since the money used by Leanillo to pay the compressor came
from his partnership share. We do not agree.
A perusal of the records of the case reveal that respondent
failed to raise this as an issue during the trial. In fact, it was not
one of the issues22 contained in the pre-trial order. Therefore,
the same cannot be considered in the resolution of the case.
As We held in the case of LICOMCEN, Inc. v. Engr. Abainza,23
all issues that the parties intend to raise during the trial must be
raised during the pre-trial, thus:
Pre-trial is primarily intended to insure that the parties properly
raise all issues necessary to dispose of a case. The parties must
disclose during pretrial all issues they intend to raise during the
trial, except those involving privileged or impeaching matters.
Although a pre-trial order is not meant to catalogue each issue
that the parties may take up during the trial, issues not included
in the pre-trial order may be considered only if they are
impliedly included in the issues raised or inferable from the
issues raised by necessary implication. x x x.24 (Citation
omitted)
Hence, the issue of whether there is a partnership that is
existing between petitioner, Leanillo and respondent and
whether the partnership share of respondent was used to pay
the compressor are not impliedly included or is inferable from
the issues raised in the pre-trial order. As such, the same
cannot be considered during the trial. Even if We rule that the
said issues were included or inferable by necessary implication
from the issues raised in the pre-trial order, respondent still
failed to present an iota of evidence to prove that the
partnership exist or that his partnership shares were used to
pay off the compressor. Mere allegation without sufficient proof May 18, 2009
is not evidence of the existence of a fact or of the truthfulness DECISION Villarica Pawnshop, Inc.
of an allegation. Mar. 2000 - Jun. 2000
GESMUNDO, J.: P68,922.03
Since respondent failed to prove that the money used to pay Feb. 20, 2009
the compressor was respondent's partnership share nor the Condonation statutes—being an act of liberality on the part of
existence of a partnership among them, the payment of Leanillo the State—are strictly construed against the applicants unless Jan. 2000 - Jun. 2000
can be considered as payment by a third party. Under Article the laws themselves clearly state a contrary rule of P21,353.70
1236 of the Civil Code, it is provided that: interpretation. Feb. 26, 2009

Article 1236. The creditor is not bound to accept payment or This is a petition for review on certiorari under Rule 45 of the
performance by a third person who has no interest in the Rules of Court filed by petitioners H. Villarica Pawnshop, Inc.,
fulfillment of the obligation, unless there is a stipulation to the HL Villarica Pawnshop, Inc., HRV Villarica Pawnshop, Inc. and
contrary. Villarica Pawnshop, Inc., (petitioners) seeking to reverse and set
aside the Decision1 dated February 26, 2016 and Resolution2
Whoever pays for another may demand from the debtor what dated November 2, 2016, of the Court of Appeals (CA) in CA-
he has paid, except that if he paid without the knowledge or G.R. SP No. 140916, which affirmed the Resolution3 dated
against the will of the debtor, he can recover only insofar as the November 6, 2013, and Order4 dated January 21,2015, of the
payment has been beneficial to the debtor. (Emphasis ours) Social Security Commission (SSC) denying petitioners' claim for
refund.
Under the above-cited provision, Leanillo has the right to
demand reimbursement from respondent since it is undisputed The Antecedents
that Leanillo was the one who paid for the compressor in behalf
of respondent. Nevertheless, since Leanillo was never Petitioners are private corporations engaged in the pawnshop
impleaded as a party in this case, this Court has not acquired business and are compulsorily registered with the Social
any jurisdiction over her person, and as such, We cannot grant Security System (SSS) under Republic Act (R.A.) No. 8282,5
any relief in her favor. "It is well-settled that courts cannot otherwise known as the Social Security Law of 1997.6
grant a relief not prayed for in the pleadings or in excess of
what is being sought by a party to a case."25 This however is In 2009, petitioners paid their delinquent contributions and
without prejudice to any action that may be brought by Leanillo accrued penalties with the different branches of the SSS in the
to claim reimbursement from respondent. following manner:
WHEREFORE, the foregoing considered, the petition is DENIED. PETITIONER
The Decision dated January 14, 2011 of the Court of Appeals in DELINQUENCY
CA-G.R. CV No. 00038 is hereby AFFIRMED in that respondent PERIOD
Sofronio Manlangit is the lawful owner and possessor of the AMOUNT PAID
Atlas Copco Compressor. This, however, is without prejudice to (Contribution and Penalty)
any claim for reimbursement which may thereafter be filed DATE PAID
against respondent. H. Villarica Pawnshop, Inc.
Jan. 2006 - Oct. 2006
SO ORDERED. P1,461,640.24
Apr. 23, 2009
Sereno, C.J., (Chairperson), Leonardo-De Castro, Del Castillo,
and Jardeleza, JJ., concur. Jul. 2007 - Dec. 2007
Apr. 2007- Jun. 2007
THIRD DIVISION P710,199.08.
May 1, 2009
G.R. No. 228087, January 24, 2018
Mar. 2008 - Dec. 2008
H. VILLARICA PAWNSHOP, INC., HL VILLARICA PAWNSHOP, H.L. Villarica Pawnshop, Inc.
INC., HRV VILLARICA PAWNSHOP, INC. AND VILLARICA Sept. 2005 - Dec. 2006
PAWNSHOP, INC., Petitioners, v. SOCIAL SECURITY P2,544,525.28
COMMISSION, SOCIAL SECURITY SYSTEM, AMADOR M. Jun. 20, 2009
MONTEIRO, SANTIAGO DIONISIO R. AGDEPPA, MA. LUZ N. HRV Villarica Pawnshop, Inc.
BARROS-MAGSINO, MILAGROS N. CASUGA AND JOCELYN Q. Jan. 2009 - May 2009
GARCIA, Respondents. P132,176.32
Jan. 2005 - Aug. 2005
P699,850.34
Mar. 2, 2009
Jan. 1997 - Jan. 2009
P2,491,998.08
Apr. 7, 20097
On January 7, 2010, Congress enacted R.A. No. 9903, otherwise
known as the Social Security Condonation Law of 2009, which
took effect on February 1, 2010. The said law offered
delinquent employers the opportunity to settle, without penalty,
their accountabilities or overdue contributions within six (6)
months from the date of its effectivity.8
Consequently, petitioners thru its President and General
Manager Atty. Henry P. Villarica, sent separate Letters,9 all
dated July 26, 2010, to the different branches of the SSS
seeking reimbursement of the accrued penalties, which they
have paid in 2009, thus:
Amount Claimed
1. Diliman Branch
P860,452.6210
2. Manila Branch
P1,005,805.2811
3. Caloocan Branch
P5,376.3212
4. San Francisco Del Monte Branch
P3,119,400.1513
Invoking Section 4 of R.A. No. 9903 and Section 2 (f) of the
SSC Circular No. 2010-004 or the Implementing Rules and
Regulations of R.A. No. 9903 (IRR), petitioners claimed that the
benefits of the condonation program extend to all employers
who have settled their arrears or unpaid contributions even
prior to the effectivity of the law.14
In a Letter15 dated August 16, 2010, the SSS - San Francisco
Del Monte Branch denied petitioner Villarica Pawnshop, Inc.'s
request for refund amounting to P3,119,400.15 stating that
there was no provision under R.A. No. 9903 allowing
reimbursement of penalties paid before its effectivity.16
In another Letter17 dated September 16, 2010, petitioner HRV
Villarica Pawnshop, Inc. was likewise informed that its
application for the refund of the accrued penalty had been
denied because R.A. No. 9903 does not cover accountabilities
settled prior to its effectivity.18
In like manner, the applications for refund filed by petitioners H.
Villarica Pawnshop, Inc. and HL Villarica Pawnshop, Inc. were
both denied in separate letters dated October 4, 201019 and
October 15, 2010,20 respectively, for the same reason of being
filed outside the coverage of R.A. No. 9903.21
As a result, petitioners filed their respective Petitions22 before
the SSC seeking reimbursement of the 3% per month penalties
they paid in 2009 essentially claiming that they were entitled to
avail of the benefits under R.A. No. 9903 by reason of equity
because "one of the purposes of the law is to favor employers,
regardless of the reason for the non-payment of the arrears in
contribution;" and that the interpretation of the SSS "is
manifestly contrary to the principle that, in enacting a statute,
the legislature intended right and justice to prevail."
In its Answer23 dated March 14, 2012, the SSS prayed for the
dismissal of the petitions for utter lack of merit. It maintained
that petitioners were not entitled to avail of the condonation
program under R.A. No. 9903 because they were not
considered delinquent at the time the law took effect in 2010;
and that there was nothing more to condone on the part of
petitioners for they have settled their obligations even before
the enactment of the law. The SSS explained that the term
"accrued penalties" had been properly defined as unpaid
penalties under the IRR and, considering that laws granting
condonation constitute acts of benevolence on the part of the
State, they should be strictly construed against the applicant.24
The SSC Ruling
In its Resolution25 dated November 6, 2013, the SSC denied all
the petitions for lack of merit. It ruled that petitioners were not
entitled to the benefits of the condonation program under R.A.
No. 9903 in view of the full payment of their unpaid obligations
prior to the effectivity of the law on February 1, 2010. As
petitioners did not have unpaid contributions at the time the law
took effect, the SSC held that there could be no remission or
refund in their favor. The dispositive portion of the said
resolution states:
WHEREFORE, all four (4) petitions filed by petitioners against
the SSS are hereby DENIED for lack of merit.
SO ORDERED.26
Petitioners filed a motion for reconsideration but it was denied
by the SSC in an Order27 dated January 21, 2015.
Undeterred, petitioners appealed before the CA.
The CA Ruling
In its decision dated February 26, 2016, the CA affirmed the
ruling of the SSC. It held that the intent of the legislature in
enacting R.A. No. 9903 was the remission of the three percent
(3%) per month penalty imposed upon delinquent contributions
of employers as a necessary consequence of the late payment
or non-remittance of SSS contributions. The CA found that the
IRR of R.A. No. 9903 used the word "unpaid" to emphasize the
accrued penalty that may be waived therein, thus, it
presupposes that there was still an outstanding obligation at the
time of the effectivity of the law, which may be extinguished
through remission. It highlighted that lawmakers did not include
within the sphere of R.A. No. 9903 those employers whose
penalties have already been paid prior to its effectivity. The CA
added that it would be absurd for obligations that have already
been extinguished to be subjected to condonation.
Citing Mendoza v. People28(Mendoza), the CA further ruled that
there was no violation of the equal protection clause because
there was a substantial distinction between those delinquent
employers who paid within the six (6) month period from the
effectivity of the law and those who paid outside of the said
availment period. It underscored that only the former class was
expressly covered by R.A. No. 9903. The CA concluded that
petitioners' stand, that those who paid prior to the effectivity of
R.A. No. 9903 can avail of the condonation and refund, would
open the floodgates to numerous claims for reimbursement
before the SSS, which could lead to a depletion of its resources
to the detriment of the public's best interest. The fallo of the CA
ruling reads:
WHEREFORE, foregoing considered, the instant petition is
hereby DISMISSED. The Resolution dated November 6, 2013
and the Order dated January 21, 2015 of the Social Security
Commission in SSC Case Nos. 11-19521-11, 11-19522-11, 11-
19523-11 and 11-19524-11 are AFFIRMED.
SO ORDERED.29
Petitioners moved for reconsideration but it was denied by the
CA in its resolution dated November 2, 2016.30
Hence, this petition anchored on the following grounds:
WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN
RULING THAT RA NO. 9903 DOES NOT INCLUDE PETITIONERS
IN ITS COVERAGE, CONSIDERING THAT:
SECTION 4 OF RA NO. 9903 EXPRESSLY INCLUDES
EMPLOYERS, SUCH AS PETITIONERS, WHO SETTLED (THEIR)
ARREARS IN CONTRIBUTIONS BEFORE THE EFFECTIVITY OF
THE LAW AND THUS, ARE ENTITLED TO A WAIVER OF THEIR
ACCRUED PENALTIES.
PRIOR TO RA NO. 9903, EMPLOYERS ARE REQUIRED TO
SETTLE THEIR ARREARS IN CONTRIBUTIONS
SIMULTANEOUSLY WITH PAYMENT OF THE PENALTY, THUS
RENDERING IT IMPOSSIBLE FOR PETITIONERS TO PAY THEIR
ARREARS WITHOUT PAYING THE PENALTY
WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED IN
RULING THAT RESPONDENT SSC CORRECTLY INTERPRETED
THE TERM 'ACCRUED' UNDER THE SSS CONDONATION LAW OF
2009 TO MEAN UNPAID. IF THIS INTERPRETATION WERE TO
BE UPHELD, THOSE WHO HAVE UNPAID ACCRUED PENALTIES
WOULD BE IN A BETTER POSITION THAN THOSE WHO
DECIDED TO SETTLE BOTH THE ARREARS IN CONTRIBUTION
AND THE ACCRUED PENALTIES. CERTAINLY, THE LAW NEVER
INTENDED INJUSTICE.31
Petitioners argue that the last proviso of Section 4 of R. A. No.
9903 "clearly extends the benefit of the waiver" to employers
who have settled their arrears before the effectivity of the law,
hence, to allow the refund of the corresponding penalties
paid;32 that the "equity provision" in Section 4 of R.A. No. 9903
should be interpreted to include a refund of penalties already
paid if such law is to be given any effect;33 and that a refund
should be allowed because there is no substantial distinction
between employers who paid their accrued penalties before and
after the effectivity of the R.A. No. 9903.34
In its Comment,35 the SSC counters that since petitioners have
already paid their unremitted contributions and accrued
penalties before the effectivity of R.A. No. 9903, there is
nothing left to be condoned or waived; that, at the time of their
payment, there was no remission of accrued penalty yet; that
R.A. No. 9903 does not contain a provision allowing the
reimbursement of accrued penalty which was paid prior to its
effectivity; that the CA correctly interpreted the term "accrued
penalty" to mean "unpaid" by using the definition provided in
Section 1 (d) of the IRR; and that the ruling in Mendoza had
already recognized that Congress refused to allow a sweeping,
non-discriminatory condonation to all delinquent employers
when it provided a fixed period for the availment of the
condonation program under R.A. No. 9903. 36
In its Comment,37 the SSS avers that the payments made by
petitioners before the effectivity of R.A. No. 9903 are valid
payments which cannot be the subject of reimbursement; that
petitioners are no longer considered delinquent employers when
R.A. No. 9903 took effect; that petitioners erroneously
interpreted the "equity provision" to include a right to a refund
of penalties paid; and that laws granting condonation constitute
an act of benevolence and should be strictly construed against
the applicant.38
The Court's Ruling
The petition is bereft of merit.
Sections 2 and 4 of the R.A. No. 9903 specifically provide:
Section 2. Condonation of Penalty. — Any employer who is
delinquent or has not remitted all contributions due and payable
to the Social Security System (SSS), including those with
pending cases either before the Social Security Commission,
courts or Office of the Prosecutor involving collection of
contributions and/or penalties, may within six (6) months from
the effectivity of this Act:
(a) remit said contributions; or
(b) submit a proposal to pay the same in installments, subject
to the implementing rules and regulations which the Social
Security Commission may prescribe: Provided, That the
delinquent employer submits the corresponding collection lists
together with the remittance or proposal to pay installments:
Provided, further, That upon approval and payment in full or in
installments of contributions due and payable to the SSS, all
such pending cases filed against the employer shall be
withdrawn without prejudice to the refiling of the case in the
event the employer fails to remit in full the required delinquent
contributions or defaults in the payment of any installment
under the approved proposal.
xxxx
Section 4. Effectivity of Condonation. — The penalty provided
under Section 22 (a) of Republic Act No. 8282 shall be
condoned by virtue of this Act when and until all the delinquent
contributions are remitted by the employer to the SSS:
Provided, That, in case the employer fails to remit in full the
required delinquent contributions, or defaults in the payment of
any installment under the approved proposal, within the
availment period provided in this Act, the penalties are deemed
reimposed from the time the contributions first become due, to
accrue until the delinquent account is paid in full: Provided,
further, That for reason of equity, employers who settled
arrears in contributions before the effectivity of this Act shall
likewise have their accrued penalties waived. [emphases
supplied]
On the other hand, Sections 1 and 2 of the IRR of R.A. No.
9903 state:
Section 1. Definition of Terms. — Unless the context of a certain
provision of this Circular clearly indicates otherwise, the term:
xxx
(d) "Accrued penalty" refers to the unpaid three percent (3%)
penalty imposed upon any delayed remittance of contribution m
accordance with Section 22 (a) of R.A. No. 1161, as amended.
Section 2. Who may avail of the Program. — Any employer who
is delinquent or has not remitted all contributions due and
payable to the SSS may avail of the Program, including the
following:
(a) Those not yet registered with the SSS
(b) Those with pending or approved proposal under the
Installment Payment Scheme of the SSS (Circular No. 9-P)
pursuant to SSC Resolution No. 380 dated 10 June 2002;
(c) Those with pending or approved application under the
Program for Acceptance of Properties Offered Through Dacion
En Pago of the SSS (Circular No. 6-P) pursuant to SSC
Resolution No. 29 dated 16 January 2002;
(d) Those with cases pending before the SSC, Courts or Office
of the Prosecutor involving collection of contributions and/or
penalties;
(e) Those against whom judgment had been rendered involving
collection of contributions and/or penalties but have not
complied with the judgment, and;
(f) Those who, before the effectivity of the Act, have settled all
contributions but with accrued penalty. [emphasis supplied]
Under R.A. No. 9903 and its IRR, an employer who is
delinquent or has not remitted all contributions due and payable
to the SSS may avail of the condonation program provided that
the delinquent employer will remit the full amount of the unpaid
contributions or would submit a proposal to pay the delinquent
contributions in installment within the six (6)-month period set
by law.
Under Section 4 of R.A. No. 9903, once an employer pays all its
delinquent contributions within the six month period, the
accrued penalties due thereon shall be deemed waived. In the
last proviso thereof, those employers who have settled their
delinquent contributions before the effectivity of the law but still
have existing accrued penalties shall also benefit from the
condonation program. In that situation, there is still something
to condone because there are existing accrued penalties at the
time of the effectivity of the law. Section 1 (d) of the IRR
defines accrued penalties as those that refer to the unpaid three
percent (3%) penalty imposed upon any delayed remittance of
contribution.
Accordingly, R.A. No. 9903 covers those employers who (1)
have existing delinquent contributions and/or (2) have accrued
penalties at the time of its effectivity.
Evidently, there is nothing in R.A. No. 9903, particularly Section
4 thereof, that benefits an employer who has settled their
delinquent contributions and/or their accrued penalties prior to
the effectivity of the law. Once an employer pays all his
delinquent contributions and accrued penalties before the
effectivity of R.A. No. 9903, it cannot avail of the condonation
program because there is no existing obligation anymore. It is
the clear intent of the law to limit the benefit of the
condonation program to the delinquent employers.39
Also, the provisions of R.A. No. 9903 and its IRR state that
employers may be accorded the benefit of having their accrued
penalties waived provided that they either remit their delinquent
contributions or submit a proposal to pay their delinquencies in
installments (on the condition that there will be no default in
subsequent payments) within the "availment period" spanning
six (6) months from R.A. No. 9903's effectivity.
The Court finds that employers who have paid their unremitted
contributions and already settled their delinquent contributions
as well as their corresponding penalties before R.A. No. 9903's
effectivity do not have a right to be refunded of the penalties
already paid, which shall be discussed in seriatim.
Verba legis interpretation of R.A. No. 9903
It is the duty of the Court to apply the law the way it is
worded.40 Basic is the rule of statutory construction that when
the law is clear and unambiguous, the court is left with no
alternative but to apply the same according to its clear
language.41 The courts can only pronounce what the law is and
what the rights of the parties thereunder are.42 Fidelity to such
a task precludes construction or interpretation, unless
application is impossible or inadequate without it.43 Thus, it is
only when the law is ambiguous or of doubtful meaning may
the court interpret or construe its true intent.44
Parenthetically, the "plain meaning rule" or verba legis in
statutory construction enjoins that if the statute is clear, plain
and free from ambiguity, it must be given its literal meaning
and applied without interpretation.45 This rule of interpretation
is in deference to the plenary power of Congress to make, alter
and repeal laws as this power is an embodiment of the People's
sovereign will.46 Accordingly, when the words of a statute are
clear and unambiguous, courts cannot deviate from the text of
the law and resort to interpretation lest they end up betraying
their solemn duty to uphold the law and worse, violating the
constitutional principle of separation of powers.
Concomitantly, condonation or remission of debt is an act of
liberality, by virtue of which, without receiving any equivalent,
the creditor renounces the enforcement of the obligation, which
is extinguished in its entirety or in that part or aspect of the
same to which the remission refers.47 It is essentially
gratuitous for no equivalent is received for the benefit given.48
Relatedly, waiver is defined as a voluntary and intentional
relinquishment or abandonment of a known existing legal right,
advantage, benefit, claim or privilege, which except for such
waiver the party would have enjoyed; the voluntary
abandonment or surrender, by a capable person, of a right
known by him to exist, with the intent that such right shall be
surrendered and such person forever deprived of its benefit; or
such conduct as warrants an inference of the relinquishment of
such right; or the intentional doing of an act inconsistent with
claiming it.49 On the other hand, refund is an act of giving back
or returning what was received.50 In cases of monetary
obligations, a claim for refund exists only after the payment has
been made and, in the act of doing so, the debtor either
delivered excess funds or there exists no obligation to pay in
the first place. This right arises either by virtue of solutio
indebiti as provided for in Articles 2154 to 2163 of the Civil
Code or by provision of another positive law, such as tax laws
or amnesty laws.51
A plain reading of Section 4 of R.A. No. 9903 shows that it does
not give employers who have already settled their delinquent
contributions as well as their corresponding penalties the right
to a refund of the penalties paid. What was waived here was
the amount of accrued penalties that have not been paid prior
to the law's effectivity—it does not include those that have
already been settled.
The words "condoned", "waived" and "accrued" are
unambiguous enough to be understood and directly applied
without any resulting confusion. As discussed earlier, the word
''condonation" is the creditor's act of extinguishing an obligation
by renunciation and the word "waive" is an abandonment or
relinquishment of an existing legal right. On the other hand, the
term "accrue" in legal parlance means "to come into existence
as an enforceable claim."52 Thus, the phrases "shall be
condoned" and "shall likewise have their accrued penalties
waived" under Section 4 of the R.A. No. 9903 can only mean
that, at the time of its effectivity, only existing penalties may be
extinguished or relinquished. No further interpretation is
necessary to clarify the law's applicability.
Prospective application of R.A. No. 9903
Statutes are generally applied prospectively unless they
expressly allow a retroactive application. It is a basic principle
that laws should only be applied prospectively unless the
legislative intent to give them retroactive effect is expressly
declared or is necessarily implied from the language used.53
Absent a clear contrary language in the text and, that in every
case of doubt, the doubt will be resolved against the retroactive
operation of laws.54
Here, R.A. No. 9903 does not provide that, prior to its
effectivity, penalties already paid are deemed condoned or
waived. What Section 2 of the law provides instead is an
availment period of six (6) months after its effectivity within
which to pay the delinquent contributions for the existing and
corresponding penalties to be waived or condoned. This only
means that Congress intends R.A. No. 9903 to apply
prospectively only after its effectivity and until its expiration.
Interpretation in favor of social justice
Even if there is doubt as to the import of the term "accrued
penalties," condonation laws—especially those relating to social
security funds—are construed strictly against the applicants.
Social justice in the case of the laborers means compassionate
justice or an implementation of the policy that those who have
less in life should have more in law.55 And since it is the State's
policy to "promote social justice and provide meaningful
protection to [SSS] members and their beneficiaries against the
hazards of disability, sickness, maternity, old age, death, and
other contingencies resulting in loss of income or financial
burden,"56 Court should adopt a rule of statutory interpretation
which ensures the financial viability of the SSS.
Here, the State stands to lose its resources in the form of
receivables whenever it condones or forgoes the collection of its
receivables or unpaid penalties. Since a loss of funds ultimately
results in the Government being deprived of its means to
pursue its objectives, all monetary claims based on condonation
should be construed strictly against the applicants. In the case
of SSS funds, the Court in Social Security System v. Commission
on Audit57 had emphatically explained in this wise:
THE FUNDS contributed to the Social Security System (SSS) are
not only imbued with public interest, they are part and parcel of
the fruits of the workers' labors pooled into one enormous trust
fund under the administration of the System designed to insure
against the vicissitudes and hazards of their working lives. In a
very real sense, the trust funds are the workers' property which
they could turn to when necessity beckons and are thus more
personal to them than the taxes they pay. It is therefore only
fair and proper that charges against the trust fund be strictly
scrutinized for every lawful and judicious opportunity to keep it
intact and viable in the interest of enhancing the welfare of
their true and ultimate beneficiaries. [emphasis supplied]
To this end, the Court upholds and abides by this canon of
interpretation against applicants of the benefits of R.A. No.
9903 as a recognition to the constitutional policies of freeing the
people from poverty through policies that provide adequate
social services58 and affording full protection to labor.59 It is
consistent with the congressional intent of placing a primary
importance in helping the SSS increase its funds through
stimulating cash inflows by encouraging delinquent employers
to settle their accountabilities.60 Thus, R.A. No. 9903 shall be
understood as not to include a refund of penalties paid before
its effectivity.
It is the essence of judicial duty to construe statutes so as to
avoid such a deplorable result of injustice.61 Simply put, courts
are not to give words meanings that would lead to absurd or
unreasonable consequences.62 This is to preserve the intention
of Congress—the branch which possesses the plenary power for
all purposes of civil government.63
Logically, only existing obligations can be extinguished either by
payment, loss of the thing due, remission or condonation,
confusion or merger or rights, compensation, novation,
annulment of contract, rescission, fulfillment of a resolutory
condition, or prescription. Interpreting R.A. No. 9903 in such a
way that it extinguishes an obligation which is already
extinguished is simply absurd and unreasonable.
Rule-making power of the SSS
The SSS (through the SSC)64 is empowered to issue the
necessary rules and regulations for the effective implementation
of R.A. No. 9903.65 Quasi-legislative power is exercised by
administrative agencies through the promulgation of rules and
regulations within the confines of the granting statute and the
doctrine of non-delegation of powers from the separation of the
branches of the government.66
Accordingly, with the growing complexity of modem life, the
multiplication of the subjects of governmental regulations, and
the increased difficulty of administering the laws, the rigidity of
the theory of separation of governmental powers has, to a large
extent, been relaxed by permitting the delegation of greater
powers by the legislative and vesting a larger amount of
discretion in administrative and executive officials, not only in
the execution of the laws, but also in the promulgation of
certain rules and regulations calculated to promote public
interest.67 Stated differently, administrative agencies are
necessarily authorized to fill in the gaps of a statute for its
proper and effective implementation. Hence, the need to
delegate to administrative bodies—the principal agencies tasked
to execute laws in their specialized fields—the authority to
promulgate rules and regulations to implement a given statute
and effectuate its policies.68
In the instant case, Section 30 of the R.A. No. 8282 and Section
5 of R.A. No. 9903 gave the SSS the power to promulgate rules
and regulations to define the terms of social security-related
laws that may have a likelihood of being subjected to several
interpretations. This is exactly what the SSS did when it defined
the term "accrued penalties'' to mean "unpaid penalties" so as
to make it unequivocal and prevent confusion as to the
applicability of R.A. No. 9903. More importantly, since the
ascription of the meaning of "unpaid penalties" to "accrued
penalties" bear a reasonable semblance and justifiable
connection, it should not be disturbed and altered by the courts.
Delinquent contributions and penalties may be paid separately
There is no existing statutory or regulatory provision which
requires the simultaneous or joint payment of corresponding
penalties along with the payment of delinquent contributions.
Consequently, it is possible that a class of employers who have
settled their delinquent contributions but have not paid the
corresponding penalties before the effectivity of R.A. No. 9903,
may exist. As adequately pointed out by the SSC:69
It is worthy to note that there is no provision in RA 8282, as
amended, nor in any SSS Circular or Office Order that requires
employers to settle their arrears in contributions simultaneously
with payment of the penalty. On the contrary, in its sincere
effort to be a partner in nation[-]building, along with the State's
declared policy to establish, develop, promote and perfect a
sound and viable tax-exempt social security system suitable to
the needs of the Philippines, the SSS is empowered to accept,
process and approve applications for installment proposal
evincing that employers are not required to settle their arrears
in contributions simultaneously with the payment of the penalty.
[emphasis supplied]
The Court finds that the aforementioned assertion of the SSC is
not without any legal basis as Section 4 (c) of the R.A. No. 8282
provides:
Section 4. Powers and Duties of the Commission and SSS. -
xxxx
(6) To compromise or release, in whole or in part, any
interest, penalty or any civil liability to SSS in connection with
the investments authorized under Section 26 hereof, under such
terms and conditions as it may prescribe and approved by the
President of the Philippines; and xxx (emphasis supplied)
Based on the foregoing, the SSS—through the SSC—is
authorized to address any act that may undermine the
collection of penalties due from delinquent employers subject
only to the condition in Section 26 of the same law that the
potential revenues being compromised "are not needed to meet
the current administrative and operational expenses." Thus,
petitioners' claim that "a class of employers who simply paid the
arrears in contribution but did not settle their penalties due
does not exist"70 is erroneous.
There is no violation of the equal protection clause
There is a substantial distinction between employers who paid
prior and subsequent to R.A. No. 9903's effectivity. The equal
protection clause guarantees that no person or class of persons
shall be deprived of the same protection of laws which is
enjoyed by other persons or other classes in the same place
and in like circumstances.71 However, the concept of equal
protection does not require a universal application of the laws
to all persons or things without distinction; what it simply
requires is equality among equals as determined according to a
valid classification.72
In other words, equal protection simply requires that all persons
or things similarly situated should be treated alike, both as to
rights conferred and responsibilities imposed.73It does not
forbid discrimination as to things that are different.74 Neither is
it necessary that the classification be made with mathematical
nicety.75 Congress is given a wide leeway in providing for a
valid classification;76 especially when social or economic
legislation is at issue.77 Hence, legislative classification may
properly rest on narrow distinctions, for the equal protection
guaranty does not preclude the legislature from recognizing
degrees of evil or harm, and legislation is addressed to evils as
they may appear.78
Correspondingly, the primordial duty of the Court is merely to
apply the law in such a way that it shall not usurp legislative
powers by judicial legislation and that in the course of such
application or construction, it should not make or supervise
legislation, or under the guise of interpretation, modify, revise,
amend, distort, remodel, or rewrite the law, or give the law a
construction which is repugnant to its terms.79 In enacting a
law, it is the sole prerogative of Congress—not the Judiciary—to
determine what subjects or activities it intends to govern limited
only by the provisions set forth in the Constitution.
Significantly, petitioners have already paid not only their
delinquent contributions but also their corresponding penalties
before the enactment and effectivity of R.A. No. 9903. Because
of this observation, petitioners cannot anymore be considered
as "delinquent" under the purview of R.A. No. 9903 and are not
within the class of "delinquent employers."80 Simply put, they
are not similarly situated with other employers who are
delinquent at the time of the law's effectivity. Accordingly,
Congress may treat petitioners differently from all other
employers who may have been delinquent.
Verily, this Court cannot—in the guise of interpretation—modify
the explicit language of R.A. No. 9903 in waiving the collection
of accrued penalties to also include claims for refund. It
obviously violates the Trias Politica Principle entrenched in the
very fabric of democracy itself. While violation of the equal
protection clause may be a compelling ground for this Court to
nullify an arbitrary or unreasonable legislative classification, it
may not be used as a basis to extend the scope of a law to
classes not intended to be covered.81 Therefore, R.A. No. 9903,
which waived outstanding penalties, cannot be expanded to
allow a refund of those which were already settled before the
law's effectivity.
Final note
Settling the contributions in arrears within the availment period
only entitles delinquent employers to a remission of their
corresponding accrued and outstanding penalties—not a refund
of the penalties which have already been paid. There is nothing
in R.A. No. 9903 which explicitly imposes or even implicitly
recognizes a positive or natural obligation on the part of the
SSS to return the penalties which have already been settled
before its effectivity.
It is absurd to revive obligations that have already been
extinguished by payment or performance just to be re-
extinguished by condonation or remission so that it may create
a resulting obligation on the basis of solutio indebiti. More
importantly, there is no violation of the equal protection clause
because there is a substantial distinction in the classes of
employers. Therefore, the Court deems it fitting to deny
petitioners' claim for refund for lack of substantial and legal
basis.
WHEREFORE, the petition is DENIED. The February 26, 2016
Decision and November 2, 2016 Resolution of the Court of
Appeals in CA- G.R. SP No. 140916 are AFFIRMED in toto.
SO ORDERED.
Bersamin (Acting Chairperson), Leonen, and Jardeleza,* JJ.,
concur.
Martires, J., on official leave.
SECOND DIVISION
GR. No. 199081, January 24, 2018
ASIGA MINING CORPORATION, Petitioner, v. MANILA MINING
CORPORATION AND BASIANA MINING EXPLORATION
CORPORATION, Respondents.
DECISION
REYES, JR., J.:
Under the Mineral Resources Decree of 1974, as amended, and
as properly interpreted by established jurisprudence,
abandonment by non-performance of the annual work
obligation could be declared only after the observance of due
process.
The Case
Challenged before the Court via this Petition for Review on
Certiorari under Rule 45 of the Rules of Court is the Decision1
of the Court of Appeals (CA) in CA-G.R. SP No. 100335,
promulgated on May 12, 2011, which affirmed in toto the
Decision2 dated July 31, 2007 of the Mines Adjudication Board
(MAB) of the Department of Environment and Natural
Resources (DENR). Likewise challenged is the subsequent
Resolution3 promulgated on October 24, 2011 which upheld the
earlier decision.
The Antecedent Facts
Petitioner Asiga Mining Corporation (Asiga) was the holder of
mining claims over hectares of land located in Santiago, Agusan
del Norte. These claims, known as MIRADOR and CICAFE, were
granted unto Asiga by virtue of the Mining Act of 1936.4
Subsequently, when the law was amended by the Mineral
Resources Decree of 1974,5 the petitioner had to follow
registration procedures so that its earlier mining claims,
MIRADOR and CICAFE, could be recognized under the new law.
Following their successful application, their mining claims over
the subject area were upheld. Two decades later, the Mineral
Resources Decree of 1974 was amended and superseded by the
Mining Act of 1995.6 Like before, Asiga was again required by
the supervening law to undergo registration procedures so that
its mining claims could be recognized anew.
Hence, on March 31, 1997, Asiga applied with the Mines and
Geosciences Bureau (MGB) to convert its mining claims into a
Mineral Production Sharing Agreement (MPSA) as required by
the Mining Act of 1995 and its implementing rules and
regulations.
As fate would have it, it was during this application process
when Asiga discovered that its mining claims overlapped with
that of respondent Manila Mining Corporation (respondent
MMC), by about 1,661 hectares, and of respondent Basiana
Mining Exploration Corporation (respondent BMEC) by 214
hectares.7
As it happened, each of the respondents had pending
applications for MPSA over the overlapping subject areas which
were filed way earlier than the petitioner's application.
Respondent MMC applied for MPSA over Cabadbaran and
Santiago, Agusan del Norte as early as November 26, 1992.
Respondent BMEC, on the other hand, made a similar
application as early as October 3, 1995. After satisfying the
initial mandatory requirements, respondents MMC and BMEC
published and posted their respective Notices of Application for
MPSA in a newspaper of general circulation for two (2)
consecutive weeks, and posted the same in the bulletin boards
of concerned government agencies.8
Upon knowledge of the foregoing, and to protect its interest
over the subject area, Asiga filed before the MGB-CARAGA
Regional Office an Adverse Claim with Petition for Preliminary
Injunction against the respondents MMC and BMEC, and prayed
for the exclusion of the area applied for by the respondents
from the bounds of its mining claims. It asserted that: (1) it has
vested right to the approved and existing mining claims that
were awarded to it since 1975; (2) it has preferential right to
enter into any mode of mineral agreement with the government
for the period up to 14 September 1997; and (3) the
respondents' MPSA applications are null and void because the
areas applied for encroached on Asiga's mining claims and thus,
were closed to application.
The respondents MMC and BMEC, on the other hand, separately
filed a Motion to Dismiss on grounds of prescription and
abandonment of mining claims. Collectively, they averred that:
(1) Asiga's adverse claim is rendered void by prescription as it
was only filed more than thirty (30) days from the date of the
first publication of respondents' Notice of Application for MPSA;
(2) Asiga did not substantiate the alleged encroachment since it
failed to submit documents that would prove such claim; (3)
Asiga already abandoned its mining claims because it failed to
file an Affidavit of Annual Work Obligation (AAWO) showing its
work performance over the subject mining areas for more than
two (2) consecutive years.
On December 24, 1998, the Panel of Arbitrators organized by
the MGB-CARAGA Regional Office rendered a Decision in favor
of Asiga, the dispositive portion of which states:
WHEREFORE, finding petitioner's adverse claim unnecessary,
the same is hereby dismissed. Respondents Manila Mining
Corporation and Basiana Mining Corporation's Mineral
Production Sharing Agreement Applications whose areas
overlapped Asiga's existing and valid mining claims, "MIRADOR"
and "CICAFE" as shown herein and in the records of the Mines
and Geosciences Bureau, Region XIII, Surigao City should be
amended accordingly and excluded therefrom Petitioner's said
valid and existing mining claims. But respondent's Mineral
Production Sharing Agreement applications whose areas fell in
areas open for mining locations and those which fell within
petitioner's abandoned claims should remain as they are.9
The respondents appealed to the Mines Adjudication Board
(MAB) reiterating their arguments of prescription and
abandonment, to which the MAB agreed. In the dispositive
portion of its Decision dated July 31, 2007, the MAB said:
WHEREFORE, PREMISES CONSIDERED, the Decision of the
Panel of Arbitrators dated December 24, 1998 in POA CASE NO.
XIII-09-97 is hereby REVERSED AND SET ASIDE. The Regional
Director of the Mines and Geosciences Regional Office No. XIII,
Surigao City is hereby ordered to give due course to the valid
Application for Mineral Production Sharing Agreement No. APSA-
0007-X of Manila Mining Corporation and APSA No. 00047-X
Basiana Mining Exploration Corp., subject to compliance with
the existing mining law and its implementing rules and
regulations.10
Aggrieved, Asiga filed a Petition for Review under Rule 43 of the
Rules of Court before the CA. It assailed the MAB decision
arguing that: (1) holders of valid and existing mining claims
cannot be divested of their rights by mere failure to file adverse
claim within the prescribed 30-day period from publication of
new mining applications; and (2) the decision ignored the new
grace period of September 15, 1997 provided under DAO 97-07
(Series of 1997) within which to file an MPSA application and
pay the required fees.
On May 12, 2011, the CA promulgated the assailed decision. It
ruled that Asiga cannot be considered a holder of valid and
existing mining claims. The Court of Appeals said that:
Clearly, ASIGA was duty bound to conduct actual work on its
mining claims and to file an AWWO showing proof of its
compliance before Mines Regional Officer concerned within sixty
(60) days from the end of the year in which such work
obligation was required. Significantly. it is provided that failure
to comply with the said obligations for two (2) consecutive
years shall result to an automatic abandonment of ASIGA's
mining claims.
It is an established fact—as found by both POA and MAB—that
ASIGA had, indeed, failed to file an AAWO nor to conduct actual
work on its mining claims ever since it was granted a leasehold
right over the same. Consequently, pursuant to Section 27
aforequoted, ASIGA's mining claims were deemed abandoned
by operation of law. x x x.11
Thus, the dispositive portion of the decision of the CA reads:
WHEREFORE, premises considered, the instant petition is
DISMISSED. The Decision dated 31 July 2007 of the Mines
Adjudication Board is AFFIRMED in toto.12
After the dismissal of Asiga 's motion for reconsideration, Asiga
filed this petition for review on certiorari.
The Issues
The petitioner raised the following arguments:
A — The [CA] committed grave error in law in instantly
divesting petitioner of its existing rights over its mining claims
for alleged failure to submit its Annual Work Obligations report,
the decision being inconsistent with existing doctrines requiring
field investigation on the actual work done and summary
hearing to determine propriety of cancellation for abandonment
of claims.
B — The [CA] committed grave error in law in holding that
petitioner's failure to pay occupation fees within thirty (30) days
from the filing of Mineral Production Sharing Agreement (MPSA)
conversion amounts to abandonment, the finding being
completely incompatible with DAO Memorandum Order No. 97-
07 which allows payment of fees within 30 days from final
termination or resolution of pending cases or dispute of claims.
C — The [CA] committed grave error in law in sustaining the
cancellation of petitioner's mining claim in favor of respondents
Manila Mining Corporation (MMC) and Basiana Mining
Exploration Corporation (BMEC).13
In sum, petitioner Asiga comes before this Court to ask for the
resolution of only one issue: whether or not Asiga could be
considered to have abandoned its mining claim over the
hectares of land located in Santiago, Agusan del Norte on the
basis of (a) non-submission of the affidavit of annual work
obligations, and (b) non-payment of fees. An answer to this
query will serve as the fulcrum around which the rights of the
petitioner and the respondents could be ascertained.
This Court's Ruling
The petition is impressed with merit.
Based on the facts as borne by the records of this case, the
Court is of the considered opinion that Asiga did not abandon its
mining claims over the subject area. To rule that it did on the
basis merely of the non-submission of the affidavit and the non-
payment of fees, without considering the relevant implementing
rules and regulations of the law as well as settled jurisprudence
on the matter, would cause undue injury to a right granted—
and thus protected by law—unto the petitioner.
The notion of "automatic abandonment" being invoked by the
respondents is provided for in Section 27 of the Mineral
Resources Development Decree of 1974. And as early as 1990,
the Court has already ruled on the proper interpretation of this
provision in the case of Santiago v. Deputy Executive
Secretary.14 In no uncertain terms, the Court has already
established that there is no rule of automatic abandonment with
respect to mining claims for failure to file the affidavit of annual
work obligations.15
As originally worded, Section 27 of the Mineral Resources
Development Decree of 1974 provided that the failure of a claim
owner to submit a sworn statement of its compliance with its
annual work obligations for two (2) consecutive years shall
"cause the forfeiture of all rights to his claim." Particularly, it
states that:
SECTION 27. Proof of Annual Work Obligations. — The claim
owner shall submit proof of compliance with the annual work
obligations by filing a sworn statement with the Director within
sixty (60) days from the end of the year in which the work
obligation is required, in a form to be prescribed by regulation.
Failure of the claim owner to file such proof of compliance for
two (2) consecutive years shall cause the forfeiture of all rights
to his claim.
In 1978, Section 15 of Presidential Decree (P.D.) No. 1385
amended this specific provision. Instead of merely causing the
forfeiture of the mining rights upon failure to comply with the
required submissions, the section then provided for an
"automatic abandonment" of the mining claims, viz:
SECTION 15. Section 27 of the same Decree is hereby amended
to read as follows:
SECTION 27. Proof of Annual Work Obligations. — The claim
owner/lessee shall submit proof of compliance with the annual
work obligations by filing an affidavit therefor and the
statement of expenditures and technical report in the
prescribe[d] form in support thereof with the Mines Regional
Officer within sixty (60) days from the end of the year in which
the work obligation is required: Provided, That failure of the
claimowner to comply therewith for two (2) consecutive years
shall constitute automatic abandonment of the mining claims:
Provided, Further, That, if it is found upon field verification that
no such work was actually done on the mining claims, the
claimowner/lessee shall likewise lose all his rights thereto
notwithstanding submission of the aforesaid documents.16
(Emphasis supplied)
In 1980, this provision was once again amended. Section 5 of
P.D. No. 1677 retained the "automatic abandonment" provision
and further included that, should a verification be conducted
and it was discovered that no work was actually accomplished
despite the submission of an affidavit to that effect, the
owner/lessee shall likewise automatically lose all the rights
appurtenant to his/her mining claims. As stated by this decree:
SECTION 5. Section 27 of Presidential Decree No. 463 as
amended by Section 15 of Presidential Decree No. 1385, is
further amended to read, as follows:
Sec. 27. Proof of Annual Work Obligations. — The claim
owner/lessee shall submit proof of compliance with the annual
work obligations by filing an affidavit therefor and the
statement of expenditures and technical report in the prescribed
form in support thereof with the Mines Regional Officer
concerned within sixty (60) days from the end of the year in
which the work obligations is required: Provided, That failure of
the claim owner to comply therewith for two (2) consecutive
years shall constitute automatic abandonment of the mining
claim: Provided, further, That if it is found upon field verification
that no such work was actually done on the mining claim, the
claim owner/lessee shall likewise automatically lose all his rights
thereto notwithstanding submission of the aforesaid
documents.17 (Emphasis supplied)
Finally, Section 27, as it now stands, was modified by Section 2
of P.D. No. 1902:
SECTION 2. Section 27 of Presidential Decree No. 463, as
amended by Section 15 of Presidential Decree No. 1385 and
Section 5 of Presidential Decree No. 1677, is further amended
to read as follows:
SECTION. 27. Annual Work Obligations. — The
claimowner/lessee shall submit proof of compliance with the
annual work obligations by filing an affidavit therefor and the
statement of expenditures and technical report in the prescribed
form in support thereof with the Mines Regional Officer
concerned within one hundred and twenty (120) days from the
end of the year in which the work obligation is required:
Provided, That failure of the claimowner to comply therewith for
two (2) consecutive years shall constitute automatic
abandonment of the mining claim: Provided, further, That, if it
is found upon field verification that no such work was actually
done on the mining claim, the claimowner/lessee shall likewise
automatically lose all his rights thereto notwithstanding
submission of the aforesaid documents: Provided, finally, That
the Director, in cases of unstable peace and order conditions
and/or involvement in mining conflicts may grant further
extensions. (Emphasis supplied)
What is being asked of this Court by the respondents is a re-
interpretation of this most recent iteration of the Mineral
Resources Development Decree of 1974. As how it was in
Santiago, to arrive at an answer, the subject matter of the
provision must first be clarified. Is it the non-submission of the
proof of the compliance—the affidavit of annual work
obligation—for two consecutive years, or is it the actual non-
compliance of the annual work obligation for two consecutive
years that would become the basis for the declaration of
abandonment of mining claims?
The Court opines that it is the latter.
The title of Section 27 was changed in the latest amendment
from "Proof of Annual Work Obligations" as written in the
Mineral Resources Development Decree of 1974, P.D. No. 1385,
and P.D. No. 1677 to "Annual Work Obligations" under P.D. No.
1902. The latest version indicates that there is focus on the
annual work obligations imposed upon claim owners or lessees,
and not merely on the submission of proof to this requirement.
Indeed, as ruled in Santiago, the essence of this provision is to
exact compliance of the obligations imposed upon claim owners
or lessees who are granted the privilege of exploring and/or
exploiting the Philippines' natural resources.
Thus, when Section 27 included the phrase "failure of the
claimowner to comply therewith," the phrase was referring to
the actual work obligations required of the claim owners, and
not merely the submission of the proof of the actual work
obligations. This is the proper interpretation of this section. As
explained by Justice Paras in Santiago:
Under the Consolidated Mines Administrative Order (CMAO),
implementing PD 463, as amended, the rule that has been
consistently applied is that it is the failure to perform the
required assessment work, not the failure to file the AAWO that
gives rise to abandonment. Interpreted within the context of PD
1902, the last amending decree of PD 463, it is intended,
among others, to accelerate the development of our natural
resources and to accelerate mineral productions, abandonment
under the aforequoted Sec. 27 refers to the failure to perform
work obligations which in turn is one of the grounds for the
cancellation of the lease contract (Sec. 43(a), Consolidated
Mines Administrative Order, implementing PD 463).18
(Emphasis and underscoring supplied)
Even the then Ministry of Natural Resources, now Department
of Environment and Natural Resources (DENR), was of the
opinion that it is the failure to perform actual work obligations
that would give rise to abandonment. It further interpreted the
provision as one which is more of convenience than substance,
and that the claim owners or lessees are not precluded from
proving their actual compliance through other means. Again, in
Santiago:
The question of whether or not the failure to submit AAWO for
more than two (2) consecutive years constitutes abandonment
as ground for cancellation of a mining lease contract has been
the subject matter of many cases in the Ministry of Natural
Resources (now Department of Environment and Natural
Resources). Public respondent made the following significant
findings, to quote:
In a number of cases, the MNR answered the question in the
negative. x x x. As there explained, it is the continued failure to
perform the annual work obligations, NOT the failure to file
AAWO, that gives rise to abandonment as ground for
cancellation of a mining lease contract; that compliance with
AAWO requirements, not being related to the essence of the
acts to be performed, is a matter of convenience rather than
substance; and that non-submission of AAWO does not preclude
the lessee from proving performance of such working obligation
in some other way.19 (Emphasis and underscoring supplied)
Further, in declaring claim owners or lessees to have
abandoned their mining claims, due process must primarily be
observed. In fact, in the recent case of Yinlu Bicol Mining
Corporation v. Trans-Asia Oil and Energy Development
Corporation,20 the Court, through Justice Bersamin, had
occasion to discuss that the basic tenets of due process require
that notice be given to the claim owners if their mining claims
are to be considered cancelled. Yinlu ruled:
The failure of Yinlu's predecessor-in-interest to register and
perform annual work obligaitons did not automatically mean
that they had already abandoned their mining rights, and that
such rights had already lapsed. For one, the DENR itself
declared that it had not issued any specific order cancelling the
mining patents. Also, the tenets of due process required that
Yinlu and its predecessor-in-interest be given written notice of
their non-compliance with PO No. 463 and the ample
opportunity to comply. If they still failed to comply despite such
notice and opportunity, then written notice must further be
given informing them of the cancellation of their mining
patents. In the absence of any showing that the DENR had
provided the written notice and opportunity to Yinlu and its
predecessors-in-interest to that effect, it would really be
inequitable to consider them to have abandoned their patents,
or to consider the patents as having lapsed.21 (Emphasis and
underscoring supplied, citations omitted)
And so, by jurisprudential rulings, there is no "automatic
abandonment" on the basis of the non-submission of the AAWO
alone. If the claim owners or lessees did indeed fail to perform
their obligations as required in Section 27 of the Mineral
Resources Development Decree of 1974, as amended, then the
cancellation of their mining claims could only be considered
proper upon observance of due process, which, according to
Yinlu, takes the form of: (1) a written notice of non-compliance
to the claim owners and lessees and an ample opportunity to
comply; and (2) in the event of the claim owners' and lessees'
failure to comply, a written notice effecting the cancellation of
their mining claims.22
In this case, nothing on record indicates that the foregoing
requirements have been complied with. There were no notices
sent to Asiga, which either notified it of its non-compliance to
Section 27 or notified it of the cancellation of its mining claims.
Thus, on the basis of the foregoing, it could not be said that the
petitioner has abandoned its mining claims over the disputed
parcels of land.
Further, with regard to the payment of occupational fees, a
reading of DENR Department Administrative Order (DENR DAO)
No. 97-07, the "Guidelines in the Implementation of the
Mandatory September 15, 1997 Deadline for the Filing of
Mineral Agreement Applications by Holders of Valid and Existing
Mining Claims and Lease/Quarry Applications and for Other
Purposes," would reveal that the petitioner is correct in
asserting that the payment thereof could be completed upon
the resolution of the present dispute.
The CA was partially correct when it quoted Section 9 of DENR
DAO No. 97-07 and found that it is the duty of the holder of a
valid and existing mining claim to "present proof of full payment
of the occupation fees and/or minimum work obligations or a
Letter of Commitment undertaking to pay such amount within
thirty (30) days from the date of the filing of its Mineral
Agreement Application."23 Section 9 provides:
SECTION 9. Occupational Fees and Work Obligations — In case
of any deficiency in the payment of occupation fees and/or
minimum work obligations required, no Mineral Agreement
applications by holders of valid and existing mining claims and
lease/quarry applications shall be accepted without proof of full
payment of such deficiency or a Letter-Commitment to pay such
amount within thirty days from the date of filing of the Mineral
Agreement Application. Failure to present proof of full payment
upon the filing of the Mineral Agreement application or within
thirty days from filing of said Letter-Commitment shall result in
the denial of the application, after which the area covered
thereby shall be open for Mining Applications. (Emphasis and
underscoring supplied)
However, the CA failed to consider Section 8 of the same
administrative order which, in cases when the holder of the
mining claim is involved in a mining dispute/case, allowed the
submission of the actual mineral agreement application thirty
(30) days from the final resolution of the dispute/case. Section
8 reads:
Section. 8. Claimants/Applicants Required to File Mineral
Agreement Applications
Only holders of mining claims and lease/quarry applications filed
prior to the effectivity of the Act which are valid and existing as
defined in Section 5 hereof who have not filed any Mineral
Agreement Applications over areas covered by such mining
claims and lease/quarry applications are required to file Mineral
Agreement applications pursuant to Section 273 of the IRR on
or before September 15, 1997; Provided, that the holder of
such a mining claim or lease/quarry application involved in a
mining dispute/case shall instead file on or before said deadline
a Letter of Intent to file the necessary Mineral Agreement
application; Provided, further, That if the mining claim or
lease/quarry application is not determined to be invalid in the
dispute/case, the claimant or applicant shall have thirty (30)
days from the final resolution of the dispute/case to file the
necessary Mineral Agreement application; Provided, finally, that
failure by the claimant or applicant to file the necessary Mineral
Agreement application within said thirty (30)-day period shall
result in the abandonment of such claim or application, after
which, any area covered by the same shall be opened for
Mining Applications. (Emphasis and underscoring supplied)
These provisions could not be any clearer. In cases where a
claim owner or lessee is involved in a mining dispute, it shall
just submit a "Letter of Intent to file the necessary Mineral
Agreement application." The actual mineral agreement
application, however, should only be filed within thirty (30) days
from the final resolution of the dispute of the case. Necessarily,
therefore, and contrary to the CA ruling, the 30-day period
within which to pay the occupational fees would only commence
to run from the filing of the actual mineral agreement
application, and not before.
Considering that the present case is the very mining dispute
referred to in Section 8 of DENR DAO No. 97-07, then, contrary
to the MAS and CA decisions, Asiga is correct in asserting that it
has thirty (30) days from the finality of this decision to pay in
full the occupational fees as required by Section 9 thereof.
Resultantly, the disputed parcel of land covered by respondent
MMC's MPSA application which overlapped with Asiga's claim by
about 1,661 hectares, and the parcel of land covered by
respondent BMEC's MPSA application which overlapped by 214
hectares, should be excluded in the respondents' MPSA
application. This is because the petitioner's mining claims are
"valid and existing mining claims" as defined in Section 5(c) of
DENR DAO No. 97-07,24 and are therefore, as provided for in
Section 19(c) of the Mining Act of 1995,25 closed to other
mining applications.
WHEREFORE, premises considered, the Decision of the Court of
Appeals dated May 12, 2011, and the subsequent Resolution
dated October 24, 2011 are hereby REVERSED and SET ASIDE.
The Decision of the Panel of Arbitrators, Mines and Geosciences
Bureau, Region 13 dated December 24, 1998 is hereby
REINSTATED.
SO ORDERED.
SECOND DIVISION
G.R. No. 208638, January 24, 2018
SPOUSES FRANCISCO ONG AND BETTY LIM ONG, AND
SPOUSES JOSEPH ONG CHUAN AND ESPERANZA ONG CHUAN,
Petitioners, v. BPI FAMILY SAVINGS BANK, INC., Respondent.
DECISION
REYES, JR., J.:
This is a Petition for Review under Rule 45 of the Rules of
Court, as amended, seeking to reverse and set aside the
Decision1 dated January 31, 2013 and Resolution2 dated
August 16, 2013 of the Court of Appeals (CA) in CA-G.R. CV No.
92348
The Facts
Spouses Francisco Ong and Betty Lim Ong and Spouses Joseph
Ong Chuan and Esperanza Ong Chuan (collectively referred to
as the petitioners) are engaged in the business of printing
under the name and style "MELBROS PRINTING CENTER.3
Sometime in December 1996, Bank of Southeast Asia's (BSA)
managers, Ronnie Denila and Rommel Nayve, visited
petitioners' office and discussed the various loan and credit
facilities offered by their bank. In view of petitioners' business
expansion plans and the assurances made by BSA's managers,
they applied for the credit facilities offered by the latter.
Sometime in April 1997, they executed a real estate mortgage
(REM) over their property situated in Paco, Manila, covered by
Transfer Certificate of Title No. 143457, in favor of BSA as
security for a P15,000,000.00 term loan and P5,000,000.00
credit line or a total of P20,000,000.00.
With regard to the term loan, only P10,444,271.49 was released
by BSA (the amount needed by the petitioners to pay out their
loan with Ayala life assurance, the balance was credited to their
account with BSA).
With regard to the P5,000,000.00 credit line, only
P3,000,000.00 was released. BSA promised to release the
remaining P2,000,000.00 conditioned upon the payment of the
P3,000,000.00 initially released to petitioners.
Petitioners acceded to the condition and paid the P3,000,000.00
in full. However, BSA still refused to release the P2,000,000.00.
Petitioners then refused to pay the amortizations due on their
term loan.
Later on, BPI Family Savings Bank (BPI) merged with BSA, thus,
acquired all the latter's rights and assumed its obligations. BPI
filed a petition for extrajudicial foreclosure of the REM for
petitioners' default in the payment of their term loan.
In order to enjoin the foreclosure, petitioners instituted an
action for damages with Temporary Restraining Order and
Preliminary Injunction against BPI praying for P23,570,881.32
as actual damages; P1,000,000.00 as moral damages;
P500,000.00 as attorney's fees, litigation expenses and costs of
suit.
On November 10, 2008, the trial court rendered its Decision,4
disposing, thus:
WHEREFORE, in view of all the foregoing, the Court hereby
resolves in favor of the plaintiffs and against the defendant
bank for the latter to pay the former the above-cited sum of
Php20,469,498.00 by way of actual damages and
Php500,000.00 by way of attorney's fees.
No pronouncement as to costs.
SO ORDERED.5
BPI thereafter appealed to the CA averring that the court a quo
erred when it ruled that petitioners were entitled to damages.
BPI posited that petitioners are liable to them on the principal
balance of the mortgage loan agreement.
The CA reversed the decision of the lower court and ruled in
favor of BPI, the dispositive portion of which states:
WHEREFORE, in the light of the foregoing, the assailed Decision
dated 10 November 2008 of the Regional Trial Court, Branch
49, Manila, in Civil Case No. 02-105189 is hereby REVERSED
and SET ASIDE. The Complaint for Damages below is
DISMISSED for lack of merit.
SO ORDERED.
Petitioners filed a Motion for Reconsideration but the same was
denied by the CA in a Resolution dated August 16, 2013, viz.:
Finding no new matter of substance which would warrant the
modification much less the reversal of the assailed decision,
plaintiffs-appellees' motion for reconsideration is hereby
DENIED for lack of merit.
SO ORDERED.6
Aggrieved, petitioners filed the present petition.
The Issues
WHETHER OR NOT THERE WAS ALREADY AN EXISTING AND
BINDING CONTRACT BETWEEN PETITIONERS AND BSA WITH
REGARD TO THE OMNIBUS CREDIT LINE;
WHETHER OR NOT BSA INCURRED DELAY IN THE
PERFORMANCE OF ITS OBLIGATIONS;
WHETHER OR NOT PETITIONERS ARE ENTITLED TO
DAMAGES; and
WHETHER OR NOT BPI CAN FORECLOSE THE MORTGAGE ON
THE LAND OF HEREIN PETITIONERS.7
Ruling of the Court
The Court finds merit in the petition.
In fine, petitioners contend that the CA in its assailed decision
erred in ruling that that there was no perfected contract
between the parties with respect to the omnibus credit line and
that being so, no delay could be attributed to BPI, the
successor-in-interest of BSA. Petitioners likewise pointed out
that it was error for the CA to delve into the matter regarding
existence or perfection of a contract, especially when such issue
was never raised by BPI in any of its pleadings or proceedings
in the lower court.
As a rule, a contract is perfected upon the meeting of the minds
of the two parties. It is perfected by mere consent, that is, from
the moment that there is a meeting of the offer and acceptance
upon the thing and the cause that constitute the contract.8
In the case of Spouses Palada v. Solidbank Corporation, et al.,9
this Court held that under Article 1934 of the Civil Code, a loan
contract is perfected only upon the delivery of the object of the
contract. In that case, although therein petitioners applied for a
P3,000,000.00 loan, only the amount of P1,000,000.00 was
approved by therein respondent bank because petitioners
became collaterally deficient. Nonetheless, the loan contract
was deemed perfected on March 17, 1997, the date when
petitioners received the P1,000,000.00 loan, which was the
object of the contract and the date when the REM was
constituted over the property.10
Applying this to the case at bench, there is no iota of doubt that
when BSA approved and released the P3,000,000.00 out of the
original P5,000,000.00 credit facility, the contract was
perfected.
The conclusion reached by the appellate court that only the
term loan of P15,000,000.00 was proved to have materialized
into an actual contract while the P5,000,000.00 omnibus line
credit remained non-existent is ludicrous. A careful perusal of
the records reveal that the credit facility that BSA extended to
petitioners was a credit line of P20,000,000.00 consisting of a
term loan in the sum of P15,000,000.00 and a revolving
omnibus line of P3,000,000.00 to be used in the petitioner's
printing business. In separate Letters both dated January 31,
1997, BSA approved the term loan and the credit line. Such
approval and subsequent release of the amounts, albeit
delayed, perfected the contract between the parties.
Loan is a reciprocal obligation, as it arises from the same cause
where one party is the creditor and the other the debtor.11 The
obligation of one party in a reciprocal obligation is dependent
upon the obligation of the other, and the performance should
ideally be simultaneous. This means that in a loan, the creditor
should release the full loan amount and the debtor repays it
when it becomes due and demandable.12
In this case, BSA did not only incur delay in releasing the pre-
agreed credit line of P5,000,000.00 but likewise violated the
terms of its agreement with petitioners when it deliberately
failed to release the amount of P2,000,000.00 after petitioners
complied with their terms and paid the first P3,000,000.00 in
full. The default attributed to petitioners when they stopped
paying their amortizations on the term loan cannot be sustained
by this Court because long before they sent a Letter to BSA
informing the latter of their refusal to continue paying
amortizations, BSA had already reneged on its obligation to
release the amount previously agreed upon, i.e., the
P5,000,000.00 covered by the credit line.
Article 1170 of the Civil Code enumerates the instances when
parties to a contract may be held liable for damages, viz.:
Article 1170. Those who in the performance of their obligations
are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages.
It bears stressing that petitioners entered into a credit
agreement with BSA to enable them to buy machineries and
equipment for their printing business. On its face, it can be
gleaned that the purpose of the credit agreement with BSA was
indeed to assist and finance petitioner's business by way of
providing additional funds as working capital or revolving
fund.13
The direct consequences therefore of the acts of BSA are: the
machinery and equipment that were essential to petitioners'
business and requisite for its operations had to be procured so
late in time and had crippled the printing of school supplies,
hence, petitioners were constrained to cancel purchase orders
of their clients to petitioners' damage.14
BSA claims that the release of the amount covered by the credit
line was subject to the "availability of funds" thus only a part of
the proceeds of the entire omnibus line was released.
Assuming for the sake of discussion that the funds at the time
were insufficient to cover the entire P5,000,000.00, BSA should
have at least informed petitioners in advance so that the latter
could have resorted to other means to secure the amount
needed for their printing business. The omnibus line was
approved and became effective on January 1997 yet BSA did
not allow petitioners to draw from the line until November 1997.
Moreover, BSA downgraded petitioners' drawdown to only
P3,000,000.00 despite the clear wordings of their credit
agreement whereby petitioners were allowed to draw any
portion or all of the omnibus line not to exceed P5,000,000.00.
The almost 10 months delay in releasing the amount applied for
by petitioners negates good faith on the part of BSA.
BPI insists that it acted in good faith when it sought
extrajudicial foreclosure of the mortgage and that it was not
responsible for acts committed by its predecessor, BSA. Good
faith, however, is not an excuse to exempt BPI from the effects
of a merger or consolidation, viz.:
Section 80. Effects of merger or consolidation. - The merger or
consolidation shall have the following effects:
1. The constituent corporations shall become a single
corporation which, in case of merger, shall be the surviving
corporation designated in the plan of merge; and, in case of
consolidation, shall be the consolidated corporation designated
in the plan of consolidation;
xxxx
4. The surviving or the consolidated corporation shall thereupon
and thereafter possess all the right, privileges, immunities and
franchises of each of the constituent corporations; and all
property, real or personal, and all receivable due on whatever
account, including subscriptions to shares and other choses in
action, and all and every other interest of, or belonging to, or
due to each constituent corporation, shall be deemed
transferred to and vested in such surviving or consolidated
corporation without further act or deed; and
5. The surviving or consolidated corporation shall be responsible
and liable for all the liabilities and obligations of each of the
constituent corporations in the same manner as if such
surviving or consolidated corporation had itself incurred such
liabilities or obligations; and any pending claim, action, or
proceeding brought by or against any of such constituent
corporations may be prosecuted by or against the surviving or
consolidated corporation. The rights of creditors or liens upon
the property of any of such constituent corporations shall not be
impaired by such merger or consolidation. Applying the
pertinent provisions of the Corporation Code, BPI did not only
acquire all the rights, privileges and assets of BSA but likewise
acquired the liabilities and obligations of the latter as if BPI itself
incurred it.
Moreover, Section 1(e) of the Articles of Merger dated
November 21, 2001 provides that all liabilities and obligations of
BSA shall be transferred to and become the liabilities and
obligations of BPI in the same manner as if it had itself incurred
such liabilities or obligations.15
Pursuant to such merger and consolidation, BPI's right to
foreclose the mortgage on petitioner's property depends on the
status of the contract and the corresponding obligations of the
parties originally involved, that is, the agreement between its
predecessor BSA and petitioner.
Since BSA incurred delay in the performance of its obligations
and subsequently cancelled the omnibus line without
petitioners' consent, its successor BPI cannot be permitted to
foreclose the loan for the reason that its successor BSA violated
the terms of the contract even prior to petitioners' justified
refusal to continue paying the amortizations.
The trial court pointed out that based on the evidence
presented by petitioners, the latter conformed to the acquisition
of the loan precisely because BSA promised them working
capital for the expansion of their business, viz.:
Clear from the plaintiffs' evidence actually presented and
marked is the fact that plaintiffs conformed to the acquisition of
the loan principally upon the promise by BSA that the working
capital would be made available to plaintiffs on time for the
opening of classes, for plaintiffs to be able to secure their
machineries and meet the orders of their clients.16
The subsequent refusal of BSA in releasing the maximum
amount agreed upon, transgressed the very purpose of
petitioners in availing the credit facility. Clearly, given the
nature of petitioners' business, time is of the essence as they
needed to have the orders ready before opening of classes.
To emphasize the injury caused to the petitioners due to the
bank's delay and subsequent refusal to release the omnibus
loan, the petitioners testified as follows:
And the 4.2 was released... When we originally received the
Php 4. 2 Million, we could not push through with our plan in our
business, sir.
Q
The fact that the bank did not allow you to avail of the omnibus
line, what is the effect to your business?
A
Because I have already manufactured the notebooks for St.
Michael and I already sent them to supermarkets and family
stores like SM and Gaisano and they have PO coming, I cannot
deliver the goods because of lack of funds. They kept calling
and confirming about their PO Because of this my reputation is
going down.
(TSN dated November 28, 2002 pp. 28-29)
Witness:
And the 4.2 was released... When we originally received the
Php 4. 2 Million, we could not push through with our plan in our
business, sir.
Court:
Why?
Witness:
Because it was not sufficient and money came to us very late
with the lines of our plans, because we are supposed to
manufacture notebooks, school items in time for the school
opening in June, and it was delayed, your Honor. We continued
paying our amortization for two years. We paid almost 7 million.
(TSN dated September 24, 2007 pp. 13 and 14)
Q the lender should perform its obligation - the release of the full
How important is your working capital to your business?
A the loaned amount. In other words, Guariña Corporation would
The omnibus line is the most important in the business.
Court:
The question is, why is it important?
A:
Because I need capital for my business to replenish my supply
and to pay the labor and materials
Atty. Cinco:
and when you said the proceeds of the omnibus line was
released only on November 10, 1997, how did this affect your
business?
A:
My business suffered badly because I already got the orders
from the department stores and book stores.
(TSN dated September 17, 2004 pp. 43-44)17
The CA, on the other hand, is of the opinion that the delay and
damages claimed by the petitioners are mere cloaks to hide
their obligations in the mortgage loan agreement.
The Court disagrees.
No evidence was ever presented in the lower courts showing
that the petitioners defaulted in paying their amortizations on
the term loan prior to their refusal which was mainly grounded
on BSA's failure to release the amount covered by the omnibus
line. Petitioners' continuous payment of amortizations even
during the period between January 1997 and November 1997
(when BSA incurred delay in releasing the omnibus line credit)
is inconsistent with the appellate court's finding that petitioners
intended to hide their obligations in the mortgage loan
agreement. Petitioners' refusal to continue paying was only
prompted by BSA's refusal to abide by the terms of the
contract. Thus, it would be the height of injustice to allow BPI
to foreclose on the mortgage despite violation of its predecessor
BSA of its principal obligation.
In the case of Development Bank of the Philippines v. Guariña
Agricultural and Realty Development Corp.,18 the Court ruled
that a debtor cannot incur delay unless the creditor has fully
performed its reciprocal obligation, viz.:
It is true that loans are often secured by a mortgage constituted
on real or personal property to protect the creditor's interest in
case of the default of the debtor. By its nature, however, a
mortgage remains an accessory contract dependent on the
principal obligation, such that enforcement of the mortgage
contract will depend on whether or not there has been a
violation of the principal obligation. While a creditor and a
debtor could regulate the order in which they should comply
with their reciprocal obligations, it is presupposed that in a loan
loan amount - before it could demand that the borrower repay
not incur in delay before DBP fully performed its reciprocal
obligation.19
Since the credit facility that BSA extended to petitioners was a
credit line total of P20,000,000.00, its refusal to release the
balance on the omnibus line prevented full performance of its
obligation to petitioners. There being no release of the full loan
amount, no default could be attributed to petitioners. In other
words, foreclosure was premature.
In Metropolitan Bank v. Wong,20 the Court declared:
While the law recognizes the right of a bank to foreclose a
mortgage upon the mortgagor's failure to pay his obligation, it
is imperative that such right be exercised according to its clear
mandate. Each and every requirement of the law must be
complied with, lest, the valid exercise of the right would end. It
must be remembered that the exercise of a right ends when the
right disappears, and it disappears when it is abused especially
to the prejudice of others.21
BPI was remiss in its duty of looking into the transaction
involving the mortgage it sought to foreclose. As BSA's
successor-in-interest, it cannot feign ignorance of transactions
entered into by the former especially when it seeks to benefit
from the same by foreclosing the mortgage thereon.
Anent the propriety of awarding damages, the Court upholds
the ruling of the trial court that actual damages in the amount
of P2,772,000.00 is proper. Said amount is the computed total
difference in interest paid to other sources and that which
should have only been paid to BSA had the latter complied with
the terms of the agreement. However, with regard to the claim
of damages representing petitioners' unrealized profits of
P23,570,881.32, the Court agrees with the CA that petitioners
failed to prove with a reasonable degree of certainty, premised
upon competent proof and on the best evidence obtainable, the
actual amount of loss. Although petitioners were able to present
in evidence purchase orders, company records and checks, the
Court agrees with the appellate court that these are insufficient
as they are self-serving. Although petitioners claimed that these
orders were cancelled, no other evidence was adduced to prove
such fact of cancellation.
The law allows the grant of exemplary damages to set an
example for the public good. The banking system has become
an indispensable institution in the modern world and plays a
vital role in the economic life of every civilized society. Whether
as mere passive entities for the safe-keeping and saving of
money or as active instruments of business and commerce,
banks have attained an ubiquitous presence among the people,
who have come to regard them with respect and even gratitude
and most of all, confidence. For this reason, banks should guard
against injury attributable to negligence or bad faith on its
part.22 Thus, the Court finds it proper to likewise award
exemplary damages in the amount of P100,000.00.
Finally, as to the matter concerning attorney's fees, the Court
finds the P500,000.00 awarded by the trial court to be
excessive and should accordingly be reduced to P300,000.00.
WHEREFORE, in light of the foregoing, the petition is hereby
GRANTED. The Decision dated January 31, 2013 of the Court of
Appeals in CA-G.R. CV No. 92348 is hereby REVERSED and SET
ASIDE. The questioned extrajudicial foreclosure of real estate
mortgage is likewise declared VOID. Respondent BPI Family
Savings Bank, Inc. is hereby ORDERED to pay petitioners
Spouses Francisco Ong and Betty Lim Ong and Spouses Joseph
Ong Chuan and Esperanza Ong Chuan the amount of
P2,772,000.00 as actual or compensatory damages;
P100,000.00 as exemplary damages; P300,000.00 as attorney's
fees; and interest of six percent (6%) per annum on all the
amounts of damages reckoned from the finality of this decision.
SO ORDERED.
Carpio (Chairperson), Bersamin,* Perlas-Bernabe, and Caguioa,
JJ., concur.
SECOND DIVISION
G.R. No. 210504, January 24, 2018
HEIRS OF ALFONSO YUSINGCO, REPRESENTED BY THEIR
ATTORNEY-IN-FACT, TEODORO K. YUSINGCO, Petitioners, v.
AMELITA BUSILAK, COSCA NAVARRO, FLAVIA CURAYAG AND
LIXBERTO1 CASTRO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule
45 of the Rules of Court assailing the Decision2 of the Court of
Appeals (CA), Cagayan de Oro City, dated July 31, 2013 in CA-
G.R. SP No. 04500. The questioned CA Decision set aside the
Joint Decision3 of the Regional Trial Court (RTC), Branch 30,
Surigao City, dated August 17, 2011, which affirmed with
modification the February 25, 2011 Omnibus Judgment4 of the
Municipal Trial Court in Cities (MTCC), Branch 1, Surigao City, in
five (5) consolidated cases for accion publiciana and/or recovery
of possession.
The pertinent factual and procedural antecedents of the case
are as follows:

On August 11, 2005, herein petitioners filed five separate (5)
Complaints5 for accion publiciana and/or recovery of possession
against herein respondents and a certain Reynaldo Peralta. The
suits, which were subsequently consolidated, were filed with the
MTCC of Surigao City, which were later raffled to Branch 1
thereof. Petitioners uniformly alleged in the said Complaints
that: they are owners of three (3) parcels of land, denominated
as Lot Nos. 519, 520 and 1015, which are all located at
Barangay Taft, Surigao City; they inherited the lots from their
predecessor-in-interest, Alfonso Yusingco; they were in
possession of the said properties prior to and at the start of the
Second World War, but lost possession thereof during the war;
after the war, petitioners discovered that the subject properties
were occupied by several persons, which prompted petitioners
to file separate cases for accion reivindicatoria and recovery of
possession against these persons; during the pendency of these
cases, herein respondents entered different portions of the
same properties and occupied them without the knowledge and
consent of petitioners; petitioners were forced to tolerate the
illegal occupation of respondents as they did not have sufficient
resources to protect their property at that time and also
because their ownership was still being disputed in the earlier
cases filed; subsequently, the cases which they earlier filed
were decided in their favor and they were declared the owners
of the subject properties; thereafter, petitioners demanded that
respondents vacate the said properties, but the latter refused.
In their Answer, respondents raised essentially similar defenses,
contending, in essence, that: they have been in possession of
the subject properties for more than thirty (30) years;
petitioners never actually possessed the said parcels of land and
that they never had title over the same; thus, petitioners' claim
would be in conflict with and inferior to respondents' claim of
possession.
After the issues were joined, trial ensued.
On February 25, 2011, the MTCC, Branch 1, Surigao City issued
an Omnibus Judgment in favor of herein petitioners and
disposed as follows:
WHEREFORE, premises considered judgment is hereby rendered
in favor of the plaintiffs, Heirs of Alfonso Yusingco, represented
by their attorney-in-fact Teodoro E. Yusingco, against
defendants Flavia Curayag, Cosca Navarro, Amelita Busilak,
Lexberto Castro, Reynaldo Peralta and Adriano Solamo
ordering:
1. Defendants Flavia Curayag, Cosca Navarro, Amelita Busilak,
Lexberto Castro, Reynaldo Peralta and Adriano Solamo and all
those claiming rights under them to vacate the premises of the
lots respectively occupied by them and to remove their
improvements from the premises and restore possession to the
plaintiffs;
2. Defendant Amelita Busilak to pay the plaintiffs a monthly
compensation of 1,200.00 for the use of the property occupied
by her at 2763 P. Reyes cor. Narciso Sts., Surigao City,
computed from the time of the filing of the complaint on August
11, 2005 until she vacates the subject property;
3. Defendant Cosca Navarro to pay the plaintiffs a monthly
compensation of P2,120.00 for the use of the property occupied
by her located at 03240 Borromeo St., Surigao City, computed
from the time of the filing of the complaint on August 11, 2005
until she vacates the subject property;
4. Defendant Flavia Curayag to pay the plaintiffs a monthly
compensation of P1,760.00 for the use of the property occupied
by her located at 03818, Narciso St., Surigao City, computed
from the time of the filing of the complaint on August 11, 2005
until she vacates the subject property;
5. Defendant Lexberto Castro to pay the plaintiffs a monthly
compensation of P1,500.00 for the use of the property occupied
by her located at SLB Pension House, Borromeo St., Surigao
City, computed from the time of the filing of the complaint on
November 27, 2007 until he vacates the subject property;
6. Defendants Reynaldo Peralta and Adriano Solamo to pay the
plaintiffs a monthly compensation of P2,000.00 for the use of
the property occupied by them located at 04286, Navarro St.,
Surigao City, computed from the time of the filing of the
complaint on November 27, 2007 until they vacate the subject
property
7. All the defendants to pay the cost of the suit.
SO ORDERED.6
The MTCC held that: in an earlier case for accion reivindicatoria
(Civil Case No. 1645) decided by the Court of First Instance of
Surigao Del Norte on June 8, 1979 and affirmed by the CA in its
Decision dated August 30, 1982 (CA-G.R. No. 66508-R), which
became final and executory on December 18, 1986, herein
petitioners were declared the true and lawful co-owners of the
subject properties; on the other hand, evidence showed that
respondents were mere intruders on the lots in question; thus,
as judicially-declared owners of the said lots, petitioners are
entitled to possession thereof as against respondents whose
entries into the said properties are illegal.
Herein respondents filed an appeal with the RTC of Surigao
City.
On August 17, 2011, the RTC, Branch 30, Surigao City,
rendered a Joint Decision, which affirmed, with modification,
the Omnibus Judgment of the MTCC. The dispositive portion of
the RTC Joint Decision reads, thus:
WHEREFORE, the assailed Omnibus Judgment dated February
25, 2011 of the Municipal Trial Court in Cities, Branch 1, Surigao
City is AFFIRMED WITH MODIFICATION as to the judgment
against defendants Reynaldo Peralta and Adriano Solamo who
did not file an appeal therefrom. x x x
SO ORDERED7
Herein respondents then filed with the CA a petition for review
under Rule 42 of the Rules of Court assailing the
abovementioned Joint Decision of the RTC.
On July 31, 2013, the CA promulgated its Decision granting the
petition of herein respondents. The CA disposed as follows:
WHEREFORE, the petition is GRANTED. The Joint Decision
dated August 17, 2011 of the Regional Trial Court, 10th Judicial
Region, Branch 30, Surigao City is SET ASIDE and a new one
rendered: (1) SETTING ASIDE the Omnibus Judgment dated
February 25, 2011 of the Municipal Trial Court in Cities, Branch
1, Surigao City, in consolidated civil cases for Accion Publiciana
and/or Recovery of Possession, and (2) DISMISSING the
consolidated cases for lack of merit.
SO ORDERED.8
The CA ruled that the RTC and CA Decisions used by the MTCC
in holding that herein petitioners are owners of the subject
properties and are, thus, entitled to legal possession thereof,
are based on a previous accion reivindicatoria, which is a suit in
personam. The CA held that, being an action in personam, the
judgments in the said case binds only the parties properly
impleaded therein. Since respondents were not parties to the
said action, the CA concluded that they could not be bound by
the judgments declaring petitioners as owners of the disputed
properties. Hence, petitioners' present actions to recover
possession of the said properties from respondents, on the
basis of the said judgments, must fail.
Aggrieved by the CA Decision, herein petitioners are now before
this Court via the instant petition for review on certiorari
contending that the assailed CA Decision is replete with legal
infirmities, to wit:
1. When Honorable Court of Appeals held that the prior
judgments declaring herein petitioners as the true and lawful
co-owners of the property did not bind herein respondents, as
they were not parties to the actions, saying that these were an
accion reivindicatoria and an action for recovery of possession,
hence in personam, and as such, they bound only the parties
properly impleaded and duly heard or given an opportunity to
be heard; even if such principle is inapplicable in the instant
case.
2. When Honorable Court of Appeals impliedly ruled that herein
respondents would have a better right of possession over the
subject matter property over herein petitioners, despite the
rulings in the prior judgments showing the contrary.
The petition is meritorious.
The issues raised in the instant petition boil down to the basic
question of whether or not the final and executory decisions
rendered in a previous accion reivindicatoria, finding petitioners
to be the lawful owners of the subject properties, are binding
upon respondents.
This Court rules in the affirmative.
At the outset, the Court finds it proper to look into the nature of
the actions filed by petitioners against respondents. A perusal of
the complaints filed by petitioners shows that the actions were
captioned as "Accion Publiciana and/or Recovery of Possession."
However, the Court agrees with the ruling of the lower courts
that the complaints filed were actually accion reivindicatoria.
In a number of cases,10 this Court had occasion to discuss the
three (3) kinds of actions available to recover possession of real
property, to wit:
x x x (a) accion interdictal; (b) accion publiciana; and (a) accion
reivindicatoria
Accion interdictal comprises two distinct causes of action,
namely, forcible entry (detentacion) and unlawful detainer
(desahuico) [sic]. In forcible entry, one is deprived of physical
possession of real property by means of force, intimidation,
strategy, threats, or stealth whereas in unlawful detainer, one
illegally withholds possession after the expiration or termination
of his right to hold possession under any contract, express or
implied. The two are distinguished from each other in that in
forcible entry, the possession of the defendant is illegal from
the beginning, and that the issue is which party has prior de
facto possession while in unlawful detainer, possession of the
defendant is originally legal but became illegal due to the
expiration or termination of the right to possess.
The jurisdiction of these two actions, which are summary in
nature, lies in the proper municipal trial court or metropolitan
trial court. Both actions must be brought within one year from
the date of actual entry on the land, in case of forcible entry,
and from the date of last demand, in case of unlawful detainer.
The issue in said cases is the right to physical possession.
Accion publiciana is the plenary action to recover the right of
possession which should be brought in the proper regional trial
court when dispossession has lasted for more than one year. It
is an ordinary civil proceeding to determine the better right of
possession of realty independently of title. In other words, if at
the time of the filing of the complaint more than one year had
elapsed since defendant had turned plaintiff out of possession
or defendant's possession had become illegal, the action will be,
not one of the forcible entry or illegal detainer, but an accion
publiciana. On the other hand, accion reivindicatoria is an action
to recover ownership also brought in the proper regional trial
court in an ordinary civil proceeding.
Accion reivindicatoria or accion de reivindicacion is, thus, an
action whereby the plaintiff alleges ownership over a parcel of
land and seeks recovery of its full possession.11 It is a suit to
recover possession of a parcel of land as an element of
ownership.12 The judgment in such a case determines the
ownership of the property and awards the possession of the
property to the lawful owner.13 It is different from accion
interdictal or accion publiciana where plaintiff merely alleges
proof of a better right to possess without claim of title.14
On the basis of the above discussions, it is clear that the lower
courts did not err in ruling that the suits filed by petitioners are
accion reivindicatoria, not accion publiciana, as petitioners seek
to recover possession of the subject lots on the basis of their
ownership thereof.
Proceeding to the main issue in the instant petition, there is no
dispute that the RTC Decision in Civil Case No. 1645 and the CA
Decision in CA-G.R. CV No. 66508-R used by the MTCC in the
present case as bases in holding that herein petitioners are
owners of the subject properties and are, thus, entitled to legal
possession thereof, are judgments on a previous case for accion
reivindicatoria, which was filed by petitioners against persons
other than herein respondents.
It is settled that a judgment directing a party to deliver
possession of a property to another is in personam.15 It is
conclusive, not against the whole world, but only "between the
parties and their successors in interest by title subsequent to
the commencement of the action."16 An action to recover a
parcel of land is a real action but it is an action in personam, for
it binds a particular individual only although it concerns the right
to a tangible thing.17 Any judgment therein is binding only
upon the parties properly impleaded and duly heard or given an
opportunity to be heard.18 However, this rule admits of the
exception that even a non-party may be bound by the judgment
in an ejectment suit19 where he is any of the following: (a)
trespasser, squatter or agent of the defendant fraudulently
occupying the property to frustrate the judgment; (b) guest or
occupant of the premises with the permission of the defendant;
(c) transferee pendente lite; (d) sublessee; (e) co-lessee; or (f)
member of the family, relative or privy of the defendant.20
In the instant case, the Court finds no cogent reason to depart
from the findings and conclusions of the MTCC, as affirmed by
the RTC, that respondents are mere intruders or trespassers
who do not have a right to possess the subject lots. Thus, the
Court adopts the discussion of the MTCC on the matter, to wit:
On the other hand, the evidence for the defendants showed
that they are mere intruders on the lots in question. They are
occupying their respective portions simply as places to stay with
intention of acquiring the said properties in the event that they
are public lands and not owned by any private person.
It is noted that while the defendants had declared their houses
and improvements for tax purposes, not one of them had
declared in his name the lot in which his house or improvement
is built on. They just waited for the Yusingcos to show proof of
their ownership of the lot.
It was indeed revealing that while professing that the lots are
public land, the defendants never bothered to apply under any
of the legal modes of acquiring land of the public domain for
the portion occupied by them. Obviously, their physical
possession of the premises was not under claim of ownership or
in the concept of an owner. Hence, the defendants' possession
cannot ripen into ownership by prescription as claimed by them.
They are intruders, plain and simple, without any right of
possession to be protected.
The plaintiff[s] [herein petitioners] prayed that their right of
possession of the lots is entitled to protection under the law. In
the case at bar, the evidence showed that the defendant's
[herein respondents'] entry into and possession of the disputed
premises was illegal from the beginning and remain to be so
until the present. There is no question, therefore, that as
between the plaintiffs [herein petitioners] who had been
judicially declared the owners of the land and the defendants
[herein respondents] who are mere squatters therein, the
former are entitled to such legal protection.21
On the basis of the foregoing, the CA erred in ruling that the
judgments of the RTC (in Civil Case No. 1645) and the CA (in
CA-GR. CV No. 66508-R) on the suit for accion reivindicatoria
filed by petitioners against persons other than herein
respondents are not binding upon the latter. Respondents,
being trespassers on the subject lots are bound by the said
judgments, which find petitioners to be entitled to the
possession of the subject lots as owners thereof.
WHEREFORE, the instant petition is GRANTED. The July 31,
2013 Decision of the Court of Appeals in CA-G.R. SP No. 04500
is REVERSED and SET ASIDE. The Omnibus Judgment of the
Municipal Trial Court in Cities, Branch 1, Surigao City, dated
February 25, 2011, is REINSTATED.
SO ORDERED.
Carpio, (Chairperson), Perlas-Bernabe, Caguioa, and Reyes, Jr.,
JJ., concur.
SECOND DIVISION

G.R. No. 213945, January 24, 2018
LUCILA YARED AND HEIRS OF THE LATE ERNESTO YARED,
SR., Petitioners, v. LAND BANK OF THE PHILIPPINES,
Respondent.
DECISION
REYES, JR., J.:
Before this Court is a petition for review on certiorari1 under
Rule 45 filed by Lucila C. Yared and the Heirs of Ernesto Yared,
Sr. namely, Ma. Magdalena Lourdes Y. Ng, Ma. Carmela Y.
Malayang, Lucila C. Yared, Mary Anne Martha Y. Naldo, Ma.
Teresa Y. de Leon, Ernesto C. Yared, Jr., and Joseph Ray C.
Yared (petitioners, for brevity), seeking to set aside the
Decision2 dated April 20, 2012 of the Court of Appeals (CA) in
C.A. G.R. SP No. 05773, which affirmed with modification (by
deleting the award of legal interest, exemplary damages and
attorney's fees) the Decision3 dated January 31, 2011 of the
Regional Trial Court (RTC) of Dumaguete City, Branch 32,
directing Land Bank of the Philippines (Land Bank) to pay the
remaining balance of just compensation with legal interest and
attorney's fees, exemplary damages, unpaid Commissioners'
fees and cost of suit.
The Antecedents
Petitioners were the registered owners of a parcel of land
covered by Transfer Certificate of Title (TCT) No. ST-27 with a
total area of 134.895 hectares located in Bais City, Negros
Oriental. Sometime in 1996, the property was placed under the
coverage of Comprehensive Agrarian Reform Program (CARP)
under Republic Act (R.A.) No. 6657,4 compulsory acquisition
scheme of the government. Land Bank initially valued the
property at P7,067,426.91 and deposited the amount, in cash
and agrarian reform bonds, to the account of the petitioners, as
evidenced by the certification and inscription in TCT No. ST-27
dated September 25, 1996.5
Dissatisfied with the valuation, the petitioners initiated a case
before the Department of Agrarian Reform Adjudication Board
(DARAB) docketed as DARAB Case No. JC-RVII-NEG-22-CO. On
August 22, 2001, DARAB directed Land Bank to recompute the
initial valuation of the property. In compliance, Land Bank
submitted a manifestation and motion dated November 8, 2011
with a re-evaluation of the property in the amount
P11,366,366.15.6
After seven years from the submission of Land Bank's
manifestation and motion and petitioners' several motions to
resolve the case, DARAB acted on the resolution of the case on
July 1, 2008, by rejecting the amount submitted by Land Bank
and reverting to the initial valuation of P7,067,426.91, as the
proper amount of just compensation.7
Aggrieved, petitioners filed a Petition for the Determination of
Just Compensation before the RTC, sitting as Special Agrarian
Court (SAC), of Dumaguete City, Negros Oriental and prayed for
the following: (1) the determination of just compensation in an
amount not less than of P7,067,426.91; (2) payment of legal
interest on the basis of recomputed initial valuation of Land
Bank from 1996 until the finality of this case due to the delay
caused by the inaction of DARAB in resolving the amount of just
compensation; and (3) payment of attorney's fees and filing
fee.8
On its part, Land Bank argued that the valuation of TCT No. ST-
27 depends on the data used, including but not limited to the
Annual Gross Production (AGP), Selling Price (SP), Market Value
per Tax Declaration (MV) and the actual receipt of the claim
folder from Department of Agrarian Reform (DAR). Land Bank
arrived at the initial valuation of P7,067,426.91 following the
provisions of DAR Administrative Order No. 6, Series of 1992
pursuant to the valuation formula as provided for by Sec. 17 of
R.A. No. 6657. Rejecting the argument of the petitioners, Land
Bank averred that the adjacent property (TCT No. ST-27) may
not necessarily be similar in land valuation to the contested
property of the petitioners. Finally, Land Bank argued that it
was prompt in its deposit of the initial valuation of just
compensation on the property and attributed fault on the
release due to petitioners' non-compliance with the
documentary requirements.9
Ruling of the RTC
In a Decision10 dated January 31, 2011, the trial court
recomputed the initial valuation of Land Bank due to the bank's
failure to reconsider the other relevant factors of sales
transactions, cost of acquisition and mortgage value in the
computation of just compensation. The trial court noted the
bank's disregard of the other mandatory factors in the
computation of just compensation due to lack of earnest efforts
in ensuring the procurement of the necessary data. In arriving
at the total land compensation, the trial court followed the
alternative formula of Land Value (LV) = [Capitalized Net
Income (CNI) x 0.9] + [Market Value (MV) x 0.1], considering
the absence of comparable sales data.11
As compensation for the time lost and delay, an award of legal
interest was imposed on the difference between the initial
deposit of P7,067,426.91 and judicially determined
compensation of P18,604,478.00 from September 25, 1996 until
full payment of just compensation. The trial court likewise
awarded attorney's fees and exemplary damages considering
that the petitioners were compelled to litigate in court for the
payment of just compensation and to serve as an example for
"public good as a form of deterrent to the repetition of this
oppressive practice by government agencies."12 Finally, the
RTC ordered the payment of P15,000.00 as Commissioner's fee,
in view of the indispensability of the appointment of
Commissioners to aid in the judicial determination of just
compensation.13
The dispositive portion of the RTC ruling reads:
WHEREFORE, premises considered, the Court finds for the
Petitioners, and hereby DIRECTS the Respondent Land Bank to
pay the following: (1) the remaining balance of the just
compensation to the Petitioners in the amount of Eleven Million
Five Hundred Thirty-Seven Thousand Four Hundred Seventy-
Eight Pesos (P11,537,478.00), with legal interest of 12% per
annum reckoned from September 25, 1996 up to the time when
the whole amount is actually paid; (2) to pay attorney's fees in
the amount of Fifty Thousand Pesos (P50,000.00); (3)
exemplary damages in the amount of One Hundred Thousand
Pesos (P100,000.00); (4) unpaid Commissioner's fees in the
amount of Fifteen Thousand (P15,000.00); and (5) cost of suit.
SO ORDERED.14
Ruling of the CA
In a Decision15 dated April 20, 2012, the CA affirmed with
modification the decision of the trial court. While the CA upheld
the applied formula in determining the land valuation, the CA
nonetheless deleted legal interest due to the absence of any
delay in the payment of just compensation. The appellate court
likewise deleted the award of exemplary damages and
attorney's fees in the absence of bad faith on the part of Land
Bank. The dispositive portion of the decision reads:
WHEREFORE, premised considered, the petition is PARTLY
GRANTED. The January 31, 2011 Decision of the [RTC] Branch
32 of Dumaguete City is AFFIRMED with MODIFICATION. The
award of 12% interest, one hundred thousand pesos (PhP
100,000.00) exemplary damages and fifty thousand pesos (PhP
50, 000.00) attorney's fees shall be DELETED.
SO ORDERED.16
Discontented, Land Bank filed its Petition for Review on
Certiorari before this Court entitled as "Land Bank of the
Philippines v. Lucila Yared, Heirs of Ernesto Yared, Sr. "17
disputing the decision of the CA. On July 30, 2012, the Court
denied the petition for failure to sufficiently show any reversible
error in the assailed CA decision to warrant the exercise of the
Court's discretionary appellate jurisdiction. On December 18,
2012, the denial of the petition became final and executory.18
Meanwhile, the petitioners filed a Motion for Reconsideration
before the CA on May 28, 2012 but the same was denied in a
Resolution dated July 3, 2014. Hence, this present petition.
The Issue
The lone issue before the Court is whether or not legal interest
shall be imposed on the unpaid balance of P11,537,478.00
reckoned from the time of taking until full payment of just
compensation.

Ruling of the Court
The petitioners allege that the CA erred when it deleted the
award of legal interest on the unpaid balance of just
compensation despite the incurred delay on the part of the
government. They argue on the imposition of legal interest on
the payment of unpaid balance of just compensation, following
the Court's decisions in Apo Fruits Corporation, et al. v. Land
Bank of the Philippines,19Land Bank of the Philippines v. Rivera,
et al.,20Land Bank of the Philippines v. Santiago, Jr.21 and
Land Bank v. Nable.22
In its Comment, Land Bank disputes the award considering the
absence of delay upon immediate deposit of P7,067,426.91 on
September 25, 1996. In the same way, Land Bank stressed on
the earned interest of the deposited amount of just
compensation, thus, there is no more reason to grant additional
interest.
The petition is granted.
The concept of just compensation has long been settled by the
Court as the full and fair equivalent of the property which must
be paid to the owners of the land within a reasonable time from
its taking.23 This is because without prompt payment,
"compensation cannot be considered "just" inasmuch as the
property owner is being made to suffer the consequences of
being immediately deprived of his land while being made to
wait for a decade or more before actually receiving the amount
necessary to cope with his loss."24
In Republic of the Philippines, et al. v. Judge Mupas, et al.,25
the Court elucidated that just compensation does not only refer
to the full and fair equivalent of the property taken; it also
means, equally if not more than anything else, payment in full
without delay. It is presumed that there is delay if the
government failed to pay the property owner the full amount of
just compensation on the date of taking. Accordingly, to
equalize the effect of losing the income-generating potential of
the property, the Court imposed an interest on the unpaid
compensation from the time of taking until full payment.26
Similar ruling on the imposition of interest was concurred with
in the 2010 Resolution of Apo Fruits:27
[I]f property is taken for public use before compensation is
deposited with the court having jurisdiction over the case, the
final compensation must include interest[s] on its just value to
be computed from the time the property is taken to the time
when compensation is actually paid or deposited with the court.
In fine, between the taking of the property and the actual
payment, legal interests] accrue in order to place the owner in a
position as good as (but not better than) the position he was in
before the taking occurred.
While the LBP immediately paid the remaining balance on the
just compensation due to the petitioners after this Court had
fixed the value of the expropriated properties, it overlooks one
essential fact - from the time that the State took the petitioners'
properties until the time that the petitioners were fully paid,
almost 12 long years passed. This is the rationale for imposing
the 12% interest - in order to compensate the petitioners for
the income they would have made had they been properly
compensated for their properties at the time of the taking.28
(Emphasis Ours)
The Court recognizes that the owner's loss is not limited to his
property alone but includes its income-generating potential. The
government, upon its taking of the landholding, must properly
compensate the landowner through its payment of the full
valuation of the property with imposition of legal interest. This
is the only way to achieve a fair exchange for the property and
the potential income loss of the landowner.29
In the recent case of Land Bank v. Phil-Agro Industrial
Corporation,30 the Court explained that the award of interest is
in the nature of damages for delay in payment which makes the
obligation on the part of the government one of forbearance to
ensure prompt payment of the value of the land and limit the
opportunity loss of the owner.
From the foregoing, the Court agrees with the trial court that
the petitioners have been painstakingly waiting for a very long
time for the payment of their property. Land Bank could have
expedited the proceedings had it considered all the relevant
factors mandated by law in its determination of just
compensation. To make the matters worse for the petitioners,
DARAB ordered Land Bank to recompute the property valuation
only to revert back to the initial valuation of P7,067,426.91 after
for more than six years of inaction. Clearly, these factual
circumstances fall within the purview of the contemplated delay
in just compensation.
In contrast, the Court cannot subscribe to the contention of
Land Bank that there is no need to impose additional interest on
just compensation since the deposited amount of initial
valuation is already earning interest since 1996. It is worth
stressing that while indeed there was an immediate deposit of
partial payment in the name of the petitioners, it is significant to
point out that 21 years have already passed since the taking of
the property. A lost opportunity in the interest-earning potential
of the difference between the initial valuation and final amount
adjudged is too substantial to be considered as the full
requirement of just compensation.
As to the rate of imposable interest and reckoning period, the
Court concurs with the recent jurisprudential doctrines imposing
legal interest on just compensation reckoned from the time of
taking. In
Land Bank v. Edgardo Santos,31 an interest of 12% per annum
on the unpaid balance of the just compensation reckoned from
the time of taking was imposed due to delay in the payment of
just compensation to the landowner; the obligation to
compensate the landowners is deemed to be an effective
forbearance on the part of the State.32
In Land Bank v. Kho33 as further affirmed in Heirs of Pablo
Feliciano v. Land Bank34 and Land Bank v. Heirs of Jose
Tapulado,35 the Court provided a guideline in the award of
interest in expropriation cases in line with the amended interest
rate pursuant to Bangko Sentral ng Pilipinas-Monetary Board
(BSP-MB) Circular No. 799, series of 2013, as affirmed in Nacar
v. Gallery Frames, et al.36 As held:
3. Interest may be awarded as may be warranted by the
circumstances of the case and based on prevailing
jurisprudence. In previous cases, the Court has allowed the
grant of legal interest in expropriation cases where there is
delay in the payment since the just compensation due to the
landowners was deemed to be an effective forbearance on the
part of the State. Legal interest on the unpaid balance shall be
pegged at the rate of 12% p.a. from the time of taking on May
27, 2002 until June 30, 2013 only. Thereafter, or beginning July
1, 2013, until fully paid, the just compensation due the
landowners shall earn interest at the new legal rate of 6% p.a.
in line with the amendment introduced by BSP-MB Circular No.
799, series of 2013.
Similar rulings were upheld in Land Bank v. Miguel Omengan37
and Land Bank v. Dalauta38 imposing an interest on just
compensation or the balance thereof with a rate of 12% per
annum from the time of taking until June 30, 2013. Thereafter,
the rate of six percent (6%) interest per annum shall be
imposed until full payment, pursuant to the modification
introduced by BSP-MB Circular No. 799 as affirmed in Nacar.
Applying the foregoing jurisprudence, an interest rate of 12%
per annum shall be imposed on the amount of P11,537,478.00
representing the difference between the initial deposit of
P7,067,426.91 and actual compensation as judicially determined
to be P 18,604,478.00 reckoned from September 25, 1996 until
June 30, 2013. Thereafter, an interest rate of six percent (6%)
per annum shall be imposed until full payment.
WHEREFORE, after judicious review of the records, the Court
resolves to DIRECT the respondent Land Bank of the Philippines
to pay the remaining balance of P11,537,478.00 at a rate of
twelve percent (12%) legal interest per annum from September
25, 1996 until July 30, 2013 and at a rate of six percent (6%)
legal interest per annum from July 1, 2013 until full payment of
just compensation.
SO ORDERED.
Carpio (Chairperson), Peralta, Perlas-Bernabe, and Caguioa, JJ.,
concur.
SECOND DIVISION
G.R. No. 225929, January 24, 2018
JOSE V. GAMBITO, Petitioner, v. ADRIAN OSCAR Z. BACENA,
Respondent.
RESOLUTION
REYES, JR., J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the
Rules of Court, assailing the Decision2 dated April 8, 2016 and
Resolution3 dated July 19, 2016 of the Court of Appeals (CA) in
CA-G.R. SP No. 140980.
The Antecedents
The records show that before the Municipal Trial Court (MTC) of
Bayombong, Nueva Vizcaya, Jose V. Gambito (Gambito) filed a
complaint for quieting of title, declaration of nullity of title,
specific performance and damages over a parcel of land located
in La Torre South, Bayombong, Nueva Vizcaya, against Adrian
Oscar Z. Bacena (Bacena), one of the defendants therein.
Gambito alleged before the MTC that he is the true and
registered owner of a certain parcel of land located in La Torre
South, Bayombong, Nueva Vizcaya containing an area of 8,601
square meters, more or less, under Transfer Certificate of Title
(TCT) No. T-149954. The said parcel of land was acquired by
him through a Deed of Donation executed on July 9, 2008 by
his mother, Luz V. Gambito (Luz), who held said property under
TCT No. 92232. Her mother, Luz, acquired the same property
from Dominga Pascual (Pascual) and her co-owner, Rosalina
Covita (Covita), through a Deed of Sale dated December 16,
1994 which finds its origin from Original Certificate of Title
(OCT) No. R-578 issued on March 30, 1916.4
Gambito claimed that through his efforts, he discovered that
Bacena surreptitiously secured before the Community
Environment and Natural Resources Office (CENRO), a patent
title, Katibayan ng Orihinal na Titulo Bilang P-21362 covering
4,259 sq m, more or less, which was a part and portion of the
same lot registered in Gambito's name under TCT No. T-
149954. Gambito further alleged that he is aware his parents
filed a protest before the CENRO, Bayombong, Nueva Vizcaya
on August 31, 2007 against Bacena but the same was later
withdrawn by his parents upon realization that said office is not
the proper forum and that the order of dismissal was issued on
April 8, 2009 and thus there is a need to clear up the cloud cast
by the title of Bacena over his ancient title.
Bacena, in his defense, alleged that the folder of Petronila
Castriciones (Castriciones), survey claimant of Lot No. 1331,
Cad 45, La Torre, Bayombong, Nueva Vizcaya, is supported by
the records of the CENRO, Bayombong, Nueva Vizcaya. The title
OCT No. P-21362 was regularly issued and was based on
authentic documents.5 On the other hand, the title of Gambito's
predecessor-in-interest is evidently null and void ab initio
because it was derived from a Deed of Sale, dated December
16, 1994 which supposedly signed by vendor Pascual although
she was already dead, having died on August 25, 1988 or after
a period of seven years. Moreover, the signatory-vendor, Covita
denied that she ever signed the Deed of Sale which is
supposedly that of her husband, Mariano G. Mateo, supposedly
signifying his conformity to the sale, is likewise a fake signature
of her husband because he was already dead at the time of the
execution of the document having died on June 14, 1980.6
By way of counterclaim, Bacena prayed, among others, that
Gambito's Title (TCT No. T-149954) and that of his
predecessor-in-interest, Luz, TCT No. T-92232 and the Deed of
Sale, basis of TCT No. T-92232 as null and void; and to declare
that title of Bacena, OCT No. P-21262, valid and effective and
be cleared/quieted of any cloud thereto.7
Ruling of the MTC
After the parties' presentation of evidence, the MTC rendered a
Decision8 dated March 11, 2014 in favor of Gambito. The MTC
considered the defense's position as a collateral attack on
Gambito's title.9 The MTC ruled that the issue on the validity of
title, whether or not fraudulently issued, can only be raised in
action expressly instituted for that purpose.
Moreover, the MTC ruled that in successive registrations, where
more than one certificate is issued in respect of a particular
estate or interest in land, the person claiming under the prior
certificate is entitled to the estate or interest, and here, the
origin of Gambito's title was issued in 1916 and while Bacena's
title was only issued on February 25, 1999.10
Ruling of the Regional Trial Court
Aggrieved, Bacena appealed before the Regional Trial Court
(RTC) of Bayombong, Nueva Vizcaya, Branch 27, which granted
the appeal in a Decision11 rendered on November 21, 2014.
In its ruling, the RTC laid that in an action for quieting of title, it
is an indispensable requisite that the plaintiff or complainant
has a legal or an equitable title to or interest in the real
property subject of the action, which is however wanting at the
time Gambito filed his verified Complaint.12
The RTC also noted that Gambito's title was derived through a
certificate of title which was based on a falsified Deed of Sale
which was made to appear to have been signed by the parties
who were long dead at the time of its execution.13
Moreover, the RTC found that Bacena's title has become
indefeasible and incontrovertible as it has been possessed by
Bacena and his predecessors-in-interest and never been
occupied by Gambito and his mother.
Contrary to the MTC's ruling, the RTC held that Bacena's
counterclaim partakes of a direct attack on Gambito's title.
The RTC likewise found that the title in the name of Bacena was
regularly issued as he and his predecessors have been in
undisturbed possession, occupation and utilization of Lot No.
1331 as early as October 1, 1913 when it was cadastrally
surveyed and even before it; has always been declared for
taxation purposes with taxes thereof duly paid yearly; and that
as private property, it is not within the jurisdiction of the Bureau
of Lands to grant it to public land application.14
The RTC awarded damages in favor of Bacena.
Ruling of the CA
On appeal, the CA, in its Decision15 dated April 8, 2016,
affirmed the RTC's Decision dated November 21, 2014. The CA
agreed with the findings and ruling of the RTC.
Undaunted, Gambito filed a Motion for Reconsideration of the
said decision of the CA which was however denied in its
Resolution16 dated July 19, 2016.
Hence, this petition for review on certiorari.
In support of the petition, Gambito assails the decision of the
CA claiming that it is not in consonance with law and
jurisprudence. The underlying issues presented by Gambito for
resolution are as follows, viz.:
The decision did not properly address the important issue on
laches;
The decision misapplied the concept of transferee in good faith;
and
The decision misappreciated the objection on the award for
damages.
Ruling of the Court
The petition is denied.
The decision of the CA is in consonance with law and
jurisprudence
On the issue of laches, the decision of the CA properly
addressed the important issue thereon and the CA correctly
held that it should be Bacena and not the Gambito who should
invoke laches.
Laches is defined as the failure or neglect for an unreasonable
and unexplained length of time to do that which, by exercising
due diligence, could or should have been done earlier; it is
negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert
it either has abandoned it or declined to assert it.17
It should be noted that the CA found that Bacena has no reason
to doubt his own ownership and possession of Lot No. 1331, as
established in this case obtained through the right of
Castriciones. Moreover, it was Gambito who disturbed that
open, continuous, peaceful, adverse and notorious possession
of Bacena and his predecessors-in-interest. Thus, Bacena is not
expected to assert his right for having possession and title to
the land in dispute and the CA is correct when it found that
Bacena has no reason to doubt his own ownership and
possession of Lot No. 1331. Hence, the Court is in accord with
the CA when it held that laches cannot apply and it should be
Bacena and not Gambito who should invoke laches.
Private ownership of land—as when there is prima facie proof of
ownership like a duly registered possessory information or a
clear showing of open continuous, exclusive, and notorious
possession, by present or previous occupants—is not affected
by the issuance of a free patent over the same land.18
While Gambito assails both the RTC and CA on the principle of
laches on the uninterrupted existence of OCT No. R-578 of 98
years, it should be noted that the CA found, it was certain that
when the cadastral survey was conducted in 1913 to 1914,
there were already two survey claimants, one of which is
Castriciones. Thus, OCT No. R-578 should not have included Lot
No. 1331, as there was already a supervening event that
transpired from the time it was applied for until the title was
issued. Moreover, here it established that Castriciones is the
previous occupant with open continuous, exclusive, and
notorious possession as above contemplated. Hence, OCT No.
R-578 issued as a free patent, by application, cannot affect
Castriciones' previous occupation with open continuous,
exclusive, and notorious possession.
On the issue of transferee in good faith, the decision of the CA
did not misapply the concept of transferee in good faith.
While Gambito argues that the CA misapplied the concept of
transferee in good faith for the reason that bad faith has died
when Pascual, inherited the property from Venancio Pascual,
We disagree.
Under Section 53 of Presidential Decree No. 1529, known as the
Property Registration Decree, in all cases of registration
procured by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without
prejudice, however, to the rights of any innocent holder for
value of a certificate of title. After the entry of the decree of
registration on the original petition or application, any
subsequent registration procured by the presentation of a
forged duplicate certificate of title, or a forged deed or other
instrument, shall be null and void.
In this case, Gambito is not an innocent holder for value for the
reason that he is a donee acquiring the property gratuitously by
a Deed of Donation and not by purchase. Hence, the concept of
an innocent purchaser for value cannot apply to him.
Moreover, in Ingusan v. Heirs of Aureliano I. Reyes,19 the Court
happened to pass upon falsified documents involving properties,
thus:
There is no doubt that the deed of donation of titled property,
cancellation of affidavit of loss and agreement of subdivision
with sale, being falsified documents, were null and void. It
follows that TCT Nos. NT-241155, NT-241156, NT-239747 and
NT-239748 which were issued by virtue of these spurious
documents were likewise null and void.20
In this case, it is an established fact that the fraud referred to
by the CA is the fraud on the transfer of the property from
Pascual and Covita to Luz on the basis of fake signatures
considering that the vendor signatories therein are all dead. As
such, by applicability of the foregoing jurisprudence, the deed is
considered a forged deed and hence null and void. Thus, Luz's
title is null and void which transferred nothing by Deed of
Donation to her son Gambito, the petitioner herein. Hence, the
CA did not misapply the concept of transferee in good faith by
considering the fraud in the transfer of the property to Luz
consequently ending up with Gambito.
On the issue that the CA decision misappreciated the objection
on the award for damages, Gambito's argument that he cannot
be in bad faith deserves scant consideration.
Good faith is ordinarily used to describe that state of mind
denoting "honesty of intention, and freedom from knowledge of
circumstances which ought to put the holder upon inquiry;21 an
honest intention to abstain from taking any unconscientious
advantage of another, even through technicalities of law,
together with absence of all information, notice, or benefit or
belief of facts which render the transaction unconscientious."22
The CA in its resolve as to the award of damages referred to
the RTC's basis of the awards. As can be gleaned from the CA's
Resolution dated July 19, 2016, viz.:
The trial court discussed the basis of the awards, yet petitioner,
aside from his self-serving claim that there was no bad faith,
failed to discuss the lack of sufficient basis for the grant of
awards.23
In this connection, the RTC in its Decision24 dated November
21, 2014, laid down its basis in concluding the award for
damages finding absence of good faith on the part of Gambito
by taking a second hard look into the facts and circumstances
obtaining on the manner by which the appellee, who was the
notary public who notarized the Last Will and Testament and
who as expected fully knew the rights of the appellant over the
lot in question.25 Thus, it is evident that Gambito's state of
mind had no honesty of intention and had no freedom from
knowledge of circumstances which ought to put him upon
inquiry. Hence, Gambito's claim that the CA decision
misappreciated the objection on the award for damages is
incorrect.
In sum, the Court finds that the decision of the CA is in
consonance with law and jurisprudence.
WHEREFORE, in light of the foregoing, the petition is hereby
DENIED. The Decision dated April 8, 2016 issued by the Court
of Appeals in CA-G.R. SP No. 140980 is AFFIRMED.
SO ORDERED.
Carpio (Chairperson), Peralta, Perlas-Bernabe, and Caguioa, JJ.,
concur.
THIRD DIVISION
G.R. No. 189609, January 29, 2018
VICTORIA N. RACELIS, IN HER CAPACITY AS ADMINISTRATOR,
Petitioner, v. SPOUSES GERMIL JAVIER AND REBECCA JAVIER,
Respondents.
DECISION
LEONEN, J.:
Lessees are entitled to suspend the payment of rent under
Article 1658 of the Civil Code if their legal possession is
disturbed. Acts of physical disturbance that do not affect legal
possession is beyond the scope of this rule.
In a contract to sell, the payment of earnest money represents
the seller's opportunity cost of holding in abeyance the search
for other buyers or better deals. Absent proof of a clear
agreement to the contrary, it should be forfeited if the sale does
not happen without the seller's fault. The potential buyer bears
the burden of proving that the earnest money was intended
other than as part of the purchase price and to be forfeited if
the sale does not occur without the seller's fault.
Through this Petition for Review,1 petitioner Victoria N. Racelis
(Racelis) challenges the Court of Appeals January 13, 2009
Decision2 and September 17, 2009 Resolution,3 which ordered
her to reimburse the sum of P24,000.00 to respondents
Spouses Germil Javier and Rebecca Javier (the Spouses Javier).
Before his death, the late Pedro Nacu, Sr. (Nacu) appointed his
daughter, Racelis,4 to administer his properties,5 among which
was a residential house and lot located in Marikina City.6 Nacu
requested his heirs to sell this property first.7 Acting on this
request, Racelis immediately advertised it for sale.8
In August 2001, the Spouses Javier offered to purchase the
Marikina property. However, they could not afford to pay the
price of P3,500,000.00.9 They offered instead to lease the
property while they raise enough money. Racelis hesitated at
first but she eventually agreed.10 The parties agreed on a
month-to-month lease and rent of P10,000.00 per month.11
This was later increased to P11,000.00.12 The Spouses Javier
used the property as their residence and as the site of their
tutorial school, the Niño Good Shepherd Tutorial Center.13
Sometime in July 2002, Racelis inquired whether the Spouses
Javier were still interested to purchase the property. The
Spouses Javier reassured her of their commitment and even
promised to pay P100,000.00 to buy them more time within
which to pay the purchase price.14
On July 26, 2002, the Spouses Javier tendered the sum of
P65,000.00 representing "initial payment or goodwill money."
15 On several occasions, they tendered small sums of money to
complete the promised P100,000.00,16 but by the end of 2003,
they only delivered a total of P78,000.00. 17 Meanwhile, they
continued to lease the property. They consistently paid rent but
started to fall behind by February 2004. 18
Realizing that the Spouses Javier had no genuine intention of
purchasing the property, Racelis wrote to inform them that her
family had decided to terminate the lease agreement and to
offer the property to other interested buyers.19 In the same
letter, Racelis demanded that they vacate the property by May
30, 2004.20 Racelis also stated that:
It is a common practice that earnest money will be forfeited in
favor of the seller if the buyer fails to consummate [the] sale
after the lapse of a specified period for any reason so that we
have the legal right to forfeit your P78,000 on account of your
failure to pursue the purchase of the property you are leasing.
However, as a consideration to you, we undertake to return to
you the said amount after we have sold the property and
received the purchase price from [the] prospective buyer.21
The Spouses Javier refused to vacate due to the ongoing
operation of their tutorial business. They wrote Racelis on
March 16, 2004, informing her of their inability to purchase the
property at P3,500,000.00 because "Mrs. Rebecca Javier's plan
for overseas employment did not materialize."22 They also
informed her that they had "purchased a more affordable
lot."23 They insisted that the sum of P78,000.00 was advanced
rent and proposed that this amount be applied to their
outstanding liability until they vacate the premises.24
Disagreeing on the application of the P78,000.00, Racelis and
the Spouses Javier brought the matter to the barangay for
conciliation. Unfortunately, the parties failed to reach a
settlement.25 During the proceedings, Racelis demanded the
Spouses Javier to vacate the premises by the end of April 30,
2004.26 However, the Spouses Javier refused to give up
possession of the property and even refused to pay rent for the
succeeding months.27
On May 12, 2004, Racelis caused the disconnection of the
electrical service over the property forcing the Spouses Javier to
purchase a generator.28 This matter became the subject of a
complaint for damages filed by the Spouses Javier against
Racelis.29 Racelis was absolved from liability.30 The Spouses
Javier no longer interposed an appeal.31
Meanwhile, Racelis filed a complaint for ejectment against the
Spouses Javier before the Metropolitan Trial Court in Marikina
City. The case was docketed as Civil Case No. 04-7710.32
In her Complaint,33 Racelis alleged that she agreed to lease the
property to the Spouses Javier based on the understanding that
they would eventually purchase it.34 Racelis also claimed that
they failed to pay rent from March 2004 to September 200435
and the balance of P7,000.00 for the month of February, or a
total of P84,000.00.36 Racelis prayed that the Spouses Javier
be ordered to: (1) vacate the leased premises; (2) pay accrued
rent; and (3) pay moral and exemplary damages, and attorney's
fees.37
In their Answer,38 the Spouses Javier averred that they never
agreed to purchase the property from Racelis because they
found a more affordable property at Greenheights Subdivision in
Marikina City. They claimed that the amount of P78,000.00 was
actually advanced rent.39
During trial, the Spouses Javier vacated the property and
moved to their new residence at Greenheights Subdivision40 on
September 26, 2004.41 The Metropolitan Trial Court then
determined that the only issue left to be resolved was the
amount of damages in the form of unpaid rentals to which
Racelis was entitled.42
On August 19, 2005, the Metropolitan Trial Court rendered a
Decision43 dismissing the complaint. It ruled that the Spouses
Javier were entitled to suspend the payment of rent under
Article 1658 of the Civil Code due to Racelis' act of
disconnecting electric service over the property.44 The
Metropolitan Trial Court declared that the Spouses Javier's
obligation had been extinguished. Their advanced rent and
deposit were sufficient to cover their unpaid rent.45
The Metropolitan Trial Court, however, did not characterize the
P78,000.00 as advanced rent but as earnest money.
Accordingly, Racelis was ordered to return the P78,000.00 due
to her waiver in the Letter dated March 4, 2004.46
On appeal, the Regional Trial Court rendered a Decision47
reversing the Metropolitan Trial Court August 19, 2005 Decision.
The Regional Trial Court held that the Spouses Javier were not
justified in suspending rental payments.48 However, their
liability could not be offset by the P78,000.00. The Regional
Trial Court explained that the parties entered into two (2)
separate and distinct contracts—a lease contract and a contract
of sale. Based on the evidence presented, the P78,000.00 was
not intended as advanced rent, but as part of the purchase
price of the property.49 The Regional Trial Court ordered the
Spouses Javier to pay accrued rent and declared that they may
recover the P78,000.00 in a separate proceeding.50
The Spouses Javier moved for reconsideration. In its April 24,
2007 Order,51 the Regional Trial Court reduced the Spouses
Javier's unpaid rentals by their advanced rental deposit. They
were ordered to pay P54,000.00 instead.52
The Spouses Javier appealed the Regional Trial Court January
15, 2007 Decision and April 24, 2007 Order.
On January 13, 2009, the Court of Appeals rendered a
Decision53 declaring the Spouses Javier justified in withholding
rental payments due to the disconnection of electrical service
over the property.54 Nevertheless, the Court of Appeals stated
that they were not exonerated from their obligation to pay
accrued rent. On the other hand, Racelis was bound to return
the sum of P78,000.00 in view of her waiver. The Court of
Appeals, by way of compensation, reduced the liability of the
Spouses Javier by their advanced rent and the sum of
P78,000.00. Accordingly, Racelis was ordered to reimburse the
amount of P24,000.00 to the Spouses Javier.55 The dispositive
portion of this Decision stated:
WHEREFORE, in view of the foregoing, the petition is
GRANTED. The assailed decision is REVERSED and SET ASIDE.
Herein respondent RACELIS is ordered to reimburse herein
petitioners in the amount of P24,000.00 on the counterclaim.
SO ORDERED.56
Racelis moved for reconsideration but her motion was denied in
the Court of Appeals September 17, 2009 Resolution.57
On November 25, 2009, Racelis filed a Petition for Review58
before this Court to which the Spouses Javier filed a
Comment.59 On July 1, 2010, Racelis filed a Reply.60
Petitioner asserts that the Court of Appeals erred in applying
Article 1658 of the Civil Code in favor of respondents.
Respondents cannot invoke the right given to lessees under
Article 1658 of the Civil Code. Petitioner claims that she was
justified in causing the temporary disconnection of electrical
service over the property because respondents were remiss in
paying rent. However, assuming that respondents were entitled
to suspend the payment of rent pursuant to Article 1658 of the
Civil Code, petitioner argues that the suspension should only be
temporary or for an intervening period.61
Petitioner likewise claims that she did not expressly waive her
right over the initial payment of P78,000.00 but merely
extended an offer to reimburse this amount, which respondents
rejected. Hence, she is entitled to retain it and it cannot be
used to offset respondents' accrued rent.62
Respondents do not dispute their liability to pay accrued rent.
However, they insist that their liability should be offset by the
initial payment of P78,000.00. Respondents argue that
petitioner waived her right over this, amount. Hence, it can be
applied to pay their obligation.63

The issues for this Court's resolution are:
First, whether or not respondents Spouses Germil and Rebecca
Javier can invoke their right to suspend the payment of rent
under Article 1658 of the Civil Code; and
Second, whether or not the P78,000.00 initial payment can be
used to offset Spouses Germil and Rebecca Javier's accrued
rent.
I that it must be prior to the sale), the obstacles to enjoyment
A contract of lease is a "consensual, bilateral, onerous and
commutative contract by which the owner temporarily grants
the use of his property to another who undertakes to pay rent
therefor."64
Article 1658 of the Civil Code allows a lessee to postpone the
payment of rent if the lessor fails to either (1) "make the
necessary repairs" on the property or (2) "maintain the lessee in
peaceful and adequate enjoyment of the property leased." This
provision implements the obligation imposed on lessors under
Article 1654(3) of the Civil Code.65
The failure to maintain the lessee in the peaceful and adequate
enjoyment of the property leased does not contemplate all acts
of disturbance.66 Lessees may suspend the payment of rent
under Article 1658 of the Civil Code only if their legal possession
is disrupted.67 In Goldstein v. Roces:68
Nobody has in any manner disputed, objected to, or placed any
difficulties in the way of plaintiff's peaceful enjoyment, or his
quiet and peaceable possession of the floor he occupies. The
lessors, therefore, have not failed to maintain him in the
peaceful enjoyment of the floor leased to him and he continues
to enjoy this status without the slightest change, without the
least opposition on the part of any one. That there was a
disturbance of the peace or order in which he maintained his
things in the leased story does not mean that he lost the
peaceful enjoyment of the thing rented. The peace would
likewise have been disturbed or lost had some tenant of the
Hotel de Francia, living above the floor leased by plaintiff,
continually poured water on the latter's bar and sprinkled his
bar-tender and his customers and tarnished his furniture; or
had some gay patrons of the hotel gone down into his saloon
and broken his crockery or glassware, or stunned him with
deafening noises. Numerous examples could be given to show
how the lessee might fail peacefully to enjoy the floor leased by
him, in all of which cases he wo[u]ld, of course, have a right of
action for the recovery of damages from those who disturbed
his peace, but he would have no action against the lessor to
compel the latter to maintain him in his peaceful enjoyment of
the thing rented. The lessor can do nothing, nor is it incumbent
upon him to do anything, in the examples or cases mentioned,
to restore his lessees peace.
....
True it is that, pursuant to paragraph 3, of article 1554, the
lessor must maintain the lessee in the peaceful enjoyment of
the lease during all of the time covered by the contract, and
that, in consequence thereof, he is obliged to remove such
obstacles as impede said enjoyment; but, as in warranty in a
case of eviction (to which doctrine the one we are now
examining is very similar, since it is necessary, as we have
explained, that the cause of eviction be in a certain manner
imputable to the vendor, which must be understood as saying
which the lessor must remove are those that in some manner or
other cast doubt upon the right by virtue of which the lessor
himself executed the lease and, strictly speaking, it is this right
that the lessor should guarantee to the lessee.69 (Citations
omitted, emphasis supplied)
The principle in Goldstein was reiterated in Chua Tee Dee v.
Court of Appeals.70
In Chua Tee Dee, the lease contract stated that the lessor was
obliged to "maintain the [lessee] in the quiet peaceful
possession and enjoyment of the leased premises during the
effectivity of the lease."71 The lessees were harassed by
claimants of the leased property. Hence, the lessee withheld
rental payments for the lessor's failure to comply with his
contractual obligation.72
Citing Goldstein, this Court in Chua Tee Dee struck down the
lessee's argument and held that "[t]he duty 'to maintain the
lessee in the peaceful and adequate enjoyment of the lease for
the duration of the contract' mentioned in [N]o. 3 of [Article
1654] is merely a warranty that the lessee shall not be
disturbed in his legal, and not physical, possession."
Furthermore, this Court found that there was no disturbance in
the lessee's legal possession because her right to possess the
property was neither questioned nor raised as an issue in any
legal proceeding. Hence, she was not entitled to suspend the
payment of rent.73
In this case, the disconnection of electrical service over the
leased premises on May 14, 200474 was not just an act of
physical disturbance but one that is meant to remove
respondents from the leased premises and disturb their legal
possession as lessees. Ordinarily, this would have entitled
respondents to invoke the right accorded by Article 1658 of the
Civil Code.
However, this rule will not apply in the present case because
the lease had already expired when petitioner requested for the
temporary disconnection of electrical service. Petitioner
demanded respondents to vacate the premises by May 30,
2004.75 Instead of surrendering the premises to petitioner,
respondents unlawfully withheld possession of the property.
Respondents continued to stay in the premises until they moved
to their new residence on September 26, 2004.76 At that point,
petitioner was no longer obligated to maintain respondents in
the "peaceful and adequate enjoyment of the lease for the
entire duration of the contract."77 Therefore, respondents
cannot use the disconnection of electrical service as justification
to suspend the payment of rent.
Assuming that respondents were entitled to invoke their right
under Article 1658 of the Civil Code, this does exonerate them
from their obligation under Article 1657 of the civil Code "to pay
the price of the lease according to the terms stipulated."78
Lessees who exercise their right under Article 1658 of the Civil
Code are not freed from the obligations imposed by law or
contract.
Moreover, respondents' obligation to pay rent was not
extinguished when they transferred to their new residence.
Respondents are liable for a reasonable amount of rent for the
use and continued occupation of the property upon the
expiration of the lease. To hold otherwise would unjustly enrich
respondents at petitioner's expense.
II
Respondents admit their liability to pay accrued rent for the
continued use and possession of the property. However, they
take exception to the proper treatment of the P78,000.00 initial
payment. Throughout the proceedings, respondents insist that
this amount was intended as advanced rent. Hence, it can be
used to offset their obligation.79
Respondents' argument is unmeritorious.
The P78,000.00 initial payment cannot be characterized as
advanced rent. First, records show that respondents continued
to pay monthly rent until February 2004 despite having
delivered the P78,000.00 to petitioner on separate dates in
2003.80 Second, as observed by the Metropolitan Trial Court,
respondents indicated in the receipt that the P78,000.00 was
initial payment or goodwill money. They could have easily
stated in the receipt that the P78,000.00 was advanced rent
instead of denominating it as "initial payment or goodwill
money." Respondents even proposed that the initial payment be
used to offset their accrued rent.81
Both the Metropolitan Trial Court and the Regional Trial Court
rejected respondents' assertion that the P78,000.00 was
advanced rent and characterized it as earnest money.82
Under Article 1482 of the Civil Code, whenever earnest money
is given in a contract of sale,83 it shall be considered as "proof
of the perfection of the contract."84 However, this is a
disputable presumption, which prevails in the absence of
contrary evidence. The delivery of earnest money is not
conclusive proof that a contract of sale exists.85
The existence of a contract of sale depends upon the
concurrence of the following elements: (1) consent or meeting
of the minds; (2) a determinate subject matter; and (3) price
certain in money or its equivalent.86 The defining characteristic
of a contract of sale is the seller's obligation to transfer
ownership of and deliver the subject matter of the contract.
Without this essential feature, a contract cannot be regarded as
a sale although it may have been denominated as such.87
In a contract of sale, title to the property passes to the buyer
upon delivery of the thing sold. In contrast, in a contract to sell,
ownership does not pass to the prospective buyer until full
payment of the purchase price. The title of the property
remains with the prospective seller.88
In a contract of sale, the non-payment of the purchase price is
a resolutory condition that entitles the seller to rescind the
sale.89 In a contract to sell, the payment of the purchase price
is a positive suspensive condition that gives rise to the
prospective seller's obligation to convey title.90 However, non-
payment is not a breach of contract but "an event that prevents
the obligation of the vendor to convey title from becoming
effective."91 The contract would be deemed terminated or
cancelled, and92 the parties stand "as if the conditional
obligation had never existed."93
Based on the evidence on record, petitioner and respondents
executed a contract to sell, not a contract of sale. Petitioner
reserved ownership of the property and deferred the execution
of a deed of sale until receipt of the full purchase price. In her
Letter dated March 4, 2004, petitioner stated:
It was our understanding that pending your purchase of the
property you will rent the same for the sum of P10,000.00
monthly. With our expectation that you will be able to purchase
the property during 2002, we did not offer the property for sale
to third parties. We even gave you an extension verbally for
another twelve months or the entire year of 2003 within which
we could finalize the sale agreement and for you to deliver to us
the amount of P3.5 Million, the agreed selling price of the
property. However, to this date, we are not certain whether or
not you have the capacity to purchase the property. The
earnest money of P100,000 that we initially agreed upon only
reached P78,000 as of date accumulated through several
installments during 2003. It is not our intention to wait for a
long time to dispose the property since you are very much
aware of the situation of my mother.94 (Emphasis supplied)
In this case, since respondents failed to deliver the purchase
price at the end of 2003, the contract to sell was deemed
cancelled. The contract's cancellation entitles petitioner to retain
the earnest money given by respondents.
Earnest money, under Article 1482 of the Civil Code, is
ordinarily given in a perfected contract of sale.95 However,
earnest money may also be given in a contract to sell.
In a contract to sell, earnest money is generally intended to
compensate the seller for the opportunity cost of not looking for
any other buyers. It is a show of commitment on the part of the
party who intimates his or her willingness to go through with
the sale after a specified period or upon compliance with the
conditions stated in the contract to sell.
Opportunity cost is defined as "the cost of the foregone
alternative."96 In a potential sale, the seller reserves the
property for a potential buyer and foregoes the alternative of
searching for other offers. This Court in Philippine National Bank
v. Court of Appeals97 construed earnest money given in a
contract to sell as "consideration for [seller's] promise to
reserve the subject property for [the buyer]."98 The seller, "in
excluding all other prospective buyers from bidding for the
subject property ... [has given] up what may have been more
lucrative offers or better deals."99
Earnest money, therefore, is paid for the seller's benefit. It is
part of the purchase price while at the same time proof of
commitment by the potential buyer. Absent proof of a clear
agreement to the contrary, it is intended to be forfeited if the
sale does not happen without the seller's fault. The potential
buyer bears the burden of proving that the earnest money was
intended other than as part of the purchase price and to be
forfeited if the sale does not occur without the fault of the
seller. Respondents were unable to discharge this burden.
There is no unjust enrichment on the part of the seller should
the initial payment be deemed forfeited. After all, the owner
could have found other offers or a better deal. The earnest
money given by respondents is the cost of holding this search in
abeyance.
This Court notes that respondents were even unable to meet
their own promise to pay the full amount of the earnest money.
Of the P100,000.00 that respondents committed to pay, only
P78,000.00 was received in irregular tranches. To rule that the
partial earnest money should even be returned is both
inequitable and would have dire repercussions as a precedent.
Although petitioner offered to return the earnest money to
respondents, it was conditioned upon the sale of the property to
another buyer.100 Petitioner cannot be said to have expressly
waived her right to retain the earnest money. Petitioner's offer
was even rejected by respondents, who proposed that the
earnest money be applied instead to their unpaid rent.101
Therefore, respondents' unpaid rent amounting to
P84,000.00102 cannot be offset by the earnest money.
However, it should be reduced by respondents' advanced
deposit of P30,000.00. As found by the Regional Trial Court,
petitioner failed to establish that respondents' advanced deposit
had already been consumed or deducted from respondents'
unpaid rent.103
WHEREFORE, the Petition for Review is GRANTED. The January
13, 2009 Decision and September 17, 2009 Resolution of the
Court of Appeals in CA-G.R. SP No. 98928 are REVERSED and
SET ASIDE. Respondents Spouses Germil and Rebecca Javier
are ordered to pay petitioner Vanessa N. Racelis the sum of
P54,000.00, representing accrued rentals, with interest at the
rate of six percent (6%) per annum from the date of the finality
of this judgment until fully paid.
SO ORDERED.
Velasco, Jr., (Chairperson), Bersamin, and Gesmundo, JJ.,
concur.
Martires, J., On official leave as per Letter dated January 18,
2018.
FIRST DIVISION
G.R. No. 230404, January 31, 2018
IN THE MATTER OF THE INTESTATE ESTATE OF REYNALDO
GUZMAN RODRIGUEZ; ANITA ONG TAN, Petitioner, v.
ROLANDO C. RODRIGUEZ, RACQUEL R. GEGAJO*, ROSALINDA
R. LANDON, REYNALDO C. RODRIGUEZ, JR., ESTER R.
FULGENCIO, RAFAEL C. RODRIGUEZ AND REYNEST C.
RODRIGUEZ, Respondents.
DECISION
TIJAM, J.:
Before Us is a Petition for Review on Certiorari,1 assailing the
Decision2 dated June 13, 2016 and Resolution3 dated March 3,
2017 of the Court of Appeals (CA) in CA-G.R. CV No. 105665
filed by petitioner Anita Ong Tan (Anita).
The Facts of the Case
Respondents Rolando Rodriguez, Racquel Gegajo, Rosalinda
Landon, Reynaldo Rodriguez, Jr., Ester Fulgencio, Rafael
Rodriguez and Reynest Rodriguez are children of Reynaldo
Rodriguez (Reynaldo) and Ester Rodriguez (Ester), who died on
August 27, 2008 and September 11, 2004 respectively.4
Reynaldo and Ester left several properties to their surviving
children. On February 13, 2009, respondents executed an
Extrajudicial Settlement of the Estate of the late Reynaldo and
Ester.5
On the other hand, Anita is a co-depositor in a Joint Account
under the name Anita Ong Tan and Reynaldo with account
number 003149-0718-56 in the Bank of the Philippine Islands
(BPI). When Reynaldo passed away, said joint account
continued to be in active status.6
On August 31, 2009, BPI sent a letter to Anita and informed her
that her joint account with Reynaldo would become dormant if
no transaction will be made. As such, Anita decided to withdraw
her funds. BPI, however, required her to submit additional
requirements, one of which is the extrajudicial settlement of the
heirs of Reynaldo.7 To comply with the same, Anita approached
respondents and asked them to sign a waiver of rights to the
said joint account. Respondents refused to sign the waiver as
they believed that the funds in the said joint account belonged
to their father.8
Respondents then submitted documents to BPI for the release
of half of the funds deposited in said joint account.9
BPI withheld the release of the funds because of the conflicting
claims between Anita and respondents.10
In 2011, Anita filed before the trial court a petition for the: (a)
settlement of the Intestate Estate of the late Reynaldo; and (b)
issuance of letters of administration to any competent neutral
willing person, other than any of the heirs of Reynaldo.
Anita alleged that the funds used to open the BPI joint account
were her exclusive funds, which came from her East West Bank
(East West) account. To prove her claim, she presented as
evidence a Debit Memo from East West Bank, which was used
for the issuance of a Manager's Check in the amount of One
Million Twenty-One Thousand Eight Hundred Sixty- Eight and
30/100 Pesos (P 1,021,868.30), which exact amount was
deposited to the BPI joint account.11 Anita presented the
testimony of Mineleo Serrano, Branch Manager of East West in
Tomas Morato, to corroborate her testimony that the subject
amount came from her East West account.12
Respondents filed a Motion to Dismiss, arguing that the funds
deposited in the BPI joint account belonged exclusively to
Reynaldo.
In 2014, Rolando Rodriguez was appointed and took his oath as
an administrator of the subject estate.
In an Order13 dated March 13, 2015, the Regional Trial Court
(RTC) ruled in favor of Anita. The RTC held that Anita
sufficiently adduced evidence to rebut the presumption that the
funds deposited under the BPI joint account of Anita and
Reynaldo were owned by them in common. The fallo reads:
WHEREFORE, petitioner's claim against the estate of deceased
Reynaldo G. Rodriguez is hereby GRANTED. Accordingly,
Rolando Rodriguez, in his capacity as the appointed
Administrator of the intestate estate of Reynaldo G. Rodriguez,
is hereby directed to withdraw, together with the petitioner, the
funds under Joint Account No. 003149-0718-56 deposited with
the Bank of the Philippine Islands, Kamuning Branch, Quezon
City and the entire proceeds thereof be given to petitioner.
SO ORDERED.14
Respondents filed a motion for reconsideration, but it was
denied in an Order dated May 25, 2015.
Undaunted, respondents filed an appeal before the CA.
In a Decision15 dated June 13, 2016, the CA reversed the ruling
of the RTC. In giving credence to respondents' contention, the
CA maintained that the presumption of co-ownership as regards
the nature of joint accounts was not sufficiently overturned, as
Anita failed to prove that she is indeed the sole owner of the
funds therein. The CA disposed thus:
WHEREFORE, the instant appeal is hereby PARTIALLY
GRANTED. The assailed Order dated March 13, 2015 and Order
dated May 25, 2015 of the Region[al] Trial Court [,] Branch 74,
Ma1abon City is hereby MODIFIED.
The bank deposit under the Joint Account number 003149-
0718-56 is to be divided in equal shares between Petitioner-
appellee on one hand and the Respondents-appellants on the
other on a 50-50 proposition.
SO ORDERED.16
Anita filed a motion for reconsideration, which was denied in a
Resolution17 dated March 3, 2017, thus:
WHEREFORE, petitioner-appellee's Motion for Reconsideration is
hereby DENIED for lack of merit.
SO ORDERED.18
The Issue
In sum, the sole issue in this case is whether or not the CA
erred in declaring Anita and Reynaldo as co-owners of the
subject bank deposits despite the evidence submitted by Anita
to prove otherwise.
The Ruling of the Court
A joint account is one that is held jointly by two or more natural
persons, or by two or more juridical persons or entities. Under
such setup, the depositors are joint owners or co-owners of the
said account, and their share in the deposits shall be presumed
equal, unless the contrary is proved.19 The nature of joint
accounts is governed by the rule on co-ownership embodied in
Article 485 of the Civil Code, to wit:
Art. 485. The share of the co-owners, in the benefits as well as
in the charges, shall be proportional to their respective
interests. Any stipulation in a contract to the contrary shall be
void.
The portions belonging to the co-owners in the co-ownership
shall be presumed equal, unless the contrary is proved.
While the rule is that the shares of the owners of the joint
account holders are equal, the same may be overturned by
evidence to the contrary. Hence, the mere fact that an account
is joint is not conclusive of the fact that the owners thereof
have equal claims over the funds in question.
In line with this, it is also indispensable to consider whether or
not there exists a survivorship agreement between the co-
depositors. In said agreement, the co-depositors agree that
upon the death of either of them, the share pertaining to the
deceased shall accrue to the surviving co-depositor or he can
withdraw the entire deposit.20
It must be noted that there exists no survivorship agreement
between Anita and Reynaldo. Hence, it is but rightful to
determine their respective shares based on evidence presented
during trial.
On this note, the Court agrees with the findings of the lower
court that Anita sufficiently proved that she owns the funds in
the BPI joint account exclusively.
It can be gleaned from the records that the money in the BPI
joint account amounts to One Million Twenty-One Thousand
Eight Hundred Sixty-Eight Pesos and Thirty Centavos
(P1,021,868.30), and it is undisputed that said amount came
from Anita's personal account with East West. In East West,
Anita opened a Trust Placement in August 2007 with the
amount of Two Million Fourteen Thousand Twenty-Four Pesos
and Twenty-Five Centavos (P2,014,024.25). Based on East
West's records, as testified to by its Branch Manager, two
withdrawals were subsequently made: first, in the amount of
One Million Twenty-One Thousand Eight Hundred Sixty-Eight
Pesos and 30 Centavos (P1,021,868.30); and second, in the
amount of One Million Three Thousand One Hundred Eleven
Pesos and Eleven Centavos (P1,003,111.11). In all such
withdrawals, manager's checks were issued.
The exact amount which was first withdrawn from the East
West account, i.e., One Million Twenty-One Thousand Eight
Hundred Sixty-Eight Pesos and Thirty Centavos
(P1,021,868.30), was the exact amount used to open the BPI
joint account. Notable is the fact that these transactions
occurred within the same day on November 14, 2007.21 It is
also significant to consider that no further transaction in said
joint account was made after the same was opened until the
death of Reynaldo.
With all these, it is apparent that Anita owned the funds
exclusively as she sufficiently overturned the presumption under
the law. It bears stressing that despite the evidence shown by
Anita, respondents failed to refute her evidence, other than
their bare allegations that Anita and Reynaldo had an amorous
relationship and that Anita had no source of income to sustain
the funds in a bank.22
The Court also takes note of the fact that respondents admitted
that they knew the existence of the joint account, yet they still
failed to include the same in the list of included properties in
the inventory when they executed an extrajudicial settlement.
Their failure to include said joint account in the list of the items
owned by Reynaldo for the purposes of determining his estate
obviously refutes their claim that Reynaldo was the sole owner
of the funds in said joint account.
Taken together, the Court finds the ruling of the trial court that
Anita is the sole owner of the funds in question proper.
Lastly, noteworthy is the fact that even if the probing arms of
an intestate court is limited, it is equally important to consider
the call of the exercise of its power of adjudication especially so
when the case calls for the same, to wit:
While it may be true that the Regional Trial Court, acting in a
restricted capacity and exercising limited jurisdiction as a
probate court, is competent to issue orders involving inclusion
or exclusion of certain properties in the inventory of the estate
of the decedent, and to adjudge, albeit, provisionally the
question of title over properties, it is no less true that such
authority conferred upon by law and reinforced by
jurisprudence, should be exercised judiciously, with due regard
and caution to the peculiar circumstances of each individual
case.23
The facts obtaining in this case call for the determination of the
ownership of the funds contained in the BPI joint account; for
the intestate estate of Reynaldo has already been extrajudicially
settled by his heirs. The trial court, in this case, exercised sound
judiciousness when it ruled out the inclusion of the BPI joint
account in the estate of the decedent.
Equally important is the rule that the determination of whether
or not a particular matter should be resolved by the Court of
First Instance in the exercise of its general jurisdiction or of its
limited jurisdiction as a special court (probate, land registration,
etc.) is in reality not a jurisdictional question. It is in essence a
procedural question involving a mode of practice "which may be
waived."24
Such waiver introduces the exception to the general rule that
while the probate court exercises limited jurisdiction, it may
settle questions relating to ownership when the claimant and all
other parties having legal interest in the property consent,
expressly or impliedly, to the submission of the question to the
probate court for adjudgment.25
Such waiver was evident from the fact that the respondents
sought for affirmative relief before the court a quo as they
claimed ownership over the funds in the joint account of their
father to the exclusion of his co-depositor.
In this case, the Court notes that the parties submitted to the
jurisdiction of the intestate court in settling the issue of the
ownership of the joint account. While respondents filed a
Motion to Dismiss, which hypothetically admitted all the
allegations in Anita's petition, the same likewise sought
affirmative relief from the intestate court. Said affirmative relief
is embodied in respondents' claim of ownership over the funds
in said joint account to the exclusion of Anita, when in fact said
funds in the joint account was neither mentioned nor included
in the inventory of the intestate estate of the late Reynaldo.
Therefore, respondents impliedly agreed to submit the issue of
ownership before the trial court, acting as an intestate court,
when they raised an affirmative relief before it. To reiterate, the
exercise of the trial court of its limited jurisdiction is not
jurisdictional, but procedural; hence, waivable.
WHEREFORE, premises considered, the Petition is GRANTED.
The Decision dated June 13, 2016 and Resolution dated March
3, 2017 of the Court of Appeals in CA-G.R. CV No. 105665 are
REVERSED and SET ASIDE. Accordingly, the Order dated March
13, 2015 of the Regional Trial Court of Malabon City, Branch 74
is REINSTATED.
SO ORDERED.
Sereno, C.J., (Chairperson), Leonardo-De Castro, Del Castillo,
and Jardeleza, JJ., concur.
SECOND DIVISION
G.R. No. 213972, February 05, 2018
FELICITAS L. SALAZAR, Petitioner, v. REMEDIOS FELIAS, ON
HER OWN BEHALF AND REPRESENTATION OF THE OTHER
HEIRS OF CATALINO NIVERA, Respondents.
DECISION
REYES, JR., J.:
The movant's claim that his/her property is exempt from
execution for being the family home is not a magic wand that
will freeze the court's hand and forestall the execution of a final
and executory ruling. It is imperative that the claim for
exemption must be set up and proven.
This treats of the petition for review on certiorari1 under Rule
45 of the Revised Rules of Court seeking the reversal of the
Decision2 dated December 62013, and Resolution3 dated
August 7, 2014, rendered by the Court of Appeals (CA) in CA-
G.R. CV No. 97309, which affirmed the execution of the final
and executory judgment issued by the Regional Trial Court,
Branch 55, Alaminos, Pangasinan (RTC Branch 55).
The Antecedent Facts
On February 28, 1990, private respondent Remedios Felias,
representing the heirs of Catalino Nivera (Heirs of Nivera) filed a
Complaint for Recovery of Ownership, Possession and Damages
against the Spouses Romualdo Lastimosa (Romualdo) and
Felisa Lastimosa (Fe1isa). The former sought to recover from
the latter four parcels of land located in Baruan, Agno,
Pangasinan (subject property).
On March 3, 1997, during the trial of the case, Romualdo died.
Consequently, on July 6, 1998, a Motion for Substitution4 was
filed by the decedent's wife, Felisa, and their children Flordeliza
Sagun, Reynaldo Lastimosa, Recto Lastimosa (Recto), Rizalina
Ramirez (Rizalina), Lily Lastimosa, and Avelino Lastimosa (Heirs
ofLastimosa).
On March 16, 2004, the RTC Branch 55 rendered a Decision,5
declaring the Heirs of Nivera as the absolute owners of the
parcels of land in question, and thereby ordering the Heirs of
Lastimosa to vacate the lands and to surrender possession
thereof. The dispositive portion of the decision of the RTC
Branch 55, reads:
WHEREFORE, this Honorable Court renders judgment:
a. Declaring the [Heirs of Nivera] absolute owners of the parcels
of land in question as described in the Amended Complaint, and
ordering the [Heirs of Lastimosa] to surrender possession
thereof and vacate the same;
b. Ordering the [Heirs of Lastimosa], jointly and severally, to
pay the [Heirs of Nivera] actual damages in the amount of Php
270,000.00 for 1975 to 1995, and Php 10,000.00 annually from
1996 and through all the subsequent years until actual
possession shall have been restored to the [Heirs of Nivera];
attorney's fees and litigation expenses in the amount of Php
21,000.00; and costs.
SO ORDERED.6
The Heirs of Lastimosa did not file an appeal against the trial
court's ruling.
Meanwhile, Felicitas Salazar (Felicitas), daughter of Romualdo,
along with Recto and Rizalina filed a Petition for Annulment of
Judgment dated June 22, 2006 with the CA. Felicitas sought the
nullification of the RTC Branch 55's Decision dated March 16,
2004, and the corresponding Writs of Execution and Demolition
issued pursuant thereto.7 In her Petition for Annulment of
Judgment, Felicitas claimed that she was deprived of due
process when she was not impleaded in the case for Recovery
of Ownership, before the RTC Branch 55.8
On June 5, 2008, the Former Tenth Division of the CA rendered
a Decision,9 in CA-G.R. SP No. 95592, dismissing the Petition
for Annulment of Judgment. The CA refused to give credence to
the contention that the Heirs of Nivera are at fault for failing to
implead Felicitas as a party defendant in the action for recovery
of ownership. Rather, the failure to include Felicitas in the
proceedings was due to the fault of the Heirs of Lastimosa, who
neglected to include her (Felicitas) in their Motion to Substitute.
The CA further ratiocinated that since the RTC acquired
jurisdiction over the person of the original defendants Romualdo
and Felisa, the outcome of the case is binding on all their heirs
or any such persons claiming rights under them.10
On June 3, 2009, this Court affirmed the CA decision in the
Petition for Annulment of Judgment.11 The Court's ruling
became final, as per Entry of Judgment, on October 5, 2009.
Meanwhile, the Heirs of Lastimosa filed with the RTC Branch 55
an Urgent Motion to Order the Sheriff to Desist from Making
Demolition dated April 24, 2010. The Motion to Desist was
premised on the fact that the Sheriff cannot execute the lower
court's decision considering that Felicitas had an aliquot share
over the property, which had not yet been partitioned.12
At about the same time, the Heirs of Nivera filed a Motion for
Execution and Demolition dated May 28, 2010. The Motion for
Execution was anchored on the fact that the Decision dated
March 16, 2004, in the case for recovery of ownership,
possession and damages had long attained finality.13
On July 9, 2010, the RTC Branch 55 issued an Order granting
the Motion for Execution and Demolition, and denying the
Motion to Desist.14 The dispositive portion of the order reads:
After going over the allegations in both motions, the Court
resolves to deny the motion, to order the Sheriff to desist from
making demolition filed by the defendants through counsel, it
appearing that the grounds raised in the said motion are
already mooted by the subsequent filing of the motion for
execution and demolition filed by plaintiff through counsel.
The motion for execution and demolition is hereby granted.
Accordingly, let [a] Writ of Execution and Demolition issue to
satisfy judgement rendered in this case.
SO ORDERED.15
Dissatisfied with the ruling, the Heirs of Lastimosa16 filed an
appeal before the CA, questioning the Writ of Execution and
Demolition issued by the lower court.
On December 6, 2013, the Fifteenth Division of the CA rendered
the assailed Decision17 dismissing the appeal on the following
grounds, to wit: (i) the Heirs of Lastimosa availed of the wrong
remedy by filing an appeal, instead of a petition for certiorari
under Rule 65; (ii) the matter pertaining to the non-inclusion of
Felicitas is already barred by res judicata, as it has been settled
with finality in CA-G.R. SP No. 95592, and affirmed by the
Supreme Court in G.R. No. 185056; and (iii) the execution of
the decision rendered by the RTC Branch 55 is proper
considering that case has long attained finality. The dispositive
portion of the assailed CA decision reads:
ACCORDINGLY, the appeal is DENIED. The assailed Order dated
April 6, 2011 is AFFIRMED.18
Felicitas filed a Motion for Reconsideration against the same
Decision, which was denied by the CA in its Resolution19 dated
August 7, 2014.
Undeterred, Felicitas filed the instant petition for review on
certiorari20 under Rule 45 of the Revised Rules of Court seeking
the reversal of the assailed CA decision and resolution.
The Issue
The main issue for this Court's resolution rests on whether the
CA erred in ordering the execution of the Decision dated March
16, 2004.
In seeking the reversal of the assailed decision, Felicitas claims
that the Writ of Execution and Demolition issued by the RTC
Branch 55 was executed against the wrong party.21 She points
out that she was not impleaded in the case for recovery of
ownership and possession, and thus the decision cannot bind
her.22 Felicitas argues that she was deprived of her property as
an heir without due process, as she was left out of the
proceedings, "completely unable to protect her rights."23 In
addition, Felicitas contends that the execution cannot continue
as the Writ of Execution is being enforced against property that
is exempt from execution, as what is sought to be demolished is
her family home. In this regard, Article 155 of the Family Code
ordains that the family home shall be exempt from execution.24
On the other hand, the Heirs of Nivera counter that the petition
for review on certiorari is nothing but a dilatory tactic employed
by Felicitas to overthrow and delay the execution of the
judgment rendered in as early as March 16, 2004.25 The Heirs
of Nivera maintain that Felicitas' claim that she was deprived of
her property as an heir without due process of law has already
been settled with finality in the Petition for Annulment of
Judgement, which was dismissed by the CA, and this Court.26
Likewise, anent the claim that the subject property is exempt
from execution, the Heirs of Nivera aver that Felicitas failed to
present an iota of evidence to prove her claim. On the contrary,
Felicitas herself admitted in her pleadings that she does not
reside in the subject property in Alaminos, but actually lives in
Muñoz, Nueva Ecija.27 Moreover, the subject property belonged
to the Heirs of Nivera in as early as the 1950s, thereby negating
Felicitas' claim that it is her family home.28
Ruling of the Court
The petition is bereft of merit.
Nothing is more settled than the rule that a judgment that is
final and executory is immutable and unalterable. It may no
longer be modified in any respect, except when the judgment is
void, or to correct clerical errors or to make nunc pro tunc
entries. In the same vein, the decision that has attained finality
becomes the law of the case, regardless of any claim that it is
erroneous. Any amendment or alteration which substantially
affects a final and executory judgment is null and void for lack
of jurisdiction, including the entire proceedings held for that
purpose.29 Accordingly, the court cannot refuse to issue a writ
of execution upon a final and executory judgment, or quash it,
or stay its implementation.30
Concomitantly, neither may the parties object to the execution
by raising new issues of fact or law. The only exceptions thereto
are when: "(i) the writ of execution varies the judgment; (ii)
there has been a change in the situation of the parties making
execution inequitable or unjust; (iii) execution is sought to be
enforced against property exempt from execution; (iv) it
appears that the controversy has been submitted to the
judgment of the court; (v) the terms of the judgment are not
clear enough and there remains room for interpretation thereof;
or (vi) it appears that the writ of execution has been
improvidently issued, or that it is defective in substance, or
issued against the wrong party, or that the judgment debt has
been paid or otherwise satisfied, or the writ was issued without
authority."31
In the case at bar, there is no dispute that in as early as March
16, 2004, the RTC Branch 55 of Alaminos, Pangasinan rendered
a Decision in the case for Recovery of Ownership, Possession
and Damages, ordering the Heirs of Lastimosa to vacate the
subject properties and surrender them to the Heirs of Nivera.
There is no dispute that this ruling of the RTC had become final
and executory. Pursuant thereto, the lower court issued a Writ
of Execution and Demolition.
This notwithstanding, Felicitas seeks to prevent the execution of
the same order, arguing that the writ was issued against the
wrong party; and that the property sought to be executed is
exempt from execution.
The Court is not persuaded.
It must be noted at the outset that the matter of whether
Felicitas was deprived of due process of law for not having been
impleaded in the case for recovery of ownership and possession
has long been settled with finality.
In the decision of the CA in the case for Petition for Annulment
of Judgment (CA-G.R. SP No. 95592),32 the Former Tenth
Division of the CA squarely and judiciously passed upon the
issue of whether the. judgment of the lower court in the action
for recovery of ownership and possession was void for failure to
implead Felicitas. The CA held that:
Finally, the intimation of the petitioners that private respondent
is at fault for failing to implead [Felicitas] as party defendant in
this case is patently without basis. It must be recalled that the
lower court acquired jurisdiction over the person of the original
defendants Romualdo and Feliza Lastimosa. Hence, the
outcome of this case is binding on all the heirs or persons
claiming rights under the said defendants. When [Romualdo]
died on March 3, 1997, the defendants filed an Urgent Motion
to Substitute Other Heirs of the said defendant listing the
names of the heirs to be substituted. It is therefore crystal clear
that if [Felicitas] was not impleaded in this case as party
defendant being the daughter of [Romualdo], that omission
could not be attributed to the private respondent but the
defendants themselves.33 (Underscoring in the original)
This ruling of the CA was affirmed by this Court in the
Resolution dated June 3, 2009, and attained finality as per Entry
of Judgment. Markedly, it is crystal clear that the issues
pertaining to Felicitas' non-inclusion in the proceedings, and the
consequent validity of the lower court's judgment have long
attained finality. It bears reiterating that a judgment that is final
and executory cannot be altered, even by the highest court of
the land. This final judgment has become the law of the case,
which is now immutable.
Additionally, as an heir of the original defendants in the action
for recovery of ownership, Felicitas is bound by the decision
rendered against her predecessors-in-interest. Thus, there is
nothing that exempts her from the enforcement of the Writ
ofExecution.
In another attempt to thwart the execution of the RTC's final
and executory judgment, Felicitas claims that the execution
cannot proceed, as the subject property is her family home and
is therefore exempt from execution.
Indeed, the family home is a real right which is gratuitous,
inalienable and free from attachment, constituted over the
dwelling place and the land on which it is situated. It confers
upon a particular family the right to enjoy such properties.34 It
cannot be seized by creditors except in certain special cases.35
However, the claim that the property is exempt from execution
for being the movant's family home is not a magic wand that
will freeze the court's hand and forestall the execution of a final
and executory ruling. It must be noted that it is not sufficient
for the claimant to merely allege that such property is a family
home. Whether the claim is premised under the Old Civil Code
or the Family Code, the claim for exemption must be set up and
proved.36
In fact, in Ramos, et al. v. Pangilinan, et al.,37 the Court, citing
Spouses Kelley, Jr. v. Planters Products, Inc., et al.,38 laid down
the rules relative to the levy on execution of the family home,
viz.:
No doubt, a family home is generally exempt from execution
provided it was duly constituted as such. There must be proof
that the alleged family home was constituted jointly by the
husband and wife or by an unmarried head of a family. It must
be the house where they and their family actually reside and
the lot on which it is situated. The family home must be part of
the properties of the absolute community or the conjugal
partnership, or of the exclusive properties of either spouse with
the latter's consent, or on the property of the unmarried head
of the family. The actual value of the family home shall not
exceed, at the time of its constitution, the amount of P300,000
in urban areas and P200,000 in rural areas.39
In addition, residence in the family home must be actual. The
law explicitly mandates that the occupancy of the family home,
either by the owner thereof, or by any of its beneficiaries must
be actual. This occupancy must be real, or actually existing, as
opposed to something merely possible, or that which is merely
presumptive or constructive.40
Guided by the foregoing jurisprudential tenets, it becomes all
too apparent that Felicitas cannot conveniently claim that the
subject property is her family home, sans sufficient evidence
proving her allegation. It bears emphasis that it is imperative
that her claim must be backed with evidence showing that the
home was indeed (i) duly constituted as a family home, (ii)
constituted jointly by the husband and wife or by an unmarried
head of a family, (iii) resided in by the family (or any of the
family home's beneficiaries), (iv) forms part of the properties of
the absolute community or the conjugal partnership, or of the
exclusive properties of either spouse with the latter's consent,
or property of the unmarried head of the family, and (v) has an
actual value of Php 300,000.00 in urban areas, and Php
200,000.00 in rural areas.
A perusal of the petition, however, shows that aside from her
bare allegation, Felicitas adduced no proof to substantiate her
claim that the property sought to be executed is indeed her
family home.
Interestingly, Felicitas admitted in her Motion for
Reconsideration dated December 23, 2013, and her Petition for
Annulment of Judgment dated June 22, 2006, that she is, and
has always been a resident of Muñoz, Nueva Ecija.41 Similarly,
the address indicated in Felicitas' petition for review on
certiorari is Muñoz, Nueva Ecija.42
Equally important, the Court takes judicial notice of the final
ruling of the RTC Branch 55 in the case for recovery of
ownership, that the subject property has belonged to the Heirs
of Nivera since the 1950s.43 This automatically negates
Felicitas' claim that the property is her family home.
Undoubtedly, Felicitas' argument that the property subject of
the writ of execution is a family home, is an unsubstantiated
allegation that cannot defeat the binding nature of a final and
executory judgment. Thus, the Writ of Execution and
Demolition issued by the RTC Branch 55 must perforce be given
effect.
In fine, an effective and efficient administration of justice
requires that once a judgment has become final, the winning
party should not be deprived of the fruits of the verdict. The
case at bar reveals the attempt of the losing party to thwart the
execution of a final and executory judgment, rendered by. the
court thirteen (13) long years ago. The Court cannot sanction
such vain and obstinate attempts to forestall the execution of a
final ruling. It is high time that the case be settled with finality
and the ruling of the RTC Branch 55 be given full force and
effect.
WHEREFORE, premises considered, the instant petition is
DENIED for lack of merit. Accordingly, the Decision dated
December 6, 2013 and Resolution dated August 7, 2014,
rendered by the Court of Appeals in CA-G.R. CV No. 97309 are
AFFIRMED in toto.
SO ORDERED.
Carpio, (Chairperson), Peralta, Perlas-Bernabe, and Caguioa,
JJ., concur.
SECOND DIVISION
G.R. No. 226208, February 07, 2018
AGNES COELI BUGAOISAN, Petitioner, v. OWI GROUP MANILA
AND MORRIS CORPORATION, Respondents.
DECISION
REYES, JR., J.:
This is a petition for review on certiorari1 pursuant to Rule 45 of
the Rules of Court, as amended, seeking to partially annul,
reverse and set aside the Decision2 dated February 24, 2016
and Resolution3 dated August 3, 2016 of the Court of Appeals
(CA) in CA-G.R. SP No. 131670, which modified the Decision4 of
the National Labor Relations Commission (NLRC) dated May 31,
2013 and denied Agnes Coeli Bugaoisan's (petitioner) partial
motion for reconsideration, respectively.
The Facts
A complaint for constructive illegal dismissal and payment of
salary for the unexpired portion of the employment period,
moral and exemplary damages, and attorney's fees was filed by
the petitioner against respondents OWI Group Manila, Inc.
(OWI) and Morris Corporation (Morris) (collectively referred to
as the respondents) and Marlene D. Alejandrino before the
NLRC. The case was docketed as NLRC NCR OFW CASE No.
(L)01-0032-12. In that case, the petitioner alleged that on May
6, 2011 she responded to an advertisement that she saw from
OWI regarding a job opening in Australia. She sent a copy of
her resume online and was thereafter scheduled for an
interview at OWI's office in Makati.5
OWI is the agent of Morris here in the Philippines. OWI offered
petitioner full time employment after she underwent a series of
three interviews and did a cooking demonstration. The following
were the terms and conditions of her employment:
Position Chef
Employee Collective Agreement (ECA) Level Hospitality,
Stream, Level 4
Work Status Fulltime
Annual Salary AUS$60,000 per annum. Please refer to
clause 4.13.3 of the accompanying ECA
Superannuation An additional 9% of the Annual Salary
Leave 152 hours/20 days paid annual leave & 76 hours/10
days paid personal leave (sick and carers)
Appended to the offer of full-time employment was the
petitioner's employment contract with Morris, a foreign
corporation based in Australia. It was stated that her term of
employment was for one year. Petitioner was later medically
cleared to work as chef for Morris by OWI's accredited clinic.6
On September 25, 2011, petitioner flew from Manila to Perth,
Australia. Upon arrival, she was asked to sign another offer of
full-time employment by Morris. It was indicated in the offer
that her position would be of a breakfast chef and she would
receive an annual salary of AUS$75,000.00. She was likewise
entitled to a paid annual leave of 190 hours or 25 days.7
Position Chef
Annual Salary AUS$75,000 per annum. Please refer to
clause 4.13.3 of the accompanying ECA
xxxx
Morris Corporation Australia Pty Ltd will pay your economy class
airfare to Australia and one return flight to the Philippines once
your 457 visa or your right to work in Australia has expired. If
your contract is terminated by either party during the first 2
years of employment with Morris Corporation, you will be
expected to return the full cost of the above stated travel.8
(Emphasis Ours)
On October 2, 2011, petitioner was deployed to Morris' mining
site in Randalls Kalgoorlie, Australia. She was tasked to prepare
breakfast buffet for Morris' 85 employees all by herself. Due to
the sheer number of employees, petitioner had to work through
the night in order to serve breakfast on time. It was only then
did she learn that after cooking the dishes, she was also the
one who was tasked to wash the dishes. Overwhelmed with her
duties and concerned for her safety when she goes to work at
night, petitioner raised her concerns to the attention of Morris.9
Morris refused to give her an assistant to aid her in her duties
because the Randalls mining site is relatively small and the
tasks can be done by one chef. Nevertheless, Morris tried to
accommodate her by transferring her to its mining site in
Golden Grove, Geraldton, Western Australia. The mining site in
Golden Grove is bigger but petitioner worked with a team.10
On October 20, 2011, petitioner was transferred to Morris'
mining site in Golden Grove, Geraldton, Western Australia. She
still performed the same task only this time she had to prepare
a breakfast buffet for Morris' 550 mining workers.11
On the evening of November 12, 2011, while preparing the
breakfast for the following day, petitioner felt a tingling
sensation followed by numbness on both of her hands. She was
referred to Morris' on-site nurse, who gave her pain reliever.
She was diagnosed to be suffering from Carpal Tunnel
Syndrome (CTS) and was advised to undergo an intensive
examination for confirmation.12
Petitioner did not heed the advice of the on-site nurse. Instead,
she went back to her work. In the morning of November 14,
2011, she was distraught when the tingling sensation and
numbness on both of her hands worsened. Consequently, she
was again brought to the on-site nurse. Thereafter, she was
flown to Perth, Australia for an extensive medical test.13
Several physicians, including Morris' preferred physician,
conducted a series of medical examinations on petitioner. She
was diagnosed to be suffering from Bilateral CTS and was
declared unfit to work for several days. Dr. Timothy Hewitt
strongly advised her to undergo surgery.14
Petitioner filed a compensation claim with the Worker's
Compensation and Injury Management (WCIM) of Australia to
seek compensation for her wages while she was still unfit for
work or reimbursement of her medical expenses. Her
application, however, was denied.15
On December 23, 2011, Morris' representative met with
petitioner to inform her that she already exhausted her paid
annual leaves. Nevertheless, they assured her that they would
not be terminating her employment. She must, however, be
declared fit for work before they would allow her to report
back.16
Although still employed, petitioner had no other means to
support her daily sustenance and the required medication for
her CTS due to the fact that she would not be receiving salary
until declared fit to go back to work. She decided to tender her
resignation letter and left for the Philippines. Thus, she was
repatriated and arrived in the Philippines on December 25,
2011. Respondents, commiserating with petitioner's plight, paid
for her transportation and reimbursed her expenses for her
excess baggage and meal expenses.17
Respondents were later surprised to learn that petitioner filed a
labor complaint against them on January 6, 2012. She averred
in her Position Paper18 that she was illegally dismissed and was
not paid her salaries, overtime pay and medical expenses.
In a Decision dated December 28, 2012, the Labor Arbiter (LA)
ruled that the petitioner was illegally dismissed from
employment. It was found that the respondents committed
gross misrepresentation and bad faith in inducing petitioner to
work for them. Respondents ordered her to manually prepare a
breakfast buffet for 600 workers all by herself. According to the
LA, petitioner's CTS was caused or at least aggravated by
respondents' oppressive acts. Furthermore, the tenor of her
resignation letter and the immediate filing of the labor
complaint evinced that she did not voluntarily tender her
resignation.19 Thus, the LA disposed as follows:
WHEREFORE, premises considered, judgment is hereby
rendered declaring the dismissal of [petitioner] as unjust and
illegal. As such, respondents are hereby ordered to pay, jointly
and severally, [petitioner] the following sums:
AUS$137,500.00 - As salary for the remaining period of her 2-
year employment contract
Php200,000.00 - As moral damages
Php200,000.00 - As exemplary damages
Ten (10%) percent of the total monetary award as attorney's
fees
Payment can be made in Australian Dollars or its equivalent in
Philippine Peso at the time of payment.
SO ORDERED.20 (Emphasis and underlining Ours)
On appeal, the NLRC sustained the findings of the LA with
regard to the existence of constructive dismissal, the solidary
liability of the respondents, and the award of petitioner's salary
for the unexpired portion of her two-year employment contract.
Respondents filed a Motion for Reconsideration but the same
was denied by the NLRC in its Resolution dated July 22, 2013.
Aggrieved, respondents filed with the CA a Petition for Certiorari
under Rule 65 assailing the NLRC's decision and resolution, with
prayer for issuance of. Temporary Restraining Order and/or Writ
of Preliminary Injunction.
On February 24, 2016, the CA issued its first assailed Decision
in favor of petitioner, the pertinent portion of which reads as
follows:
Pursuant to the Master Employment Contract between
[petitioner] and [Morris], which was submitted to the Philippine
Overseas Employment Agency on 10 June 2011, the term of the
contract for employment was for one (1) year. Her period of
employment started when she arrived in Perth, Australia on 25
September 2011 and ended three (3) months later. Accordingly,
[petitioner] is entitled to receive total amount of AUS$56,250,
which represents her salary for the unexpired portion of her
employment contract.21 (Emphasis and underlining Ours)
The dispositive portion of the CA Decision dated February 24,
2016, reads:
WHEREFORE, there being no grave abuse of discretion
amounting to lack or excess of jurisdiction committed by the
NLRC, the petition is DISMISSED for lack of merit. The Decision
of the NLRC dated 31 May 2013 is hereby AFFIRMED with
MODIFICATION. [Petitioner] is awarded with the amount of
AUS$56,250 or its current equivalent in Philippine Peso,
representing her unpaid salaries for the unexpired portion of
her one (1) year emplovment contract. The rest of the Decision
stands. A legal interest of 6% per annum of the total monetary
awards from finality of this decision until full satisfaction is
likewise imposed.
The [LA] is hereby ORDERED to compute the total monetary
benefits awarded and due the [petitioner] in accordance with
this decision.
SO ORDERED.22 (Emphasis and underlining Ours)
Petitioner moved for partial reconsideration of the CA decision
insofar as it :ruled that petitioner's Overseas Employment
Contract was only for one (1) year, instead of two (2) years as
ruled by the LA and the NLRC.
On August 3, 2016, the CA issued its assailed Resolution23
denying petitioner's Motion for Reconsideration, the pertinent
portions of which read as follows:
Thus, we note from the Master Employment Contract that the
[petitioner] signed and submitted with the Philippine Overseas
Employment Agency on 10 June 2011, that it was explicitly
states [sic] that the duration of her contract was for one (1)
year.
Certainly, employment contracts that were approved and
verified by the Department of Labor and Employment (DOLE)
may still be substituted or altered from the time the parties
actually signed the same up to its expiration even without
approval of the DOLE. Provided, however, that the employee
was not prejudiced and the modifications made were in
accordance with the minimum standards, terms and conditions
of employment set by the POEA-SEC for contracts of
employment of land-based workers.
Here, it is not clear from the letter of offer of full time
employment that [petitioner's] employment contract was
extended to two (2) years. All the same, the absence of
[petitioner's] signature in the said letter evinced the fact that
[petitioner] did not accept such offer. Settled is the rule that
contracts are perfected by mere consent. That is, a contract is
perfected upon the meeting of the offer, which must be certain,
and the absolute acceptance upon the thing and the cause
which shall constitute the contract.24 (Emphasis and
underlining Ours)
Hence, this petition.
The Issues
WHETHER OR NOT THE CA GRAVELY ERRED WHEN IT RULED
THAT PETITIONER'S EMPLOYMENT CONTRACT WITH MORRIS
WAS FOR ONLY ONE (1) YEAR AS PER ITS POEA
MASTEREMPLOYMENTCONTRACT
WHETHER OR NOT SAID CONTRACT WAS VALIDLY MODIFIED
BY MORRIS' SUBSEQUENT "OFFER OF FULLTIME
EMPLOYMENT" FOR AT LEAST TWO (2) YEARS THUS
ENTITLING HER TO THE UNPAID SALARIES FOR THE
UNEXPIRED PORTION OF THE TWO-YEAR CONTRACT.25
Ruling of the Court
In a petition for review on certiorari under Rule 45, only
questions of law may be raised, in contrast with jurisdictional
errors which are essentially the basis of Rule 65. Simply put, in
a Rule 65, petition for certiorari filed with the CA, the latter
must limit itself to the determination of whether or not the
inferior court, tribunal, board or officer exercising judicial or
quasi-judicial functions acted without, in excess of or with grave
abuse of discretion amounting to lack or excess of jurisdiction.
In resolving said questions of jurisdiction, the CA ruled in favor
of petitioner and public respondent NLRC. It affirmed the
findings of the NLRC, ruling that no grave abuse of discretion
could be attributed to the latter when it issued its Decision
dated May 31, 2013 and Resolution dated July 22, 2013.
However, the appellate court modified the aforesaid decision by
reducing the award of unpaid salaries due the petitioner on the
ground that the basis should be the first contract of
employment which had a duration of only one (1) year.
On the other hand, the NLRC decision affirmed the ruling of the
LA insofar as it concerned, among others, the award of
petitioner's unpaid salaries for the unexpired portion of her
employment contract which was adjudged to be two (2) years,
viz.:
WHEREFORE, premises considered, judgment is hereby
rendered declaring the dismissal of [petitioner] as unjust and
illegal. As such, respondents are hereby ordered to pay, jointly
and severally, [petitioner] the following sums:
AUS$137,500.00 - As salary for the remaining period of her 2-
year employment contract
Php200,000.00 - As moral damages
Php200,000.00 - As exemplary damages
Ten (10%) percent of the total monetary award as attorney's
fees.
Payment can be made in Australian Dollars or its equivalent in
Philippine Peso at the time of payment.
SO ORDERED.26 (Emphasis and underlining Ours)
The primary issue now that must be resolved is whether or not
the CA was correct when it went beyond the issues of the case
and the assigned errors raised by respondents when it filed the
certiorari petition under Rule 65.
The Rules of Court is clear and unambiguous in this regard. A
petition for certiorari is governed by Rule 65 of the Revised
Rules of Court, which reads:
Section 1. Petition for certiorari. - When any tribunal, board or
officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of its or his
jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that
judgment be rendered annulling or modifying the proceedings
of such tribunal, board or officer, and granting such incidental
reliefs as law and justice may require.
xxxx
To eradicate confusion, what respondents filed with the CA was
a special civil action for certiorari, under Rule 65 of the Revised
Rules of Court. The issues raised by respondents before the
appellate court ascribed grave abuse of discretion on the part of
the NLRC in resolving the merits of the case. If respondents
wanted to question the matter regarding contract duration, it
should have raised the issue at the earliest possible opportunity
or raised it as error on the part of the NLRC, thus,
strengthening its claim of abuse of discretion committed by the
latter. This issue, however, remained unraised.
A writ of certiorari may be issued only for the correction of
errors of jurisdiction or grave abuse of discretion amounting to
lack or excess of jurisdiction. It cannot be used for any other
purpose, as its function is limited to keeping the inferior court
within the bounds of its jurisdiction.27
The supervisory jurisdiction of a court over the issuance of a
writ of certiorari cannot be exercised for the purpose of
reviewing the intrinsic correctness of a judgment of the lower
court - on the basis either of the law or the facts of the case, or
of the wisdom or legal soundness of the decision.28 Even if the
findings of the court are incorrect, as long as it has jurisdiction
over the case, such correction is normally beyond the province
of certiorari.29 Where the error is not one of jurisdiction, but an
error of law or fact - a mistake of judgment - appeal is the
remedy.30
Applying this to the case at bench, the supervisory jurisdiction
of the CA under Rule 65 was confined only to the determination
of whether or not the NLRC committed grave abuse of
discretion in deciding the issues brought before it on appeal. To
recapitulate, the CA is allowed to consider the factual issues
only insofar as they serve as the basis of the jurisdictional error
imputed to the lower court or in this case, the NLRC.
What, then, is the "question of law" that must be resolved by
this Court in a Rule 45 petition assailing a decision of the CA on
a Rule 65 certiorari petition?
In the case of Montoya v. Transmed Manila Corporation/Mr.
Ellena, et al.,31 the Court ruled:
In a Rule 45 review, we consider the correctness of the assailed
CA decision, in contrast with the review for jurisdictional error
that we undertake under Rule 65. Furthermore, Rule 45 limits
us to the review of questions of law raised against the assailed
CA decision. In ruling for legal correctness, we have to view the
CA decision in the same context that the petition for certiorari it
ruled upon was presented to it; we have to examine the CA
decision from the prism of whether it correctly determined the
presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC
decision on the merits of the case was correct. In other words,
we have to be keenly .aware that the CA undertook a Rule 65
review, not a review on appeal, of the NLRC decision challenged
before it. This is the approach that should be basic in a Rule 45
review of a CA ruling in a labor case.32
Similarly, the petition before the Court involves mixed questions
of law and fact. Respondents, in its Comment claim that the
present petition must be denied for the reason that only
questions of law must be raised in a petition for review under
Rule 45. They are correct.
To reiterate, the CA correctly affirmed the findings of the NLRC
in that: (1) petitioner was illegally dismissed; and (2) petitioner
was entitled to her unpaid salaries for the unexpired portion of
the employment contract, damages and attorney's fees.
However, it departed from the issues presented by the parties
and decided by the labor tribunals when it modified the award
of unpaid salaries to petitioner notwithstanding the fact that
neither party ever raised as an issue the matter regarding
duration of petitioner's employment contract. The labor
tribunals ruled that the award of unpaid salaries should be the
amount corresponding to the unexpired portion of the
employment contract which is two (2) years. The CA, on the
other hand, modified the award on the ground that the second
contract was not clear as to whether or not the original duration
of one (1) year had been extended. Thus, applying the
pertinent provisions of the Civil Code regarding perfection of
contracts, it posits that the one (1) year period should be
applied.
Without an iota of doubt, this is a question of fact that is
outside the scope of a petition for review under rule 65. The CA
is only tasked to determine whether or not the NLRC committed
grave abuse of discretion in its appreciation of factual issues
presented before it by any parties. The CA is not given
unbridled discretion to modify factual findings of the NLRC and
LA, especially when such matters have not been assigned as
errors nor raised in the pleadings.
With regard to the issues brought to the Court in this present
petition, it bears stressing that this Court's review of a CA ruling
is limited to: (i) ascertaining the correctness of the CA's decision
in finding the presence or absence of grave abuse of discretion;
and (ii) deciding any other jurisdictional error that attended the
CA's interpretation or application of the law.33
Clearly, the appellate court found no grave abuse of discretion
committed by the NLRC as enunciated in the dispositive portion
of its assailed decision, viz.:
WHEREFORE, there being no grave abuse of discretion
amounting to lack or excess of jurisdiction committed by the
NLRC, the petitio11 is DISMISSED for lack of merit x x x.34
There being no grave abuse of discretion, the CA erred when it
ruled that petitioner's employment contract with Morris was for
only one (1) year.
The Court is precluded from doing an independent review of
this factual matter since it has already been decided by the
labor tribunals, unless the CA, in the certiorari petition,
ascertains that the NLRC acted with grave abuse of discretion.
Absent such determination, factual findings of the NLRC are
deemed conclusive and binding even on this Court.
In light of the foregoing, the Court considers the findings of fact
of the LA, as affirmed by the NLRC, final and conclusive, in the
absence of proof that the latter acted without, in excess of or
with grave abuse of discretion amounting to lack or excess of
jurisdiction.
WHEREFORE, premises considered, the petition is hereby
GRANTED. The Decision dated February 24, 2016 and
Resolution dated August 3, 2016 of the Court of Appeals in CA-
G.R. SP No. 131670 are AFFIRMED with MODIFICATION insofar
as the award of petitioner Agnes Coeli Bugaoisan unpaid
salaries is concerned. The Decision dated May 31, 2013 of the
National Labor Relations Commission with respect to the award
of unpaid salaries to petitioner Agnes Coeli Bugaoisan for the
unexpired portion of her two-year contract with respondents
OWI Group Manila, Inc. and Morris Corporation is hereby
REINSTATED.
SO ORDERED.
Carpio, (Chairperson), Peralta, Perlas-Bernabe, and Caguioa,
JJ., concur.
FIRST DIVISION
December 14, 2017
G.R. No. 188666
SPOUSES JUAN and ANTONINA CANO, ROLANDO CANO and
JOSEPHINE "JOSIE" CANOAQUINO, Petitioners
vs.
SPOUSES ARTURO and EMERENCIANA CANO, Respondents
DECISION
SERENO, CJ.:
These consolidated Petitions for Review involve a dispute over
possession and ownership of a parcel of land located in the
Barrio of Palaming, City of San Carlos, Pangasinan. Petitioners
Juan and Antonina Cano anchor their claim upon a donation
propternuptias allegedly made by Feliza1 Baun in their favor in
1962. Respondents Arturo and Emerenciana Cano, on the other
hand, claim that they purchased the land from Feliza in 1982
and caused the annotation of the Deed of Absolute Sale on the
Original Certificate of Title (OCT) No. 62276 covering the
property.
The Petition in G.R. No. 188666 assails the Decision2 and the
Resolution3 of the Fourth Division of the Court of Appeals (CA)
in CA-G.R. SP No. 104200, which affirmed the Regional Trial
Court (RTC) Resolution4 ordering petitioners to vacate the
property and surrender possession thereof to respondents.
Meanwhile, the Petition in G.R. No. 190750 questions the CA
Decision5 and the Resolution,6 which affirmed the RTC
Decision7 confirming respondents' ownership of the property.
The factual background and the proceedings held in each case
will be discussed in turn.
FACTUAL ANTECEDENTS
G.R. No. 188666
(Ejectment Case)
On 16 November 1999, respondents filed a Complaint for
Ejectment with Prayer for Injunction8 against petitioners on the
basis of a Deed of Absolute Sale9 executed in the former's favor
by Feliza, the registered owner of the property. Immediately
after the sale, respondents allegedly (1) took possession of the
land;10 (2) employed a relative to act as caretaker thereof;11
and (3) received the fruit of the mango trees planted
thereon.12
Respondents also asserted that they benevolently allowed
petitioners to take actual possession of the property after the
sale because the parties were all blood relatives.13 This
peaceful arrangement continued until 3 October 1999, the day
petitioners allegedly harassed and threw stones at the
individuals hired by respondents to spray the mango trees with
chemical fruit inducers.14 This act of ingratitude supposedly
prompted respondents to send petitioners a demand letter to
vacate the property.15
Because the demand to vacate went unheeded, respondents
filed an ejectment complaint before the Municipal Trial Court in
Cities (MTCC) of San Carlos City, Pangasinan.16 They prayed
for (a) an order directing petitioners to vacate the property and
pay moral damages and attorney’s fees to the former;17 and
(b) an injunction to restrain petitioners from performing acts
that would disturb or harass respondents or the latter's agents
in violation of their right of ownership and possession over the
property.18
In an Answer with Affirmative and/or Special Defenses and
Counterclaim,19 petitioners denied the allegations in the
Complaint. They claimed ownership of the property on the basis
of (l) a donation propternuptias20 executed in their favor by
Feliza on 30 May 1962; and (2) their continuous possession of
the land since they were born, or for more than 63 years at the
time of the filing of the suit for ejectment.21 They also asserted
that the Deed of Absolute Sale cited by respondents was a
falsified instrument.22
The MTCC Ruling
In a Decision23 dated 21 February 2000, the MTCC dismissed
the Complaint for lack of merit. Citing an Ocular Inspection
Report submitted by the sheriff who investigated the disputed
property, the court noted that three semi-concrete houses
owned by petitioners, as well as several mango trees, were
standing on the land. These improvements were considered as
evidence of laches on the part of respondents and justified the
dismissal of the Complaint:
Plaintiffs[’] failure to raise a restraining arm to the defendants’
introduction of several improvements on the disputed property
in a span of almost eighteen (18) years is simply contrary to
their claim of ownership.
Thus, the plaintiffs[’] long inaction or passivity in asserting their
alleged rights over the disputed property will preclude them
from recovering the same under the equitable principle of
laches.
xxxx
If, indeed the plaintiffs are very assertive of their claim of
ownership over the disputed property, they should have filed a
judicial action for recovery of possession or ejectment before or
at the time of the construction of two (2) additional houses of
defendant Juan Cano's children, namely defendants Rolando
Cano and Josie Aquino, and NOT merely paying realty taxes and
securing Tax Declarations, only on December 22, 1999
considering that tax receipts and tax declarations are only prima
facie evidence of ownership and possession (Heirs of Leopoldo
Vencilao, Sr., et al. vs. CA, April 1, 1998).24
As to the issue of ownership, the MTCC ruled in favor of
petitioners. It upheld the validity of the donation propter
nuptias in view of the absence of a declaration by a proper
forum that the instrument was null and void25 and the lack of
evidence that Feliza was indeed incapable of signing her name
on the instrument of donation.26
The following circumstances were likewise deemed consistent
with the claim of ownership by petitioners: (a) their payment of
realty taxes on the property; (b) the continued registration of
the title to the property in the name of their mother, Feliza; and
(c) the execution of the donation propter nuptiasprior to the
Deed of Sale.27
The RTC Ruling
While the RTC initially affirmed the MTCC Decision and
considered the claim of respondents barred by laches,28 it
subsequently reversed its own ruling. In a Resolution dated 27
May 2008,29 the RTC declared respondents as the true owners
of the property on account of the registered Deed of Absolute
Sale in their favor. This instrument was considered as evidence
of a preferred right as against petitioners' claim based on an
unregistered donation propternuptias:
The Court notes that the Deed of Absolute Sale executed in
favor of plaintiffs-appellants over the portion pertaining to Felisa
Baun is registered on the title itself. This registration is proof of
their ownership over the land, the purpose of which is to quiet
title to land and to put a stop forever to any question of the
legality of the title. Not only that, the annotation on the said
title says that that portion pertaining to the share of Felisa Baun
is tenanted by plaintiff-appellant[,] Arturo Cano. Clearly,
plaintiff-appellant, before and at the time he was ousted by the
defendantsappellees, was in possession of the property, first as
a tenant prior to 1982 and as the owner thereof from 1982
onwards.
Indeed, as provided under Section 51, 2nd paragraph, P.D.
1529, "the act of registration shall be the operative act to
convey or affect the [l]and insofar as third parties are
concerned, and in all cases under this Decree, the registration
shall be made in the office of the Registrar of Deeds for the
province or city where the land lies." As between the two
transactions, the donation and the sale, respectively, concerning
the subject parcel of land in the name of Felisa Baun, plaintiffs-
appellants who have registered the sale in their favor [have] a
preferred right over the defendants-appellees who have not
registered their title.30
The CA Ruling
On appeal,31 the CA upheld the RTC ruling and declared that
the registered transaction should prevail over the earlier
unregistered right:32
It is not contested that the property in question is a registered
land with Original Certificate of Title No. 62276. It is also
uncontested that the sale in favor of respondents herein have
been annotated on the title. On the other hand, the purported
Donation PropterNuptias in favor of petitioners herein has not
been annotated in the Title of the property subject of this case.
xxxx
annotated in the title and the donation in favor of petitioners,
the effective and binding transfer is that covered by the Deed of
Sale.33
The CA denied the Motion for Reconsideration filed by
petitioners,34 prompting them to file the Petition for Review in
G.R. No 188666.35
Proceedings before the Court
Before this Court, petitioners contend that the non-registration
of the donation propternuptias in their favor does not make
their claim inferior to that of respondents.36 Citing Article 749
of the Civil Code, the petitioners argue that donations of
immovable property are considered valid so long as these are
made in a public document.37 They also claim that registration
does not vest ownership over any particular property, but is
merely an evidence of title thereto.38 Moreover, registration
was supposedly unnecessary in this case, because respondents
were "manifestly aware of the petitioners' existing interest in
the property, albeit not registered,"39 as petitioners were in
possession of the property at the time it was allegedly
purchased.40
Petitioners also emphasize that the donation propternuptias was
executed by Feliza 20 years before the alleged execution of the
Deed of Absolute Sale.41 Assuming that she had agreed to the
sale, this second transaction conveyed nothing to
respondents.42 Finally, petitioners assert that even if the
donation propternuptias is assumed to be invalid, they still have
a better right over the property as they have already
established their ownership by virtue of acquisitive
prescription.43
In their Comment,44 respondents deny the allegation that they
were aware of petitioners' claim over the property at the time
they purchased it.45 They also assert that after they had
purchased the lot, they had the Tax Declarations transferred to
their names, and that they henceforth paid the realty taxes
thereon up to the present.46 Respondents likewise pray for the
dismissal of the Petition for raising factual issues that have
already been resolved by the lower courts.47
During the pendency of G.R. No. 188666, a second Petition
docketed as G.R. No. 190750 was filed before this Court. As will
be discussed, the second case involves the same property and
the same parties, but pertains specifically to the issue of
ownership.
G.R. No. 190750
(Quieting of Title Case)
The dispute in G.R. No. 190750 stemmed from a Complaint for
Quieting of Title, Declaration of Nullity of Document, Ownership
and Damages48 filed by petitioners with the RTC of San Carlos
City, Pangasinan.49 The suit was instituted while the ejectment
case in G.R. No. 188666 was pending.
In the Complaint, petitioners claimed absolute ownership over
the subject property citing the donation propternuptias
executed in their favor,50 as well as their possession of the land
since 1962. They further alleged that the quieting of title was
necessary, because respondents were claiming ownership of the
same lot on the basis of a spurious and simulated deed of sale.
In their Sworn Answer,51 respondents sought the dismissal of
the Complaint on the following grounds: (1) failure to comply
with a condition precedent, i.e., the conduct of barangay
conciliation proceedings; (2) forum shopping; (3) laches; (4)
prescription; and (5) failure to state a cause of action.52 They
also asserted that the signature of Feliza on the instrument of
donation was spurious, considering that she did not know how
to write and could only affix her thumbmark to legal documents.
The RTC Ruling
In a Decision53 dated 27 May 2008, the RTC declared
respondents the rightful owners of the property.54 While
affirming the validity of both the donation propternuptias made
in favor of petitioners and the Deed of Absolute Sale presented
by respondents, the trial court declared that the sale prevailed
over the donation because of the operative fact of
registration.55 The RTC explained:
The formalities required by law having been established on the
two (2) documents (Donation Propter Nuptias for the plaintiffs
and Deed of Absolute Sale for the defendants), We now
proceed to determine which between these documents prevails
over the other. The Court finds the right of the defendants
superior over that of the plaintiffs.
Section 51, 2nd paragraph, P.D. 1529 provides, "the act of
registration shall be the operative act to convey or affect the
land insofar as third persons are concerned and in all cases
under this Decree, the registration shal1 be made in the office
of the Registrar of Deeds for the province or city where the land
lies.
It is settled in this jurisdiction that the maxim "Prior est in
tempore. Potior est injure." (He who is first in time is preferred
in right) is observed in land registration matters. As between
the two transactions, the donation and the sale, respectively,
concerning the subject parcel of land in the name of Felisa
Baun, the defendants who have registered the sale in their
favor have a preferred right over the plaintiffs have not
registered their title, even if the latter are in actual possession
of the property involved.56
The RTC also noted that respondents presented sufficient
evidence to prove their possession of the property since 1982,
while petitioners failed to submit proof in support of the latter's
claim of ownership and occupancy:
Moreover, as established by evidence, the house on which
plaintiffs stay was once the ancestral house of the family of
Felissa Baun. It was likewise the only house standing on the
land in question until the dispute between the parties arose in
1999. The annotation on TCT no. 62276 in 1982 that defendant
Arturo Cano is the tenant of the subject parcel of land would
show that indeed it was defendant Arturo Cano who possessed
and took care of the land prior to the said year until he
purchased the same in 1982. Defendants, after the sale[,] had
declared the subject property for taxation purposes in their
names. Likewise, from 1982 up to 2005, defendants religiously
paid the realty tax due from (sic) the subject property. Their
possession however was disturbed in 1999, the year he was
disallowed entry by the plaintiffs. Aside from defendants'
registered ownership over the parcel of land in question, the tax
declaration and annual tax payments bolster the fact of their
ownership of the subject lot.
Plaintiffs on the other hand failed to present evidence that
indeed they are the legitimate owners of the subject parcel of
land. Except for their present possession of the subject
property, they and their children failed to present evidence that
the subject land and the improvements, particularly the houses
standing thereon, are declared in their names. They also failed
to present any documentary evidence to prove payment of
taxes due from the property.57
On the basis of its determination that respondents were the
rightful owners of the property, the RTC declared that they had
the right to possess it.58 Moreover, since petitioners were
staying on the property by the mere tolerance of the real
owners, the trial court ruled that it was incumbent upon them
to vacate the land59 and to pay respondents for actual
damages caused by the dispossession.60
The CA Ruling
Petitioners sought the reversal of the RTC Decision, but the CA
dismissed the appeal for lack of merit.61 The appellate court
agreed with the trial court's ruling that respondents were the
rightful owners of the property, albeit on a different ground;
that is, the invalidity of the donation propternuptias executed by
Feliza in their favor:
The document captioned as Donation Property Nuptias does not
show that plaintiffs-appellants, as the donees, accepted the
subject parcel of land as a gift from the donor. Neither have the
plaintiffs-appellants presented any other document that would
evidence such acceptance and notification to the donor. Hence,
it is our considered view that the ownership over the subject
parcel of land did not pass to plaintiffs-appellants by reason of
their failure to accept the donation as required by law. And, by
necessary consequence, considering that Felisa retained the
ownership over the subject parcel of land, she can validly sell
the same, as she did in 1982, in favor of defendants-
appellees.62 (Emphases omitted)
The CA also emphasized that respondents were purchasers in
good faith, as there was nothing in OCT No. 62276 itself or in
the circumstances of the sale that could have warned them that
the property was being claimed by others:
[E]very person dealing with registered land may safely rely on
the correctness of its certificate of title and the law will not
oblige him to go beyond what appears on the face thereof to
determine the condition of the property. This rule applies to
defendants-appellees who are purchasers in good faith of the
subject parcel of land. There was nothing in TCT No. 62276 or
the circumstances surrounding the subject parcel of land that
could have warned or made them suspicious that other persons
have a claim over the land. At the time they purchased the
subject parcel of land in 1982, the same remains covered by
TCT No. 62276 in the name of Felisa, and her co-owners, and
the donation of the land by Felisa to plaintiffs-appellants does
not appear in said TCT. Likewise, as the trial court found based
on the evidence on record, only the ancestral house of Felisa
was standing on the subject parcel of land at the time the latter
sold it to defendants-appellees. In view thereof, the reliance of
defendants-appellees on TCT No. 62276 when they purchased
the subject parcel of land is supported by law. We also find no
defect in the Deed of Absolute Sale executed by Felisa and
defendants-appellees, which effected the transfer of ownership
of the subject parcel of land from the fonner to the latter.63
Petitioners sought reconsideration of the Decision, but the CA
denied the motion in its Resolution dated 14 December 2009.64
Proceedings before this Court
Petitioners filed a Petition for Review before this Court65
seeking the reversal of the above CA Decision and Resolution.
They contend that the CA erred in declaring the donation
propternuptias invalid on the ground of lack of acceptance by
the donee. It allegedly made that declaration even if the
applicable provisions of the Civil Code did not impose that
requirement.66 They assert that since the donation had been
validly made, Feliza sold nothing to respondents in 1982, as she
had already divested herself of ownership over that same
property in 1962.67
The Comment68 filed by respondents on the Petition in G.R. No.
190750 raises substantially the same arguments as those found
in their Comment in G.R. No. 188666.
Consolidation of Cases
Considering that the two Petitions involved identical parties
litigating over the same property, the two cases were
consolidated by the Court in a Resolution69 dated 17 March
2010. Petitioners were thereafter ordered to file a consolidated
reply to the Comments filed in both petitions.70
In their Consolidated Reply,71 petitioners point out that the two
cases involve not only the issue of possession, but also of
ownership.72 Consequently, they argue that the findings of the
lower courts on possession were not controlling in this case.73
They also reiterate their arguments on the validity of the
donation in their favor.74
ISSUES
The consolidated Petitions present the following issues for
resolution:
(1) Whether the CA erred in nullifying the donation
propternuptias executed by Feliza in favor of petitioners
because of the absence of an express acceptance by the donee
(2) Whether the CA erred in declaring that respondents are the
rightful owners of the property
(3) Whether the CA erred in awarding the possession of the
property to reepondents
OUR RULING
We DENY the Petitions.
While we disagree with certain pronouncements of the CA in
respect of the validity of donations propternuptias, we affirm its
ultimate conclusion that respondents are the rightful owners of
the property and are consequently entitled to possession
thereof.
Written acceptance and notification to
the donor are not required for
donations propter nuptias executed
under the Civil Code.
Disposing of a preliminary matter, we clarify our position with
respect to the pronouncement of the CA in G.R. No. 190750
that the donation propternuptias executed in favor of petitioners
was invalid.
In the CA Decision affirming the RTC ruling in the action for
quieting of title, the appellate court invalidated the donation
propter nuptias because of petitioners' failure to comply with
the formal requirement of acceptance. The CA explained:
When applied to a donation of an immovable property, the law
further requires that the donation be made in a public
document and that the acceptance thereof be made in the
same deed or in a separate public instrument; in cases where
the acceptance is made in a separate instrument, it is mandated
that the donor be notified thereof in an authentic form, to be
noted in both instruments. The acceptance of the donation by
the donee is indispensable. Where the deed of donation fails to
show the acceptance, or where the formal notice of the
acceptance, made in a separate instrument, is either not given
to the donor or else not noted in the deed of donation and in
the separate acceptance, the donation is null and void.
The document captioned as Donation Propter Nuptias does not
show that plaintiffs-appellants, as the donees, accepted the
subject parcel of land as a gift from the donor. Neither have
plaintiffs-appellants presented any other document that would
evidence such acceptance and notification to the donor. Hence,
it is our considered view that the ownership over the subject
parcel of land did not pass to plaintiffs-appellants by reason of
their failure to accept the donation as required by law. And, by
necessary consequence, considering that Felisa retained the
ownership over the subject parcel of land, she can validly sell
the same, as she did in 1982, in favor of defendants-
appellees.75 (Emphases in the original)
We note that petitioners do not deny that they never accepted
the donation in their favor. They insist, though, that acceptance
of the gift was not required, since the donation propternuptias
was executed on 30 May 1962, or while the Civil Code was still
in effect.76 Thus, they contend that the CA erred in applying
the ordinary rules of donation to the instrument herein,77 when
the applicable provisions were in fact Articles 126 to 134 of the
Civil Code.
We agree with petitioners on this point.
It is settled that only laws existing at the time of the execution
of a contract are applicable thereto.78 The donation
propternuptias in this case was executed on 30 May 1962,79
while the provisions on such donations under the Civil Code
were still in force and before the Family Code took effect on 3
August 1988.. The formal requisites for the validity of the
donation should therefore be determined in accordance with the
following provisions of the Civil Code:
ARTICLE 126. Donations by reason of marriage are those which
are made before its celebration, in consideration of the same
and in favor of one or both of the future spouses.
ARTICLE 127. These donations are governed by the rules on
ordinary donations established in Title III of Book III, except as
to their form which shall be regulated by the Statute of Frauds;
and insofar as they are not modified by the following articles.
ARTICLE 129. Express acceptance is not necessary for the
validity of these donations.
In Valencia v. Locquiao,80 we explained the effect of these Civil
Code provisions on the formal requirements for donations
propternuptias:
Unlike ordinary donations, donations propternuptias or
donations by reason of marriage are those "made before its
celebration, in consideration of the same and in favor of one or
both of the future spouses." The distinction is crucial because
the two classes of donations are not governed by exactly the
same rules, especially as regards the formal essential requisites.
xxxx
Under the New Civil Code, the rules are different. Article 127
thereof provides that the form of donations propternuptias are
[sic] regulated by the Statute of Frauds. Article 1403, paragraph
2, which contains the Statute of Frauds requires that the
contracts mentioned thereunder need be in writing only to be
enforceable. However, as provided in Article 129, express
acceptance "is not necessary for the validity of these
donations." Thus, implied acceptance is sufficient.81 (Emphases
supplied)
Given that this old rule governs this case, it is evident that the
CA erroneously invalidated the donation propternuptias in favor
of petitioners. The absence of proof that the gift was accepted
in a public instrument is not controlling, since implied
acceptance - such as the celebration of marriage and the
annotation of this fact in the OCT82 - must be deemed
sufficient.
We must clarify that the foregoing rule applies only to donations
propternuptias made prior to the Family Code (as in this case).
At the time, Article 129 of the Civil Code allowed acceptance of
those donations to be made impliedly. Since that provision is no
longer part of the current Family Code, donations
propternuptias made thereafter are now subject to the rules on
ordinary donations83 including those on the formal requisites
for validity. As a result, donations of immovables under the
Family Code, including those made by reason of marriage, must
now be expressly accepted by the donee in a public
instrument.84
The CA correctly ruled that
respondents are the rightful owners
of the property.
The validity of the donation propternuptias executed by Feliza in
favor of petitioners, however, does not detract from our
ultimate conclusion that respondents are the rightful owners of
the property. On this point, we agree with the CA that the prior
unregistered donation does not bind respondents, who are
innocent purchasers for value. Hence, it correctly declared them
the rightful owners of the subject property.
The unregistered donation propter
nuptias does not bind third persons.
Pursuant to Article 709 of the Civil Code, all rights over
immovable property must be duly inscribed or annotated on the
Registry of Deeds before they can affect the rights of third
persons. The provision states:
Art. 709. The titles of ownership, or other rights over
immovable property, which are not duly inscribed or annotated
in the Registry of Property shall not prejudice third persons.
The same rule is enunciated in Presidential Decree No. (P.D.)
1529, or the Property Registration Decree, specifically Sections
51 and 52 thereof, which provide:
SECTION 51. Conveyance and other dealings by registered
owner - x x x But no deed, mortgage, lease, or other voluntary
instrument, except a will purporting to convey or affect
registered land, shall take effect as a conveyance or bind the
land, but shall operate only as a contract between the parties
and as evidence of authority to the Register of Deeds to make
registration.
The act of registration shall be the operative act to convey or
affect the land insofar as third persons are concerned, x x x.
SECTION 52. Constructive notice upon registration. Every
conveyance, mortgage, lease, lien, attachment, order,
judgment, instrument or entry affecting registered land shall, if
registered, filed or entered in the office of the Register of Deeds
for the province or city where the land to which it relates lies,
be constructive notice to all persons from the time of such
registering, filing or entering.
In Gonzales v. Court of Appeals, we explained the significance
of the foregoing provisions to unregistered donations as
follows:85
From the foregoing provisions, it may be inferred that as
between the parties to a donation of an i1nmovabk property, all
that is required is for said donation to be contained in a public
document. Registration is not necessary for it to be considered
valid and effective. However, in order to bind third persons, the
donation must be registered in the Registry of Property (now
Registry of Land Titles and Deeds). Although the non-
registration of a deed of donation shall not affect its validity, the
necessity of registration comes into play when the rights of
third persons are affected, as in the case at bar.
xxxx
It is undisputed in this case that the donation executed by
Ignacio Gonzales in favor of his grandchildren, although in
writing and duly notarized, has not been registered in
accordance with law. For this reason, it shall not be binding
upon private respondents who did not participate in said deed
or had no actual knowledge thereof. Hence, while the deed of
donation is valid between the donor and the donees, such deed,
however, did not bind the tenants-farmers who were not parties
to the donation. As previously enunciated by this Court, non-
registration of a deed of donation does not bind other parties
ignorant of a previous transaction (Sales vs. Court of Appeals,
211 SCRA 858 [1992)).86 (Emphases supplied)
In this case, petitioners do not deny that the donation
propternuptias was never registered. Applying the rule laid
down in Gonzales, the conveyance of the property in their favor
is not considered binding on third persons, who had no
participation in the deed or any actual knowledge thereof.87
The Court is convinced that respondents fall within the scope of
this rule.
The records of both the cases for ejectment and the quieting of
title are bereft of evidence of respondents' participation in or
actual knowledge of the deed. In fact, petitioners never made
that assertion in any of their submissions before the courts.
Instead, they focused on their claim that respondents were
aware of the former’s possession of the property.88
We emphasize, however, that in order for prior unregistered
interest to affect third persons despite the absence of
registration, the law requires actual knowledge of that interest.
Nothing less would suffice. As we explained in Pineda v.
Arcalas,89 mere possession of the property is not enough:
True, that notwithstanding the preference given to a registered
lien, this Court has made an exception in a case where a party
has actual knowledge of the claimant’s actual, open, and
notorious possession of the disputed property at the time the
levy or attachment was registered. In such situations, the actual
notice and knowledge of a prior unregistered interest, not the
mere possession of the disputed property, was held to be
equivalent to registration.
Lamentably, in this case, Pineda did not even allege, much less
prove, that Arcalas had actual knowledge of her claim of
ownership and possession of the property at the time the levy
was registered. The records fail to show that Arcalas knew of
Pineda's claim of ownership and possession prior to Pineda’s
filing of her third party claim before the Quezon City RTC.
Hence, the mere possession of the subject property by Pineda,
absent any proof that Arcalas had knowledge of her possession
and adverse claim of ownership of the subject property, cannot
be considered as equivalent to registration.90
In the absence of proof that respondents participated in the
transaction, or had knowledge of petitioners' interest over the
land at the time the property was purchased in 1982, this Court
must rule that they are not bound by the unregistered
donation.91 Hence, the conveyance had no effect as to
respondents.
Respondents are innocent
purchasers for value.
The acquisition of the property by respondents must likewise be
respected because they were innocent purchasers for value.
They had every right to rely on OCT No. 62276 insofar as it
indicated that (1) one-fourth of the property was owned by
Feliza; and (2) the land was subject only to the encumbrances
annotated on the title, which did not include the donation
propternuptias in favor of petitioners.
Our ruling is rooted in the general principle that persons dealing
with registered land have the right to completely rely on the
Torrens title issued over the property.92 Buyers are not
required to go beyond what the certificate of title indicates on
its face,93 provided the acquisition of the land is made in good
faith, that is, without notice that some other person has a right
to, or interest in, the property.
Nevertheless, the protection granted by law to innocent
purchasers for value is not absolute. In Lausa v. Quilaton,94 the
Court explained:
Jurisprudence has established exceptions to the protection
granted to an innocent purchaser for value, such as when the
purchaser has actual knowledge of facts and circumstances that
would compel a reasonably cautious man to inquire into the
status of the lot; or of a defect or the lack of title in his vendor;
or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property in litigation.
The presence of anything that excites or arouses suspicion
should then prompt the vendee to look beyond the certificate
and investigate the title of the vendor appearing on the face of
the certificate. One who falls within the exception can neither
be denominated as innocent purchaser for value nor a
purchaser in good faith, and hence does not merit the
protection of the law.
In particular, the Court has consistently held that that a buyer
of a piece of land that is in the actual possession of persons
other than the seller must be wary and should investigate the
rights of those in possession. Without such inquiry, the buyer
can hardly be regarded as a buyer in good faith.95
Here, petitioners maintain that they had prior physical
possession of the land, and that they built permanent structures
thereon even before respondents' acquisition of the property
from Feliza. Citing the findings of the MTC during the ocular
inspection conducted in G.R. No. 188666, petitioners argue that
the permanent structures and the trees found on the disputed f
property prove their possession thereof over a considerable
period of time.96 They insist that respondents cannot feign
ignorance of these facts; hence, the latter cannot claim to be
innocent purchasers for value.97
We are not persuaded.
The Court notes that petitioners have failed to sufficiently
establish their assertion. Notably, the RTC in both the cases for
ejectment and quieting of title declared that it was respondent
Arturo Cano who was in possession of the property as a tenant
prior to and at the time of the sale in 1982, based on the
annotation on the title to the property (OCT No. 62276).
In its Decision dated 27 May 2008, the RTC in G.R. No. 190750
dismissed the case filed by petitioners for quieting of title on the
basis of the following findings of fact:
x x x The annotation on TCT no. 62276 in 1982 that defendant
Arturo Cano is the tenant of the subject parcel of land would
show that indeed it was defendant Arturo Cano who possessed
and took care of the land prim· to the said year until he
purchased the same in 1982.
Defendants, after the sale[,] had declared the subject property
for taxation purposes in their names. Likewise, from 1982 up to
2005, defendants religiously paid the realty tax due from (sic)
the subject property. Their possession however was disturbed
in 1999, the year he was disallowed entry by the plaintiffs.
Aside from defendants' registered ownership over the parcel of
land in question, the tax declaration and annual tax payments
bolster the fact of their ownership of the subject lot.
xxxx
x x x The Court further notes that prior to defendants' purchase
of the land, they were the ones tilling the subject land as
tenants.1âwphi1 Clearly, therefore, prior to 1982 and
thereafter, defendants were in possession of the subject land as
tenants and thereafter as registered owners. Their possession,
however, was disturbed in 1999 when plaintiffs, who as
established are staying on the subject lot upon the tolerance of
the defendants were disallowed entry by the former.98
(Emphasis supplied)
On the other hand, the RTC in G.R. No. 188666 ordered the
ejectment of petitioners from the property, upon a finding that
respondents had been in continuous possession of the land
even prior to their purchase thereof in 1982:
Not only that, theannotation on the said title says that that
portion pertaining to the appellant, before and at the time he
was ousted by the defendants-appellees, was in possession of
the property, first as a tenant prior to 1982 and as the owner
thereof from 1982 onwards.
xxxx
x x x Likewise, from 1982 up to 2005, plaintiffs-appellants
religiously paid the realty tax due from the subject property.
The plaintiffs-appellants have explained on the observation of
this Court that prior to the purchase plaintiffs-appellants were
already in possession at that time, being the tenants thereof.
Their possession however was disturbed in October 3, 1999, the
day plaintiff-appellant Arturo was disallowed entry by the
defendants-appellees. Aside from plaintiffs-appellants'
registered ownership over the parcel of land in question, the tax
declaration and tax payments bolster the fact of their ownership
of the subject lot.99 (Emphases supplied)
In their petition, petitioners allude to three semi-concrete
houses and several trees currently standing on the land as
evidence of their possession thereof. However, they have failed
to prove that these structures were already in place at the time
of the sale in 1982. In fact, the RTC and the CA in the case for
quieting of title declared that the only house standing on the
property was the ancestral house of the seller, Feliza, when the
Deed of Sale was executed. The RTC declared:
Moreover, as established by evidence. the house on which
plaintiffs stay was once the ancestral house of the family of
Felissa Baun. It was likewise the only house standing on the
land in question until the dispute between the parties arose in
1999.100 x x x. (Emphasis supplied)
This finding was affirmed by the CA in its Decision dated 30
September 2009:
At the time they purchased the subject parcel of land in 1982,
the same remains covered by TCT No. 62276 in the name of
Felisa, and her co-owners, and the donation of the land by
Felisa to plaintiffs-appellants does not appear in said TCT.
Likewise, as the trial court found based on the evidence on
record, only the ancestral house of Felisa was standing on the
subject parcel of land at the time the latter sold it to
defendants-appellees. 101 (Emphasis supplied)
We find no reason to overturn the foregoing factual findings.
It must be emphasized that the Petitions before us were filed
under Rule 45 of the Rules of Court. As such, our mandate is
limited to only a review of errors of law.102 It is not our place
to analyze the factual findings of the lower courts and weigh
the evidence all over again. 103 At most, our inquiry should
only pertain to whether these findings are sufficiently supported
by evidence.
In this case, the determinations made by the CA and the RTC as
to the party in possession of the property, and the structures
standing on the land at a specific point of time, are entitled to
deference. These factual determinations are supported by the
annotation on OCT No. 62276, the tax declarations submitted
by petitioners and other pieces of evidence that show that only
the ancestral house of the seller was standing on the land.
Considering that the factual findings of the lower courts are
consistent with the evidence on record, we affirm their
conclusion that respondents are innocent purchasers for value
who had no reason to investigate further or to go beyond what
was stated in the OCT. Having acquired the land in good faith,
respondents' claim of ownership must be upheld.
Acquisitive prescription does
not apply to registered land.
The assertion of petitioners that they acquired ownership of the
property by virtue of their open, continuous, adverse and
exclusive possession thereof for more than 60 years104 is
likewise untenable.
As early as 1902, when Act No. 496 created the Torrens system
of registration, the law already declared that registered land
cannot be acquired by prescription or adverse possession.105
This principle is currently found in Section 47 of P.D. 1529:
Section 47. Registered land not subject to prescriptions. No title
to registered land in derogation to that of the registered owner
shall be acquired by prescription or adverse possession.
Respondents are entitled to
possession of the property.
In view of our ruling in favor of respondents on the issue of
ownership, we likewise conclude that they are entitled to
possession of the land in question. They have the right to enjoy
and dispose of it without limitations other than those imposed
by law.106
Our ruling on ownership also renders immaterial the issue of
tolerance raised by petitioners. Since their supposed title over
the land - based on the donation propter nuptias and on their
claim of acquisitive prescription - has been defeated by the
registered Deed of Absolute Sale, petitioners clearly have no
right to remain on the property. Regardless of whether or not
their prior possession of the property had been tolerated by
respondents, it is evident that petitioners must now vacate the
land.
Accordingly, we rule that the CA committed no reversible error
in declaring respondents as the rightful owners of the land in
the action for the quieting of title; and in ordering petitioners to
vacate the property in the ejectment case.
As a final point, the Court is aware that our ruling will affect the
structures currently standing on the property, which petitioners
claim to own. Our decision may then engender certain issues of
accession, particularly the right to reimbursement of expenses
and payment of damages. Unfortunately, these matters were
not raised by any of the parties before this Court or any of the
lower courts. The dearth of evidence on this point likewise
prevents us from making any pronouncement on the matter.
These questions must perforce be dealt with in another
proceeding.
WHEREFORE, the Petitions are DENIED. The Court of Appeals
Decision and Resolution dated 29 April 2009 and 3 July 2009,
respectively, in CA-G.R. SP No. 104200, and the Decision and
Resolution dated 30 September 2009 and 14 December 2009,
respectively, in CA-G.R. CV No. 91587 are hereby AFFIRMED.
SO ORDERED.
MARIA LOURDES P.A. SERENO
Chief Justice
FIRST DIVISION
December 14, 2017
G.R. No. 214805
MARIANITO PADILLA and ALFREDO JAVALUYAS, Petitioners
vs.
UNIVERSAL ROBINA CORPORATION, represented by its Senior
Vice President, JOHNSON ROBERT GO, Respondents
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the April 22, 2014
Decision2 of the Court of Appeals (CA) in CA-G.R CV No. 93260
reversing and setting aside the December 13, 2008 Decision3 of
the Regional Trial Court (RTC) of Gapan City, Branch 36, in Civil
Case No. 1495 for damages and injunction with preliminary
injunction. TI1e trial court declared the obligations of
petitioners Marianito Padilla (Padilla) and Alfredo Javaluyas
(Javaluyas) to respondent Universal Robina Corporation (URC)
extinguished, ordered the release of the real estate mortgages
executed by petitioners in favor of URC, and made permanent
the Writ of Preliminary Injunction enjoining the extrajudicial
foreclosure of petitioners' mortgaged properties.
Factual Antecedents
This case stemmed from a Complaint4 for Damages filed by
several poultry Farmers, namely Eduardo Pineda,Simplicio Ortiz
Luis, Jose Bantigue, Azucena Vergara, Eduardo Guingon and
herein petitioners (complainants) against URC on May 26, 1995,
before the RTC of Gapan City, Branch 36.
The facts, as culled from the records of the case, are as follows:
For various years, URC, a corporation engaged in the
manufacture and sale of various agro-industrial products,
sold/supplied on credit day-old chicks and poultry feeds to
complainants who, in turn, provided the labor, poultry houses,
electricity and water facilities to care and grow these chicks
until they are ready for harvest after 50 days, more or less. URC
had the option of buying from complainants the full-grown
broiler chickens that met the target harvest weight at an agreed
price per kilo. Liquidation was made within 15 days after the
harvest by setting off the price of the full grown broiler chickens
with the amount of purchases made by complainants on credit.
Thus, if the purchases on credit were greater than the value of
the chickens harvested, complainants paid the balance to URC,
but if it were otherwise, complainants received their respective
paybacks or earnings.
Documents entitled Continuing Credit Accommodation with Real
Estate Mortgage (CCAREM)5 were executed by the parties
whereby URC agreed to extend a continuous credit
accommodation in favor of each complainant, for the latter's
purchases of day-old chicks, poultry feeds, and other
agricultural products from the former, while each complainant
put up a real estate mortgage. The relevant terms and
conditions of the CCAREM are as follows:
xxxx
I. AS TO CREDIT ACCOMMODATION -
1. It is agreed upon by the parties that all purchases will be
paid not later than sixty (60) days from the date of every
purchase. Any purchase not paid or settled within the said
period will automatically make all subsequent purchases due
and payable even before their due dates.
2. The MORTGAGOR and/or PRINCIPAL will be considered in
default if they fail to pay their obligation upon maturity with or
without demand and it is agreed that a certified statement by
the COMP ANYMORTGAGEE, as to the amount due from the
MORTGAGOR and/or PRINCIPAL will be accepted by the latter
as conclusive evidence of their obligation.
3. The obligation of the MORTGAGOR and/or PRINCIPAL in case
of their default shall earn an interest at the rate of 16% per
annum until fully paid.
4. The parties agree and stipulate that ownership in the thing
purchase[d] will not be transferred to the MORTGAGOR and/or
PRINClPAL until they have fully paid the price.
5. In case the thing purchased should be lost, damaged or
destroyed without the fault of the COMP ANY-MORTGAGEE, or
by reason of fortuitous events or force majeure - like death of
day-old chicks or chickens by reason of any sickness, disease,
"peste or NCD," theft, robbery, typhoon, fire, flood and others -
the risk of loss shall be borne by the MORTGAGOR and/or
PRINCIPAL and their liability to pay their obligation to
COMPANY-MORTGAGEE is not extinguished. The MORTGAGOR
and/or PRINCIPAL are still obligated to pay the day-old chicks,
poultry feeds and other products purchased from the
COMPANY-MORTGAGEE.
x x x x6
The business relationship between URC and complainants
continued for years and the CCAREMS were renewed yearly.
However, sometime in the year 1993, complainants informed
URC of the stunting or slow growth and high mortality rate of
the chickens. They claimed that URC supplied them with low
quality feeds with high aflatoxin content and class B or junior
day-old chicks. Meanwhile, the stunted chickens that failed to
meet the standard target weight for harvest were rejected by
URC and were condemned (beheaded). As a result,
complainants incurred outstanding obligations. URC made
several demands for complainants to settle their unpaid
obligations under the CCAREMs,7 but they refused to pay.
Hence, on June 25, 1995, URC filed an application for extra
judicial foreclosure of the real estate mortgages on
complainants' respective properties under the CCAREMs.
Proceedings before the Regional Trial Court
On May 26, 1995, complainants filed a Complaint8 for damages,
docketed as Civil Case No. 1495, with the RTC of Gapan City,
Branch 36, against URC. The complainants claimed that they
incurred losses and sustained damages from the stunting/slow
growth of the chickens as a result of the low quality feeds with
high aflatoxin content and class B or junior day-old chicks
supplied by URC in evident bad faith. Since the stunting and
eventual condemnation/death of the chickens was due to URC's
fault, complainants claimed that their obligation to pay URC was
extinguished. Complainants thereafter filed an Amended
Complaint9 to include, as a nominal party defendant, Notary
Public Olivia V. Jacoba (Notary Public Jacoba), and, as
additional cause of action, the issuance of an ex-parte
restraining order and a preliminary injunction prohibiting Notary
Public Jacoba from selling their real properties at the scheduled
public auction for the extrajudicial foreclosure of the real estate
mortgages, claiming that Notary Public Jacoba had no authority
to issue the Notices of Auction Sale10 for lack of a notarial
commission.
In its Answer Ad Cautela, 11 URC alleged that complainants had
no cause of action; that the terms and conditions of its
agreement with complainants were clearly indicated in the
CCAREMs duly signed by them; that it was compelled, under the
CCAREM, to foreclose extrajudicially the properties mortgaged
when complainants defaulted in their payment; that it never
ordered the condemnation of the defective chickens; that the
cause of the chicks' stunted growth was complainants' lack of
care in the growing of the chicks; and that it supplied the
complainants with feeds of good quality. In its Amended
Answer,12 URC further claimed that the venue of complainants'
case was improperly laid.
On July 14, 1995, the RTC issued an Order13 restraining URC
from selling the real properties of complainants. After the
hearing on the prayer for preliminary injunction, the RTC, in its
Order dated January 18, 1998,14 issued a Writ of Preliminary
Injunction prohibiting the extrajudicial foreclosure of
complainants' real properties mortgaged under the CCAREMs
upon complainants' filing of an injunction bond. A motion for
reconsideration was filed by URC questioning the legal basis of
the Writ of Preliminary Injunction, but was, however, denied by
the RTC in an Order dated October 7, 1998.15 Both the January
18, 1998 and October 7, 1998 Orders of the RTC were affirmed
by the CA upon appeal by URC, which became final on July 27,
2001.16
Meanwhile, complainants, except petitioners, withdrew their
complaints and opted to settle their respective outstanding
obligations with URC under the CCAREMs. They recanted their
previous allegation that the stunting growth of the chicks was
due to URC's fault and instead attributed the same to local
pestilence and oversight on their part in the care of the
chicks.17 Petitioners, on the other hand, insisted on URC's fault,
hence, trial proceeded only with respect to them.
During the hearing, petitioners testified that they were contract
growers of URC by virtue of CCAREMs signed by them;18 that
as per their agreement with URC, they would take care and
grow the chicks supplied by URC for more or less forty-five (45)
to fifty (50) days;19 that sometime in May 1993, they noticed
that the chicks, which they described as "small and runts" and
"maliit at bansot," were not growing normally;20 that they
reported the matter to URC which prompted the latter to send a
representative who later told them that the cause of the
stunting growth of the chickens was the purported defective
feeds supplied by URC;21 and that URC decided to
condemn/discard those chickens that did not satisfy the
standard target weight for harvest.22 Petitioners added that
since the slow growth of the chicks was caused by URC's fault,
their obligation was extinguished.23
URC, on the other hand, presented as witness William Lim (Lim)
who testified that he was the National Sales Manager of URC,
and as such, was responsible for the monitoring of sales
activities and delivery of chicks and poultry feeds to the
company's customers.24 He testified that URC entered into
continuing credit accommodation contracts with complainants,
by virtue of CCAREMs,25 wherein URC, under a buy back
arrangement, would sell on credit chicks to complainants, who,
in turn, would grow the chicks according to their own
management without URC' s intervention. URC would thereafter
offer to buy back the full-grown broiler chickens at an agreed
price.26 In 1993, URC was compelled to investigate several
complaints regarding the slow growth of the chickens, which
investigation revealed that the cause of the stunted growth was
some viral infection causing respiratory problems among the
chickens and not due to defective feeds as falsely alleged by
complainants.27 Lim denied that the feeds supplied by URC
were defective since it passed quality control28 or that URC
ordered the condemnation of the chickens, explaining that only
complainants, as owner thereof, can dispose of the same.29
Since URC only harvested those chickens that met the standard
weight and since the value of the full grown ones was not
enough to pay for the amount of chicks and poultry feeds
purchased from URC, complainants incurred outstanding
obligations prompting URC to initiate foreclosure proceedings
when complainants refused to pay on demand.30
Checker, Live Broiler Chicken Checker, and Materials
Coordinator.31 According to Del Pilar, he attended a meeting
called by the management of URC wherein it was discussed that
the cause of the stunted growth was the poultry feeds supplied
by URC. During that meeting, URC also ordered the
condemnation of the stunted chickens.32 On cross-examination,
he stated that he was ordered by Lim to witness the
condemnation and in the process, prepared/issued the
corresponding condemnation reports.33
On December 13, 2008, the trial court rendered a Decision,34
the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is rendered:
a) declaring the obligations of Alfredo Javaluyas and Marianito
Padilla to Universal Robina Corporation under the latter's
statements of account both dated 03 January 1997, in the
amount of Php624,872.04 and Php727,317.59 respectively,
extinguished;
b) making the Writ of Preliminary Injunction, enjoining the URC
to desist from foreclosing extrajudicially the properties
mortgaged by Alfredo Javaluyas and Marianito Padilla
permanent;
c) ordering defendant Universal Robina Corporation:
1) to release the real estate mortgages executed by Alfredo
Javaluyas and Marianito Padilla in its favor;
2) to pay the sum of Php50,000.00 as attorney's fee; and
[3] to pay the cost of suit.
SO ORDERED.35
In declaring petitioners' contractual obligation with URC as
extinguished, the trial court found the CCAREMs as
unconscionable and against public policy for being a contract of
adhesion which contained terms that were heavily weighed in
favor of URC. It held that what the parties entered into was
actually a growing agreement whereby petitioners, as contract
growers, took care and grew the broiler chicks supplied by URC
which retained ownership of the chicks. The delivery of the
chicks to petitioners did not transfer its ownership to them nor
make the relationship of the parties one of a buy back
arrangement considering that the contract growers had no right
to sell the broiler chickens to others except to URC and that
URC controlled the operation and growing of the chicks by
exclusively supplying poultry feeds and agricultural products, as
well as by giving orders of condemnation. As the owner of the
broiler chicks/chickens, URC should bear the loss. At the same
time, the trial court found petitioners not guilty of negligence in
the care of the chicks as to hold them liable for the loss. Since
neither of the parties was shown to be at fault by
preponderance of evidence, the RTC held that each had to bear
their respective losses and accordingly was not entitled to
damages against each other.
Proceedings before the Court of Appeals
URC appealed to the CA, assailing the trial court ruling that it
entered into a growing agreement with petitioners; that it
retained ownership of the broiler chickens; that the CCAREMs
were unconscionable and against public policy; and that the
obligations of petitioners were extinguished. It also claimed that
the trial court erred in ordering the release of the real estate
mortgages executed by petitioners; in making permanent the
writ of injunction; and in ordering it to pay attorney's fees and
the cost of suit.
On April 22, 2014, the CA rendered a Decision36 granting URC's
appeal. The CA held that petitioners' acquiescence to the terms
and provisions of the CCAREMs made it a binding agreement
between the parties that should govern and delineate their
respective rights and obligations. Under the CCAREM, URC shall
only be accountable if the loss, damage, or destruction of the
subject livestock was due to its fault, which, in this case, was
not proven. In ruling in favor of URC, the CA held that there
was no credible evidence, except mere self-serving claims, that
URC supplied contaminated poultry feeds which affected the
growth of the broiler chicks. No veterinarians or nutritionists
were presented to prove petitioners' claims. The CA therefore
ruled that petitioners should bear the loss of the broiler
chickens and are liable to pay URC their outstanding obligations
plus interest and attorney's fees in accordance with the
provisions of the CCAREM.
The CA struck down for being improper the foreclosure sale
made at the instance of Notary Public Jacoba who lacked the
necessary notarial commission. However, in recognizing URC's
right to avail of the remedy of foreclosure as provided under the
CCAREM, the CA lifted the permanent injunction issued by the
trial court to allow URC to initiate other foreclosure proceedings
against the mortgaged properties of petitioners.
The CA further denied URC's claim for exemplary damages since
there was no showing that petitioners exhibited bad faith in
dealing with URC.
The dispositive portion of the Decision reads:
WHEREFORE, the Appeal is GRANTED. The Decision dated 13
December 2008 of Branch 36, Regional Trial Court (RTC) of
Gapan City is hereby REVERSED and SET ASIDE.
ACCORDINGLY, this Court hereby:
1. DECLARES plaintiff-appellee Marianito Padilla liable to pay
defendant-appellant Universal Robina Corporation the following
amounts: (a) ₱368,009.10 as principal; (b) ₱213,844.97 as
interest; and (c) ₱l45,463.52 as attorney's fee;
2. DECLARES plaintiff-appellee Alfredo Javaluyas liable to pay
defendant-appellant Universal Robina Corporation the following
amounts: a) ₱272,069.26 in principal; (b) ₱213,844.9737 as
interest; and (c) ₱l45,463.5238 as attorney's fee;
3. LIFTS the Permanent Injunction issued by Branch 36,
Regional Trial Court (RTC) of Gapan City on the Foreclosure of
plaintiffs-appellees' Real Estate Mortgage. However, the
foreclosure sale of TCT Nos, NT-186419, P-108280, and NT-
191940; and TCT No. 196756 made with the participation of
Notary Public Olivia-Velasco Jacoba is declared VOID and of NO
EFFECT;
4. DENIES defendant-appellant's claim for exemplary damages
for lack of merit.
SO ORDERED.39
Petitioners filed a Motion for Reconsideration40 of the CA
Decision, arguing that they have proven by preponderance of
evidence that the cause of the stunted growth of the broiler
chickens was the low-quality poultry feeds supplied by URC.
They averred that Del Pilar's testimony as regards the admission
by URC of its fault in supplying defective feeds, as well as the
failure of respondent URC's lone witness to deny this admission,
were enough evidence to prove their cause. This motion for
reconsideration was, however, denied by the CA in its
Resolution41 of September 17, 2014.
Issue
Hence, this present Petition on the sole ground that:

THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED
THAT THE LOSS, DAMAGE OR DESTRUCTION OF THE SUBJECT
LIVESTOCKS WAS NOT DUE TO URC'S F AULT.42
Petitioners aver that the testimony of Del Pilar, a disinterested
witness, on what actually transpired during a meeting
conducted by URC when the latter, through Lim, admitted that
the stunted growth of the broiler chicks was due to the poultry
feeds it supplied, should be given weight and credence. Not
having been denied by Lim when he was presented as witness,
this positive testimony and admission deserves great weight to
establish the fault or negligence of URC. Hence, their obligation
was already extinguished due to URC's admission of fault.
Our Ruling
The Petition is unmeritorious.
At the outset, it must be stated that the CCAREMs executed and
signed by the parties govern their rights and obligations
considering that the validity of its provisions was not assailed by
petitioners.
The threshold issue is whether or not there is sufficient
evidence to establish URC's fault or negligence for the
defective/stunted growth of the broiler chickens as would
extinguish petitioners' obligation under the CCAREM. Paragraph
5 of the CCAREM provides that:
In case the thing purchased should be lost, damaged or
destroyed without the fault of the COMP ANY-MORTGAGEE, or
by reason of fortuitous events or force majeure - like death of
day-old chicks or chickens by reason of any sickness, disease,
"peste or NCD," theft, robbery, typhoon, fire, flood and others -
the risk of loss shall be borne by the MORTGAGOR and/or
PRINCIPAL and their liability to pay their obligation to COMP
ANY-MORTGAGEE is not extinguished. The MORTGAGOR and/or
PRINCIPAL are still obligated to pay the day-old chicks, poultry
feeds and other products purchased from the COMPANY-
MORTGAGEE.43
Based on the foregoing, URC is accountable only if the loss,
damage, or destruction of the broiler chickens was due to its
fault, otherwise, petitioners should bear the loss and their
obligation to pay the day-old chicks and poultry feeds
purchased from URC is not extinguished.
"[I]t is basic rule in civil cases that the party making the
allegations has the burden of proving them by a preponderance
of evidence.1âwphi1 The parties must rely on the strength of
their own evidence and not upon the weakness of the defense
offered by their opponent."44 The Court finds that petitioners
failed to prove by preponderance of evidence their claims
against URC as to extinguish their obligation under the contract.
It bears stressing that both the RTC and the CA found no
evidence of fault or negligence on the part of URC. The CA
affirmed the finding of the trial court that there was no basis to
the allegation that the stunted growth of the broiler chickens
was caused by the purported low-quality poultry feeds supplied
by URC. Suffice it to say that factual findings of the trial court,
when adopted by the CA, are binding and conclusive on this
Court.45 Besides, this Court has already ruled that the finding
of negligence is a question of fact which it cannot look into as
the Court is not a trier of facts.46
In any event, the Court finds no compelling reason to deviate
from the finding of the lower courts inasmuch as it is supported
by the evidence and records of the case. It was held, in the
case of Nutrimix Feeds Corporation v. Court of Appeals, 47 that
the manufacturer or seller of animal feeds cannot be held liable
for any damage allegedly caused by the product in the absence
of proof that the product was defective. The defect of the
product requires evidence that there was no tampering with, or
changing of the animal feeds.48 The Court explained that "[i]n
the sale of animal feeds, there is an implied warranty that it is
reasonably fit and suitable to be used for the purpose which
both parties contemplated."49
In this case, URC maintains that it is unlikely that it supplied its
customers with defective poultry feeds because if it were, it
would not have passed quality control.50 Further, there is
evidence showing the possibility of tampering with the poultry
feeds in the hands of the poultry farmers. On cross-
examination, Lim testified in this manner:
Court:
Q. So, there was no instance where the growers ever bought
feeds from other sources?
A. There [were] instances [when] they bought other ingredients
from other source[ s ], sir.
Q. I am asking you feeds not ingredients.
A. It is added to the feeds, sir, so it becomes part of the feeds.
Court:
In this case, did you find [that] the plaintiff added ingredients
to the feeds?
A There [were] instances, sir.
Court:
Did you personally see that they mix[ ed] or add[ ed] some
ingredients to the feeds that you suppl[ied]?
A Yes, sir.
Court:
Where is your proof?
A I saw it personally, sir.51
In light of the ruling in Nutrimix, it is incumbent on petitioners
to establish the liability of URC on the basis of breach of implied
warranty. No evidence, however, was adduced. They even
failed to dispute Lim's testimony that the feeds passed quality
control and of the possibility that other ingredients from other
sources were mixed to the feeds. As correctly observed by the
CA, there was nothing in the records, except self-serving claims,
which proves that URC delivered low-quality feeds tainted with
high aflatoxin and other harmful components. There were no
veterinarians/nutritionists or any other credible evidence
presented by petitioners to confirm that the poultry feeds
supplied by URC were contaminated or affected the growth of
the broiler chicks. The documentary evidence proffered by
petitioners, to wit: 1) Notices of Auction Sale52 of the
properties mortgaged under the CCAREMs, 2) Certifications53 of
the Clerks of Court of RTC Gapan and Cabanatuan City stating
that Notary Public Jacoba had no notarial commission, and 3)
Condemnation Mortality Rate Reports54 showing the number of
disposed/condemned broiler chickens, do not prove any liability
on URC of its alleged supply of defective feeds.
Petitioners, however, insist that the cause of the stunted growth
of the broiler chicks was the defective poultry feeds supplied by
URC, and that URC caused the condemnation of the chickens,
based on the alleged admission made by Lim during a meeting
called by the URC management. In addition, they aver that Lim
never denied this purported admission when he was presented
in court.
The Court is not persuaded.
For one, nowhere in the testimonies of Del Pilar was it
categorically stated that Lim admitted that URC delivered
defective feeds. While he testified that it was Lim who ordered
the condemnation of the stunted chickens,55 it was the Satellite
Farm Manager of URC's Satellite Poultry Farm (not Lim) who
discussed the problems regarding the feeds. The testimony of
Del Pilar is summarized as follows:
Court:
Q As a Live Broiler Checker for a long time, do you know what
could have caused this stunted growing of the chickens of these
Contract Growers?
A What was discussed in the Office is regarding the feeds, sir.
Q Who discussed the problem regarding the feeds?
A The Satellite Farm Manager, sir. And [the feeds] was the
subject matter, the Satellite Manager of [Universal Robina
Corporation] [who] also [had] a poultry, and when they used
other brand of feeds[,] the chicken [grew], sir.
Q What are these Satellites?
A [Universal Robina Corporation] rented empty poultry and they
put their chickens there, sir.
Q In other words, this Satellite Poultry [was] practically
managed by Universal Robina Corporation?
A Yes, sir.
Q How did you confirm it, Mr. witness?
A I talked with the farm manager, sir. They used other feeds for
the chicken and the chickens grew well, sir.
Q So, in other words, Mr. witness, you were not able to witness
this because it was only told to you?
A Yes, sir.
Q In other words, Mr. witness, since you were not able to see
the chickens, you were not able to confirm it?
DECISION
DEL CASTILLO, J.:
Assailed in this Petition for Review on Certiorari1 are the August
13, 2009 Decision2 and February 22, 2012 Resolution3 of the
Court of Appeals (CA) in CA-G.R. CV No. 02296, which affirmed
with modification the March 19, 2007 Decision4 of the Regional
Trial Court (RTC) of Barotac Viejo, Iloilo, Branch 66, in LRC
Case No. 02-195.
Factual Antecedents

Q And this Satellite Poultry [also] suffered stunted growing of A Yes, sir.57
their chicken?
Lim was URC's Sales Manager and Del Pilar was clearly not
A Yes, sir. referring to him but to URC's Satellite Farm Manager. This
alleged admission on the part of URC's Satellite Farm Manager
Q And it was discussed in the Office that the one problem that as revealed by Del Pilar, however, is undeniably hearsay
caused the stunted growth was the feeds? because it was not based on the witness' personal knowledge
but on the knowledge of some other person who was never
A Yes, sir. presented on the witness stand.58 Parenthetically, Del Pilar's
testimony regarding the Satellite Farm Manager's admission can
Q How did it happen that you were present during that be admitted merely for the purpose of establishing such
discussion? utterance but not to establish its truth.59 Hence, Del Pilar's
testimony did not sufficiently establish the truth of the claim
A There was a meeting called by the management and I was that the feeds supplied by URC were defective, which could
included there in the meeting, and the condemnation [of the have affected the growth of the broiler chickens.
chickens] was ordered, sir.
In fine, petitioners failed to prove by preponderance of evidence
Q Now, they discussed about the problem [of] the stunted the fault or negligence of URC. For this reason, petitioners can
growth, you said the problem is the feeds, do you know what be held liable for their unsettled obligations under the CCAREMs
feeds they are referring [to]? they executed in favor of URC.
A The Robina feeds, sir. WHEREFORE, the Petition for Review on Certiorari is DENIED.
The assailed Decision of the Court of Appeals dated April 22,
Q The same feeds provided by the Universal Robina Corporation 2014 in CA-G.R. CV No. 93260 is AFFIRMED.
to the Contract Growers?
SO ORDERED.
A Yes, sir.56
MARIANO C. DEL CASTILLO
xxxx Associate Justice
Cross-Examination
Atty. A. Garcia:
FIRST DIVISION
Q Mr. witness, you mentioned that you knew that the problem
is the feeds because you heard it being discussed in the December 14, 2017
company, is that correct?
G.R. No. 201031
A Yes, sir.
TOMAS R. LEONIDAS, Petitioner
Q Were you able to confirm it? vs.
TANCREDO VARGAS and REPUBLIC OF THE PIDLIPPINES,
A Yes, sir. Respondents
On February 2, 2002, Tomas R. Leonidas (herein petitioner)
filed an application for land registration5 (Application) covering
Lot 566 and Lot 1677 which are both situated in Concepcion,
Iloilo (collectively, subject lots).
Petitioner alleged that he inherited the subject lots from his
parents, Ponciano Leonidas, Jr. (Ponciano) and Asuncion Roxas
de Leonidas (Asuncion); that as evidenced by the 1-fay 17, 193
7 Certificate of Sale issued by the Provincial Treasurer of Iloilo,
the subject lots, then covered by Tax Declaration (TD) No. 722,
were purchased by Asuncion when auctioned due to
delinquency in the payment of real property taxes by the
original owners, the heirs of Inis Luching; that Asuncion
immediately took possession of the subject lots and exercised
dominical rights thereover notoriously, continuously, and
exclusively; that upon Asuncion’s death in 1986, Ponciano
succeeded to the ownership and possession of the subject lots;
that after Ponciano’s death in l 991, the subject lots became his
(petitioner’s) own exclusive property; that he permitted and
tolerated the occupation of some portions of the subject lots by
Juanito Tisolan, Pancing Guevarra, Carmencita Guevarra, Delia
.Aspera-Ecleo, Victorino Mosqueda, Nora Binas, Crisanto
Amangas (Amangas),6 Rosana Vasquez, Henry Asturias, Ronnie
Astorias, Antonio Asturias, and Jacob Narciso; that as far as
known to him (petitioner), the following are the owners of all
adjoining properties, i.e. the owners of Lot 564, Lot 565 Lot
1578, and Lot 1677, Mansueto Sicad, Francisco Aspero, Brigido
Celestial, and Eugenio Bondoc, Jr. who are all from Poblacion,
Concepcion, Iloilo, and Carmen Paoli of unknown address; that
Lot 566 is bounded on the west by the provincial road and the
(petitioner) does not claim any portion thereof; that the latest
assessed value of the subject lots is ₱52, 660.00 as certified by
the Provincial Treasurer of Iloilo; that to the best of his
knowledge and belief, there is no mortgage or encumbrance of
any kind whatsoever affecting the subject lots except for taxes
due thereon; that a certain Tomas Vargas (Tomas), however,
had declared a portion of the subject lots in his name for
taxation purposes; but that Tomas died shortly after the end of
the Second World War, and the whereabouts of his heirs, if any,
are unknown, despite his diligent search to locate them in
Concepcion, Iloilo, and elsewhere.
Petitioner also alleged that he was 77 years old, Filipino, a
resident of No. 55 Chestnut St., West Fairview, Quezon City,
and married to Ofelia Gustilo Leonidas (Ofelia); that attached to
his Application were original Survey Plans with photographic
copies each, the Tracing Cloth Plan land Management Service,
Department of Environment and Natural Resources (DENR),
Region VI, Iloilo City, in lieu of the surveyor’s Certificate,
Technical Description with three photographic copies, the
Certificate in quadruplicate of the Provincial Treasurer showing
the latest assessed value of the subject lots, and a copy of the
muniment of title to prove ownership of the subject lots, with
the original to be presented at the trial.
Petitioner thus prayed that the subject lots be brought under
the operation of the Property Registration Decree7 (PD 1529)
and that the titles thereto be registered and confirmed in his
name.
The Republic of the Philippines (Republic), represented by the
Office of the Solicitor General (OSG), opposed the said
Application. The Republic claimed that neither the petitioner nor
his predecessors-in-interest had been in continuous, exclusive,
and notorious possession and occupation of the subject lots
since June 12, 1945, or prior thereto, as required by Section 48
of Commonwealth Act (CA) No. 141, as amended by PD 1073;
that the petitioner’s muniment/s of title, tax declarations, and
tax payment receipts did not constitute competent and
sufficient evidence of either a bona fide acquisition of the
subject lots, and neither did the petitioner's bare claim of open,
continuous, exclusive, and notorious possession and occupation
thereof in the concept of owner since June 12, 1945, or prior
thereto, amount to convincing proof of his claim of possession
and ownership over the subject lots; that, although the
petitioner's muniments of title might appear genuine, the tax
declarations and/or tax payments showing the pretended
possession were, in fact, of recent vintage; that the claim of
ownership in fee simple on the basis of a Spanish title or grant
could no longer be availed of by petitioner who had failed to file
an appropriate application therefor within the period of six
months from Feb1uary 16, 1976, as required by PD 892; and
that the subject lots are portions of the public domain belonging
to the Republic which are not subject to private appropriation.
Thus, the Republic prayed that the petitioner's Application be
denied and that the subject lots be declared part of the public
domain.
On March 11, 2003, Tancredo Vargas (Tancredo) also filed an
Opposition8 to the Application. Tancredo averred that he is
Tomas' legitimate son and compulsory heir; that during Tomas's
lifetime, the latter was the absolute and exclusive owner of a
certain parcel of land located at Loong, Concepcion, Iloilo,
which parcel of land is bounded on the north by the seashore,
on the south by Severino Asturias (Asturias),9 on the east by
the seashore, and on the west by Asturias and Braulio Celestial;
that this parcel of land had an area of 36,237 square meters
and was covered by TD No. 3549 in Tomas's name; that the
petitioner does not exclusively own Lot 1677 since it had been
split into two, viz. Lot 1677-A and Lot 1677-B; that he
(Tancredo) is the owner of Lot 1677-A; that Lot 566 was also
not exclusively owned by the petitioner, as this Lot 566 had also
been divided into two lots, viz. Lot 566-A and Lot 566-B; that he
(Tancredo) is the owner of Lot 566-A as shown in the RPTA Tax
Mapping project in the Municipal of Concepcion, Iloilo; that the
petitioner's allegation that the owners of the property covered
by TD 772 became delinquent in the payment of the tax due
thereon, for which reason the Provincial Treasurer of Iloilo
allegedly sold the same to Asuncion, was not at all true; that
the property covered by TD 772 was not sold at public auction
because the forfeiture was lifted prior to the public auction sale;
and that the fact that the Office of the Provincial Treasurer of
Iloilo did not have a copy of the Certificate of Sale dated May
17, 1937 bolstered the argument that petitioner’s allegation is
questionable. Tancredo thus prayed that the petitioner's
Application be denied insofar as the portions covered by the
TDs in the name of Tomas (disputed portions) are concerned.
On March 21, 2003, another Opposition10 to the Application
was filed by Moncerat A. Sicad-De Julian, Gil A. Sicad,
represented by his wife, Elizabeth Sicad, Teresita A. Sicad-
Bayuran, Villaluz Sicad-Zarriz, Eden A. Sicad, and Melchor Sicad,
represented by his wife, Elena D. Sicad, (Elena; collectively, the
Sicads) all represented by their attorney-in-fact, Elena.11 These
oppositors claimed that they are the heirs of the late Mansueto
Sicad (Mansueto) who was the owner of a portion of the subject
lots (Sicads’s contested portion); that the Sicads's contested
portion was bought by Mansueto from Asturias as evidenced by
the Deed of Definite Sale of a Parcel of Land described as Doc.
No. 75, Page No. 35, Book No. 1, Series of 1950 of the notarial
register of notary public Crespo Celestial; that the Sicads's
contested portion had been in the possession of Mansueto
during the latter's lifetime; that they had been in possession of
the Sicads’s contested portion since Mansueto's death; that part
of the Sicads’s contested portion had already been registered
under Original Certificate of Title (OCT) No. F-36795; and that
the petitioner had never been in possession of the lots subject
of his Application. The Sicads thus prayed that the petitioner's
Application be dismissed, insofar as it concerned the Sicads’s
contested portion as set forth in the aforesaid Deed of Definite
Sale; and that the Sicads’s contested portion be registered
instead in their names.
At the trial, the petitioner presented himself and Geronimo C.
Pefiaflorida (Peñaflorida), Land Management Inspector, DENR,
Community Environment and Natural Resources Office
(CENRO), at Sara, lloilo as witnesses.12 On the other hand,
Catalino Guinez, Emeliana Isturias Matulac, and Elena testified
for the Sicads.13 For his part, Tancredo presented himself and a
forn1er overseer or tenant of the Vargas family,14 Jose Etchona
(Etchona).15 Then on August 8, 2003, the petitioner filed his
Formal Offer
of Evidence16 wherein he submitted the Certificate of Sale
dated May 17, 1937, TD 014134 for the year 1976 in Asuncion's
name and covering Cadastral Lot Nos. 1, 2, and 3 PSU-216090,
TD 0037 for the year 1994 in the names of Asuncion and
Ponciano and covering Cadastral Lot No. 1677, TD 0036 for the
year 1994 in the names of Asuncion and Ponciano and covering
Cadastral Lot No. 566, TD 0114_ for the year 2003 in the
names of Asuncion and Ponciano and covering CadastraJ Lot
No. 1677-A, TD 0118 for the year 2003 in the names of
Asuncion and Ponciano and covering Cadastral Lot No. 1677-B,
TD 0116 for the year 2003 in the names of Asuncion and
Ponciano and covering Cadastral Lot No. 566-A; and TD 0117
for the year 2003 in the names of Asuncion and Ponciano and
covering Cadastral Lot No. 566-B,17 tax receipts for the years
1986, 1987, 1988, 1989, 1990, 1991, 1994, 2002 and 2003,
statement of the assessed value issued by the Provincial
Assessor of Iloilo on March 26, 1996, Lot No. 566's Blue Print
Survey Plan with technical description, Lot l 677’s Blue Print
Survey Plan with technical description, Certificate of
Unavailability of Surveyor's Certificate of Survey for Lots 566
and 1677, and Survey Inspection Report dated August 28, 1997
for Lot Nos. 566 and 1677 issued by Peñaflorida,18 i.e. CENRO
Report dated August 28, 1997, to the effect that the subject lots
are free from liens and encumbrances, and are moreover within
the alienable and disposable area. Pursuant to the RTC's
directive, petitioner also offered as additional evidence the
originally-approved subdivision plan covering Lot No. 1677, Csd-
06-008798 to prove the identity and location of the easement
for public use;19 and a certification by Joel B. Diaz, CENRO at
Sara, Iloilo, to the effect that Lot No. 1677, Pls 1099, situated in
Brgy; Loong, Concepcion, Iloilo, with an area of 8,062 square
meters was issued Patent No. 063015-92-846 dated May 28,
1992 in the name ofFlordeluz Sedigo, but that Lot No. 1677 has
doubled with the lot situated at Poblacion, Concepcion, Iloilo in
the name of the Heirs of Ponciano and that this latter lot is not
covered by any public land application filed with the CENRO in
Sara, Iloilo, which explained why no patent has been issued
therefor, hence indicating that this other Lot No. 1677, Pls
1099, which is situated in Brgy. Aglusong, Concepcion, Iloilo is
entirely different from Lot No. 1677, which is situated in Sitio
Loong, Poblacion, Concepcion, Iloilo.20
The petitioner likewise submitted in evidence an Ocular
Inspection Report covering an ocular inspection earlier ordered
by the RTC.21
Ruling of the Regional Trial Court
In its Decision dated March 19, 2007, the RTC disposed of this
case in this wise:
WHEREFORE, general default having been declared and the
[A]pplication supported by evidence, the adjudication and
registration of portion of Lot No. 566 with an area of 3.1161
hectares and portion of Lot 1677 with an area of 3. 7255
hectares, all of Concepcion Cadastre, together with all the
improvements thereon are hereby ordered in favor of applicant
[petitioner], of legal age, married to [Ofelia], Filipino, and
resident of Fairview, Quezon City, Philippines. Portions of Lot
[No.] 1677 with an area of 2.3642 hectares and portion of Lot
[No.] 566 with an area of 1.1782 hectares are hereby
adjudicated in favor of [Tancredo ], of legal age, single, Filipino,
and resident of Lawa-an Village, Balantang, Jaro, Iloilo City,
Philippines which portions shall be segregated in a proper
subdivision survey and to follow the description of the plan of
Municipal Assessor of Concepcion, Iloilo commensurate to Lot
1677-A under [T.D.] No. 054822 and 566-A under [T.D.] No.
0550.
The easement of right of way of the lots, highways, streets,
alleys, shorelines and other portion[s] of land not specified as
lots located within the borders of the land covered by this case
are declared to be the properties of the [Republic].
The Clerk of Court is directed to forward copies of this decision
to all government agencies concerned.
And finally, the Administrator, Land Registration Authority, is
hereby directed, after this decision shall have become final for
which he shall be duly advised by specific order of this Court, to
issue [a] decree of registration and title in accordance with the
amended plan on file in the record.
SO ORDERED.23
The RTC held that petitioner had sufficiently established that his
predecessors-in-interest had possessed and owned a parcel of
land in Barangay Loong, Concepcion, Iloilo to the extent not
covered by Tancredo’s Opposition; that while petitioner and his
predecessors-in-interest might not have been in actual
possession of the subject lots at all time, they nonetheless had
been consistently visiting the same; and that petitioner’s claim
of possession and ownership is supported by documents
consisting of the Certificate of Sale issued by the Provincial
Treasurer of Iloilo on May 17, 1937, the tax declarations in
Asuncion's name for the years 1976, 1994, and 2003, the
official receipts showing payments of real estate taxes thereon,
and the statement of the assessed value issued by the
Provincial Assessor of Iloilo on May 26, 1996. The RTC stressed
that the period of possession by petitioner and his
predecessors-in-interest sufficed to confer a registrable title
upon petitioner.
The RTC likewise ruled that Tancredo was also able to establish
a superior claim with respect to his disputed portions; that all of
the tax declarations in Asuncion's name continuously bore the
annotation acknowledging Tomas's adverse claim relative to
Tancredo's disputed portions; that Tomas's open and
continuous possession for more than the required number of
years was sufficiently shown by a tax declaration issued as early
as the year 1945; that the overseers and other persons
authorized to manage Tancredo's disputed portions were never
driven out by petitioner; and that Tancredo had visited the
disputed portions more frequently than petitioner who, as the
evidence shows, has his permanent residence in Quezon City,
Metro Manila.
With regard to the claim of the Sicads, the RTC held that
Mansueto and his successors-in-interest had no more interest in
the Sicads' contested portion because what was shown to have
been sold by Asturias to Mansueto pertained to a lot measuring
only two hectares, 52 acres, and 92 ares, a parcel of land at par
with the land covered by the aforementioned free patent issued
to Mansueto.
The RTC emphasized that it is well-entrenched in jurisprudence
that alienable public land openly, continuously, and exclusively
possessed by a person personally or through his predecessors-
in-interest for at least 30 years becomes ipsojure private
property by mere lapse of time, or by completion of said period
pursuant to Section 48(b) of CA 141, as amended by RA 1942
and RA 3872.
Ruling of the Court of Appeals
Only the petitioner and the Republic filed their respective
Notices of Appeal24 which were given due course by the RTC in
its Order of May 25, 2007.25 These notices of appeal were
consolidated and docketed as CA-G.R. CV No. 02296. In a
Decision dated August 13, 2009, the CA disposed as follows:
WHEREFORE, the Decision dated March 19, 2007 is modified, as
follows: 1.) the portion pertaining to the award of [Lot No.] 566
with an area of3.1161 hectares and [Lot No.] 1677 with an area
of 3.7255 hectares to [petitioner], is REVERSED and SET
ASIDE; and 2.) the portion pertaining to the award of [Lot No.]
1677 with an area of 2.3642 hectares and [Lot No.] 566 with an
area of 1.1782 hectares in favor of [Tancredo] is AFFIRMED.
SO ORDERED.26
The CA held that, contrary to the Republic's stance, the records
showed that there had been compliance with the jurisdictional
requirements of publication, posting, and notice; that petitioner
had properly identified the subject lots; that the subject lots had
already been classified as alienable and disposable at the time
that petitioner filed the Application in 2002, pursuant to the
CENRO Report dated August 28, 1997 issued by Peñaflorida;
that it has been held that "[a] certification by the CENRO of the
DENR stating that the subject lots are found to be within the
alienable and disposable site per land classification project map
is sufficient evidence to show the real character of the land
subject of the application;"27 that these notwithstanding,
petitioner failed to prove with the requisite evidence the kind of
possession and the length of time required by law for the
registration of the subject lots in his name, because his lone
testimony did not suffice to establish his and his predecessors-
in-interest’s alleged open, continuous, exclusive, and notorious
possession over the subject lots since June 12, 1945, or earlier;
that petitioner's alleged acts of swimming in, and planting trees
on the subject lots, his having finished high school at the
Victorino Salcedo High School in the neighboring town of Sara,
Iloilo, and his having left the subject lots when he attended
college - all these neither added up nor supported his assertion
of dominion or ownership· over the subject lots; that his
allegation that his childhood memories regarding the subject
lots all came back to him after the death of his father Ponciano
was indicative of the fact that he was really unaware of the
existence of the subject lots; that his Application was even
opposed by Tancredo and by the Sicads who claimed exclusive
possession over certain portions of the subject lots; that
petitioner's failure to explain why he or his predecessors-in-
interest declared the subject lots for taxation purposes only in
1976, was inconsistent with his claim of possession thereover
since 1937; and that it is an axiom of the law that the burden of
proof in a land registration case rests upon the applicant who
must present clear, positive, and convincing evidence
establishing the alleged possession and occupation in good
faith, and for the period required by law.
On the other hand, the CA ruled that Tancredo had sufficiently
proven his open, continuous, exclusive, and notorious
possession and occupation for the period required by law, over
the portions of the subject lots he was claiming in the concept
of an owner; that Tomas's adverse claims were annotated on
the TDs issued in Asuncion’s name covering the disputed
portions, i.e. TD 014134, 0114, and 0117 ;28 that Tomas
declared the disputed portions for taxation purposes in his
name as early as 1945; that Tancredo himself testified that
Tomas first used the disputed portions as rice land and
converted the same into coconut land in the 1960s; that
Tancredo’s witness, Etchona, likewise testified that Tomas
employed him and Domingo Celestial not only to cultivate, but
also to guard the disputed portions, and that Tomas himself
appropriated the harvest from the disputed portions and
introduced improvements thereon; and that even petitioner
himself admitted in his Application that Tomas had declared the
disputed portions in his (Tomas’) name for taxation purposes.
Petitioner moved for reconsideration29 but was denied by the
CA in its Resolution of February 22, 2012.30
Issue
Before this Court, petitioner now raises the following issue:
[Whether] the [CA] gravely abused its discretion in denying the
registration of [his] already vested title [over] Lot [Nos.] 566
and 1677 of the Concepcion, Iloilo Cadastre as his private
property, and in awarding some portions thereof in favor of
[Tancredo] in this land registration proceeding.31
Petitioner’s arguments
Petitioner insists in his Petition,32 Consolidated Reply,33 and
Memorandum34 that the CA erred in finding that he failed to
prove that he and his predecessors-in-interest had been in
open, continuous, exclusive, and notorious possession and
occupation of the subject lots since June 12, 1945, or earlier,
and that there is indubitable evidence that the subject lots were
in fact sold in a tax sale on May 1 7, 1937 by the gove1nment
through the Provincial Treasurer of Iloilo; that he filed the
present Application so that an OCT can be issued in his name as
evidence of his vested title over the subject lots; that assuming
that the subject lots are still part of the public domain, he is
nevertheless still entitled to have the subject lots registered in
his name by reason of his and his predecessors-in-interest's
exclusive possession and occupation thereof for more than 30
years, as compared to Tancredo's possession which supposedly
began only in 1945; that under the Land Registration Act, as
amended, the possessor is deemed to have acquired by
operation of law the right to a government grant upon
compliance with the conditions therefor, which was just what he
did in this case; that the confirmation proceeding is a mere
formality and the registration thereunder does not confer title
but merely recognizes a title that is already vested; that
rejection of his vested title to the questioned lots will occasion
loss of confidence in the government's sales of forfeited
property by reason of tax delinquency; that the CA erred in
finding that the TDs in Asuncion's name carried Tomas's
adverse claim, as the attached copies thereof did not bear any
such annotations; that the CA also erred in stating that
petitioner did not present any TDs to support his claim of
ownership over the subject lots for the reason that the CA
Decision itself mentioned that he submitted a TD for the year
1976; that contrary to the CA's findings, he did testify that he
had visited the subject lots every so often to plant trees after he
and his parents left Concepcion in 1945, and that such
improvements were reflected in his exhibits; that the CA
likewise erred in holding that he only came to know about the
subject lots after the death of his father, Ponciano, for the fact
is that he did testify that he and his cousins used to swim in the
sea near the subject lots, as early as when he was 12 years old;
that the CA moreover erred in concluding that Tancredo had
successfully established his claims over the disputed portions of
the subject lots because the TDs in Asuncion's name are all
annotated with Tomas’s adverse claim, and that Tomas had
declared said disputed portions in his name as early as 1945;
that the tax declarations supposedly in Tomas's name were
neither presented nor offered in evidence; that Tancredo
admitted during his cross-examination that Tomas’s 1945 tax
declaration was procured notwithstanding the fact that the
subject lots had already been declared in Asuncion’s name; that
Tancredo did not comply with the pertinent provisions of the
Land Registration Act, as amended, because he did not present
evidence to prove the specific date in 1945 when Tomas
acquired the disputed portions, or how Tomas in fact acquired
the same; that besides these, Tancredo could not identify the
disputed portions that he was claiming; that if Tancredo wanted
to vindicate his claims of ownership over the disputed portions,
then Tancredo should institute the proper action before a court
of general jurisdiction, and not in the land registration court, as
the subject lots were no longer part of the public domain; that
the issue of whether the sale by the government to Asuncion on
May 17, 1937 changed the classification of the subject lots from
public to private is of first impression and should be resolved by
the Supreme Court EnBanc; and that the circumstances
obtaining in this case are exceptions to the rule that only
questions of law are allowed in a petition filed pursuant to Rule
45 of the Revised Rules of Court; and that to deny his
Application, or to render judgment ordering the reversion to
public ownership of the subject lots would amount to grave
abuse on the part of the judiciary.
The Republic’s Arguments
In its Comment35 and Memorandum,36 the Republic counters
that the instant Petition merely raises questions of fact which
are proscribed under Rule 45 of the Revised Rules of Court; that
this Court is not a trier of facts; that petitioner's case does not
fall under any of the exceptions to the rule that factual findings
of the CA are invariably binding upon the Supreme Court; and
that the assailed CA Decision should not be disturbed because
the CA had amply justified the reversal of the RTC Decision
which was erected upon the petitioner's failure to substantiate
his claim of ownership over the subject lots.
Tancredo’s Arguments
In his Comment37 and Memorandum,38 Tancredo maintains
that the disputed portions had been in the absolute possession
and dominion of Tomas; that the findings of the RTC and the
CA regarding petitioner's ineligibility to obtain title to the
disputed portions due to non-compliance with the requirements
of the law, and for insufficiency of evidence, should not be
disturbed; that the CA’s finding that petitioner's TDs bore the
annotated claims of Tomas on the subject lots is a factual
finding and should not be disturbed; that petitioner's possession
is not the possession required by law for purposes of land
registration because petitioner failed to present evidence that
would prove actual, notorious, continuous, and exclusive
possession and occupation of the subject lots; that the evidence
adduced by petitioner is self-serving, hence undeserving of any
weight; that the origin of the disputed portions as pointed out
by the RTC is Assessor's Lot No. 337, which is individually
identified after the Cadastral Survey as Lot Nos. 1676- A, 1677-
A, and 566-A, all of the Concepcion (Iloilo) Cadastre; that
petitioner is barred or estopped from questioning the identity of
the disputed portions that had been adjudicated to him
(Tancredo ), as the lack of sufficient identification pertained to
the subject lots that petitioner himself was trying to register;
and that the issues raised by petitioner were factual in nature,
and the same is proscribed under Rule 45 of the Revised Rules
of Court.
The fundamental issues to be resolved in this case are: (1)
Whether the petitioner is entitled to obtain a title over the
subject lots; and (2) Wether Tancredo has established, by his
own evidence, that he was qualified to acquire title over the
disputed portions claimed by him.
The Court’s Ruling
The Petition is denied.
Requisites for the confirmation and
registration of an imperfect and
incomplete title under CA 141 and
PD 1529
"The Regalian doctrine, embodied in Section 2, Article XII of the
1987 Constitution, provides that all lands of the public domain
belong to the State, which is the source of any asserted right to
ownership of land."39 "[Commonwealth Act No. 141, in turn,]
goven1s the classification and disposition of lands of the public
domain. Section 11 [thereof] provides, as one of the modes of
disposing public lands that are suitable for agriculture, the
'confirmation of imperfect or incomplete titles.’ Section 48
[thereof], on the other hand, enumerates those who are
considered to have acquired an imperfect or incomplete title
over public lands and, therefore, entitled to confirmation and
registration under the Land Registration Act [now PD 1529]."40
The latter law then "specifies who are qualified to apply for
registration of land."41 Taken together, all the foregoing
provide for the requisites for the confirmation and registration
of an imperfect and incomplete title, thus -
x x x In particular, Section 14 (l) [of PD 1529] in relation to
Section 48 (b) of[CA] 141, as amended by Section4 of P.D. No.
1073, states:
SEC. 14. Who may apply. -The following persons may file in the
proper Court of First Instance [now Regional Trial Court] an
application for registration of title to land, whether personally or
through their duly authorized representatives:
(1) Those who by themselves or through their predecessors-in-
interest have been in open, continuous, exclusive and notorious
possession and occupation of alienable and disposable lands of
the public domain under a bonafide claim of ownership since
June 12, 1945, or earlier.
xxx xxx xxx
Section 48. The following described citizens of the Philippines,
occupying lands of the public domain or claiming to own any
such lands or an interest therein, but whose titles have not
been perfected or completed, may apply to the Court of First
Instance [now Regional Trial Court] of the province where the
land is located for confirmation of their claims and the issuance
of a certificate of title therefor, under [PD 1529], to wit:
xxx xxx xxx
(b) Those who by themselves or through their predecessors-in-
interest have been in open, continuous, exclusive and notorious
possession and occupation of [alienable and disposable lands]
of the public domain, under a bonafide claim of acquisition of
ownership, since June 12, 1945, or earlier, immediately
preceding the filing of the application for confirmation of title
except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions
essential to a Government grant and shall be entitled to a
certificate of title under the provisions of this chapter.

Based on these legal parameters, applicants for registration of
title under Section 14 (1) must sufficiently establish: (1) that
the subject land forms part of the disposable and alienable
lands of the public domain; (2) that the applicant and his
predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation of the same;
and (3) that his possession has been under a bonafide claim of
ownership since June 12, 1945, or earlier.
These triple requirements of alienability and possession and
occupation since June 12, 1945 or earlier under Section 14 (1)
are indispensable prerequisites to a favorable registration of
title to the property. Each element must necessarily be proven
by no less than clear, positive and convincing evidence;
otherwise, the application for registration should be denied.42
Petitioner did not cite the specific provision of CA 141 upon
which he based his Application. Neve1theless, the allegations
therein seem to establish the fact that his claim is one of
imperfect title under the above- quoted Section 48(b) of CA 141
in relation to Section 14(1) of PD 1529
The subject lots are considered
alienable and disposable lands of the
public domain
The first· requirement is complied with in the case at bench.
Notwithstanding that only a CENRO certification covering the
subject lots was presented in the instant case, the subject lots
are considered alienable and disposable lands of the public
domain because of this Court’s ruling that an application for
land registration may be granted despite the absence of the
DENR Secretary's certification, provided that the same was
pending at the time Republic v. Vega43 was promulgated on
January 17, 2011. In Republic v. Alora,44 this Court expressly
clarified this matter in this wise:
x x x [I]n Republic v. T.A.N Properties, Inc., which was
promulgated on 26 June 2008 x x x we held that applicants for
land registration must present a copy of the original
classification approved by the DENR Secretary and certified as
true copy by the legal custodian of the official records. x x x
x x x In Republic v. Serrano [(decided on 24 February 2010)],
we allowed the approval of a land registration application even
without the submission of the certification from the DENR
Secretary. As this ruling presented an apparent contradiction
with our earlier pronouncement in Republic v. T.A.N Properties,
Inc., we sought to harmonize our previous rulings in Republic v.
vega [(decided on 17 January 201 l)]. We then said that the
applications for land registration may be granted even without
the DENR Secretary's certification provided that the application
was currently pending at the time Republic v. vega was
promulgated. x x x45
It is worth stressing, however, that the foregoing ruling is the
exception, not the rule. As explicitly elucidated in Republic v.
Vega:46
It must be emphasized that the present ruling on substantial
compliance applies pro hac vice. It does not in any way detract
from our rulings in Republic v T.A.N Properties, Inc., and similar
cases which impose a strict requirement to prove that the public
land is alienable and disposable, especially in this case when the
Decisions of the lower court and the [CA] were rendered prior
to these rulings. To establish that the land subject of the
application is alienable and disposable public land, the general
rule remains: all applications for original registration under [PD
1529] must include both (1) a CENRO or PENRO certification
and (2) a certified true of the original classification made by the
DENR Secretary.
As an exception, however, the courts - in their sound discretion
and based solely on the evidence presented on record - may
approve the application, pro hac vice, on the ground of
substantial compliance showing that there has been a positive
act of government to show the nature and character of the land
and an absence of effective opposition from the government.
This exception shall only apply to applications for registration
currently pending before the trial court prior to this Decision
and shall be inapplicable to all future applications.
(Underscoring and emphases in the original)47
That said, we hold that both the petitioner and Tancredo failed
to establish clearly and convincingly their respective rights to
registration of imperfect titles under CA 141 and PD 1529, as
will be discussed below.
Petitioner failed to prove possession
of the subject lots in the manner and
for the period required by law
First off, petitioner failed to establish bonafide possession and
ownership over the subject lots since June 12, 1945 or earlier.
His contention that his predecessors-in-interest became the
owners of the subject lots pursuant to the May 17, 1937
Certificate of Sale48 of the Forfeited Real Property issued by the
Provincial Treasurer of Iloilo appears to be consistent with the
fact that TD 3549 in Tomas’s name which was found by the CA
as issued in 1945 bears an annotation stating that such is "[ c
]ontested by [Asuncion]".49 Even then, the Certificate of Public
Sale indicated that the balance of the purchase price in the
amount of ₱29.44, was yet to be paid on or before December
31, 1937.50
No incontrovertible proof was, however, presented to establish
the fact that this balance of the purchase price in the said
amount of ₱29 .44 had indeed been paid on or before
December 31, 193 7. In addition, the CA also correctly pointed
out that even as petitioner was able to submit TDs and
evidence of tax payments only for a few years, he nevertheless
failed to explain why he or his predecessors-in-interest declared
the subject lots for taxation purposes only in 1976, this despite
his claim that his predecessors-in-interest had been in
possession and occupation of the subject lots since 1937, as
allegedly shown in the Provincial Treasurer’s Certificate of Sale.
It is settled that intermittent and irregular tax payments run
counter to a claim of ownership or possession.51
Second, even assuming for argument's sake that petitioner’s
predecessors-in-interest had paid the balance of the delinquent
tax payment, petitioner nonetheless failed to prove his and his
predecessors-in-interests actual, notorious, exclusive and
continuous possession of the subject lots for the length of time
required by law.
To be sure, petitioner's failure to explain what happened after
his family supposedly left the subject lots in 1941, when the war
broke out, vis-a-vis his failure to prove that he had indeed
introduced valuable improvements in the subject lots during the
time that he and his parents had been allegedly in actual
possession and occupation thereof, cast doubts upon his claim
of actual possession and occupation thereof. Withal, petitioner's
testimony of having swum near the subject lots, of having
planted trees thereon, and his having finished high school at the
Victorino Salcedo High School in the neighboring town of Sara
can hardly be considered as acts of dominion or ownership over
the subject lots. Besides, petitioner did not present clear and
convincing evidence that the subject lots had indeed been
cultivated by him or by his predecessors-in-interest for the
period of time required by law. Needless to say, all these
failings weaken his claim that he has been a bonafide possessor
and occupant of the subject lots in the manner and for the
period prescribed by law, to wit:
The possession contemplated by Section 48 (b) of [CA] 141 is
actual, not fictional or constructive. In Carlos v. Republic of the
Philippines, the Court explained the character of the required
possession, as follows:
The law speaks of possession and occupation. Since these
words are separated by the conjunction and, the clear intention
of the law is not to make one synonymous with the other.
Possession is broader than occupation because it includes
constructive possession. When, therefore, the law adds the
word occupation, it seeks to delimit the all-encompassing effect
of constructive possession, Taken together with the words
open, continuous, exclusive and notorious, the word occupation
serves to highlight the fact ti1at for an applicant to qualify, his
possession must not be a mere fiction. Actual possession of a
land consists in the manifestation of acts of dominion over it of
such a nature as a party would naturally exercise over his own
property.52 (Emphases in the original)
Oddly enough, while in its Decision the RTC appeared to have
granted petitioner’s Application, said Decision seemed to have
indulged in a bit of non-sequitur when it said that "[petitioner]
and his predecessors were not in actual possession of the
[subject Jots] all the time" x x x.53 Simply said, the -A
effectively ruled that since petitioner failed to prove that he or
his predecessors-in-interest had indeed performed the required
acts of possession and occupation, or specific acts of dominion
over the subject lots, it stands to reason that registration
thereof in his name cannot be allowed.
Tancredo also failed to establish
possession and occupation over the
disputed portions in the manner and
for the period required by law
At this juncture, we shall revisit the uniform finding by both the
RTC and the CA, which in effect upheld Tancredo's right to
register the disputed portions in his name (as an exception to
the settled rule that questions of fact are proscribed in a Rule
45 petition since a correct evaluation of the facts will yield a
different conclusion).54
First off, Tancredo failed to show that his or his predecessor-
ininterest’s possession and occupation over the disputed
portions had been under a bonafide claim of ownership since
June 12, 1945, or earlier. We are inclined to agree with
petitioner's posture that Tancredo failed to adduce clear and
convincing evidence which established the origin or antecedents
of Tomas's straightforward possession and occupation, or claim
of ownership, over the disputed portions. Consider the following
exchange/s between/among Tancredo, the petitioner, and the
Court -
[Petitioner]: (to the witness[, Tancredo])
Q: When did your father acquire this property?
A: In 1945.
Q: From whom?
A: I have no idea.
xxxx
Q: Did you not ask your father from whom he acquired this
property?
A: No, I did not.
Q: As a matter of fact[,] until the death of your father[,] you
have not ask[ed] him from whom did he acquire the property?
A: No, Sir.
xxxx
COURT: (to the witness[, Tancredo])
Q: Your father died in 1995 [,] why did you not [cause] the
transfer of tax declaration in your name or to the heirs?
A: Because the plan of the heirs is, if the property [is
registered] in my father[']s name [then] the title should be
transferred in my name.
xxxx
Q: Your tax receipts correspond only [to] the year 2003, how
about other tax receipts?
A: I [will just [try] to find out if the Provincial Treasurer’s Office
still has the copy.
Q: Even just a certification stating that you [continued] in
paying realty tax from 1946 up to 2003?
A: Yes, I can ask the provincial treasurer for that matter.
Q: When you secure[d] the tax declaration[,] you [knew] that
the lot was also declared in the name of [Asuncion], is it not?
A: Yes, Your Honor.
Q: That was in the office of the Municipal Assessor?
A: Yes, Your Honor.
Q: Did you verify if they were paying taxes also?
A: No, Your Honor.
Q: You did not?
A: I [did] not[,] Your Honor.
Q: If that is the case[,] why did you [say] a while ago that you
[knew]. only [about] the case of [petitioner] when this case was
filed because the tax declaration itself [stated] that the lot was
also declared in the name of [Asuncion]?
A: Although I have already seen the notation on the tax
declaration that they also [secured a] tax declaration [over] the
[disputed Portions]. I did not mind it Your Honor because they
did not openly claim ownership over the [disputed portions].
And in the same manner[.] Your Honor[,] in their tax
declaration it is also indicated that the [disputed portions] is
also declare[d] in the name of [Tomas].55
More than this, Tancredo did not present clear, convincing
evidence to support his claim that the disputed portions were in
fact transferred to him by his father, Tomas. Tancredo merely
testified that the disputed portions were given to him solely by
Tomas, an act that was allegedly consented to by his siblings.
Thus-
[Petitioner]: (to the witness, Tancredo)
Q: You have siblings, meaning brothers and sisters?
A: Yes, Sir.
Q: You said a while ago that you succeeded to the ownership of
the [subject lots] when your father died in 1985, how about
your siblings[?] [Did they] not succeed to the [ownership of the
subject lots?]
A: They sign[ed] a deed of adjudication in favor of me[.] I have
a copy and it was notarized.
xxxx
Q: In your [O]pposition you said that you were authorized?
A: Yes, Sir.
Q: By whom?
A: By my brothers and sisters.
Q: Where is your authority?
A: I can produce it. I can pass [sic] it anytime.
Q: You did not [s]tate in your [O]pposition that you have your
siblings with you?
A: Because the property was given to me by my father. 56
Nonetheless, there is nothing in the records to support or
confirm Tancredo’s claim that the property was in fact deeded
over to him by his father, Tomas.
In Buenaventura v. Pascual,57 this Court affirmed the lower
courts' dismissal of the claims for registration of imperfect titles
because, among others, both the applicant and oppositors failed
to adduce evidence as to how they acquired the subject
property from their respective predecessors-in-interest, i.e.,
whether by succession or by donation or by some other mode.
Furthermore, we stressed therein that the applicant failed to
prove the manner by which her predecessors-in-interest
possessed the subject property.
Then, again, Tancredo also failed to establish that he and his
predecessors-in-interest had/have been in open, continuous,
exclusive and notorious possession and occupation of the
disputed portions since June 12, 1945, or prior thereto.
If anything, the records showed that Tancredo merely
submitted photocopies of four tax declarations which were
attached as annexes to his Opposition.1âwphi1 These included
the 1945 TD 3549 as adverted to by the CA in the records58
pertaining to a 3.6237-hectare lot in an unstated cadastral lot,
TD 0548 covering an 813-hectare lot in Cadastral Lot No. 1676-
A,59 TD 0549 for a 2.3642-hectare lot in Cadastral Lot No.
1677-A,60 and TD 0550 concen1ing a 1.1782-hectare lot in
Cadastral Lot No. 566-A.61 All four TDs are in Tomas's name,
without copies of the dorsal portions thereof, and bearing
annotations stating either "[c]ontested by [Asuncion]" or "[a]lso
declared in the name of [Asuncion] or [Ponciano]".
It would thus appear that Tancredo had erected his
opposition/claim to the lots in question upon the said
photocopies of four tax declarations whose authenticity or
genuineness is open to the most serious doubts. And, even on
the assumption that the said tax declarations are in fact
authentic and genuine, still it is settled that tax declarations are
not conclusive proof of ownership. If anything, tax declarations
are merely corroborative of a person's claim of possession. More
than that, as elsewhere indicated, intermittent and irregular tax
payments, as in this case, do not really provide strong support
for a claim of ownership or possession.62
It is axiomatic of course that "[i]t is the policy of the State to
encourage and promote the distribution of alienable public lands
as a spur to economic growth and in line with the social justice
ideal enshrined in the Constitution. At the same time, the law
imposes stringent safeguards upon the grant of such resources
lest they fall into the wrong hands to the prejudice of the
national patrimony."63 This ruling controls the present case.
As a final note: All of the foregoing discussion showed that the
issues raised in this case have all been previously resolved and
determined by settled jurisprudence; hence, there is no reason
to grant petitioner's prayer for this case to be referred to or
heard by the Court EnBanc, as this is not a case of first
impression at all.
WHEREFORE, the Petition is hereby DENIED. We
AFFIRMwithMODIFICATION the August 13, 2009 Decision and
the February 22, 2012 Resolution of the Court of Appeals in CA-
G.R. CV No. 02296 in that the award by the Regional Trial Court
of Barotac Viejo, Iloilo, Branch 66 in LRC Case No. 02~ 195 of
Lot No. 1677 with an area of 2.3642 hectares and Lot No. 566
with an area of 1.1 782 hectares, both in favor of respondent
Tancredo Vargas, is OVERTURNED and NULLIFIED
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
SECOND DIVISION
G.R. No. 227124, December 06, 2017
HEIRS OF VICTOR AMISTOSO, NAMELY: VENEZUELA A. DELA
CRUZ, FLORA A. TULIO, WILFREDO D. AMISTOSO, RUFINO D.
AMISTOSO, VICENTE D. AMISTOSO, MAXIMO D. AMISTOSO,
AND ZENAIDA D. AMISTOSO, Petitioners, v. ELMER T.
VALLECER, REPRESENTED BY EDGAR VALLECER, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated February 24, 2016 and the Resolution3 dated
August 10, 2016 of the Court of Appeals (CA) in CA-G.R. SP No.
06720, which upheld the Resolution4 dated May 28, 2014 and
the Order5 dated December 3, 2014 of the Regional Trial Court
of Liloy, Zamboanga del Norte, Branch 28 (RTC) in Civil Case
No. L-298, denying the Motion to Hear and Resolve Affirmative
Defenses filed by petitioners Heirs of Victor Amistoso, namely:
Venezuela A. Dela Cruz, Flora A. Tulio, Wilfredo D. Amistoso,
Rufino D. Amistoso, Vicente D. Amistoso, Maximo D. Amistoso,
and Zenaida D. Amistoso (petitioners) for their failure to
substantiate their affirmative defenses of res judicata,
prescription, and laches.
The Facts
Sometime in March 1996, respondent Elmer T. Vallecer
(respondent), through his brother Dr. Jose Benjy T. Vallecer
(Benjy), filed a Complaint6 for recovery of possession and
damages against petitioners, docketed as Civil Case No. S-606,7
involving a 2,265-square meter parcel of land, located in
Labason, Zamboanga del Norte, described as Lot C-7-A and
covered by Transfer Certificate of Title No. T-442148 (TCT T-
44214) and Tax Declaration No. 93-73299 under respondent's
name. He claimed that he purchased the property sometime in
June 1990 after confirming with the Department of Agrarian
Reform (DAR) that the property was not tenanted. When he
started making preparations for the construction of a
commercial building on the property, petitioners, with the aid of
their workers, agents, representatives, and/or employees,
stopped or barred him by force, threats, and intimidation.
Despite repeated demands10 and explanations made by the
Municipal Agrarian Reform Officer (MARO)11 of the DAR during
a pre- litigation conference that no landlord-tenancy relationship
ever existed between them as regards the property, petitioners
continued to refuse him from entering and enjoying possession
of his property.12 Thus, he prayed for the court to, among
others, order petitioners, with their representatives, agents,
employees, and assigns, to vacate the property and pay
damages.13
In their defense,14 petitioners claimed that they have been in
actual, peaceful, and continuous possession of the land as
evidenced by Certificate of Land Transfer No. 0-00262315 (CLT)
issued in November 1978 to their predecessor-in-interest Victor
Amistoso (Victor) by virtue of Presidential Decree No. 27.16
On January 8, 2001, the RTC declared respondent as the
absolute owner of the subject property under his name.17 On
appeal, the CA rendered a Decision18 dated October 17, 2003
in CA-G.R. CV No. 70128 (October 17, 2003 CA Decision)
reversing the RTC ruling. It found that Benjy failed to show
proof of his capacity to sue on respondent's behalf and that the
CLT issued by the DAR acknowledges petitioners as "deemed
owner" of the land after full payment of its value. Having
proven full compliance for the grant of title, petitioners have a
right to the land which must be respected.19 This CA Decision
became final and executory on November 4, 2003,20 and
consequently, a Writ of Execution21 was issued on May 9,
2005.
Thereafter, or on July 18, 2012, respondent filed a Complaint22
for quieting of title, ownership, possession, and damages with
preliminary injunction against petitioners, docketed as Civil Case
No. L-298, subject of the present case. Asserting ownership
over the property under TCT No. T-44214 and tax declarations,
and citing petitioners' unlawful possession and occupation
thereof despite repeated demands to vacate, respondent
claimed that: petitioners' CLT does not contain the technical
description of the property which it purportedly covers; the
tenancy relationship from which petitioners anchor their
possession pertains to the portion of the adjacent land that
belongs to Maria Kho Young with whom they admittedly have
the tenancy relationship; and the October 17, 2003 CA Decision
involving Civil Case No. S-606, annotated on his TCT No. T-
44214, constitutes a cloud on his title.23 Thus, respondent
prayed for the court to: restrain and prohibit petitioners from
continuing to usurp his real rights on the property as owner
thereof; prevent or prohibit them from dealing and negotiating
the property with any person for any purpose; prohibit or
prevent them from obstructing and preventing the free passage,
possession, use, and appropriation of the property and its fruits;
declare him as the absolute owner of the property; and order
petitioners to vacate the property and remove all structures and
improvements introduced thereon at their expense.24
Petitioners, for their part, filed an Answer with Counterclaim
and Affirmative Defenses25 invoking res judicata, prescription
and laches. In support thereof, they pointed out that the
October 17, 2003 CA Decision stemming from Civil Case No. S-
606 had already become immutable. Likewise, they moved to
hear and resolve the affirmative defense.26
The RTC Ruling
In a Resolution27 dated May 28, 2014, the RTC denied
petitioners' Motion to Hear and Resolve Affirmative Defenses for
lack of merit, declaring that the principle of res judicata would
not apply in view of the lack of identity of causes of action. It
held that in contrast to Civil Case No. S-606, which involves
recovery of possession, Civil Case No. L-298 is essentially one
for declaration of ownership. It also ruled that since the land is
covered by a Torrens title, it can no longer be acquired by
prescription or be lost by laches.28
Aggrieved, petitioners moved for reconsideration29 which the
RTC denied in an Order30 dated December 3, 2014. Undaunted,
they elevated the case before the CA via a petition for
certiorari,31 arguing that Civil Case No. L-298 for quieting of
title is barred by res judicata, and that respondent lacked cause
of action.32
The CA Ruling
In a Decision33 dated February 24, 2016, the CA affirmed the
RTC ruling. It held that the RTC did not gravely abuse its
discretion in holding that Civil Case No. L-298 is not barred by
res judicata, considering that Civil Case No. S-606 filed by
respondent is anchored on his right to possess the real property
as the registered owner; while Civil Case No. L-298 was filed in
order to clear his title over the land and remove all adverse
claims against it.34
Dissatisfied, petitioners moved for reconsideration,35
additionally arguing that the RTC lacked jurisdiction to cancel
their CLT. The CA denied petitioners' motion in a Resolution36
dated August 10, 2016; hence, this petition.
The Issues Before the Court
The essential issue for the Court's resolution is whether or not
Civil Case No. L-298 is barred by res judicata.
The Court's Ruling
The petition lacks merit.
Preliminarily, petitioners insist, albeit belatedly, that the RTC
had no jurisdiction over the complaint in Civil Case No. L-298,
considering that what is sought to be cancelled is their CLT;
hence, an agrarian dispute falling within the jurisdiction of the
DARAB.37
The argument is specious.
In order to classify a matter as an agrarian dispute which falls
under the jurisdiction of the DARAB, it must be first shown that
a tenancy relationship exists between the parties. For such
relationship to be proven, it is essential to establish all its
indispensable elements, namely: (a) that the parties are the
landowner and the tenant or agricultural lessee; (b) that the
subject matter of the relationship is an agricultural land; (c) that
there is consent between the parties to the relationship; (d)
that the purpose of the relationship is to bring about agricultural
production; (e) that there is personal cultivation on the part of
the tenant or agricultural lessee; and (f) that the harvest is
shared between the landowner and the tenant or agricultural
lessee.38
Moreover, it is well-settled that the jurisdiction of the court over
the subject matter of the action is determined by the material
allegations of the complaint and the law at the time the action
was commenced, irrespective of whether or not the plaintiff is
entitled to recover all or some of the claims or reliefs sought
therein and regardless of the defenses set up in the court or
upon a motion to dismiss by the defendant.39
In this case, a reading of the material allegations of
respondent's complaint in Civil Case No. L-298 and even
petitioners' admissions readily reveals that there is neither a
tenancy relationship between petitioners and respondent, nor
had petitioners been the tenant of respondent's predecessors-
in-interest. In fact, respondent did not even question the
validity of petitioners' CLT nor sought for its cancellation.
Rather, what respondent sought was for a declaration that the
property covered by his Torrens title is different from the
property covered by petitioners' CLT in order to quiet his title
and remove all adverse claims against it. Clearly, this is not an
agrarian dispute that falls within the DARAB's jurisdiction.
Proceeding to the main issue, petitioners contend that Civil Case
No. S-606 and Civil Case No. L-298 were founded on the same
facts, allegations, and arguments, and sought the same relief,
i.e., to cancel their CLT. Considering that the October 17, 2003
CA Decision stemming from Civil Case No. S-606 had already
attained finality, the same constitutes res judicata to Civil Case
No. L-298.40
The Court disagrees.
"Res judicata literally means 'a matter adjudged; a thing
judicially acted upon or decided; a thing or matter settled by
judgment."' It also refers to the "rule that an existing final
judgment or decree rendered on the merits, and without fraud
or collusion, by a court of competent jurisdiction, upon any
matter within its jurisdiction, is conclusive of the rights of the
parties or their privies, in all other actions or suits in the same
or any other judicial tribunal of concurrent jurisdiction on the
points and matters in issue in the first suit."41
For res judicata to absolutely bar a subsequent action, the
following requisites must concur: (a) the former judgment or
order must be final; (b) the judgment or order must be on the
merits; (c) it must have been rendered by a court having
jurisdiction over the subject matter and parties; and (d) there
must be between the first and second actions, identity of
parties, of subject matter, and of causes of action.42
In this case, the Court finds that Civil Case No. S-606 did not
bar the filing of Civil Case No. L-298 on the ground of res
judicata as the causes of action in the two cases are not the
same.
In particular, in Civil Case No. S-606, respondent alleged that
he purchased the property after confirming with the DAR that it
was not tenanted; that petitioners, with their workers and/or
representatives, stopped or barred him by force, threats, and
intimidation from entering and occupying the property; and that
despite repeated demands43 and explanations made by the
MARO44 that no landlord-tenant relationship ever existed
between them as regards the property, petitioners continued to
prohibit him from entering and enjoying possession of his
property. He thus prayed for the court to order petitioners, with
their representatives, et al., to vacate the property and pay
damages.45
At this point, it is apt to clarify that the CA erroneously classified
Civil Case No. S-606 as an accion reivindicatoria, or a suit which
has for its object the recovery of possession of real property as
owner and that it involves recovery of ownership and
possession based on the said ownership.46 As plaintiff in Civil
Case No. S-606, respondent never asked that he be declared
the owner of the land in question, but only prayed that he be
allowed to recover possession thereof from petitioners. As such,
Civil Case No. S-606 should have instead, been properly
classified as an accion publiciana, or a plenary action to recover
the right of possession of land.47 Hence, while petitioners were
acknowledged by the DAR as "deemed owners" of the land in
Civil Case No. S-606, such declaration was merely provisional as
it was only for the purpose of determining possession. In
Gabriel, Jr. v. Crisologo,48 the Court thoroughly discussed the
nature and purpose of an accion publiciana:
Also known as accion plenaria de posesion, accion publiciana is
an ordinary civil proceeding to determine the better right of
possession of realty independently of title. It refers to an
ejectment suit filed after the expiration of one year from the
accrual of the cause of action or from the unlawful withholding
of possession of the realty.
The objective of the plaintiffs in accion publiciana is to recover
possession only, not ownership. When parties, however, raise
the issue of ownership, the court may pass upon the issue to
determine who between the parties has the right to possess the
property. This adjudication, nonetheless, is not a final and
binding determination of the issue of ownership; it is only for
the purpose of resolving the issue of possession, where the
issue of ownership is inseparably linked to the issue of
possession. The adjudication of the issue of ownership, being
provisional, is not a bar to an action between the same parties
involving title to the property. The adjudication, in short, is not
conclusive on the issue of ownership.49 (Emphases and
underscoring supplied)
On the other hand, in Civil Case No. L-298, respondent asserted
his ownership over the property by virtue of his Torrens title,
and alleged that petitioners' tenancy relationship actually
pertains to the portion of the adjacent land that belongs to
Maria Kho Young with whom petitioners admittedly have the
tenancy relationship. Respondent also claimed that petitioners'
CLT does not contain the technical description of the property
which it purportedly covers and therefore does not show that
their alleged tenancy right falls on his property.50 Thus, the
October 17, 2003 CA Decision stemming from Civil Case No. S-
606 and petitioners' unlawful possession and claim of ownership
constitute a cloud on his title over the property. Accordingly,
respondent prayed for the court to declare him as the absolute
owner of the property, and restrain and prohibit petitioners
from performing and/or continuing to perform act/s that affect
his possession and enjoyment thereof as owner.51
Clearly, the complaint in Civil Case No. L-298 is, as indicated
herein, one for quieting of title pursuant to Article 47652 of the
Civil Code. In Green Acres Holdings, Inc. v. Cabral,53 the Court
discussed:
Quieting of title is a common law remedy for the removal of any
cloud upon, doubt, or uncertainty affecting title to real property.
Whenever there is a cloud on title to real property or any
interest in real property by reason of any instrument, record,
claim, encumbrance, or proceeding that is apparently valid or
effective, but is in truth and in fact, invalid, ineffective,
voidable, or unenforceable, and may be prejudicial to said title,
an action may be brought to remove such cloud or to quiet the
title. In such action, the competent court is tasked to determine
the respective rights of the complainant and the other
claimants, not only to place things in their proper places, and
make the claimant, who has no rights to said immovable,
respect and not disturb the one so entitled, but also for the
benefit of both, so that whoever has the right will see every
cloud of doubt over the property dissipated, and he can
thereafter fearlessly introduce any desired improvements, as
well as use, and even abuse the property.
For an action to quiet title to prosper, two indispensable
requisites must concur: (1) the plaintiff or complainant has a
legal or equitable title or interest in the real property subject of
the action; and (2) the deed, claim, encumbrance, or
proceeding claimed to be casting a cloud on his title must be
shown to be in fact invalid or inoperative despite its prima facie
appearance of validity or legal efficacy.54 (Emphasis and
underscoring supplied)
Based on the foregoing, it is clear that the causes of action in
Civil Case Nos. S-606 and L-298 are different from each other.
And thus, the ruling in the former would not operate as res
judicata on the latter.
Moreover, it should be pointed out that petitioners' attack on
the validity of respondent's Torrens title in Civil Case No. S-606
by claiming that their father Victor became the owner of the
subject property by virtue of the CLT issued to him in 1978
constitutes a collateral attack on said title. It is an attack
incidental to their quest to defend their possession of the
property in an accion publiciana, not in a direct action aimed at
impugning the validity of the judgment granting the title.55
Time and again, it has been held that a certificate of title shall
not be subject to a collateral attack and that the issue of the
validity of title can only be assailed in an action expressly
instituted for such purpose.56 Hence, any declaration the CA
may have made in its October 17, 2003 Decision stemming from
Civil Case No. S-606 cannot affect respondent's ownership over
the property nor nullify his Torrens title, as the adjudication was
only for the purpose of resolving the issue of possession.
All told, the October 17, 2003 CA Decision involving Civil Case
No. S-606 did not bar the filing of Civil Case No. L-298 that
seeks to determine the issue of the property's ownership, clear
respondent's title over the property, and remove all adverse
claims against it.
WHEREFORE, the petition is DENIED. The Decision dated
February 24, 2016 and the Resolution dated August 10, 2016 of
the Court of Appeals in CA-G.R. SP No. 06720 are hereby
AFFIRMED.
SO ORDERED.
Carpio (Chairperson), Peralta, Caguioa, and Reyes, Jr., JJ.,
concur.
SECOND DIVISION
December 6, 2017
G.R. No. 209376
JOSE DIAZ, JR. (herein substituted by his legal heirs VERONICA
BOLAGOT-DIAZ and RIO ANGELA BOLAGOT-DIAZ) and
ADELINA D. McMULLEN, Petitioners
vs.
SALVADOR VALENCIANO, JR., [deceased] substituted by
MADELINE A. VALENCIANO, RANIL A. VALENCIANO,
ROSEMARIE V. SERRANO, SHEILA V ALENCIANOMOLO and
JOHN-LYN VALENCIANO-V ARGAS, Respondent
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari of the Court of
Appeals Decision1 dated April 30, 2013, which reversed and set
aside the Decision2 dated July 9, 2010 of the Regional Trial
Court of Legazpi City, and reinstated the Decision3 dated
January 5, 2010 of the Municipal Trial Court in the Cities
(MTCC), dismissing the complaint for unlawful detainer on the
ground of res judicata.
The facts are undisputed.
On June 2, 1992, a complaint for unlawful detainer was filed by
petitioners Jose Diaz, Jr. and his sister Adelina D. McMullen
against Salvador Valenciano Sr., the father of respondent
Salvador Valenciano Jr. In their complaint docketed as Civil
Case No. 3931, petitioners alleged that they are the lawful and
registered owners of a parcel of land (Lot No. 163-A) located at
Rosario St., Old Albay, Legazpi City, and covered by Transfer
Certificate of Title (TCT) No. 20126. On the other hand,
Salvador Jr. countered that his father, Salvador Valenciano Sr.,
and the rest of his family have been in open, peaceful and
actual possession of the same property since 1958 when
petitioner Diaz mortgaged it to Salvador Sr.
On July 30, 1992, petitioners and Salvador Sr. entered into a
Compromise Agreement where they agreed to amicably settle
the civil case provided that: (a) Salvador Sr. will vacate and
surrender the property to petitioner Diaz within a period of one-
and-a-half (1 ½)years or on January 31, 1994; and (b) Diaz
shall pay to Salvador Sr. the sum of ₱1,600.00 on or before
January 31, 1993. On August 10, 1992, the MTCC issued a
Resolution approving the Agreement.
For failure of Salvador Sr. and his family to vacate the subject
property in accordance with the Compromise Agreement, Diaz
filed on February 1, 1994 an Ex-Parte Motion for Execution. The
MTCC granted the motion for execution on February 4, 1994. A
writ of execution was then issued, commanding the sheriff to
cause Salvador Sr., or anyone acting in his behalf, to vacate the
property and surrender complete possession thereof to Diaz.
By sheer tolerance, petitioners allegedly chose not to implement
the writ of execution, and allowed Salvador Sr. and his family to
stay on the property, subject to the condition that they will
vacate the same when petitioners need it. Meanwhile, Salvador
Sr. passed away.
On February 9, 2009, or after more than fifteen (15) years from
the issuance of the writ of execution, petitioners sent a demand
letter to Salvador Jr., who refused to vacate the property
despite notice.
On June 1, 2009, petitioners filed against Salvador Jr. a
Complaint4 for unlawful detainer which was docketed as Civil
Case No. 5570. Petitioners claimed to be the lawful and
registered owners of the property covered by TCT No. 20126,
and subject of the previous case for unlawful detainer docketed
as Civil Case No. 3931. Attached to their complaint was a
certified copy of TCT No. 20126, Tax Declaration No. 01300117,
and a Certification from the Office of the Treasurer of the City
of Legaspi stating that realty taxes for the subject property are
declared in the name of Jose and Adelina Diaz for 2008 and
previous years.
In his Answer with Affirmative Defense and Counterclaim,5
Salvador Jr. contended that the complaint was barred by res
judicata in view of the judicially-approved Compromise
Agreement in the first unlawful detainer case between
petitioners and his father, Salvador Sr. He also claimed that he
and his predecessor-in-interest have been occupying the subject
property in the concept of an owner for more than forty-five
(45) years, and have declared the same in their names for
taxation purposes, paying taxes therefor. Attached to the
Answer was Tax Declaration No. 02917 and the Sworn
Statement of the True Current and Fair Market Value of Real
Estate Properties both issued under the name of Salvador Sr.
On January 5, 2010, the MTCC rendered a judgment in favor of
Salvador Jr., dismissing the complaint on the ground of res
judicata. The MTCC found that there is substantial identity of
parties in the first and second unlawful detainer cases because
Salvador Jr. is the successor-in-interest of his father, who is the
defendant in the first case, and he is the new possessor of the
same property subject of the second case. With respect to the
identity of the subject matter and cause of action, the MTCC
held that the first and second actions for unlawful detainer were
both based on tolerance, and that the acts of dispossession or
unlawful withholding of possession were the same wrong
alleged and prayed for by petitioners in both Complaints. The
MTCC ruled that the second action is barred by res judicata
because the same evidence in the first action would support
and establish the cause of action in the second action, namely,
the TCT to prove ownership, and the written demand to vacate,
as proof of breach.
Aggrieved, petitioners filed an appeal before the RTC.
On July 9, 2010, the RTC rendered a Decision, finding the
appeal meritorious and holding that the August 10, 1992 MTCC
Resolution approving the Compromise Agreement was not a
judgment on the merits, hence, the principle of res judicata
does not apply. Since both parties claim ownership over Lot
163-A, the RTC made a provisional determination that
petitioners' TCT No. 20126 vested them better title than
Salvador Jr. The dispositive portion of the Decision reads:
WHEREFORE, Premises Considered, the lower court's (MTCC,
Branch 3, Legazpi City) judgment dated 05 January 2010 in Civil
Case No. 5570 is set aside, ·and thus this Court renders
judgment, as follows, to wit:
1. Ordering the appellee Salvador Valenciano, Jr., as well as his
agents, representatives, privies, successors-in-interest, or any
other person/s claiming any right to possess under him to leave
and vacate Lot 163-A, and thereafter transfer possession of this
lot to the appellants Jose Diaz, Jr. and Adelinda D. McMullen;
2. Ordering the appellee Salvador Valenciano, Jr. to pay rentals
for the use of Lot 163-A in the amount of 500 pesos per month
from the time that the complaint in this case was filed in court
until such time that he will vacate this lot;
3. Ordering the appellee Salvador Valenciano, Jr. to pay the
appellants Jose Diaz, Jr. and Adelinda D. McMullen the sums of
30,000 pesos and 20,000 pesos as attorney's fees and litigation
expenses, respectively; and
4. Ordering the appellee Salvador Valenciano, Jr. to pay the
costs of suit.
SO ORDERED.6
Dissatisfied with the RTC Decision, Salvador Jr. filed a petition
for review before the Court of Appeals.
On April 30, 2013, the CA rendered a Decision, the dispositive
portion of which states:
WHEREFORE, premises considered, the instant petition is
GRANTED. The RTC Decision dated 09 July 2010 in Civil Case
No. 10897 is REVERSED and SETASIDE. The MTCC Decision
dated 05 January 2010 in Civil Case No. 5570 is thereby
REINSTATED. Without costs.
SO ORDERED.7
The CA held that the R TC erred in ruling that there is no
identity of parties in the two unlawful detainer cases, and that
there is no judgment on the merits in the first case. Since
petitioners and Salvador Sr. envisioned an end to the litigation
of the first case, subject to compliance with the respective
obligations under the. Compromise Agreement, the CA ruled
that the MTCC resolution approving the Agreement had the
same effect of an ordinary court judgment, which is a judgment
on the merits that immediately became final and executory. The
CA noted that there is substantial identity of parties in both
cases because Salvador Jr. is the son of the defendant in the
first case, and they have shared interest and occupied the same
property prior to the filing of such case. The CA also stated that
after the issuance of the writ of execution in the first case and
the lapse of the period for its implementation, petitioners slept
on their rights for 15 years, which is beyond the period to
enforce a judgment under the Statute of Limitations; hence,
estoppel by laches bars the filing of the second case.
Unconvinced by the CA Decision, petitioners filed a motion for
reconsideration which was denied for lack of merit.
In this Petition for Review on Certiorari, petitioners argue that
the CA decided a question of substance not in accord with laws
and jurisprudence when it reversed the RTC Decision, and held
that all the elements of res judicata are present.8
The core issue to be resolved is whether petitioners' subsequent
unlawful detainer case against Salvador Jr. involving the same
property is barred by res judicata and estoppel by laches due to
a previous unlawful detainer case they had filed against his
father, which was subject of a judicially-approved Compromise
Agreement that was never executed by mere tolerance of
petitioners.
Petitioners argue that the CA erred in ruling that res judicata
bars the second complaint for unlawful detainer because of the
absence of three (3) elements, namely: final judgment on the
merits, identity of parties, and of cause of action.
First, petitioners assert that the Compromise Agreement was a
mere consensual contract that cannot be considered as a
judgment on the merits, because there was no actual
adjudication of the respective rights, contention and issues
raised by the opposing parties.
Second, petitioners insist that there is no identity of parties in
the first and second cases for unlawful detainer because he
cannot be considered as successor-in-interest of his father
Salvador Sr. Petitioners stress that prior to the death of
Salvador Sr., he had already entered into a Compromise
Agreement with them whereby he acknowledged and affirmed
their legal right of possession of the subject property. As such,
it cannot be said that Salvador Jr.’s occupation of the property
was by mere transference of rights or by stepping into the
shoes of his father, because there was nothing to transmit or
step into, as the Compromise Agreement had effectively barred
the same.
Third, petitioners assert that there is a variance in the cause of
action in the two unlawful detainer cases, which negates the
existence of res judicata. They claim that the occupation of
Salvador Jr. is based on his own right and distinct from that of
his father. They also submit that Salvador Jr.’s occupation is
akin to that made through stealth and strategy, which is forcible
entry.
In his Comment, Salvador Jr. argues that all the elements of
resjudicata are present. With respect to the element of final
judgment on the merits, he cites the well-settled rule that a
Compromise Agreement, once approved by order of the court,
is immediately final and executory with the force of res judicata,
and becomes more than a mere private contract binding upon
the parties, as the court's sanction imbues it with the same
effect as any other judgment. Anent the element of identity of
parties, Salvador Jr. points out that he and petitioners are
substantially the same parties as those who were involved in
the first unlawful detainer case, because he is the son and
successor-in-interest of the defendant in the said case.
The petition is meritorious.
Res judicata applies in the concept of "bar by prior judgment" if
the following requisites concur: (1) the former judgment or
order must be final; (2) the judgment or order must be on the
merits; (3) the decision must have been rendered by a court
having jurisdiction over the subject matter and the parties; and
(4) there must be, between the first and the second action,
identity of parties, of subject matter, and of causes of action.9
Apart from petitioners' insistence as to the absence of the three
requisites -judgment on the merits, identity of parties, and
identity of causes of action - the presence of all the other
elements of res judicata are beyond dispute. As can be gleaned
from the records and allegations in the Complaints docketed as
Civil Case Nos. 3931 and 5570, the Compromise Agreement in
the first unlawful detainer case involving the same property in
Legazpi City subject of the second unlawful detainer case, is
already final and executory, as it was duly approved by the
MTCC ofLegazpi City, which has jurisdiction over the ejectment
case and the parties.
Anent the first disputed requisite of res judicata, a judgment is
said to be "on the merits" when it amounts to a legal
declaration of the respective rights and duties of the parties
based upon disclosed facts.10 It is that which rendered by the
court after the parties have introduced their respective
evidence, with the primary objective in view of concluding
controversies or determining the rights of the parties.11
"Merits" has been defined as a matter of substance in law, as
distinguished from a matter of form; it refers to the real or
substantial grounds of action or defense, as contrasted with
some technical or collateral matter raised in the course of the
suit.
The Court held in one case12 that a ruling based on a motion to
dismiss, without any trial on the merits or formal presentation
of evidence, can still be a judgment on the merits. Even a
dismissal on the ground of failure to state a cause of action may
operate as res judicata on a subsequent case involving the
same parties, subject matter, and causes of action, provided
that the order of dismissal actually ruled on the issues raised.13
What appears to be essential to a judgment on the merits is
that it be a reasoned decision, which clearly states the facts and
the law on which it is based.14
Contrary to petitioners’ view and the RTC ruling that the
Compromise Agreement approved by the MTCC does not
constitute as a judgment on the merits, jurisprudence holds that
a judgment based on Compromise Agreement is a judgment on
the merits,15 wherein the parties have validly entered into
stipulations and the evidence was duly considered by the trial
court that approved the Agreement.16
A judgment by Compromise is a judgment embodying a
Compromise Agreement entered into by the parties in which
they make reciprocal concessions in order to terminate a
litigation already instituted.17 A Compromise approved by final
order of the court has the force of res judicata between the
parties, and cannot and should not be disturbed except for vices
of consent or forgery, it being the obvious purpose of such
Compromise to settle once and for all the issues involved and
bar all future disputes and controversies.18 Clearly, the
Resolution dated August 10, 1992 of the MTCC approving the
Compromise Agreement has the same effect as an ordinary
judgment, which immediately became final and executory with
the force of res judicata. As correctly noted by the CA:
[O]nce stamped with judicial imprimatur, a Compromise
Agreement becomes more than a mere contract binding upon
the parties. Having the sanction of the court and entered as its
determination of the controversy, it has the force and effect of
any other judgment. Thus, the Resolution approving the
Compromise Agreement had the same effect of an ordinary
court judgment, which immediately became final and executory
as to those who are bound thereby. Verily, [petitioners] and
Salvador [Sr.] envisioned an end to the litigation of the First
Case except only as regards to the compliance with [the]
respective obligations thereunder in the conclusion of the said
Agreement. Indeed, the Resolution was a judgment on the
merits, thus satisfying the third element of res judicata. 19
In Palarea v. De Anzon,20 the Court rejected appellants'
argument questioning the validity of the judgment upon the
contention that the lower court, in merely transcribing the
Compromise Agreement, has failed to make findings of fact and
conclusions of law in the decision, as the law requires. The
Court held that in contemplation of law, the lower court is
deemed to have adopted the same statement of facts and
conclusions of law made and resolved by the parties themselves
in their Compromise Agreement; and their consent has
rendered it both unnecessary and improper for the court to still
make preliminary adjudication of the matters thereunder
covered.
Equally devoid of merit is petitioners' stance that there is no
substantial identity of parties between the first unlawful
detainer case where Salvador Sr. was the defendant, and the
second case where Salvador Jr. is the defendant. There is
identity of parties where the parties in both actions are the
same, or there is privity between them, or they are successors-
in-interest by title subsequent to the commencement of the
action, litigating for the same thing and under the same title
and in the same capacity.21 Privity exists between a decedent
and his heir, next of kin, devisee, or legatee, and a judgment
for or against a decedent prior to his death will conclude such
persons as to all matters in issue in the case and determined by
the judgment.22 In this case, substantial identity of parties in
both unlawful detainer cases is aptly underscored by the CA:
In the instant case, it is undisputed that petitioner Valenciano
[Salvador Jr.] is the son of the deceased Salvador [Sr.], against
whom the First Case was instituted.1âwphi1 In his Position
Paper, petitioner Valenciano [Salvador Jr.] stated that he, his
father Salvador, and the rest of their family have been in "open,
peaceful, and actual possession" of Lot No. 163-A until the
institution of the First Case. Moreover, petitioner Valenciana
[Salvador Jr.] likewise alleged that after the death of his father,
he continued the possession of the said lot up to the present.
Considerably, petitioner Valenciano [Salvador Jr.] and Salvador
[Sr.] during the latter's lifetime, have shared the same interest
over the said property and have occupied the same Lot prior to
the institution of the First Case. Such identity of interest is
sufficient to make them privy-in-law, thereby satisfying the
requisite of substantial identity of parties.23
Considering further that family, relatives, and other privies of
the defendant are as much bound by the judgment in an
ejectment case as the party from whom they derive their
possession,24 petitioners cannot claim that there is no identity
of parties in the first and second unlawful detainer cases.
Be that as it may, petitioners are partly correct that there is no
identity of cause of action between the first and second
unlawful detainer cases, but not for the reason that Salvador
Jr.’s occupation is akin to forcible entry made through stealth
and strategy - an allegation that is nowhere to be found in the
Complaints.
The Rules of Court defines cause of action as an act or omission
by which a party violates a right of another.25 One of the tests
to determine the identity of causes of action so as to warrant
application of res judicata is the "same evidence rule." In
ascertaining the identity of causes of action, the test is to look
into whether or not the same evidence fully supports and
establishes both the present and the former causes of action.26
If the answer is in the affirmative, the former judgment would
be a bar; otherwise, that prior judgment would not serve as
such a bar to the subsequent action.27 In an unlawful detainer
case, the evidence needed to establish the cause of action
would be the lease contract and the violation of that lease.28
However, in this case where a person occupies the land of
another at the latter’s tolerance or permission, without any
contract between them, what must be· proven is that such
possession is by mere tolerance, and that there was a breach of
implied promise to vacate the land upon demand.
Applying the "same evidence rule," the Court cannot fully agree
with the MTCC that the evidence necessary to obtain affirmative
in the second unlawful detainer case based on tolerance is the
same as in the first one which· is also based on tolerance. While
petitioners correctly rely on the same transfer certificate of title
(TCT No. 20126) as proof of ownership and right to possession
of the property subject of both cases, the Court finds that
separate and distinct demand letters are required to prove the
different breaches of implied promise to vacate the property,
namely, the demand letter29 addressed to Salvador Sr., and the
demand letter dated February 9, 2009 addressed to Salvador Jr.
It bears stressing the refusal to comply with the first demand to
vacate constitutes a cause of action for unlawful detainer in Civil
Case No. 3931, while the refusal to comply with the second
demand to vacate creates a different cause of action for
unlawful detainer in Civil Case No. 5570. The first case deals
with Salvador Sr.'s possession by mere tolerance of petitioners,
while the second case refers to Salvador Jr.’s possession by
mere tolerance, which arose when they neglected to execute
the judgment in the first case.
The CA thus committed reversible error when it overlooked that
fact that the cause of action in the first unlawful detainer case is
Salvador Sr.’s breach of the implied promise to vacate the
property being occupied by his family by mere tolerance of
petitioners, whereas the cause of action in the second case is
another breach of implied promise to vacate the same property
by Salvador Jr., the son and successor-in-interest of Salvador
Sr., despite the judicially-approved Compromise Agreement
which petitioners neglected to enforce even after the issuance
of a writ of execution.
The CA likewise erred in ruling that petitioners' inaction for a
period of about 15 years after the issuance of the writ of
execution calls for the application of the equitable doctrine of
estoppel by laches under Article 1144 (3)30 of the New Civil
Code. Suffice it to state that said provision pertains to the
prescriptive period to enforce or revive a final judgment.
Granted that respondents can no longer enforce the judgment
in the first unlawful detainer case due to the lapse of the
reglementary period to execute the same, they can still file a
similar action involving the same property based on the
different cause of action.
Under Article 1144 (3), in relation to Article 115231 of the New
Civil Code and Section 6, Rule 3932 of the Rules of Court, once
a judgment becomes final and executory, the prevailing party
may have it executed as a matter of right by mere motion
within five (5) years from the date of entry of judgment. If such
party fails to have the decision enforced by a motion after the
lapse of 5 years, the same judgment is reduced to a right of
action which must be enforced by the institution of a petition in
a regular court within ten (10) years from the time the
judgment becomes final; otherwise, the judgment can no longer
be executed, for being barred by laches. Verily, the said
provisions on enforcement and revival of judgment do not apply
to the filing of a subsequent action which is based on a different
cause of action.
In Limpan Investment Corporation v. Sy,33 the Court held that
although the first action of the owner for the ejectment of the
tenant was dismissed by the court under a judgment that
became final and executory, such dismissal does not preclude
the owner from making a new demand upon the tenant to
vacate should the latter again fail to pay the rents due. This is
because the second demand for the payment of the rents and
for the surrender of the possession of the leased premises and
the refusal of the tenant to vacate constitutes a new cause of
action. Thus, the action on the first case could not serve as a
bar to the second action for ejectment.
Significantly, as the registered owners, petitioners' right to eject
any person illegally occupying their property cannot be barred
by laches.34 In Labrador v. Pobre, 35 the Court held that:
... As a registered owner, petitioner has a right to eject any
person illegally occupying his property. This right is
imprescriptible and can never be barred by laches. In Bishop v.
Court of Appeals, we held, thus:
As registered owners of the lots in question, the private
respondents have a right to eject any person illegally occupying
their property. This right is imprescriptible. Even if it be
supposed that they were aware of the petitioners' occupation of
the property, and regardless of the length of that possession,
the lawful owners have a right to demand the return of their
property at any time as long as the possession was
unauthorized or merely tolerated, if at all. This right is never
barred by laches.
It bears emphasis that Salvador Jr.’s claim of right of ownership
and possession of the subject property is merely anchored on a
tax declaration36 dated October 13, 1978 and a sworn
statement of the current and fair market value thereof dated
June 23, 1983, both under the name of his father, Salvador Sr.
In contrast, petitioners' claim over the subject property is based
on TCT No. 20126,37 a tax declaration38 and a certification39
of payment of realty taxes issued under the name of petitioner
Diaz Jr. Considering the principles that tax declarations and
realty tax payments are not conclusive proof of ownership or
possession, and that a certificate of title under the Torrens
system serves as evidence of an indefeasible title to the
property in favor of the person whose name appears thereon,
the Court holds that petitioners have proven by preponderant
evidence better right to ownership and possession of the
subject property, and that Salvador Jr.’s occupation is by mere
tolerance of petitioners.
The oft-repeated rule is that a person who occupies the land of
another at the latter's tolerance or permission, without any
contract between them, is bound by an implied promise that he
will vacate the same upon demand, failing which a summary
action for ejectment is the proper remedy against him.40 Since
Salvador Jr.’s occupation is by mere tolerance of petitioners, he
is bound by an implied promise that he will vacate the property
upon demand. His status is analogous to that of a lessee or
tenant whose term of lease has expired but whose occupancy
continued by tolerance of the owner.41
On a final note, the adjudication of ownership in an ejectment
case may be necessary to decide the question of material
possession, but such determination is merely provisional, as it
will not bar or prejudice an action between the same parties
involving title to the property, if and when such action is
brought seasonably before the proper forum.42
WHEREFORE, premises considered, the Petition for Review on
Certiorari is GRANTED. The Decision dated April 30, 2013 of the
Court of Appeals in CA-G.R. SP No. 115316 is REVERSED and
SET ASIDE, while the Decision dated July 9, 2010 of the
Regional Trial Court of Legazpi City, Branch 5, in Civil Case No.
10897 is REINSTATED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
SECOND DIVISION
December 6, 2017
G.R. No. 206184
SPOUSES ED DANTE LATONIO AND MARY ANN LATONIO and
the minor ED CHRISTIAN LATONIO, Petitioners
vs.
MCGEORGE FOOD INDUSTRIES INC., CEBU GOLDEN FOODS
INDUSTRIES, INC., and TYKE PHILIP LOMIBAO, Respondents
DECISION
PERALTA, J.:
Before this Court is a petition for review1 via Rule 45 of the
Rules of Court assailing the Decision2 dated September 28,
2012 and Resolution3 dated January 31, 2013 of the Court of
Appeals (CA), Cebu City in CA-G.R. CV No. 03079, which
reversed and set aside the Decision4 of the Regional Trial Court
(RTC) Branch 22, Cebu City and denied the motion for
reconsideration, respectively.
The facts are as follows:
On September 17, 2000, the petitioners, spouses Ed Dante (Ed)
and Mary Ann Latonio (Mary Ann); accompanied their eight-
month-old child Ed Christian to a birthday party at the
McDonald's Restaurant, Ayala Center, Cebu City.
During the party and as part of the birthday package,
McDonald's presented two mascots – "Birdie" and "Grimace" -
to entertain and dance for the guests. Respondent Tyke Philip
Lomibao (Lomibao )5 was the person inside the "Birdie" mascot
suit.
After the mascots danced, guests had their pictures taken with
them. Intending to have her child's photo taken with the
mascots, Mary Ann placed Ed Christian on a chair in front of the
mascot "Birdie." The mascot positioned itself behind the child
and extended its "wings" to give a good pose for the camera.
As photos were about to be taken, Mary Ann released her hold
of Ed Christian. Seconds later, the child fell head first from the
chair onto the floor.
Several guests attended to Ed Christian. Meanwhile, the
employees of respondent McDonald’s Cebu Golden Food6 (Cebu
Golden Food) assisted petitioners in giving first aid treatment to
Ed Christian. Petitioners, nevertheless, remained and continued
with the party and left only after the party was over.
At about 9:30 in the evening of the same day, Mary Ann called
up Cebu Golden Food to inform them that their doctor advised
them to get an x-ray examination on Ed Christian. Cebu Golden
Food then assured her that they were willing to shoulder the
expenses for the x-ray examination of Ed Christian. Later,
McDonald’s reimbursed Mary Ann for the expenses incurred
relative to the x-ray examination. It further offered to pay the
expenses for the CT scan to be conducted on Ed Christian.
For some time, nothing was heard from petitioners.
Nonetheless, a staff of Cebu Golden Food visited the Latonios in
their residence to follow up the results of the CT scan test. The
staff was met by the brother of Mary Ann, who allegedly
repeatedly shouted at them saying that they would file a case
against Cebu Golden Food. Thus, Cebu Golden Food reported
the incident to their licensor, McGeorge Food Industries, Inc.
Sometime in October 2000, McGeorge received a Letter from
the lawyer of the Latonios regarding the September 17, 2000
incident. In its reply, McGeorge immediately assured the
Latonios that the health and safety of all McDonald's customers
is its utmost concern and that the best medical and hospital
care would be made available to Ed Christian.
McGeorge also sent its Field Service Director, together with its
lawyer, to meet with the Latonios and their lawyers to assure
them that McDonald's was ready to assist in whatever medical
attention would be required of Ed Christian.
During the meeting, McGeorge agreed to contact a neurologist
for consultation to ensure Ed Christian’s health. McGeorge
conferred and consulted with two neurosurgeons at the St.
Luke's Medical Center and the Makati Medical Center, who both
recommended to first study the x-ray results and CT scan to
determine the extent of the injury sustained by the baby.
Thereafter, McGeorge relayed the doctor’s requirement to the
Latonios who initially agreed to give McGeorge copies of the x-
ray and CT scan results. However, the Latonios had a change of
heart and informed McGeorge that they had decided against
lending them the x-ray and CT scan results and other related
medical records.
Instead, the Latonios sent a Letter to McGeorge demanding for
compensation in the amount of Fifteen Million Pesos
(₱15,000,000.00).
As their demand remained unheeded, the Latonios caused the
publication of the accident in the local newspaper, Sun Star
Cebu on February 8, 2001 with a headline "Food outlet sued for
₱.9 M damages". Simultaneously, the Latonios also instituted a
complaint for damages and attorney's fees against McGeorge.
On March 3, 2009, the RTC, in Civil Case No. CEB-26126, issued
a Decision,7 the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiffs and against defendants Tyke
Philip Lomibao and Cebu Golden Foods, Inc., finding defendant
Tyke Philip Lomibao liable for acts of negligence causing the fall
of baby Ed Christian Latonio and correspondingly, finding
defendant Cebu Golden Foods, Inc. liable solidarily with
defendant Tyke Philip Lomibao, pursuant to Article 2180 of the
New Civil Code inasmuch as defendant Cebu Golden Foods, Inc.
was the employer of defendant Tyke Philip Lomibao.
Accordingly, defendants Tyke Philip Lomibao and Cebu Golden
Foods, Incorporated, are hereby ordered to pay to the plaintiffs
the following:
1. ₱900,000.00 as Moral Damages;
2. ₱50,000.00 as Exemplary Damages, and
3. ₱300,000.00 as Attorney's fees.
The case against defendant McGeorge Food Industries Inc., is
hereby dismissed for lack of evidence.
SO ORDERED.
Aggrieved, Cebu Golden Food and Lomibao filed an appeal
before the Court of Appeals-Cebu City.
On September 28, 2012, in its assailed Decision, the Court of
Appeals reversed the trial court's decision and said that the trial
court overlooked substantial facts and circumstances which, if
properly considered, would justify a different conclusion and
alter the results of the case. The dispositive portion of the
decision reads, thus:
WHEREFORE, the appeal is GRANTED. The Decision dated 03
March 2009 of the Regional Trial Court, Branch 22, Cebu City is
REVERSED and SET ASIDE. Civil Case No. CEB-26126 is
DISMISSED for lack of merit. The compulsory counterclaims of
defendants-appellants are DENIED. No costs.
SO ORDERED.8
Thus, the instant petition for review under Rule 45 of the Rules
of Court brought before this Court raising the sole issue of:
Whether the Court of Appeals erred in ruling that the proximate
cause of Ed Christian’s fall was the negligence of petitioner
Mary Ann Latonia. 9
The trial court held Cebu Golden Food is liable because the
proximate cause of Ed Christian’s fall is the negligence of their
employee, Lomibao. On the other hand, the Court of Appeals
reversed the trial court's decision and held that Ed Christian’s
mother, Mary Ann, is liable because the proximate cause of the
child's fall was Mary Ann's act of leaving her eightmonth- old
child, Ed Christian, in the "hands" of Lomibao who was at the
time wearing the Birdie mascot costume.
We find no merit on this instant petition.
The principle is well-established that this Court is not a trier of
facts. Therefore, in an appeal by certiorari under Rule 45 of the
Rules of Court, only questions of law may be raised. The
resolution of factual issues is the function of the lower courts
whose findings on these matters are received with respect and
are, as a rule, binding on this Court.10
However, this rule is subject to certain exceptions. One of these
is when the findings of the appellate court are contrary to those
of the trial court.11 It is also settled that the appellate courts
will not as a general rule disturb the findings of the trial court,
which is in a better position to determine the same. The trial
court has the distinct advantage of actually hearing the
testimony of and observing the deportment of the witnesses.
Nevertheless, the rule admits of exceptions such as when its
evaluation was reached arbitrarily, or it overlooked or failed to
appreciate some facts or circumstances of weight and
substance which could affect the result of the case,12 as what
happened in the instant case.
In the instant case, there is no dispute that petitioners suffered
damages because of Ed Christian's fall. However, as to the
issues on negligence and proximate cause, the Court of Appeals
and the trial court gave contradicting findings.
As the action is predicated on negligence, the relevant law is
Article 2176 of the Civil Code, which states that-
Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there was no pre-existing
contractual relation between the parties, is called quasi-delict
and is governed by the provisions of this chapter.
The trial court held that the proximate cause of Ed Christian's
fall and the resulting injury was Lomibao’s act of holding the
baby during the party which was purportedly prohibited under
the rules and policy of the establishment.
We disagree.
Indeed, the testimony of Mary Ann herself on cross-examination
is telling. Thus:
xxxx
Q. And when you said that you informed the mascot, what
exact words did you use?
A. I tap (sic) him on his side and then I called him that I am
going to have the taking of pictures with my baby.
xxxx
Q. Now did you wait for the mascots to make a reply?
A. He was looking at me and he look (sic) at my face.
Q. Did he make a reply?
A. No, Ma’am.
Q. Did you see his eyes looking at you?
A. No, Ma’am.
x x x.13
ATTY. ABELLA A. There was an opening of the costume near the mouth. If the Q: Can you tell us or can you give us any reason why you move
mascot cannot see, then how can he play with the kids? (sic) to the side?
xxxx
Q. You said that you told the mascot that you were leaving the A: Because I motioned my husband already that he would take
Q. And at the time you already observed that the person was baby to him? a picture of the baby and the mascot before I left and I am so
wearing a thick leather suit? sure that the baby is securely (sic) with the mascot holding the
A. Ipat (sic) him. baby.19
A. Yes.
Q. Did you see the ears of the person inside the mascot? xxxx
Q. Did you actually see the body of the person who lift (sic)
your baby then? A. No. Q. And your child at that time was eight (8) months old?

A. No.
Q. Did you see the hands inside the costume?
A. Of course, I cannot see the hands.
Q. Did you see the arms of the person inside the mascot?
A. I cannot because he is (sic) wearing a costume.14
COURT
Q. You were not sure that when you handed the baby it was
firmly held by the mascot?
A. I placed the baby in front of the mascot.
Q. You were not aware about the hands when you turned over
the baby because it was a mascot?
A. I was sure because I can feel the hands and my baby was
standing in front of him; and he is doing like this (witness
demonstrating).15
ATTY. ABELLA
Q. Did you see the eyes of the person inside the mascot
costume?
A. No.
Q. Were you aware if there were openings for the eyes of the
person inside the mascot?
A. Yes, I was aware.
Q. The eyesin this mascot costume actually had no opening?
A. Yes, no opening.16
Q. Did you even know if there was an opening for the ears at
the person wearing the mascot costume?
A. No, but I was nearer the mascot.
x x x.17
We agree with the appellate court that despite Mary Ann’s
insistence that she made sure that her baby was safe and
secured before she released her grasp on Ed Christian, her own
testimony revealed that she had, in fact, acted negligently and
carelessly, to wit:
Q. Now when you said that you made sure that the mascot was
holding your baby, what action did you do to insure that?
A. When I saw that the mascot was holding my baby so I make
(sic) a motion to my husband for the picture taking so I left
beside. I backed off a little bit.
x x x x.
Q. I will not risk my baby if I am not sure that the mascot was
not inserting his hands over my baby when I left the scene. The
(sic) I am sure that the baby was already safe in the hands of
the mascot.
Q. When you say that you make (sic) sure you just relied on
your sight?
A. Yes, ma'am.18
xxxx
Q: Did you check what part of your child's body was in contact
in any part of the mascot’s body?
A: Partly it was here on the waist of the child until (sic) the
armpit.
A: Yes, ma’am.
Q: He cannot stand on his own?
A: He can stand but he has to have support.
Q: He cannot walk on his own at that time?
A: At that time with support."
x x x.20
More telling is the ratiocination of the Court of Appeals, which
we quote with approval:
Indeed, it is irresponsible for a mother to entrust the safety,
even momentarily, of her eight-month-old child to a mascot, not
to mention a bird mascot in thick leather suit that had no arms
to hold the child and whose diminished ability to see, hear, feel,
and move freely was readily apparent. Moreover, by merely
tapping the mascot and saying "papicture ta", Mary Ann Latonio
cannot be said to have "told, informed and instructed the
mascot that she was letting the mascot hold the baby
momentarily." Releasing her grasp of the baby without waiting
for any indication that the mascot heard and understood her is
just plain negligence on the part of Mary Ann.
To Our mind, what is more in accord with human experience
and dictates of reason is that a diligent mother would naturally
ensure first and foremost the safety of her child before
releasing her hold on him. Such is not the case here. Mary Ann
Latonio, in placing Ed Christian on a chair and expecting a bird
mascot to ensure the child's safety, utterly failed to observe the
degree of diligence expected of her as a mother of an eight-
month- old baby.21
Clearly, based on the foregoing, Mary Ann’s negligence was the
proximate cause of Ed Christian’s fall which caused him injury.
Proximate cause is defined as –

COURT Q: Now you said that you move (sic) further to the side from that cause, which, in natural and continuous sequence,
where your baby was standing, is that your testimony? unbroken by any efficient intervening cause, produces the
Q. You entrusted the baby even if there was no opening of the injury, and without which the result would not have occurred.
eyes? A: Yes, ma’am. And more comprehensively, the proximate legal cause is that
acting first and producing the injury, either immediately or by
setting other events in motion, all constituting a natural and
continuous chain of events, each having a close causal
connection with its immediate predecessor, the final event in
the chain immediately effecting the injury as a natural and
probable result of the cause which first acted, under such
circumstances that the person responsible for the first event
should, as an ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default
that an injury to some person might probably result
therefrom.22
Here, it is beyond dispute that the cause of Ed Christian’s fall is
traceable to the negligent act of Mary Ann of leaving him in the
"hands" of Lomibao who was wearing the Birdie mascot suit.
We noted that "hands" and "wings" were used interchangeably
during the testimonies of the witnesses, thus, causing
confusion. However, it must be stressed that while indeed
Lomibao has hands of his own, at the time of the incident he
was wearing the Birdie mascot suit. Suffice it to say that the
Birdie mascot suit have no hands but instead have wings.
Lomibao cannot possibly hold or grasp anything while wearing
the thick Birdie mascot suit. In fact, even if he wanted to hold
Ed Christian or anything, he could not possibly do so because
he was wearing the Birdie mascot suit which do not even have
hands or fingers to be able to hold or grasp firmly.
Notably, while the CA and the trial court made conflicting
rulings on the negligence of Cebu Golden Food and Lomibao,
they, however, concur on Mary Ann's own negligence. The trial
court's summation of Mary Ann's own negligence is as follows:
xxxx
A review of their testimonies would reveal that although we
ascribe negligence of defendant Lomibao we, likewise,
unraveled that plaintiff herself was not entirely blameless.
Therefore, plaintiff Mary Ann Latonio was likewise negligent.
Why was she negligent can be traced to the fact as established
that she left her eight-month-old baby on top of a chair to the
temporary custody of a mascot. Even if the baby was only left
for a few seconds or minutes that could already spell a disaster,
in fact, it really happened. The baby fell from the chair and
went straight into the floor head first. Even if she already
informed and told the mascot that she was leaving the baby to
his hold she should not have let go of her grip because as a
mother she ought to exercise the commensurate prudence and
case.
x x x."23
Thus, all the aforementioned circumstances lead us to no other
conclusion than that the proximate cause of the injury sustained
by Ed Christian was due to Mary Ann's own negligence.
All told, in the absence of negligence on the part of respondents
Cebu Golden Foods and Lomibao, as well as their management
and staff, they cannot be made liable to pay for the damages
prayed for by the petitioners.
To warrant the recovery of damages, there must be both a right
of action for a legal wrong inflicted by the defendant, and
damage resulting to the plaintiff therefrom.1âwphi1 Wrong
without damage, or damage without wrong, does not constitute
a cause of action, since damages are merely part of the remedy
allowed for the injury caused by a breach or wrong.24
Many accidents occur and many injuries are inflicted by acts or
omissions which cause damage or loss to another but which
violate no legal duty to such other person, and consequently
create no cause of action in his favor. In such cases, the
consequences must be borne by the injured person alone. The
law affords no remedy resulting from an act which does not
amount to a legal injury or wrong.25
WHEREFORE, premises considered, the Decision dated
September 28, 2012 and Resolution dated January 31, 2013 of
the Court of Appeals in CA-G.R. CV No. 03079 are hereby
AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
SECOND DIVISION
G.R. No. 217426, December 04, 2017
ST. MARTIN POLYCLINIC, INC., Petitioner, v. LWV
CONSTRUCTION CORPORATION, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated July 11, 2014 and the Resolution3 dated
February 27, 2015 of the Court of Appeals (CA) in CA-G.R. SP
No. 125451, which affirmed with modification the Decision4
dated December 15, 2011 and the Order dated May 25, 2012 of
the Regional Trial Court of Mandaluyong City, Branch 211 (RTC)
in SCA Case No. MC11-879 (Civil Case No. 21881), and thereby
ordered herein petitioner St. Martin Polyclinic, Inc. (petitioner)
to pay respondent LWV Construction Corporation (respondent)
temperate damages in the amount of P50,000.00.
The Facts
Respondent is engaged in the business of recruiting Filipino
workers for deployment to Saudi Arabia.5 On the other hand,
petitioner is an accredited member of the Gulf Cooperative
Council Approved Medical Centers Association (GAMCA) and as
such, authorized to conduct medical examinations of
prospective applicants for overseas employment.6
On January 10, 2008, respondent referred prospective applicant
Jonathan V. Raguindin (Raguindin) to petitioner for a pre-
deployment medical examination in accordance with the
instructions from GAMCA.7 After undergoing the required
examinations, petitioner cleared Raguindin and found him "fit
for employment," as evidenced by a Medical Report8 dated
January 11, 2008 (Medical Report).9
Based on the foregoing, respondent deployed Raguindin to
Saudi Arabia, allegedly incurring expenses in the amount of
P84,373.41.10 Unfortunately, when Raguindin underwent
another medical examination with the General Care Dispensary
of Saudi Arabia (General Care Dispensary) on March 24, 2008,
he purportedly tested positive for HCV or the hepatitis C virus.
The Ministry of Health of the Kingdom of Saudi Arabia (Ministry
of Health) required a re-examination of Raguindin, which the
General Care Dispensary conducted on April 28, 2008.11
However, the results of the re-examination remained the same,
i.e., Raguindin was positive for HCV, which results were
reflected in a Certification12 dated April 28, 2008 (Certification).
An undated HCV Confirmatory Test Report13 likewise conducted
by the Ministry of Health affirmed such finding, thereby leading
to Raguindin's repatriation to the Philippines.14
Claiming that petitioner was reckless in issuing its Medical
Report stating that Raguindin is "fit for employment" when a
subsequent finding in Saudi Arabia revealed that he was
positive for HCV, respondent filed a Complaint15 for sum of
money and damages against petitioner before the Metropolitan
Trial Court of Mandaluyong City, Branch 60 (MeTC). Respondent
essentially averred that it relied on petitioner's declaration and
incurred expenses as a consequence. Thus, respondent prayed
for the award of damages in the amount of P84,373.41
representing the expenses it incurred in deploying Raguindin
abroad.16
In its Answer with compulsory counterclaim,17 petitioner denied
liability and claimed that: first, respondent was not a proper
party in interest for lack of privity of contract between them;
second, the MeTC had no jurisdiction over the case as it
involves the interpretation and implementation of a contract of
employment; third, the action is premature as Raguindin has
yet to undergo a post-employment medical examination
following his repatriation; and fourth, the complaint failed to
state a cause of action as the Medical Report issued by
petitioner had already expired on April 11, 2008, or three (3)
months after its issuance on January 11, 2008.18
The MeTC Ruling
In a Decision19 dated December 17, 2010, the MeTC rendered
judgment in favor of respondent and ordered petitioner to pay
the amount of P84,373.41 as actual damages, P20,000.00 as
attorney's fees, and the costs of suit.20
At the onset, the MeTC held that it had jurisdiction over the
case, since respondent was claiming actual damages incurred in
the deployment of Raguindin in the amount of P84,373.41.21 It
further ruled that respondent was a real party in interest, as it
would not have incurred expenses had petitioner not issued the
Medical Report certifying that Raguindin was fit to work.
On the merits, the MeTC found that respondent was entitled to
be informed accurately of the precise condition of Raguindin
before deploying the latter abroad and consequently, had
sustained damage as a result of the erroneous certification.22
In this relation, it rejected petitioner's contention that Raguindin
may have contracted the disease after his medical examination
in the Philippines up to the time of his deployment, there being
no evidence offered to corroborate the same.23
Aggrieved, petitioner appealed to the RTC, contending,24
among others, that respondent failed to comply with the
requirements on the authentication and proof of documents
under Section 24,25 Rule 132 of the Rules of Court, considering
that respondent's evidence, particularly the April 28, 2008
Certification issued by the General Care Dispensary and the HCV
Confirmatory Test Report issued by the Ministry of Health, are
foreign documents issued in Saudi Arabia.
The RTC Ruling
In a Decision26 dated December 15, 2011, the RTC dismissed
petitioner's appeal and affirmed the MeTC Decision in its
entirety.27 Additionally, the RTC pointed out that petitioner can
no longer change the theory of the case or raise new issues on
appeal, referring to the latter's argument on the authentication
of respondent's documentary evidence.28
Petitioner's motion for reconsideration29 was denied in an
Order30 dated May 25, 2012. Dissatisfied, petitioner elevated
the case to the CA.31
The CA Ruling
In a Decision32 dated July 11, 2014, the CA affirmed the RTC
Decision, with the modification deleting the award of actual
damages and instead, awarding temperate damages in the
amount of P50,000.00.33
The CA held that petitioner failed to perform its duty to
accurately diagnose Raguindin when it issued its Medical Report
declaring the latter "fit for employment", considering that he
was subsequently found positive for HCV in Saudi Arabia.34
Further, the CA opined that the Certification issued by the
General Care Dispensary is not a public document and in such
regard, rejected petitioner's argument that the same is
inadmissible in evidence for not having been authenticated.
Moreover, it remarked that petitioner's own Medical Report does
not enjoy the presumption of regularity as petitioner is merely
an accredited clinic.35 Finally, the CA ruled that petitioner could
not disclaim liability on the ground that Raguindin tested
positive for HCV in Saudi Arabia after the expiration of the
Medical Report on April 11, 2008, noting that the General Care
Dispensary issued its Certification on April 28, 2008, or a mere
seventeen (17) days from the expiration of petitioner's Medical
Report.36 Hence, the CA concluded that "it is contrary to
human experience that a newly-deployed overseas worker, such
as Raguindin, would immediately contract a serious virus at the
very beginning of a deployment."37
However, as the records are bereft of evidence to show that
respondent actually incurred the amount of P84,373.41 as
expenses for Raguindin's deployment, the CA deleted the award
of actual damages and instead, awarded temperate damages in
the amount of P50,000.00.38
Aggrieved, petitioner filed a motion for partial
reconsideration,39 which the CA denied in a Resolution40 dated
February 27, 2015; hence, this petition.
The Issue Before the Court
The essential issue advanced for the Court's resolution is
whether or not petitioner was negligent in issuing the Medical
Report declaring Raguindin "fit for employment" and hence,
should be held liable for damages.
The Court's Ruling
The petition is granted.
I.
At the outset, it should be pointed out that a re-examination of
factual findings cannot be done acting on a petition for review
on certiorari because the Court is not a trier of facts but reviews
only questions of law.41 Thus, in petitions for review on
certiorari, only questions of law may generally be put into issue.
This rule, however, admits of certain exceptions, such as "when
the inference made is manifestly mistaken, absurd or
impossible"; or "when the findings are conclusions without
citation of specific evidence on which they are based."42
Finding a confluence of certain exceptions in this case, the
general rule that only legal issues may be raised in a petition for
review on certiorari under Rule 45 of the Rules of Court would
not apply, and the Court retains the authority to pass upon the
evidence presented and draw conclusions therefrom.43
II.
An action for damages due to the negligence of another may be
instituted on the basis of Article 2176 of the Civil Code, which
defines a quasi-delict:
Article 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
The elements of a quasi-delict are: (1) an act or omission; (2)
the presence of fault or negligence in the performance or non-
performance of the act; (3) injury; (4) a causal connection
between the negligent act and the injury; and (5) no pre-
existing contractual relation.44
As a general rule, any act or omission coming under the
purview of Article 2176 gives rise to a cause of action under
quasi-delict. This, in turn, gives the basis for a claim of
damages.45 Notably, quasi-delict is one among several sources
of obligation. Article 1157 of the Civil Code states:
Article 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
However, as explained by Associate Justice Marvic M.V.F.
Leonen (Justice Leonen) in his opinion in Alano v. Magud-
Logmao46 (Alano), "Article 2176 is not an all-encompassing
enumeration of all actionable wrongs which can give rise to the
liability for damages. Under the Civil Code, acts done in
violation of Articles 19, 20, and 21 will also give rise to
damages."47 These provisions - which were cited as bases by
the MTC, RTC and CA in their respective rulings in this case -
read as follows:
Article 19. 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.
Article 20. Every person who, contrary to law, willfully or
negligently causes damage to another, shall indemnify the latter
for the same.
Article 21. Any person who willfully causes loss or injury to
another in a manner that is contrary to morals, good customs,
or public policy shall compensate the latter for the damage.
"[Article 19], known to contain what is commonly referred to as
the principle of abuse of rights, sets certain standards which
must be observed not only in the exercise of one's rights, but
also in the performance of one's duties."48 Case law states that
"[w]hen a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for
which the wrongdoer must be held responsible. But while Article
19 lays down a rule of conduct for the government of human
relations and for the maintenance of social order, it does not
provide a remedy for its violation. Generally, an action for
damages under either Article 20 or Article 21 would [then] be
proper."49 Between these two provisions as worded, it is Article
20 which applies to both willful and negligent acts that are done
contrary to law. On the other hand, Article 21 applies only to
willful acts done contra bonos mores.50
In the Alano case, Justice Leonen aptly elaborated on the
distinctive applications of Articles 19, 20 and 21, which are
general provisions on human relations, vis-a-vis Article 2176,
which particularly governs quasi-delicts:
Article 19 is the general rule which governs the conduct of
human relations. By itself, it is not the basis of an actionable
tort. Article 19 describes the degree of care required so that an
actionable tort may arise when it is alleged together with Article
20 or Article 21.
Article 20 concerns violations of existing law as basis for an
injury. It allows recovery should the act have been willful or
negligent. Willful may refer to the intention to do the act and
the desire to achieve the outcome which is considered by the
plaintiff in tort action as injurious. Negligence may refer to a
situation where the act was consciously done but without
intending the result which the plaintiff considers as injurious.
Article 21, on the other hand, concerns injuries that may be
caused by acts which are not necessarily proscribed by law. This
article requires that the act be willful, that is, that there was an
intention to do the act and a desire to achieve the outcome. In
cases under Article 21, the legal issues revolve around whether
such outcome should be considered a legal injury on the part of
the plaintiff or whether the commission of the act was done in
violation of the standards of care required in Article 19.
Article 2176 covers situations where an injury happens through
an act or omission of the defendant. When it involves a positive
act, the intention to commit the outcome is irrelevant. The act
itself must not be a breach of an existing law or a pre-existing
contractual obligation. What will be considered is whether there
is "fault or negligence” attending the commission of the act
which necessarily leads to the outcome considered as injurious
by the plaintiff. The required degree of diligence will then be
assessed in relation to the circumstances of each and every
case.51 (Emphases and underscoring supplied)
Thus, with respect to negligent acts or omissions, it should
therefore be discerned that Article 20 of the Civil Code concerns
"violations of existing law as basis for an injury", whereas
Article 2176 applies when the negligent act causing damage to
another does not constitute "a breach of an existing law or a
pre-existing contractual obligation."
In this case, the courts a quo erroneously anchored their
respective rulings on the provisions of Articles 19, 20, and 21 of
the Civil Code. This is because respondent did not proffer (nor
have these courts mentioned) any law as basis for which
damages may be recovered due to petitioner's alleged negligent
act. In its amended complaint, respondent mainly avers that
had petitioner not issue a "fit for employment" Medical Report
to Raguindin, respondent would not have processed his
documents, deployed him to Saudi Arabia, and later on - in view
of the subsequent findings that Raguindin was positive for HCV
and hence, unfit to work - suffered actual damages in the
amount of P84,373.41.52 Thus, as the claimed negligent act of
petitioner was not premised on the breach of any law, and not
to mention the incontestable fact that no pre-existing
contractual relation was averred to exist between the parties,
Article 2176 - instead of Articles 19, 20 and 21 - of the Civil
Code should govern.
III.
Negligence is defined as the failure to observe for the protection
of the interests of another person, that degree of care,
precaution and vigilance which the circumstances justly
demand, whereby such other person suffers injury.53
As early as the case of Picart v. Smith,54 the Court elucidated
that "the test by which to determine the existence of negligence
in a particular case is: Did the defendant in doing the alleged
negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence."55 Corollary
thereto, the Court stated that "[t]he question as to what would
constitute the conduct of a prudent man in a given situation
must of course be always determined in the light of human
experience and in view of the facts involved in the particular
case. Abstract speculation cannot here be of much value x x x:
Reasonable men govern their conduct by the circumstances
which are before them or known to them. They are not, and are
not supposed to be, omniscient of the future. Hence[,] they can
be expected to take care only when there is something before
them to suggest or warn of danger."56
Under our Rules of Evidence, it is disputably presumed that a
person takes ordinary care of his concerns and that private
transactions have been fair and regular.57 In effect, negligence
cannot be presumed, and thus, must be proven by him who
alleges it.58 In Huang v. Philippine Hoteliers, Inc.:59
[T]he negligence or fault should be clearly established as it is
the basis of her action. The burden of proof is upon [the
plaintiff]. Section 1, Rule 131 of the Rules of Court provides that
"burden of proof is the duty of a party to present evidence on
the facts in issue necessary to establish his claim or defense by
the amount of evidence required by law." It is then up for the
plaintiff to establish his cause of action or the defendant to
establish his defense. Therefore, if the plaintiff alleged in his
complaint that he was damaged because of the negligent acts
of the defendant, he has the burden of proving such
negligence. It is even presumed that a person takes ordinary
care of his concerns. The quantum of proof required is
preponderance of evidence.60 (Emphasis and underscoring
supplied)
The records of this case show that the pieces of evidence
mainly relied upon by respondent to establish petitioner's
negligence are: (a) the Certification61 dated April 28, 2008; and
(b) the HCV Confirmatory Test Report.62 However, these
issuances only indicate the results of the General Care
Dispensary and Ministry of Health's own medical examination of
Raguindin finding him to be positive for HCV. Notably, the
examination conducted by the General Care Dispensary, which
was later affirmed by the Ministry of Health, was conducted
only on March 24, 2008, or at least two (2) months after
petitioner issued its Medical Report on January 11, 2008.
Hence, even assuming that Raguindin's diagnosis for HCV was
correct, the fact that he later tested positive for the same does
not convincingly prove that he was already under the same
medical state at the time petitioner issued the Medical Report
on January 11, 2008. In this regard, it was therefore incumbent
upon respondent to show that there was already negligence at
the time the Medical Report was issued, may it be through
evidence that show that standard medical procedures were not
carefully observed or that there were already palpable signs
that exhibited Raguindin's unfitness for deployment at that
time. This is hardly the case when respondent only proffered
evidence which demonstrate that months after petitioner's
Medical Report was issued, Raguindin, who had already been
deployed to Saudi Arabia, tested positive for HCV and as such,
was no longer "fit for employment".
In fact, there is a reasonable possibility that Raguindin became
exposed to the HCV only after his medical examination with
petitioner on January 11, 2008. Based on published reports
from the World Health Organization, HCV or the hepatitis C
virus causes both acute and chronic infection. Acute HCV
infection is usually asymptomatic,63 and is only very rarely
associated with life-threatening diseases. The incubation
period64 for HCV is two (2) weeks to six (6) months, and
following initial infection, approximately 80% of people do not
exhibit any symptoms.65 Indisputably, Raguindin was not
deployed to Saudi Arabia immediately after petitioner's medical
examination and hence, could have possibly contracted the
same only when he arrived thereat. In light of the foregoing,
the CA therefore erred in holding that "[h]ad petitioner more
thoroughly and diligently examined Raguindin, it would likely
have discovered the existence of the HCV because it was
contrary to human experience that a newly-deployed overseas
worker, such as Raguindin, would immediately have contracted
the disease at the beginning of his deployment"66
While petitioner's Medical Report indicates an expiration of April
11, 2008, the Court finds it fitting to clarify that the same could
not be construed as a certified guarantee coming from
petitioner that Raguindin's medical status at the time the report
was issued on January 11, 2008 (i.e., that he was fit for
employment) would remain the same up until that date (i.e.,
April 11, 2008). As earlier intimated, the intervening period
could very well account for a number of variables that could
have led to a change in Raguindin's condition, such as his
deployment to a different environment in Saudi Arabia. If at all,
the expiration date only means that the Medical Report is valid -
and as such, could be submitted - as a formal requirement for
overseas employment up until April 11, 2008; it does not, by
any means, create legal basis to hold the issuer accountable for
any intervening change of condition from the time of issuance
up until expiration. Truly, petitioner could not be reasonably
expected to predict, much less assure, that Raguindin's medical
status of being fit for employment would remain unchanged.
Thus, the fact that the Medical Report's expiration date of April
11, 2008 was only seventeen (17) days away from the issuance
of the General Care Dispensary's April 28, 2008 Certification
finding Raguindin positive for HCV should not - as it does not -
establish petitioner's negligence.
IV.
At any rate, the fact that Raguindin tested positive for HCV
could not have been properly established since the courts a
quo, in the first place, erred in admitting and giving probative
weight to the Certification of the General Care Dispensary,
which was written in an unofficial language. Section 33, Rule
132 ofthe Rules of Court states that:
Section 33. Documentary evidence in an unofficial language. -
Documents written in an unofficial language shall not be
admitted as evidence, unless accompanied with a translation
into English or Filipino. To avoid interruption of proceedings,
parties or their attorneys are directed to have such translation
prepared before trial.67
A cursory examination of the subject document would reveal
that while it contains English words, the majority of it is in an
unofficial language. Sans any translation in English or Filipino
provided by respondent, the same should not have been
admitted in evidence; thus their contents could not be given
probative value, and deemed to constitute proof of the facts
stated therein.
Moreover, the due execution and authenticity of the said
certification were not proven in accordance with Section 20,
Rule 132 of the Rules of Court:
Section 20. Proof of private document. - Before any private
document offered as authentic is received in evidence, its due
execution and authenticity must be proved either:
(a)
By anyone who saw the document executed or written; or
(b)
By evidence of the genuineness of the signature or handwriting
of the maker.
(c)
Any other private document need only be identified as that
which it is claimed to be.
Notably, the foregoing provision applies since the Certification
does not fall within the classes of public documents under
Section 19, Rule 132 of the Rules of Court68 - and hence, must
be considered as private. It has been settled that an unverified
and unidentified private document cannot be accorded
probative value.69 In addition, case law states that "since a
medical certificate involves an opinion of one who must first be
established as an expert witness, it cannot be given weight or
credit unless the doctor who issued it is presented in court to
show his qualifications. It is precluded because the party
against whom it is presented is deprived of the right and
opportunity to cross-examine the person to whom the
statements or writings are attributed. Its executor or author
should be presented as a witness to provide the other party to
the litigation the opportunity to question its contents. Being
mere hearsay evidence, failure to present the author of the
medical certificate renders its contents suspect and of no
probative value,"70 as in this case.
Similarly, the HCV Confirmatory Test Report issued by the
Ministry of Health of Saudi Arabia should have also been
excluded as evidence. Although the same may be considered a
public document, being an alleged written official act of an
official body of a foreign country,71 the same was not duly
authenticated in accordance with Section 24,72 Rule 132 of the
Rules of Court. While respondent provided a translation73
thereof from the National Commission on Muslim Filipinos,
Bureau of External Relations, Office of the President, the same
was not accompanied by a certificate of the secretary of the
embassy or legation, consul-general, consul, vice-consul, or
consular agent or any officer in the foreign service of the
Philippines stationed in Saudi Arabia, where the record is kept,
and authenticated by the seal of his office.74
To be sure, petitioner - contrary to respondent's contention75 -
has not changed its theory of the case by questioning the
foregoing documents. As petitioner correctly argued, it merely
amplified its defense76 that it is not liable for negligence when
it further questioned the validity of the issuances of the General
Care Dispensary and Ministry of Health. In Limpangco Sons v.
Yangco77, the Court explained that "[t]here is a difference x x x
between a change in the theory of the case and a shifting of the
incidence of the emphasis placed during the trial or in the
briefs." "Where x x x the theory of the case as set out in the
pleadings remains the theory throughout the progress of the
cause, the change of emphasis from one phase of the case as
presented by one set of facts to another phase made prominent
by another set of facts x x x does not result in a change of
theory x x x".78 In any case, petitioner had already questioned
the validity of these documents in its Position Paper79 before
the MeTC.80 Hence, there is no change of theory that would
preclude petitioner's arguments on this score.
All told, there being no negligence proven by respondent
through credible and admissible evidence, petitioner cannot be
held liable for damages under Article 2176 of the Civil Code as
above-discussed.
WHEREFORE, the petition is GRANTED. Accordingly, the
Decision dated July 11, 2014 and the Resolution dated February
27, 2015 of the Court of Appeals in CA-G.R. SP No. 125451 are
REVERSED and SET ASIDE, and a NEW ONE is entered,
DISMISSING the complaint of respondent LWV Construction
Corporation for lack of merit.
SO ORDERED.
Carpio (Chairperson), Peralta, Caguioa, and Reyes, Jr., JJ.,
concur.
SECOND DIVISION
G.R. No. 217426, December 04, 2017
ST. MARTIN POLYCLINIC, INC., Petitioner, v. LWV
CONSTRUCTION CORPORATION, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated July 11, 2014 and the Resolution3 dated
February 27, 2015 of the Court of Appeals (CA) in CA-G.R. SP
No. 125451, which affirmed with modification the Decision4
dated December 15, 2011 and the Order dated May 25, 2012 of
the Regional Trial Court of Mandaluyong City, Branch 211 (RTC)
in SCA Case No. MC11-879 (Civil Case No. 21881), and thereby
ordered herein petitioner St. Martin Polyclinic, Inc. (petitioner)
to pay respondent LWV Construction Corporation (respondent)
temperate damages in the amount of P50,000.00.
The Facts
Respondent is engaged in the business of recruiting Filipino
workers for deployment to Saudi Arabia.5 On the other hand,
petitioner is an accredited member of the Gulf Cooperative
Council Approved Medical Centers Association (GAMCA) and as
such, authorized to conduct medical examinations of
prospective applicants for overseas employment.6
On January 10, 2008, respondent referred prospective applicant
Jonathan V. Raguindin (Raguindin) to petitioner for a pre-
deployment medical examination in accordance with the
instructions from GAMCA.7 After undergoing the required
examinations, petitioner cleared Raguindin and found him "fit
for employment," as evidenced by a Medical Report8 dated
January 11, 2008 (Medical Report).9
Based on the foregoing, respondent deployed Raguindin to
Saudi Arabia, allegedly incurring expenses in the amount of
P84,373.41.10 Unfortunately, when Raguindin underwent
another medical examination with the General Care Dispensary
of Saudi Arabia (General Care Dispensary) on March 24, 2008,
he purportedly tested positive for HCV or the hepatitis C virus.
The Ministry of Health of the Kingdom of Saudi Arabia (Ministry
of Health) required a re-examination of Raguindin, which the
General Care Dispensary conducted on April 28, 2008.11
However, the results of the re-examination remained the same,
i.e., Raguindin was positive for HCV, which results were
reflected in a Certification12 dated April 28, 2008 (Certification).
An undated HCV Confirmatory Test Report13 likewise conducted
by the Ministry of Health affirmed such finding, thereby leading
to Raguindin's repatriation to the Philippines.14
Claiming that petitioner was reckless in issuing its Medical
Report stating that Raguindin is "fit for employment" when a
subsequent finding in Saudi Arabia revealed that he was
positive for HCV, respondent filed a Complaint15 for sum of
money and damages against petitioner before the Metropolitan
Trial Court of Mandaluyong City, Branch 60 (MeTC). Respondent
essentially averred that it relied on petitioner's declaration and
incurred expenses as a consequence. Thus, respondent prayed
for the award of damages in the amount of P84,373.41
representing the expenses it incurred in deploying Raguindin
abroad.16
In its Answer with compulsory counterclaim,17 petitioner denied
liability and claimed that: first, respondent was not a proper
party in interest for lack of privity of contract between them;
second, the MeTC had no jurisdiction over the case as it
involves the interpretation and implementation of a contract of
employment; third, the action is premature as Raguindin has
yet to undergo a post-employment medical examination
following his repatriation; and fourth, the complaint failed to
state a cause of action as the Medical Report issued by
petitioner had already expired on April 11, 2008, or three (3)
months after its issuance on January 11, 2008.18
The MeTC Ruling
In a Decision19 dated December 17, 2010, the MeTC rendered
judgment in favor of respondent and ordered petitioner to pay
the amount of P84,373.41 as actual damages, P20,000.00 as
attorney's fees, and the costs of suit.20
At the onset, the MeTC held that it had jurisdiction over the
case, since respondent was claiming actual damages incurred in
the deployment of Raguindin in the amount of P84,373.41.21 It
further ruled that respondent was a real party in interest, as it
would not have incurred expenses had petitioner not issued the
Medical Report certifying that Raguindin was fit to work.
On the merits, the MeTC found that respondent was entitled to
be informed accurately of the precise condition of Raguindin
before deploying the latter abroad and consequently, had
sustained damage as a result of the erroneous certification.22
In this relation, it rejected petitioner's contention that Raguindin
may have contracted the disease after his medical examination
in the Philippines up to the time of his deployment, there being
no evidence offered to corroborate the same.23
Aggrieved, petitioner appealed to the RTC, contending,24
among others, that respondent failed to comply with the
requirements on the authentication and proof of documents
under Section 24,25 Rule 132 of the Rules of Court, considering
that respondent's evidence, particularly the April 28, 2008
Certification issued by the General Care Dispensary and the HCV
Confirmatory Test Report issued by the Ministry of Health, are
foreign documents issued in Saudi Arabia.
The RTC Ruling
In a Decision26 dated December 15, 2011, the RTC dismissed
petitioner's appeal and affirmed the MeTC Decision in its
entirety.27 Additionally, the RTC pointed out that petitioner can
no longer change the theory of the case or raise new issues on
appeal, referring to the latter's argument on the authentication
of respondent's documentary evidence.28
Petitioner's motion for reconsideration29 was denied in an
Order30 dated May 25, 2012. Dissatisfied, petitioner elevated
the case to the CA.31
The CA Ruling
In a Decision32 dated July 11, 2014, the CA affirmed the RTC
Decision, with the modification deleting the award of actual
damages and instead, awarding temperate damages in the
amount of P50,000.00.33
The CA held that petitioner failed to perform its duty to
accurately diagnose Raguindin when it issued its Medical Report
declaring the latter "fit for employment", considering that he
was subsequently found positive for HCV in Saudi Arabia.34
Further, the CA opined that the Certification issued by the
General Care Dispensary is not a public document and in such
regard, rejected petitioner's argument that the same is
inadmissible in evidence for not having been authenticated.
Moreover, it remarked that petitioner's own Medical Report does
not enjoy the presumption of regularity as petitioner is merely
an accredited clinic.35 Finally, the CA ruled that petitioner could
not disclaim liability on the ground that Raguindin tested
positive for HCV in Saudi Arabia after the expiration of the
Medical Report on April 11, 2008, noting that the General Care
Dispensary issued its Certification on April 28, 2008, or a mere
seventeen (17) days from the expiration of petitioner's Medical
Report.36 Hence, the CA concluded that "it is contrary to
human experience that a newly-deployed overseas worker, such
as Raguindin, would immediately contract a serious virus at the
very beginning of a deployment."37
However, as the records are bereft of evidence to show that
respondent actually incurred the amount of P84,373.41 as
expenses for Raguindin's deployment, the CA deleted the award
of actual damages and instead, awarded temperate damages in
the amount of P50,000.00.38
Aggrieved, petitioner filed a motion for partial
reconsideration,39 which the CA denied in a Resolution40 dated
February 27, 2015; hence, this petition.
The Issue Before the Court
The essential issue advanced for the Court's resolution is
whether or not petitioner was negligent in issuing the Medical
Report declaring Raguindin "fit for employment" and hence,
should be held liable for damages.
The Court's Ruling
The petition is granted.
I.
At the outset, it should be pointed out that a re-examination of
factual findings cannot be done acting on a petition for review
on certiorari because the Court is not a trier of facts but reviews
only questions of law.41 Thus, in petitions for review on
certiorari, only questions of law may generally be put into issue.
This rule, however, admits of certain exceptions, such as "when
the inference made is manifestly mistaken, absurd or
impossible"; or "when the findings are conclusions without
citation of specific evidence on which they are based."42
Finding a confluence of certain exceptions in this case, the
general rule that only legal issues may be raised in a petition for
review on certiorari under Rule 45 of the Rules of Court would
not apply, and the Court retains the authority to pass upon the
evidence presented and draw conclusions therefrom.43
II.
An action for damages due to the negligence of another may be
instituted on the basis of Article 2176 of the Civil Code, which
defines a quasi-delict:
Article 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for
the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
The elements of a quasi-delict are: (1) an act or omission; (2)
the presence of fault or negligence in the performance or non-
performance of the act; (3) injury; (4) a causal connection
between the negligent act and the injury; and (5) no pre-
existing contractual relation.44
As a general rule, any act or omission coming under the
purview of Article 2176 gives rise to a cause of action under
quasi-delict. This, in turn, gives the basis for a claim of
damages.45 Notably, quasi-delict is one among several sources
of obligation. Article 1157 of the Civil Code states:
Article 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
However, as explained by Associate Justice Marvic M.V.F.
Leonen (Justice Leonen) in his opinion in Alano v. Magud-
Logmao46 (Alano), "Article 2176 is not an all-encompassing
enumeration of all actionable wrongs which can give rise to the
liability for damages. Under the Civil Code, acts done in
violation of Articles 19, 20, and 21 will also give rise to
damages."47 These provisions - which were cited as bases by
the MTC, RTC and CA in their respective rulings in this case -
read as follows:
Article 19. 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.
Article 20. Every person who, contrary to law, willfully or
negligently causes damage to another, shall indemnify the latter
for the same.
Article 21. Any person who willfully causes loss or injury to
another in a manner that is contrary to morals, good customs,
or public policy shall compensate the latter for the damage.
"[Article 19], known to contain what is commonly referred to as
the principle of abuse of rights, sets certain standards which
must be observed not only in the exercise of one's rights, but
also in the performance of one's duties."48 Case law states that
"[w]hen a right is exercised in a manner which does not
conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for
which the wrongdoer must be held responsible. But while Article
19 lays down a rule of conduct for the government of human
relations and for the maintenance of social order, it does not
provide a remedy for its violation. Generally, an action for
damages under either Article 20 or Article 21 would [then] be
proper."49 Between these two provisions as worded, it is Article
20 which applies to both willful and negligent acts that are done
contrary to law. On the other hand, Article 21 applies only to
willful acts done contra bonos mores.50
In the Alano case, Justice Leonen aptly elaborated on the
distinctive applications of Articles 19, 20 and 21, which are
general provisions on human relations, vis-a-vis Article 2176,
which particularly governs quasi-delicts:
Article 19 is the general rule which governs the conduct of
human relations. By itself, it is not the basis of an actionable
tort. Article 19 describes the degree of care required so that an
actionable tort may arise when it is alleged together with Article
20 or Article 21.
Article 20 concerns violations of existing law as basis for an
injury. It allows recovery should the act have been willful or
negligent. Willful may refer to the intention to do the act and
the desire to achieve the outcome which is considered by the
plaintiff in tort action as injurious. Negligence may refer to a
situation where the act was consciously done but without
intending the result which the plaintiff considers as injurious.
Article 21, on the other hand, concerns injuries that may be
caused by acts which are not necessarily proscribed by law. This
article requires that the act be willful, that is, that there was an
intention to do the act and a desire to achieve the outcome. In
cases under Article 21, the legal issues revolve around whether
such outcome should be considered a legal injury on the part of
the plaintiff or whether the commission of the act was done in
violation of the standards of care required in Article 19.
Article 2176 covers situations where an injury happens through
an act or omission of the defendant. When it involves a positive
act, the intention to commit the outcome is irrelevant. The act
itself must not be a breach of an existing law or a pre-existing
contractual obligation. What will be considered is whether there
is "fault or negligence” attending the commission of the act
which necessarily leads to the outcome considered as injurious
by the plaintiff. The required degree of diligence will then be
assessed in relation to the circumstances of each and every
case.51 (Emphases and underscoring supplied)
Thus, with respect to negligent acts or omissions, it should
therefore be discerned that Article 20 of the Civil Code concerns
"violations of existing law as basis for an injury", whereas
Article 2176 applies when the negligent act causing damage to
another does not constitute "a breach of an existing law or a
pre-existing contractual obligation."
In this case, the courts a quo erroneously anchored their
respective rulings on the provisions of Articles 19, 20, and 21 of
the Civil Code. This is because respondent did not proffer (nor
have these courts mentioned) any law as basis for which
damages may be recovered due to petitioner's alleged negligent
act. In its amended complaint, respondent mainly avers that
had petitioner not issue a "fit for employment" Medical Report
to Raguindin, respondent would not have processed his
documents, deployed him to Saudi Arabia, and later on - in view
of the subsequent findings that Raguindin was positive for HCV
and hence, unfit to work - suffered actual damages in the
amount of P84,373.41.52 Thus, as the claimed negligent act of
petitioner was not premised on the breach of any law, and not
to mention the incontestable fact that no pre-existing
contractual relation was averred to exist between the parties,
Article 2176 - instead of Articles 19, 20 and 21 - of the Civil
Code should govern.
III.
Negligence is defined as the failure to observe for the protection
of the interests of another person, that degree of care,
precaution and vigilance which the circumstances justly
demand, whereby such other person suffers injury.53
As early as the case of Picart v. Smith,54 the Court elucidated
that "the test by which to determine the existence of negligence
in a particular case is: Did the defendant in doing the alleged
negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence."55 Corollary
thereto, the Court stated that "[t]he question as to what would
constitute the conduct of a prudent man in a given situation
must of course be always determined in the light of human
experience and in view of the facts involved in the particular
case. Abstract speculation cannot here be of much value x x x:
Reasonable men govern their conduct by the circumstances
which are before them or known to them. They are not, and are
not supposed to be, omniscient of the future. Hence[,] they can
be expected to take care only when there is something before
them to suggest or warn of danger."56
Under our Rules of Evidence, it is disputably presumed that a
person takes ordinary care of his concerns and that private
transactions have been fair and regular.57 In effect, negligence
cannot be presumed, and thus, must be proven by him who
alleges it.58 In Huang v. Philippine Hoteliers, Inc.:59
[T]he negligence or fault should be clearly established as it is
the basis of her action. The burden of proof is upon [the
plaintiff]. Section 1, Rule 131 of the Rules of Court provides that
"burden of proof is the duty of a party to present evidence on
the facts in issue necessary to establish his claim or defense by
the amount of evidence required by law." It is then up for the
plaintiff to establish his cause of action or the defendant to
establish his defense. Therefore, if the plaintiff alleged in his
complaint that he was damaged because of the negligent acts
of the defendant, he has the burden of proving such
negligence. It is even presumed that a person takes ordinary
care of his concerns. The quantum of proof required is
preponderance of evidence.60 (Emphasis and underscoring
supplied)
The records of this case show that the pieces of evidence
mainly relied upon by respondent to establish petitioner's
negligence are: (a) the Certification61 dated April 28, 2008; and
(b) the HCV Confirmatory Test Report.62 However, these
issuances only indicate the results of the General Care
Dispensary and Ministry of Health's own medical examination of
Raguindin finding him to be positive for HCV. Notably, the
examination conducted by the General Care Dispensary, which
was later affirmed by the Ministry of Health, was conducted
only on March 24, 2008, or at least two (2) months after
petitioner issued its Medical Report on January 11, 2008.
Hence, even assuming that Raguindin's diagnosis for HCV was
correct, the fact that he later tested positive for the same does
not convincingly prove that he was already under the same
medical state at the time petitioner issued the Medical Report
on January 11, 2008. In this regard, it was therefore incumbent
upon respondent to show that there was already negligence at
the time the Medical Report was issued, may it be through
evidence that show that standard medical procedures were not
carefully observed or that there were already palpable signs
that exhibited Raguindin's unfitness for deployment at that
time. This is hardly the case when respondent only proffered
evidence which demonstrate that months after petitioner's
Medical Report was issued, Raguindin, who had already been
deployed to Saudi Arabia, tested positive for HCV and as such,
was no longer "fit for employment".
In fact, there is a reasonable possibility that Raguindin became
exposed to the HCV only after his medical examination with
petitioner on January 11, 2008. Based on published reports
from the World Health Organization, HCV or the hepatitis C
virus causes both acute and chronic infection. Acute HCV
infection is usually asymptomatic,63 and is only very rarely
associated with life-threatening diseases. The incubation
period64 for HCV is two (2) weeks to six (6) months, and
following initial infection, approximately 80% of people do not
exhibit any symptoms.65 Indisputably, Raguindin was not
deployed to Saudi Arabia immediately after petitioner's medical
examination and hence, could have possibly contracted the
same only when he arrived thereat. In light of the foregoing,
the CA therefore erred in holding that "[h]ad petitioner more
thoroughly and diligently examined Raguindin, it would likely
have discovered the existence of the HCV because it was
contrary to human experience that a newly-deployed overseas
worker, such as Raguindin, would immediately have contracted
the disease at the beginning of his deployment"66
While petitioner's Medical Report indicates an expiration of April
11, 2008, the Court finds it fitting to clarify that the same could
not be construed as a certified guarantee coming from
petitioner that Raguindin's medical status at the time the report
was issued on January 11, 2008 (i.e., that he was fit for
employment) would remain the same up until that date (i.e.,
April 11, 2008). As earlier intimated, the intervening period
could very well account for a number of variables that could
have led to a change in Raguindin's condition, such as his
deployment to a different environment in Saudi Arabia. If at all,
the expiration date only means that the Medical Report is valid -
and as such, could be submitted - as a formal requirement for
overseas employment up until April 11, 2008; it does not, by
any means, create legal basis to hold the issuer accountable for
any intervening change of condition from the time of issuance
up until expiration. Truly, petitioner could not be reasonably
expected to predict, much less assure, that Raguindin's medical
status of being fit for employment would remain unchanged.
Thus, the fact that the Medical Report's expiration date of April
11, 2008 was only seventeen (17) days away from the issuance
of the General Care Dispensary's April 28, 2008 Certification
finding Raguindin positive for HCV should not - as it does not -
establish petitioner's negligence.
IV.
At any rate, the fact that Raguindin tested positive for HCV
could not have been properly established since the courts a
quo, in the first place, erred in admitting and giving probative
weight to the Certification of the General Care Dispensary,
which was written in an unofficial language. Section 33, Rule
132 ofthe Rules of Court states that:
Section 33. Documentary evidence in an unofficial language. -
Documents written in an unofficial language shall not be
admitted as evidence, unless accompanied with a translation
into English or Filipino. To avoid interruption of proceedings,
parties or their attorneys are directed to have such translation
prepared before trial.67
A cursory examination of the subject document would reveal
that while it contains English words, the majority of it is in an
unofficial language. Sans any translation in English or Filipino
provided by respondent, the same should not have been
admitted in evidence; thus their contents could not be given
probative value, and deemed to constitute proof of the facts
stated therein.
Moreover, the due execution and authenticity of the said
certification were not proven in accordance with Section 20,
Rule 132 of the Rules of Court:
Section 20. Proof of private document. - Before any private
document offered as authentic is received in evidence, its due
execution and authenticity must be proved either:
(a)
By anyone who saw the document executed or written; or
(b)
By evidence of the genuineness of the signature or handwriting
of the maker.
(c)
Any other private document need only be identified as that
which it is claimed to be.
Notably, the foregoing provision applies since the Certification
does not fall within the classes of public documents under
Section 19, Rule 132 of the Rules of Court68 - and hence, must
be considered as private. It has been settled that an unverified
and unidentified private document cannot be accorded
probative value.69 In addition, case law states that "since a
medical certificate involves an opinion of one who must first be
established as an expert witness, it cannot be given weight or
credit unless the doctor who issued it is presented in court to
show his qualifications. It is precluded because the party
against whom it is presented is deprived of the right and
opportunity to cross-examine the person to whom the
statements or writings are attributed. Its executor or author
should be presented as a witness to provide the other party to
the litigation the opportunity to question its contents. Being
mere hearsay evidence, failure to present the author of the
medical certificate renders its contents suspect and of no
probative value,"70 as in this case.
Similarly, the HCV Confirmatory Test Report issued by the
Ministry of Health of Saudi Arabia should have also been
excluded as evidence. Although the same may be considered a
public document, being an alleged written official act of an
official body of a foreign country,71 the same was not duly
authenticated in accordance with Section 24,72 Rule 132 of the
Rules of Court. While respondent provided a translation73
thereof from the National Commission on Muslim Filipinos,
Bureau of External Relations, Office of the President, the same
was not accompanied by a certificate of the secretary of the
embassy or legation, consul-general, consul, vice-consul, or
consular agent or any officer in the foreign service of the
Philippines stationed in Saudi Arabia, where the record is kept,
and authenticated by the seal of his office.74
To be sure, petitioner - contrary to respondent's contention75 -
has not changed its theory of the case by questioning the
foregoing documents. As petitioner correctly argued, it merely
amplified its defense76 that it is not liable for negligence when
it further questioned the validity of the issuances of the General
Care Dispensary and Ministry of Health. In Limpangco Sons v.
Yangco77, the Court explained that "[t]here is a difference x x x
between a change in the theory of the case and a shifting of the
incidence of the emphasis placed during the trial or in the
briefs." "Where x x x the theory of the case as set out in the
pleadings remains the theory throughout the progress of the
cause, the change of emphasis from one phase of the case as
presented by one set of facts to another phase made prominent
by another set of facts x x x does not result in a change of
theory x x x".78 In any case, petitioner had already questioned
the validity of these documents in its Position Paper79 before
the MeTC.80 Hence, there is no change of theory that would
preclude petitioner's arguments on this score.
All told, there being no negligence proven by respondent
through credible and admissible evidence, petitioner cannot be
held liable for damages under Article 2176 of the Civil Code as
above-discussed.
WHEREFORE, the petition is GRANTED. Accordingly, the
Decision dated July 11, 2014 and the Resolution dated February
27, 2015 of the Court of Appeals in CA-G.R. SP No. 125451 are
REVERSED and SET ASIDE, and a NEW ONE is entered,
DISMISSING the complaint of respondent LWV Construction
Corporation for lack of merit.
SO ORDERED.
Carpio (Chairperson), Peralta, Caguioa, and Reyes, Jr., JJ.,
concur.
THIRD DIVISION
November 29, 2017
G.R. No. 205838
JOSEPH HARRY WALTER POOLE-BLUNDEN, Petitioner
vs.
UNION BANK OF THE PHILIPPINES, Respondent
DECISION
LEONEN, J.:
Banks are required to observe a high degree of diligence in their
affairs. This encompasses their dealings concerning properties
offered as security for loans. A bank that wrongly advertises the
area of a property acquired through foreclosure because it
failed to dutifully ascertain the property's specifications is
grossly negligent as to practically be in bad faith in offering that
property to prospective buyers. Any sale made on this account
is voidable for causal fraud. In actions to void such sales, banks
cannot hide under the defense that a sale was made on an as-
is-where-is basis. As-is-where-is stipulations can only
encompass physical features that are readily perceptible by an
ordinary person possessing no specialized skills.
This resolves a Petition for Review on Certiorari1 under Rule 45
of the 1997 Rules of Civil Procedure praying that the assailed
November 15, 2012 Decision2 and February 12, 2013
Resolution3 of the Court of Appeals in CA-G.R. CV No. 95369 be
reversed and set aside and that judgment be rendered annulling
or rescinding the Contract to Sell between petitioner Joseph
Harry Walter Poole-Blunden (Poole-Blunden) and respondent
Union Bank of the Philippines (UnionBank).
The assailed Court of Appeals Decision affirmed the April 20,
2010 Decision of the Regional Trial Court, Branch 65, Makati
City which dismissed the Complaint for Rescission of Contract
and Damages filed by Poole-Blunden against respondent
UnionBank.4 The assailed Court of Appeals Resolution denied
Poole-Blunden's Motion for Reconsideration.5
Sometime in March 2001, Poole-Blunden came across an
advertisement placed by Union Bank in the Manila Bulletin. The
ad was for the public auction of certain properties. One of these
properties was a condominium unit, identified as Unit 2-C of T-
Tower Condominium (the "Unit"), located at 5040 P. Burgos
corner Calderon Streets, Makati City.6 UnionBank had acquired
the property through foreclosure proceedings "after the
developer defaulted in the payment of its loan from
[UnionBank]."7
The Unit was advertised to have an area of 95 square meters.
Thinking that it was sufficient and spacious enough for his
residential needs, Poole-Blunden decided to register for the sale
and bid on the unit.8
About a week prior to the auction, Poole-Blunden visited the
unit for inspection. He was accompanied by a representative of
UnionBank. The unit had an irregular shape; it was neither a
square nor a rectangle and included a circular terrace. Poole-
Blunden did not doubt the unit's area as advertised. However,
he found that the ceiling was in bad condition, that the parquet
floor was damaged, and that the unit was in need of other
substantial repairs to be habitable.9
On the day of the auction, Poole-Blunden inspected the Master
Title of the project owner to the condominium in the name of
Integrated Network (TCT No. 171433) and the Condominium
Certificate of Title of UnionBank (CCT No. 36151) to verify once
again the details as advertised and the ownership of the unit.
Both documents were on display at the auction venue.10
Poole-Blunden placed his bid and won the unit for
₱2,650,000.00.11 On May 7, 2001, Poole-Blunden entered into
a Contract to Sell with UnionBank. This Contract stipulated that
Poole-Blunden would pay 10% of the purchase price as down
payment12 and that the balance shall be paid over a period of
15 years in equal monthly instalments, with interest of 15% per
annum starting July 7, 2001.13
Poole-Blunden started occupying the unit in June 2001. By July
20, 2003, he was able to fully pay for the Unit, paying a total
amount of ₱3,257,142.49.14
In late 2003, Poole-Blunden decided to construct two (2)
additional bedrooms in the Unit. Upon examining it, he noticed
apparent problems in its dimensions. He took rough
measurements of the Unit, which indicated that its floor area
was just about 70 square meters, not 95 square meters, as
advertised by UnionBank.15
Poole-Blunden got in touch with an officer of UnionBank to raise
the matter, but no action was taken.16 On July 12, 2004, Poole-
Blunden wrote to UnionBank, informing it of the discrepancy.
He asked for a rescission of the Contract to Sell, along with a
refund of the amounts he had paid, in the event that it was
conclusively established that the area of the unit was less than
95 square meters.17
In a letter dated December 6, 2004,18 UnionBank informed
Poole-Blunden that after inquiring with the Housing and Land
Use Regulatory Board (HLURB), the Homeowners' Association of
T-Tower Condominium, and its appraisers, the Unit was
confirmed to be 95 square meters, inclusive of the terrace and
the common areas surrounding it.19
Poole-Blunden was not satisfied with UnionBank's response as
the condominium's Master Title expressly stated that the
"boundary of each unit are the interior surfaces of the perimeter
walls, floors, ceilings, windows and doors thereof."20 Thus, he
hired an independent geodetic engineer, Engr. Gayril P. Tagal
(Engr. Tagal) of the Filipinas Dravo Corporation, to survey the
Unit and measure its actual floor area. Engr. Tagal issued a
certification stating that the total floor area of the Unit was only
74.4 square meters.21 Poole-Blunden gave UnionBank a copy of
Engr. Tagal's certification on July 12, 2005.22
In a letter dated February 1, 2006, UnionBank explained:
[T]he total area of the subject unit based on the ratio allocation
maintenance cost submitted by the developer to HLURB is 98
square meters (60 square meters as unit area and 38 square
meters as share on open space). On the other hand, the actual
area thereof based on the measurements made by its surveyor
is 74.18 square meters which was much higher than the unit
area of 60 square meters that was approved by HLURB.23
Poole-Blunden's dissatisfaction with UnionBank's answer
prompted him to file his Complaint for Rescission of Contract
and Damages with the Regional Trial Court, Makati City.24
On April 20, 2010, the Regional Trial Court dismissed Poole-
Blunden's complaint for lack of merit. The dispositive portion of
its Decision read:
WHEREFORE, premises considered, the instant complaint for
rescission of contract and damages is hereby DISMISSED for
lack of merit. The counterclaim is likewise DENIED.
SO ORDERED.25
On appeal, the Court of Appeals affirmed the ruling of the
Regional Trial Court.26 It noted that the sale was made on an
"as-is-where-is" basis as indicated in Section 12 of the Contract
to Sell.27 Thus, Poole-Blunden supposedly waived any errors in
the bounds or description of the unit.28 The Court of Appeals
added that Poole-Blunden failed to show, by clear and
convincing evidence that causal fraud can be attributed to
UnionBank.29 It added that the sale was made for a lump-sum
amount and that, in accordance with Article 1542, paragraph 1
of the Civil Code,30 Poole-Blunden could not demand a
reduction in the purchase price.31
Following the denial of his Motion for Reconsideration, Poole-
Blunden filed the present Petition before this Court.32
Poole-Blunden charges UnionBank with fraud in failing to
disclose to him that the advertised 95 square meters was
inclusive of common areas.33 With the vitiation of his consent
as to the object of the sale, he asserts that the Contract to Sell
may be voided. He insists that UnionBank is liable for breach of
warranty despite the "as-is-where-is" clause in the Contract to
Sell.34 Finally, he assails the Court of Appeals' application of
Article 1542 of the Civil Code.35
For resolution is the sole issue of whether or not respondent
Union Bank of the Philippines committed such a degree of fraud
as would entitle petitioner Joseph Harry Walter Poole-Blunden
to the voiding of the Contract to Sell the condominium unit
identified as Unit 2C, T-Tower Condominium, 5040 P. Burgos
corner Calderon Streets, Makati City.
I Respondent has not disavowed Atty. Cruz's testimony. In its
No longer in dispute at this juncture is how the Unit's interior
area is only 74.4 square meters. While respondent has
maintained that the Unit's total area is in keeping with the
advertised 95 square meters, it has conceded that these 95
square meters is inclusive of outside spaces and common areas.
Even before litigation commenced, in a December 6, 2004
letter,36 respondent informed petitioner that, following inquiries
with the HLURB, the Homeowners' Association of T-Tower
Condominium, and its appraisers, it had confirmed that the
Unit's 95 square meters was inclusive of "the terrace and the
common areas surrounding it."37
During trial, respondent's former Assistant Vice President of the
Asset and Recovery Group, Atty. Elna N. Cruz (Atty. Cruz),
testified on how there would have been documents (such as an
appraisal report) relating to inspections made by respondent's
personnel at the time the unit was being offered as a collateral
to a loan. These would have concerned the unit's area.38 She
affirmed respondent's statements in its December 6, 2004 letter
and indicated that, based on an appraisal report, the declared
95 square meters was not exclusive to the Unit's interiors but
included common areas:
Q: So my impression, Madam Witness, is that before you
accepted the property as a collateral, Union Bank already knew
what was the actual area of the unit?
A: Yes, sir.
Q: But you do not know what was the actual area as found by
your inspector?
A: It would be 95 square meters as per the record, sir.
Q: That was the actual findings of your inspector, Madam
Witness?
A: Yes, sir.
Q: What's your basis for saying that?
A: The appraisal report, sir.
Q: Do you have now with you that appraisal report showing
that the actual area of the unit is indeed 95 square meters?
A: We gathered the appraisal report and in the December 06,
2004 letter that we gave Mr. Blunden, we consulted the
appraiser of the Bank and we were informed that the area was
indeed 95 square meters. But that area was brought about by
measuring not just the inside of the unit, sir, but including also
the terrace, and the common area.39 (Emphasis supplied)
Comment, it merely asserted that the "[e]xtensive reference to
the [transcript of stenographic notes] is unmistakable proof that
the litigated issue is one of fact, not of law" and insisted that
this Court should not take cognizance of the present Petition.40
Respondent's insistence on how common spaces should be
included in reckoning the Unit's total area runs afoul of how
Republic Act No. 4726, otherwise known as the Condominium
Act, reckons what forms part of a condominium unit.
Section 3(b) of the Condominium Act defines a condominium
unit, as follows:
Section 3. As used in this Act, unless the context otherwise
requires:
....
(b) "Unit" means a part of the condominium project intended
for any type of independent use or ownership, including one or
more rooms or spaces located .in one or more floors (or part or
parts of floors) in a building or buildings and such accessories
as may be appended thereto.
Section 6(a) of the Condominium Act specifies the reckoning of
a condominium unit's bounds. It also specifies that areas of
common use "are not part of the unit":
Section 6. Unless otherwise expressly provided in the enabling
or master deed or the declaration of restrictions, the incidents
of a condominium grant are as follows:
(a) The boundary of the unit granted are the interior surfaces of
the perimeter walls, floors, ceilings, windows and doors thereof.
The following are not part of the unit bearing walls, columns,
floors, roofs, foundations and other common structural
elements of the building; lobbies, stairways, hallways, and other
areas of common use, elevator equipment and shafts, central
heating, central refrigeration and central air-conditioning
equipment, reservoirs, tanks, pumps and other central services
and facilities, pipes, ducts, flues, chutes, conduits, wires and
other utility installations, wherever located, except the outlets
thereof when located within the unit. (Emphasis supplied.)
Thus, the unit sold to petitioner was deficient in relation to its
advertised area. This advertisement having been made by
respondent, it is equally settled there was a falsity in the
declarations made by respondent prior to, and with the
intention of enticing buyers to the sale. What remains in issue is
whether or not this falsity amounts to fraud warranting the
voiding of the Contract to Sell.
II
For there to be a valid contract, all the three (3) elements of
consent, subject matter, and price must be present.41 Consent
wrongfully obtained is defective. The party to a contract whose
consent was vitiated is entitled to have the contract rescinded.
Accordingly, Article 1390 of the Civil Code42 stipulates that a
contract is voidable or annullable even if there is no damage to
the contracting parties where "consent is vitiated by mistake,
violence, intimidation, undue influence or fraud."
Under Article 1338 of the Civil Code "[t]here is fraud when,
through insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract
which, without them, he would not have agreed to." However,
not all instances of fraud enable the voiding of contracts. Article
1344 clarifies that in order to make a contract voidable, the
fraud "should be serious and should not have been employed by
both contracting parties."43
Thus, Tankeh v. Development Bank of the Philippines44
explained, "There are two types of fraud contemplated in the
performance of contracts: dolo incidente or incidental fraud and
dolo causante or fraud serious enough to render a contract
voidable."45 The fraud required to annul or avoid a contract
"must be so material that had it not been present, the
defrauded party would not have entered into the contract."46
The fraud must be "the determining cause of the contract, or
must have caused the consent to be given."47
Petitioner's contention on how crucial the dimensions and area
of the Unit are to his decision to proceed with the purchase is
well-taken. The significance of space and dimensions to any
buyer of real property is plain to see. This is particularly
significant to buyers of condominium units in urban areas, and
even more so in central business districts, where the scarcity of
space drives vertical construction and propels property values.
It would be immensely guileless of this Court to fail to
appreciate how the advertised area of the Unit was material or
even indispensable to petitioner's consent. As petitioner
emphasized, he opted to register for and participate in the
auction for the Unit only after determining that its advertised
area was spacious enough for his residential needs.48
III
The significance of the Unit's area as a determining cause of the
Contract to Sell is readily discernible. Falsity on its area is
attributable to none but to respondent, which, however, pleads
that it should not be considered as having acted fraudulently
given that petitioner conceded to a sale on an as-is-where-is
basis, thereby waiving "warranties regarding possible errors in
boundaries or description of property."49
Section 12 of the Contract to Sell spells out the "as-is-where-is"
terms of the purchase:
Section 12. The BUYER recognizes that he is buying the
property on an "as-is-where-is" basis including errors in
boundaries or description of property, if any etc. and among
others, he shall be responsible for the eviction of the occupants
on the property, if any, or for the repair of the property, if
needed. It shall be understood that the SELLER makes no
warranty whatsoever on the authenticity, accuracy, or title over
property.50 (Emphasis supplied.)
Reliance on Section 12's as-is-where-is stipulation is misplaced
for two (2) reasons. First, a stipulation absolving a seller of
liability for hidden defects can only be invoked by a seller who
has no knowledge of hidden defects. Respondent here knew
that the Unit's area, as reckoned in accordance with the
Condominium Act, was not 95 square meters. Second, an as-is-
where-is stipulation can only pertain to the readily perceptible
physical state of the object of a sale. It cannot encompass
matters that require specialized scrutiny, as well as features and
traits that are immediately appreciable only by someone with
technical competence.
A seller is generally responsible for warranty against hidden
defects of the thing sold. As stated in Article 1561 of the New
Civil Code:
Article 1561. The vendor shall be responsible for warranty
against the hidden defects which the thing sold may have,
should they render it unfit for the use for which it is intended,
or should they diminish its fitness for such use to such an
extent that, had the vendee been aware thereof, he would not
have acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects or those
which may be visible, or for those which are not visible if the
vendee is an expert who, by reason of his trade or profession,
should have known.
Article 1566, paragraph 2 states the seller's liability for hidden
defects shall be inapplicable if there is a stipulation made to the
contrary. However, a mere stipulation does not suffice. To be
fully absolved of liability, Article 1566, paragraph 2 also requires
a seller to be unaware of the hidden defects in the thing sold.
Article 1566. The vendor is responsible to the vendee for any
hidden faults or defects in the thing sold, even though he was
not aware thereof.
This provision shall not apply if the contrary has been
stipulated, and the vendor was not aware of the hidden faults
or defects in the thing sold. (Emphasis supplied.)
It is clear from the records that respondent fully knew that the
Unit's area, reckoned strictly in accordance with the
Condominium Act, did not total 95 square meters. Respondent
admits that the only way the Unit's area could have amounted
to 95 square meters was if some areas for common use were
added to its interior space. It acknowledged knowing this fact
through the efforts of its appraisers and even conceded that
their findings were documented in their reports.
In Hian v. Court of Tax Appeals,51 this Court construed an as-
is-where-is stipulation as pertaining to the "physical condition"
of the thing sold and "not to [its] legal situation."52 As further
explained in National Development Company v. Madrigal Wan
Hai Lines Corporation:53
In Hian vs. Court of Tax Appeals, we had the occasion to
construe the phrase "as is, where is" basis, thus:
"We cannot accept the contention in the Government's
Memorandum of March 31, 1976 that Condition No. 5 in the
Notice of Sale to the effect that 'The above-mentioned articles
(the tobacco) are offered for sale 'AS IS' and the Bureau of
Customs gives no warranty as to their condition' relieves the
Bureau of Customs of liability for the storage fees in dispute. As
we understand said Condition No. 5, it refers to the physical
condition of the tobacco and not to the legal situation in which
it was at the time of the sale, as could be implied from the right
of inspection to prospective bidders under Condition No. 1 [.]"
(Emphasis ours)
The phrase "as is, where is" basis pertains solely to the physical
condition of the thing sold, not to its legal situation. In the case
at bar, the US tax liabilities constitute a potential lien which
applies to NSCP's legal situation, not to its physical aspect.
Thus, respondent as a buyer, has no obligation to shoulder the
same.54
A condominium unit's area is a physical attribute. In Hian's
contemplation, it appeared that the total area of a condominium
unit is a valid object of an as-is-where-is clause. However, while
as-is-where-is clauses exclusively apply to the physical
attributes of a thing sold, they apply only to physical features
that are readily observable. The significance of this Court's
pronouncements in Hian and National Development Company
are in clarifying that legal status, which is a technical matter
perceptible only by lawyers and regulators, cannot be
encompassed by an as-is-where-is stipulation. Hian and
National Development Company are not a sweeping
approbation of such stipulations' coverage of every corporeal
attribute or tangible trait of objects being sold. Thus, in Asset
Privatization v. T.J. Enterprises,55 the as-is-where-is stipulation
was understood as one which "merely describes the actual state
and location of the machinery and equipment sold,"56 and
nothing else. Features that may be physical but which can only
be revealed after examination by persons with technical
competence cannot be covered by as-is-where-is stipulations. A
buyer cannot be considered to have agreed "to take possession
of the things sold 'in the condition where they are found and
from the place where they are located'"57 if the critical defect is
one which he or she cannot even readily sense.
In inspecting the Unit prior to the auction sale, petitioner took
note of its actual state: "he noticed that the ceilings were down,
[that] there was water damage from the leaks coming from the
unit above, and [that] the parquet floor was damaged."58 He
also took note of its irregular shape and the circular terrace
outside it. These observations represent the full extent of what
was readily perceptible to petitioner. The precise measurement
of the Unit's area, in contrast, could only be determined by
someone with specialized or technical capabilities. While
ordinary persons, such as petitioner, may hold such opinions
that the Unit looks small, their perception could not be
ascertained until after an examination by someone equipped
with peculiar skills and training to measure real property.
Indeed, petitioner's suspicions were not roused until years after
he had occupied the Unit and confirmed until after a
certification was issued by a surveyor.
Any waiver of warranties under Section 12 of the Contract to
Sell could have only been concerned with the readily apparent
subpar condition of the Unit. A person not equipped with
technical knowledge and expertise to survey real property could
not reasonably be expected to recognize deficiencies in
measurement at the first instance especially if that property was
of "irregular shape," "neither square nor rectangle," and having
a "circular terrace."59
IV
Contrary to the Court of Appeals' assertion, Article 1542 of the
Civil Code does not bar the voiding of the Contract to Sell.
Article 1542 of the Civil Code states:
Article 1542. In the sale of real estate, made for a lump sum
and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price,
although there be a greater or less area or number than that
stated in the contract.
The same rule shall be applied when two or more immovables
are sold for a single price; but if, besides mentioning the
boundaries, which is indispensable in every conveyance of real
estate, its area or number should be designated in the contract,
the vendor shall be bound to deliver all that is included within
said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so,
he shall suffer a reduction in the price, in proportion to what is
lacking in the area or number, unless the contract is rescinded
because the vendee does not accede to the failure to deliver
what has been stipulated. (Emphasis supplied.)
Article 1542 has nothing to do with annulling fraudulently made
sales. What it is concerned with is the proportionate reduction
of the purchase price in relation to the measurable units of the
thing sold. Petitioner does not seek a reduction of the purchase
price. He seeks judicial relief to have the entirety of his
purchase annulled, his consent having been fraudulently
obtained. By filing an action under Article 1390 of the Civil
Code, petitioner declared that his consent to the entire subject
matter of the contract was vitiated. What suffices as relief is the
complete annulment of the sale, not the partial reimbursement
upon which Article 1542 is premised.

Likewise, Article 1542 does not contemplate the seller's delivery
to the buyer of things other than the agreed object of the sale.
While it is true that petitioner did not buy the unit on a per-
square-meter basis, it remains that what he bought was a
condominium unit. A condominium unit's bounds are reckoned
by "the interior surfaces of [its] perimeter walls, floors, ceilings,
windows and doors."60 It excludes common areas. Thus, when
petitioner agreed to purchase the Unit at a lump-sum price, he
never consented to including common areas as part of his
purchase. Article 1542's concern with a ratable reduction of the
price delivered by the buyer assumes that the seller correctly
delivered, albeit deficiently, the object of the sale.
In any case, for Article 1542 to operate, "the discrepancy must
not be substantial."61 Article 1542 remains anchored on a
sense of what is reasonable. An estimate given as a premise for
a sale should be "more or less" the actual area of the thing
sold.62 Here, the area advertised and stipulated in the Contract
to Sell was 95 square meters but the actual area of the unit was
only 74.4 square meters.63 By no stretch of the imagination can
a 21.68% deficiency be discounted as a mere minor
discrepancy.
V deemed written into every deposit agreement between a bank
By definition, fraud presupposes bad faith or malicious intent. It
transpires when insidious words or machinations are
deliberately employed to induce agreement to a contract. Thus,
one could conceivably claim that respondent could not be guilty
of fraud as it does not appear to have crafted a deceptive
strategy directed specifically at petitioner. However, while
petitioner was not a specific target, respondent was so callously
remiss of its duties as a bank. It was so grossly negligent that
its recklessness amounts to a wrongful willingness to engender
a situation where any buyer in petitioner's shoes would have
been insidiously induced into buying a unit with an actual area
so grossly short of its advertised space.
In Spouses Carbonell v. Metropolitan Bank and Trust
Company,64 this Court considered gross negligence, in relation
to the fiduciary nature of banks:
Gross negligence connotes want of care in the performance of
one's duties; it is a negligence characterized by the want of
even slight care, acting or omitting to act in a situation where
there is duty to act, not inadvertently but wilfully and
intentionally, with a conscious indifference to consequences
insofar as other persons may be affected. It evinces a
thoughtless disregard of consequences without exerting any
effort to avoid them.
In order for gross negligence to exist as to warrant holding the
respondent liable therefor, the petitioners must establish that
the latter did not exert any effort at all to avoid unpleasant
consequences, or that it wilfully and intentionally disregarded
the proper protocols or procedure . . . and in selecting and
supervising its employees.65 (Emphasis supplied)
Banks assume a degree of prudence and diligence higher than
that of a good father of a family, because their business is
imbued with public interest66 and is inherently fiduciary.67
Thus, banks have the obligation to treat the accounts of its
clients "meticulously and with the highest degree of care."68
With respect to its fiduciary duties, this Court explained:
The law imposes on banks high standards in view of the
fiduciary nature of banking. Section 2 of Republic Act No. 8791
("RA 8791"), which took effect on 13 June 2000, declares that
the State recognizes the "fiduciary nature of banking that
requires high standards of integrity and performance." This new
provision in the general banking law, introduced in 2000, is a
statutory affirmation of Supreme Court decisions, starting with
the 1990 case of Simex International v. Court of Appeals,
holding that "the bank is under obligation to treat the accounts
of its depositors with meticulous care, always having in mind
the fiduciary nature of their relationship.
This fiduciary relationship means that the bank's obligation to
observe "high standards of integrity and performance" is
and its depositor. The fiduciary nature of banking requires
banks to assume a degree of diligence higher than that of a
good father of a family. Article 1172 of the Civil Code states
that the degree of diligence required of an obligor is that
prescribed by law or contract, and absent such stipulation then
the diligence of a good father of a family. Section 2 of RA 8791
prescribes the statutory diligence required from banks — that
banks must observe "high standards of integrity and
performance" in servicing their depositors.69 (Citations omitted)
The high degree of diligence required of banks equally holds
true in their dealing with mortgaged real properties, and
subsequently acquired through foreclosure, such as the Unit
purchased by petitioner. In the same way that banks are
"presumed to be familiar with the rules on land registration,"
given that they are in the business of extending loans secured
by real estate mortgage,70 banks are also expected to exercise
the highest degree of diligence. This is especially true when
investigating real properties offered as security, since they are
aware that such property may be passed on to an innocent
purchaser in the event of foreclosure. Indeed, "the
ascertainment of the status or condition of a property offered to
it as security for a loan must be a standard and indispensable
part of a bank's operations":71
When the purchaser or the mortgagee is a bank, the rule on
innocent purchasers or mortgagees for value is applied more
strictly.1âwphi1 Being in the business of extending loans
secured by real estate mortgage, banks are presumed to be
familiar with the rules on land registration. Since the banking
business is impressed with public interest, they are expected to
be more cautious, to exercise a higher degree of diligence, care
and prudence, than private individuals in their dealings, even
those involving registered lands. Banks may not simply rely on
the face of the certificate of title. Hence, they cannot assume
that, simply because the title offered as security is on its face
free of any encumbrances or lien, they are relieved of the
responsibility of taking further steps to verify the title and
inspect the properties to be mortgaged. As expected, the
ascertainment of the status or condition of a property offered to
it as security for a loan must be a standard and indispensable
part of a bank's operations. It is of judicial notice that the
standard practice for banks before approving a loan is to send
its representatives to the property offered as collateral to assess
its actual condition, verify the genuineness of the title, and
investigate who is/are its real owner/s and actual possessors.72
(Citations omitted)
Credit investigations are standard practice for banks before
approving loans and admitting properties offered as security. It
entails the assessment of such properties: an appraisal of their
value, an examination of their condition, a verification of the
authenticity of their title, and an investigation into their real
owners and actual possessors.73 Whether it was unaware of
the unit's actual interior area; or, knew of it, but wrongly
thought that its area should include common spaces,
respondent's predicament demonstrates how it failed to
exercise utmost diligence in investigating the Unit offered as
security before accepting it. This negligence is so inexcusable; it
is tantamount to bad faith.
Even the least effort on respondent's part could have very easily
confirmed the Unit's true area. Similarly, the most cursory
review of the Condominium Act would have revealed the proper
reckoning of a condominium unit's area. Respondent could have
exerted these most elementary efforts to protect not only
clients and innocent purchasers but, most basically, itself.
Respondent's failure to do so indicates how it created a
situation that could have led to no other outcome than
petitioner being defrauded.
VI
The Regional Trial Court and the Court of Appeals gravely erred
in finding that causal fraud is not attendant in this case. Quite
the contrary, it is evident that respondent orchestrated a
situation rife for defrauding buyers of the advertised unit.
Therefore, the assailed Decision and Resolution must be
reversed, the Contract to Sell between petitioner and
respondent be annulled, and petitioner be refunded all the
amounts he paid to respondent in respect of the purchase of
the Unit.
Under Article 2232, in relation to Article 2229 of the Civil Code,
"[i]n contracts and quasi-contracts, the court may award
exemplary damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner," "by
way of example or correction for the public good." By awarding
exemplary damages to petitioner, this case shall serve as an
example and warning to banks to observe the requisite care and
diligence in all of their affairs.
Consistent with Article 2208 of the Civil Code,74 respondent is
equally liable to petitioner for attorney's fees and the costs of
litigation.
WHEREFORE, the Petition is GRANTED. The assailed November
15, 2012 Decision and February 12, 2013 Resolution of the
Court of Appeals in CA-G.R. CV No. 95369 are REVERSEDand
SET ASIDE.
The Contract to Sell entered into by petitioner Joseph Harry
Walter Poole-Blunden and respondent Union Bank of the
Philippines is declared null and void. Respondent is ordered to
pay petitioner the amount of ₱3,257,142.49 to refund the
amounts petitioner has paid to purchase Unit 2C of T-Tower
Condominium located at 5040 P. Burgos corner Calderon
Streets, Makati City. This refund shall earn legal interest at
twelve percent (12%) per annum from the date of the filing of
petitioner's Complaint for Rescission of Contract and Damages
up to June 30, 2013; and six percent (6%) per annum,
reckoned from July 1, 2013 until fully paid.
Respondent is ordered to pay petitioner ₱100,000.00 as
exemplary damages, ₱100,000.00 as attorney's fees, and the
costs of litigation.
SO ORDERED.
MARVIC M.V.F. LEONEN
Associate Justice
THIRD DIVISION
November 29, 2017
G.R. No. 209910
VISAYAN ELECTRIC COMPANY, INC., Petitioner
vs.
EMILIO G. ALFECHE, GILBERT ALFECHE, EMMANUEL
MANUGAS, AND M. LHUILLIER PAWNSHOP AND JEWELRY,
Respondents
DECISION
LEONEN, J.:
An electric distribution company is a public utility presumed to
have the necessary expertise and resources to enable a safe
and effective installation of its facilities. Absent an indication of
fault or negligence by other actors, it is exclusively liable for
fires and other damages caused by its haphazardly installed
posts and wires.
This resolves a Petition for Review on Certiorari1 under Rule 45
of the 1997 Rules of Civil Procedure praying that the assailed
Court of Appea October 25, 2012 Decision2 and October 8,
2013 Resolution3 in CA-G.R. CV No. 02583 be reversed and set
aside.
The assailed Court of Appeals October 25, 2012 Decision
reversed the January 4, 2006 Decision4 of Branch 11, Regional
Trial Court, Cebu City in Civil Case No. CEB-23694, which found
herein respondent M. Lhuillier Pawnshop and Jewelry (M.
Lhuillier) negligent and liable for the fire which burned down the
properties of Emilio G. Alfeche (Emilio), Gilbert Alfeche (Gilbert),
and Emmanuel Manugas (Manugas). The Court of Appeals
reversed the trial court decision and found herein petitioner
Visayan Electric Company, Inc. (VECO) liable in M. Lhuillier's
stead.
The assailed Court of Appeals October 8, 2013 Resolution
denied VECO's Motion for Reconsideration.5
On the night of January 6, 1998, a fire broke out at 11th Street,
South Poblacion, San Fernando, Cebu, which burned down the
house and store of respondent Emilio and his son, respondent
Gilbert (the Alfeches),6 and the adjacent watch repair shop
owned by respondent Manugas.7 It was alleged that the cause
of the fire was the constant abrasion of VECO' s electric wire
with M. Lhuillier's signboard.8
The next day, the Alfeches and Manugas reported the incident
to the police9 and to the Sangguniang Bayan of San
Fernando.10 Upon Emilio, Gilbert, and Manugas' request for site
inspection, the Sangguniang Bayan of San Fernando eventually
passed Resolution No. 12 requesting VECO to inspect the area
and to repair faulty wires. The Alfeches and Manugas sent a
letter to the management of VECO asking for financial
assistance, which VECO denied. VECO asserted that the fire was
due, not to its fault, but to that of M. Lhuillier.11
As their initial claim for financial assistance was not satisfied,
the Alfeches and Manugas filed a Complaint for Damages
against VECO and M. Lhuillier before the Regional Trial Court of
Cebu City.12
During pre-trial, M. Lhuillier admitted that it was the owner of
the signboard at its branch in San Fernando, Cebu. M. Lhuillier
and VECO admitted that a fire destroyed the Alfeches' and
Manugas' properties on January 6, 1998.13
The Alfeches and Manugas presented testimonial, documentary,
and object evidence. They presented as witnesses Emilio,
Manugas, Mignonette Alfeche (Mignonette), and Rodolfo Rabor
(Rabor ).14
Emilio testified that between 9:00 p.m. and 10:00 p.m. of
January 6, 1998, he was awakened as their house was
buming.15 He went out and saw a cut wire swinging and
burning at the top of his roof, about three (3) to four (4) meters
away.16 He explained that his house was also used by his son,
Gilbert, as a store for various merchandise such as food,
beverages, and feeds. His house adjoined an M. Lhuillier
pawnshop, which had a big signboard.17 Emilio presented a
module simulating how the fire broke out in relation to the
location of the electric posts and his house.18 He alleged that
VECO posts were transferred to their current location because
of a roadwidening project. This transfer caused the sagging
wire of VECO to constantly touch M. Lhuillier's signboard, which,
in tum, led to the breaking and burning of the wire.19 The
burning cut wire went swinging on top of and landed on Emilio's
roof; thus, it caused the fire that burned his house.20
Mignonette, the wife of Gilbert, corroborated Emilio's testimony
that the fire came from the burning end of the electric wire near
M. Lhuillier's signage. She presented pictures showing the
location of their store and an electric post near M. Lhuillier's
signage.21
Rabor testified that while in the highway on his way home, he
noticed a spark in the electric line near M. Lhuillier's signboard.
He ran towards Emilio's house to warn the Alfeches, but before
getting there, the wire had dropped on the roof and caused a
fire.22
Manugas attested that he owned the shop composed of "a small
booth with a roof and glass window"23 beside Emilio's house.
This shop was burned along with his tools, watches, and other
equipment. He identified the police blotter stating the extent of
the damage.24
VECO countered with testimonies of the following persons, in
addition to other documentary and object evidence: Engr.
Benedicto Banaag (Engr. Banaag), Engr. Simeon Lauronal
(Engr. Lauronal), Candelario L. Melencion (Melencion), Engr.
Felipe Constantino (Engr. Constantino), Engr. Edwin Chavez
(Engr. Chavez), and Engr. Miguel Ornopia (Engr. Ornopia).
Engr. Banaag, an electrical engineer and a lawyer who had
been working with VECO for 35 years,25 testified that VECO
sent two (2) superintendents and a general foreman to inspect
the site.26 The inspectors found that the cause of the incident
was the constant rubbing of the wires of VECO with M.
Lhuillier's signage.27 He also stated that M. Lhuillier's signage
"was placed long after VECO installed their poles,"28 the
relocation of which was made after the fire broke out.29 He
claimed that their wirings and installations are in full compliance
with the National Building Code and the Philippine Electrical
Code, which allowed them to install their poles one half (Y2)
meter inside the road-right-of-way and at least three (3) meters
away from any structure.30 According to him, it was M. Lhuillier
which violated the National Building Code by placing their
signage near their pole, thereby causing the abrasion and the
fire.31
The Municipal Engineer of San Fernando, Cebu, Engr. Lauronal,
averred that there was a road-widening project, which started
in September 1997, and an accompanying construction of the
drainage system, which commenced on October 6, 1997, in the
Alfeches' and Manugas' area.32 Their team asked the mayor to
seek the relocation of VECO's posts as these would be affected
by the drainage construction. VECO relocated its posts and
consequently, its wires moved closer to the signage of M.
Lhuillier with a distance of only eight (8) inches between
them.33 He also mentioned that the old location of VECO posts
left a hole in the middle of the drainage.34
Melencion, an employee of VECO for 41 years, attested that he
knew of the installation of the electric wires in the area.35
Engr. Constantino, also a VECO employee, testified that
sometime in the last week of December, there was a complaint
that the voltage in 11th Street, South Poblacion, San Fernando,
Cebu was low. Upon inspection, he noticed that VECO's wires
near the signage of M. Lhuillier were newly installed. He noted
that the wire used in the area was "a No. 4 aluminum standard,
secondary system."36
Engr. Chavez was presented by VECO as an expert witness.37
He noted that there were two (2) kinds of secondary systems
used by utility companies: the line-to-line system and the line-
to-ground system.38 According to him, in a line-to-ground
system, if one (1) of its wires was cut off, the flow of electricity
would just continue; hence, this system was more likely to
cause fire.39
Engr. Ornopia asserted that VECO used the line-to-line system
for safety purposes.40 Further, he stated that he personally
conducted area inspections and that there was no report
regarding any irregularity in the signage of M. Lhuillier.41
M. Lhuiller presented as its witnesses Ernesto G. Solon (Solon),
Jose Edgar Camuta (Camuta), Randy Adlawan (Adlawan), and
Rolando Baranquil (Baranquil).
Solon verified that he installed the signage of M. Lhuillier and
emphasized that it was free from any obstacle upon
installation.42 He noted that, in every installation, he would
consider several factors:
[T]hat the signage would not touch the electrical wirings of
VECO, both primary and secondary wires, for safety purposes;
that no pipes of [Metropolitan Cebu Water District] would be hit
in making a hole; that the primary wires would have a distance
of at least two (2) meters from the high tension wires; the
secondary wires would not touch the signage and, that the
signage [would] not be hit by the passing vehicles.43
Camuta claimed that he won the contract to install M. Lhuillier's
signage in 1995. He testified that before installing the signage,
they had to ensure that it was "free from any obstacle."44
Adlawan, an M. Lhuillier employee,45 held that "[the fire]
started at the back of the house at the right portion [and
spread] towards the firewall at the left side where the signage
of M. Lhuillier was situated."46
The Regional Trial Court ruled that the proximate cause of the
injury suffered by the Alfeches and Manugas was the negligence
of M. Lhuillier. It noted that based on Engr. Banaag's testimony,
M. Lhuillier installed its signage long after VECO moved its
poles.47 Thus, it was its negligence in installing and positioning
its signage which led to the abrasion of VECO's power line and,
ultimately, the fire.48
On appeal, the Court of Appeals reversed the Regional Trial
Court decision and found VECO liable in M. Lhuillier's stead.49
The Court of Appeals gave greater credence to the testimonies
of Rabor and Engr. Lauronal, considering them to be impartial
witnesses.50 It noted that the relocation of the posts came
before the fire, occasioned by the road widening and drainage
projects.51 Thus, VECO transferred the poles and the lines to a
distance of merely eight (8) inches from M. Lhuillier's signboard.
This, in turn, caused the abrasion of power lines and the fire:
These pieces of evidence move this Court to rule that it was
VECO, not defendant-appellant M. Lhuillier, which was
extremely remiss of its duty to ensure safe and secure
transmission lines. It was utterly negligent of VECO to have
allowed the transfer of the posts closer to the households
without ensuring that they followed the same safety standards
they used during the original installation of the posts. It must
be emphasized that VECO, as the only electric distribution
company in San Fernando, takes full charge and control of all
the electric wires installed in the locality. It has the sole power
and responsibility to transfer its wires to safe and secured
places for all its consumers. However, they undoubtedly failed
to observe the reasonable care and caution required of it under
the circumstances. Hence, they are negligent.52
The dispositive portion of the assailed Court of Appeals Decision
read:
WHEREFORE, the instant appeal is GRANTED. The Decision of
the Regional Trial Court Branch 11 of Cebu City dated 04
January 2006 is SET ASIDE and a New One Entered declaring
defendant-appellee VISA YAN ELECTRIC COMP ANY (VECO)
negligent and liable for the damages suffered by the plaintiffs-
appellees. The defendant-appellee VECO is ordered to pay the
plaintiffs-appellees the following as temperate damages, to wit:
1. To Emilio Alfeche, the amount of ₱185,000.00
2. To Gilbert Alfeche, the amount of ₱800,000.00
3. To Emmanuel Manugas, the amount of ₱65,000.00
The award of moral damages is deleted.
SO ORDERED.53
Following the denial of its Motion for Reconsideration, VECO
filed the present Petition.54
VECO insists that it is M. Lhuillier, and not itself, which should
be held liable for the fire.55 Asserting that it was impossible for
its negligence to have caused the fire, it claims that its posts
were relocated only after the fire occurred.56 It adds that it was
an error for the Court of Appeals to rely on Emilio's testimony,
which it characterized as "self-serving."57 It asserts that no
witness ever corroborated Emilio's testimony that the posts
were relocated before the fire.58 It also challenges the findings
of the Court of Appeals regarding Engr. Lauronal's testimony,
claiming that he lacked personal knowledge as to when the
posts were relocated and that he never testified that they were
relocated before the fire.59 It adds that although the picture
shown by Engr. Lauronal was alleged to have been taken one
(1) day after the fire occurred, it was only presented three (3)
years after trial had commenced. This was supposedly the only
basis of Engr. Lauronal' s testimony pointing to the hole where
the posts were previously located.60 VECO also argues that the
picture was not properly authenticated as required under the
Rules on Evidence.61
M. Lhuillier counters that Engr. Lauronal's statements clearly
showed that the relocation of the posts was made before the
fire. It emphasizes that Engr. Lauronal stated during cross-
examination that the relocation was made because of the
drainage project which was undertaken from October 6, 1997 to
November 28, 1997.62 It further underscores that the contact
between VECO's cables and its own signage would not have
happened had VECO not relocated its posts.63
For resolution is the sole issue of whether or not the Court of
Appeals erred in ruling that petitioner Visayan Electric Company
Inc.'s negligence, rather than that of respondent M. Lhuillier
Pawnshop and Jewelry, was the proximate cause of the fire
which razed the properties of respondents Emilio Alfeche,
Gilbert Alfeche, and Emmanuel Manugas.
I
The case before this Court is replete with factual issues.
Ordinarily, it is not for this Court to review factual issues in
petitions such as the present Rule 45 Petition which may only
raise questions of law.64 This rule, however, admits certain
exceptions:
(1) when the factual findings of the Court of Appeals and the
trial court are contradictory;
(2) when the findings are grounded entirely on speculation,
surmises, or conjectures;
(3) when the inference made by the Court of Appeals from its
findings of fact is manifestly mistaken, absurd, or impossible;
(4) when there is grave abuse of discretion in the appreciation
of facts;
(5) when the appellate court, in making its findings, goes
beyond the issues of the case, and such findings are contrary to
the admissions of both appellant and appellee;
(6) when the judgment of the Court of Appeals is premised on a
misapprehension of facts;
(7) when the Court of Appeals fails to notice certain relevant
facts which, if properly considered, will justify a different
conclusion;
(8) when the findings of fact are themselves conflicting;
(9) when the findings of fact are conclusions without citation of
the specific evidence on which they are based; and
(10) when the findings of fact of the Court of Appeals are
premised on the absence of evidence but such findings are
contradicted by the evidence on record.65
The findings of the Regional Trial Court and of the Court of
Appeals differ in this case. The Regional Trial Court found that
"had not defendant [M.] Lhuillier installed its signage in such a
manner that it will come in contact with the secondary lines of
defendant VECO, there could have been no short circuit which
caused the fire."66 On the other hand, the Court of Appeals
found that "one VECO post was affected by the road widening
work. Due to the transfer, the VECO wire already touched the
signboard of M. Lhuillier pawnshop."67 In the interest of
arriving at a definite determination of the attendant liabilities,
this Court exercises its power of review.
II
Despite the Regional Trial Court's and the Court of Appeals'
divergence on the liabilities of VECO and M. Lhuillier, they are
consistent in finding that the immediate cause of the fire was
the short circuiting of VECO's wires. This short circuiting, in
turn, happened because VECO's wires had been abraded or
stripped of their insulation by their constant rubbing with M.
Lhuillier's signage. The Regional Trial Court and the Court of
Appeals are consistent in this regard.
The Regional Trial Court's statement that "there could have
been no short circuit which caused the fire"68 had M. Lhuillier
installed its signage in a way that it would not touch VECO's
secondary lines accepts as truth how the confluence of
proximity, abrasion, and short circuiting led to the fire. For its
part, the Court of Appeals stated:
The constant abrasion led to the failure of the insulation
thereby causing a short circuit which eventually led to the
breaking and the burning of the wire. The burned and cut wire
which fell on the roof of plaintiff-appellees' house was proven to
be the main cause of the fire. These flow[s] of events reveal
that the negligent act of defendant-appellee VECO in
transferring its pole without providing the necessary
precautionary and safety measure was the natural and probable
result of the fire which caused damage to plaintiffs-appellees.69
This Court's inquiry proceeds from settled truth as to the
immediate, factual cause of the fire. What is in dispute is
whether VECO or M. Lhuillier was negligent to have engendered
the confluence of proximity, abrasion, and short circuiting.
III
VECO attempts to altogether skirt any imputation of negligence
by painting a scenario of impossibility. It claims that its wires
could not have caused the fire by touching M. Lhuillier's signage
as its posts were not transferred until after the fire occurred.
VECO's position is negated not only by the entire corpus of
evidence but, more basically, by common sense.
To reiterate, the Regional Trial Court and the Court of Appeals
are consistent in holding that proximity, abrasion, and short
circuiting led to the fire. Common sense dictates that the wires
and signage could never have rubbed against each other, or the
wires abraded and short circuited, had they not been in close
proximity. Common sense also shows that they could not have
been in close proximity had not either the wires or the signage
moved closer to the other. The testimonies of Solon and
Camuta were definite that when M. Lhuillier's signage was
installed in 1995, it was free from any obstacle. No allegation
was made, let alone proof presented, that the signage had been
relocated in the interim. In contrast, a plethora of evidence
attests to the relocation of VECO's posts and wires. Heeding
VECO's position demands not only this Court's disregard of the
preponderant evidence against VECO but also this Court's
acceptance of the absurdity and the impossibility that VECO's
posts and wires must have moved closer to M. Lhuillier' s
signage by some unseen, even supernatural, force.
VECO's position is not only inherently impossible. Credible
testimonies also militate against it. These testimonies remain
credible despite VECO' s attempts at undermining them.
VECO attempts to discredit Emilio by characterizing him as a
biased witness, he being one (1) of the plaintiffs.
The fact of Emilio's being a plaintiff does not amount to bias
against VECO vis-a-vis M. Lhuillier. That is, Emilio has not been
shown to be actively impeding VECO's attempt to evade liability
and to impute it instead to M. Lhuillier. In fact, his act of suing
both VECO and M. Lhuillier indicates a lack of preference for
any of them. It indicates, rather, his sole interest in the
satisfaction of his claim for damages. Having brought an action
against both VECO and M. Lhuillier, Emilio manifests intent to
submit to judicial wisdom the determination of which between
VECO and M. Lhuillier has been negligent and is liable.
VECO has also attempted to discredit the statements of its own
witness, Engr. Lauronal.
On cross examination, Engr. Lauronal indicated that VECO's
posts were transferred ahead of the fire. He definitely stated
that VECO's posts were affected by the drainage project and
that they had to be relocated.70 According to him, the project
commenced on October 6, 1997 and was already completed on
November 28, 1997,71 well ahead of the occurrence of the fire
in the evening of January 6, 1998. He also stated that had it not
been for the transfer, VECO's wires would not have touched M.
Lhuillier's signage.72
Atty. Dalawampu (to the witness)
Q- Mr. Witness, you said that there was a road widening project
at 11th Street, am I correct?
A- Yes, ma'am.
Q- You also said that there was a drainage project along the
area, correct?
A- Yes, ma' am.
Q-You said that there was a monitoring, were you aware that in
the construction of the drainage at 11th Street, the VECO posts
were affected, were you aware of that?
A-Our monitoring team requested the mayor of San Fernando to
request VECO to relocate their posts, ma'am.
Q-Your monitoring team of your office requested the municipal
mayor of San Fernando to ask VECO to relocate the posts
because they were affected by the construction of drainage,
meaning the drainage project had to pass through on that area
where the VECO posts were located, am I correct?
A-Yes, ma'am.
....
Q- Here is a VECO post as shown on this picture marked as
Exhibit N-1. Can you tell this Honorable Court in the monitoring
done by your office if this VECO post marked as Exhibit N-1
used to be located here on this hole marked as Exhibit N-5?
A-We didn't care anymore where the VECO post will be
relocated, ma[']am.
Q-My question is, can you tell this Honorable Court if this post
marked as Exhibit N-1 used to be in this hole, located in this
hole marked as Exhibit N-5, that is the question?
A-Yes, the previous location of the post was this hole marked as
N-5, ma[']am.

Q-This post which you are referring to is this Exhibit N-1,
correct?
A-Yes, ma'am.
Q- But as shown on this picture Exhibit N, the VECO post at the
other end of the street which was marked as Exhibit N-6 was
not removed nor relocated?
A-Only the VECO post was relocated, ma'am.
Q- So, the only post that was relocated was Exhibit N-1,
correct?
A-Yes, ma'am.
....
Q- Because of the relocation, the wire connecting the two (2)
posts, Exhibit N-1 and Exhibit N-6, was necessarily moved also
closer to the houses along the area at the left?
A-Of course, it will be moved also because the VECO post was
moved.
Q-And the movement of the post on Exhibit N-1 was towards or
closer to the houses along the area?
A-Yes, ma'am.
Q-The drainage project which you are testifying before this
Honorable Court was constructed or was undertaken on October
6, 1997, am I correct?
A- Yes, ma'am.
....
Q-You mean to say that the duration of the construction should
be up to November 28, 1997?
A-Yes, ma'am.
Q-Because of the transfer of this VECO post marked as Exhibit
N-1, the wire connecting the two (2) posts Exhibit N-7 and N-1,
had to touch the signage of M. Lhuillier, am I correct?
A-The distance of the wire from the M. Lhuillier signage was
about 8 inches, the clearance, and they also placed a plastic
material so that the wires will not touch the signage of M.
Lhuillier, Ma'am.
Q- Engr. Lauronal, you are aware that the fire took place on
January 6, 1998, in that area?
A-- Yes, ma'am.
Q-Engr. Lauronal, there was no change in the location or
situation of the wires connecting the 2 VECO posts after the
fire, there was none yet?
A- Yes, there was no change, ma’am.73
On further cross-examination, Engr. Lauronal stated:
Atty. Dinsay (to the witness)
Q-Because of the drainage project they have to move the post a
little bit inward to the left, correct?
A-Yes, sir.
Q-Engr. Lauronal, there was a gap from the electrical line to the
signage of M. Lhuillier at about 8 inches, correct?
A-That's correct, sir.
Q-Since you are an engineer, can you estimate from this pole
where you said the poles used to be and to the present location
of the post marked as Exhibit N-1, can you please give us an
estimate as to how far that is?
A-I can't give you an estimate, all I know is that the post was
transferred.
Q-Can you tell whether the transfer from that former hole to
the present position would be more than 8 inches?
A-I think more than 8 inches, sir.
Q-And, therefore, you would also say that had it not been for
the fact that the post was moved more than 8 inches where it is
now located, the electrical wire would not have touched the
signage of M. Lhuillier, correct?
A-Yes, Sir.74
Different from what VECO suggests, Engr. Lauronal was not
entirely dependent on Exhibit "N." On the contrary, when
initially presented with Exhibit "N," he attempted to shrug it off
by answering, "We didn't care anymore where the VECO post
will be relocated."75 Moreover, while he referenced Exhibit "N,"
the substance of Engr. Lauronal's testimony was not the
intricacies of Exhibit "N" and the veracity or the peculiarities of
its features. The substance of his testimony, rather, was how
VECO's posts and wires were transferred on account of road-
widening and drainage projects, well ahead of the fire on
January 6, 1998 and how these transfers brought VECO's wires
closer to M. Lhuillier's signage.
Also contrary to VECO's suggestion that Engr. Lauronal was
incompetent on the matters he had testified to, his testimony
deserves great weight, he having testified in his capacity as the
municipal engineer overseeing and liaising local projects. It is
also particularly notable that Engr. Lauronal maintained a sense
of objectivity and neutrality, speaking plainly of the facts, as he
knew them, despite having been presented as VECO's own
witness.
Engr. Banaag was VECO's sole witness on when it relocated its
posts, claiming that the relocation happened after the fire.76
While VECO has made much of the supposed biases of other
witnesses, it is Engr. Banaag's testimony which should be
treated with skepticism, he having admittedly worked for and
represented VECO for 35 years.77
In any case, even Engr. Banaag's own testimony militates
against VECO. In his testimony, he conceded that "the
proximate cause of the fire was the breaking of the secondary
wire forcibly caused by the abrasion of the signage of M.
Lhuillier."78 Engr. Banaag's conclusion, juxtaposed with VECO's
claim that its posts and wires were not transferred until after
the fire, strains credulity. Again, it runs afoul of common sense
to claim that the wires and signage rubbed against each other if
they had not been previously placed in close proximity.
Certainly, someone must have placed them close to each other
before they rubbed at each other. With an utter dearth of
evidence indicating that it was the signage that moved, no
reasonable conclusion is left other than that the wires and posts
were moved. This transfer could not have been effected by
anyone other than the electricity utility company responsible for
their installation and maintenance, VECO.
IV
Thus, the Court of Appeals was correct in ruling that VECO's
negligence was the proximate cause of the injury suffered by
respondents Emilio, Gilbert, and Manugas. All the elements for
liability for a quasidelict under Article 2176 of the Civil Code79
have been shown to be attendant on VECO's part. The elements
of a quasi-delict are:
(1) the damages suffered by the plaintiff; (2) the fault or
negligence of the defendant or some other person for whose
act he must respond; and
(3) the connection of cause and effect between the fault or
negligence and the damages incurred.80
On the first element, it is undisputed that the Alfeches and
Manugas suffered damage because of the fire. What has
hitherto remained unresolved is which between VECO and M.
Lhuillier is liable to indemnify them.
Fault is "a voluntary act or omission which causes damage to
the right of another giving rise to an obligation on the part of
[another]."81 On the other hand, "[n]egligence is the failure to
observe for the protection of the interest of another person that
degree of care, precaution and vigilance which the
circumstances justly demand."82

Between VECO and M. Lhuillier, it is VECO which this Court finds
to have been negligent.
M. Lhuillier was not negligent in installing its signage. It
installed its signage in 1995 well before the road-widening and
drainage projects commenced and ahead of VECO's relocation
of its posts. Solon and Camuta both emphasized that the
signage was installed free of any obstacle. Other than VECO's
evasive accusations, there is no proof to the contrary.
It was VECO that was negligent. It is apparent that it
transferred its posts and wires without regard for the hazards
that the transfer entailed, particularly with respect to the
installations which had previously been distant from the wires
and posts but which had since come into close proximity.
VECO is a public utility tasked with distributing electricity to
consumers. It is its duty to ensure that its posts are properly
and safely installed. As the holder of a public franchise, it is to
be presumed that it has the necessary resources and expertise
to enable a safe and effective installation of its facilities. By
installing its posts and wires haphazardly, without regard to
how its wires could come in contact with a previously installed
signage, VECO failed to act in keeping with the diligence
required of it.
Proximate cause is defined as "that cause which, in natural and
continuous sequence, unbroken by any efficient intervening
cause, produces the injury and without which the result would
not have occurred."83
VECO' s negligence was the proximate cause of the damage
suffered by the Alfeches and Manugas. It is settled that the
confluence of proximity, abrasion, and short-circuiting led to the
fire. The first of these-proximity arose because of VECO's
relocation of posts and wires. Installed in such a manner that its
wires constantly touched M. Lhuillier's signage, this "led to the
failure of the insulation thereby causing a short circuit which
eventually led to the breaking and burning of the wire."84 It
was this burning wire that fell on the Alfeches' residence's roof
and burned down their house and store, as well as Manugas'
adjacent shop.
VECO would have this Court sustain a flimsy excuse for evading
liability. Attempting to break the all too apparent causal
connection between its negligence and the injury suffered by
the plaintiffs, it would insist on absurdities that strain common
sense and vainly attempt to discredit even its own witness. This
Court finds no merit in VECO's pretenses and sustains the Court
of Appeals decision.
WHEREFORE, the Petition for Review on Certiorari is DENIED.
The Court of Appeals October 25, 2012 Decision and October 8,
2013 Resolution in CA-G.R. CV No. 02583 are AFFIRMED.
SO ORDERED.
On April 12, 1999, Del Rosario and Boston entered into a Real
MARVIC M.V.F. LEONEN Estate Mortgage whereby the former, representing himself as
Associate Justice single, mortgaged six (6) parcels of land located at 300 Kanlaon
St., Sta Mesa Heights, Quezon City to the latter for Seventeen
Million Pesos (Phpl7,000,000.00) at an interest rate of 4 per
centum (4%) monthly within a period of six (6) months. Said
THIRD DIVISION parcels of land registered under the name of Del Rosario has a
total land area of four thousand five hundred thirty three and
November 27, 2017 60/100 (4,533.60) square meters and are covered by transfer
certificates of title numbered as follows: RT-71666 (375141),
G.R. No. 193228 RT- 71665 (375139), RT-71668 (375142), RT-71669 (375140),
RT-71667 (375138) and RT-72517 (129992). The fair market
BOSTON EQUITY RESOURCES, INC., and WILLIAM value of the said parcels of land is One Hundred Thirteen Million
HERNANDEZ, Petitioners and Three Hundred Forty Five Thousand Pesos
vs. (Phpl13,345,000.00).
EDGARDO D. DEL ROSARIO, Respondent
However, records indicated that only two certificates of title
DECISION were attached. On May 3, 1968, the Register of Deeds of
Quezon City issued TCT No. RT-72517 (129992) covering Six
BERSAMIN, J.: Hundred Thirty Seven Square Meters and Eighty Square
Decimeters (637.8) to Edgardo del Rosario. Likewise, TCT
The two-bidder rule is not applicable during the public auction No.RT-71665 (375139) was issued to Edgardo del Rosario on
of the mortgaged assets foreclosed pursuant to Act No. 3135.1 February 3, 1988. This title covered Five Hundred Forty Seven
But the mortgage itself and the extrajudicial foreclosure thereof Square Meters and Ninety Square Decimeters (547.9).
should nonetheless be nullified for lack of the written consent to
the mortgage of conjugal assets by the spouse of the Thereafter, additional loan obligations amounting to Fifteen
mortgagor. Million Pesos (Php15,000,000.00) was obtained by Del Rosario.
Thus, on September 8, 1999, the Real Estate Mortgage
The Case previously executed was amended to include the Fifteen Million
Pesos additional loan and adopting therein all the terms and
Petitioner Boston Equity Resources, Inc. (Boston Equity), the conditions stated in the Real Estate Mortgage.
mortgagee who was also the highest bidder of the assets under
mortgage, hereby seeks the review and reversal of the adverse On various dates, Del Rosario paid a total amount of Three
decision promulgated on April 28, 2010,2 whereby the Court of Million One Hundred Seventy Eight Thousand Six Hundred Sixty
Appeals (CA) annulled the real estate mortgage (REM), its Seven Pesos (Php3,178,667.00) represented by encashed
amendment and the foreclosure proceedings taken pursuant to Checks and Twenty Five Million Pesos (Php25,000,000.00) on
the REM. December 8, 1999, as evidenced by the Official Receipt No.
14019 in favor of Boston to obtain a release from the Thirty
Antecedents Two Million Pesos (Php32,000,000.00) loan as stated in the
Certification issued by Josephine Sha, Finance Manager of
The assailed decision of the CA recited the following factual and Boston.
procedural antecedents, viz.:
On December 9, 1999, Boston issued a Cash Voucher to Del
Plaintiff-appellant Edgardo Del Rosario ... was married to herein Rosario representing the excess payment by the latter of Seven
plaintiff-intervenor-appellant Rosie Gonzales Del Rosario on Million Two Hundred Fifty Seven Thousand and Two Hundred
March 9, 1968 and their marriage has been blessed with three Pesos (Php 7,257,200.00) on the Thirty Two Million Peso[s]
children, herein plaintiffs-intervenors-appellants, Christina, Peter loan.
and Paul, all surnamed Del Rosario.
On various dates in the year 2000, Del Rosario again obtained
Defendant-appellee Boston Equity Resources, Inc., ... is a several loans totaling Thirty Four Million Four Hundred
private corporation duly registered and operating under the Thousand Pesos (Php 34,400,000.00) but because Boston made
laws of the Philippines with defendant-appellee William an advanced deduction of interest (Php 11,660,347.00), he was
Hernandez as its president. able to receive only Twenty Two Million Seven Hundred Thirty
Nine Thousand and Six Hundred Fifty Three Pesos
Defendant Mercedes Gatmaitan is impleaded in her capacity as (Php22,739,653.00) from the said loan.
Ex-Officio Sheriff of the Quezon City Regional Trial Court.
Thereafter, on February 21, 2001, Boston sent a Demand Letter
to Del Rosario for the payment of Fifty Two Million and Nine
Hundred Thousand Pesos (Php 52,900,000.00), claiming it to be
the principal amount Del Rosario owed to the former excluding
penalties and other charges. In response to Boston's demand
letter, Del Rosario sent a Letter dated March 8, 2001 asking
Boston to furnish him an accurate and specific statement of
account, so that he can properly settle his obligation as the
amount alleged in the demand letter was not accurate since it
included the commission of Nelia So.
Instead of heeding Del Rosario's requests for an accurate
statement of account, on March 13, 2001, Boston sent another
Demand Letter to Del Rosario this time seeking the payment for
the amount of Fifty One Million Four Hundred Thousand Pesos
(Php 51,400,000.00). Through a Letter dated May 31, 2001, Del
Rosario asked for [an] additional time to settle his obligation.
Boston did not grant Del Rosario's request for time to settle his
loan but proceeded to foreclose Del Rosario's properties by
causing the publication of the Notice of Foreclosure in Maharlika
Pilipinas on May 31, June 7 and June 14, 2001.
As a consequence, the Ex-Officio Sheriff of Quezon City sent a
Notice of Extra-Judicial Sale of Real Property Under Act 3135
(As Amended) dated May 28, 2001 to Del Rosario saying that
the parcels of land shall be sold at a public auction on June 27,
2001 in order to satisfy his Php 52.9 Million debt with Boston. In
the said sale, Boston was declared the sole bidder for the
properties in the amount of Seventy Five Million Pesos (Php
75,000,000.00).3
As the offshoot of the foregoing antecedents, Edgardo brought
his complaint for the declaration of the nullity of the extra
judicial foreclosure of the REM and the sheriff's sale on May 8,
2002 against Boston Equity in the Regional Trial Court in
Quezon City (RTC). The case, docketed as Civil Case No. Q-02-
46788, was initially assigned to Branch 78.4
On May 14, 2002, the RTC granted Edgardo's prayer for the
issuance of the temporary restraining order (TRO), and
enjoined Boston Equity from consolidating title and from
obtaining a writ of possession respecting the mortgaged
properties.5
On May 21, 2002, the late Rosie Gonzales Del Rosario (Rosie),
the spouse of Edgardo, and their children, namely: Christina,
Peter and Paul, all surnamed Del Rosario, filed in the RTC their
motion to admit their complaint-in-intervention on the basis that
they had a legal interest as the co-owners of the mortgaged
properties by reason of the same forming part of the conjugal
partnership of gains of Rosie and Edgardo. They joined the
prayer of Edgardo for the declaration of the nullity of the
promissory notes, the REM and its amendment, and the
extrajudicial foreclosure of the REM and the ensuing sheriff's
sale.6
On August 27, 2007,7 the RTC dismissed Edgardo's complaint,
disposing thusly:
WHEREFORE, in view of the foregoing, the instant Complaint for
Declaration of Nullity of Extrajudicial Foreclosure & Sheriff's Sale
is hereby DISMISSED for lack of merit. Accordingly, the Writ of
Preliminary Injunction issued on June 19, 2002 is hereby lifted.
SO ORDERED.8
Edgardo, Rosie and the Del Rosario children separately
appealed to the CA, which ultimately overturned the RTC's
ruling through the assailed decision of April 28, 2010, decreeing
as follows:
WHEREFORE, premises considered, the instant appeal is hereby
GRANTED. The Decision of RTC Branch 224 of Quezon City in
Civil Case No. Q-02-46788 is REVERSED AND SET ASIDE and a
new one entered declaring the nullity of the subject Real Estate
Mortgage and its Amendment, and all the proceedings
emanating therefrom.
SO ORDERED.9
The CA opined that the REM, having involved conjugal
properties, had required the written consent of Rosie for its
validity; that the REM and its amendment were consequently
null and void; that the extrajudicial foreclosure sale was further
null and void for failure to comply with the procedure mandated
by A.M. No. 99-10-05-0 (Procedure in Extra-Judicial Foreclosure
of Mortgage) requiring at least two bidders during the public
auction; and that Boston Equity could not validly consider
Edgardo's loan account to be in default without first giving him
a proper accounting.10
With the CA denying their motion for reconsideration on August
6, 2010,11 the petitioners appeal.
Issues
The petitioners insist on the following errors:
I Sec. 4. The sale shall be made at public auction, between the
THE COURT OF APPEALS ERRED IN RULING THAT THE
MORTGAGE EXECUTED BY EDGARDO IS NULL AND VOID
BECAUSE OF THE ALLEGED LACK OF CONSENT OF ROSIE,
WIFE OF EDGARDO IN THE MORTGAGE CONTRACT AND ITS
AMENDMENT.
II
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
EXTRAJUDICIAL FORECLOSURE SALE OF THE PROPERTIES
MORTGAGED WAS NULL AND VOID FOR ITS FAIL URE TO
COMPLY WITH A.M. NO. 99-10-05-0 WHICH ALLEGEDLY
REQUIRES AT LEAST TWO OR MORE PARTICIPATING BIDDERS
IN THE AUCTION SALE.
III
THE COURT OF APPEALS, WITH ALL DUE RESPECT,
COMMITTED AN ERROR WHEN IT DECLARED THAT
PLAINTIFFAPPELLANT IS ENTITLED TO A "PROPER
ACCOUNTING" OF HIS OUTSTANDING OBLIGATION.12
Ruling of the Court
The appeal, albeit meritorious on the non-applicability of the
two-bidder rule and the efficacy of the publication of the public
auction, should fail on the ground that the REM and its
amendment were void for lack of the written consent to the
mortgage of Rosie, the spouse.
I.
The CA erred in annulling the extrajudicial
foreclosure sale for failure to have at least
two bidders during the foreclosure sale
That only Boston Equity had participated in the bidding during
the foreclosure sale did not constitute a defect that nullified or
voided the foreclosure sale considering that the Court had
already dispensed with the two-bidder rule for purposes of the
foreclosure sale of private properties.13
The extrajudicial foreclosure of a mortgage with the special
power of attorney to sell the security being inserted in or
attached to the deed of mortgage is governed by Act No. 3135,
particularly the following provisions:
Sec. 3. Notice shall be given by posting notices of the sale for
not less than twenty days in at least three public places of the
municipality or city where the property is situated, and if such
property is worth more than four hundred pesos, such notice
shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the
municipality or city.
hours or nine in the morning and four in the afternoon; and
shall be under the direction of the sheriff of the province, the
justice or auxiliary justice of the peace of the municipality in
which such sale has to be made, or a notary public of said
municipality, who shall be entitled to collect a fee of five pesos
each day of actual work performed, in addition to his expenses.
Sec. 5. At any sale, the creditor, trustee, or other persons
authorized to act for the creditor, may participate in the bidding
and purchase under the same conditions as any other bidder,
unless the contrary has been expressly provided in the
mortgage or trust deed under which the sale is made.
Sec. 6. In all cases in which an extrajudicial sale is made under
the special power hereinbefore referred to, the debtor, his
successors in interest or any judicial creditor or judgment
creditor of said debtor, or any person having a lien on the
property subsequent to the mortgage or deed of trust under
which the property is sold, may redeem the same at any time
within the term of one year from and after the date of the sale;
and such redemption shall be governed by the provisions of
sections four hundred and sixty-four to four hundred and sixty-
six, inclusive, of the Code of Civil Procedure, in so far as these
are not inconsistent with the provisions of this Act.
As its aforequoted provisions indicate, Act No. 3135 does not
require the participation of at least two bidders at the public
auction. In A.M. No. 99-10-05-0 dated January 30, 2001 (Re:
Procedure in Extra-Judicial Foreclosure of Mortgage), therefore,
the Court, acting on letters containing observations and
proposals about the rules of procedure to be undertaken in the
extrajudicial foreclosure of mortgages as embodied in Circular
A.M. No. 99-10-05-0 (inclusive of the bidding requirements, and
the publication of notices), expressly resolved:
After due deliberation on the points raised by the parties and
considering the report of the OCA, the Court resolved as
follows:
1. Paragraph 5 of the Circular A.M. No. 99-10-05-0 provides:
No auction sale shall be held unless there are at least two (2)
participating bidders, otherwise the sale shall be postponed to
another date. If on the new date set for the sale there shall not
be at least two bidders, the sale shall then proceed. The names
of the bidders shall be reported by the sheriff or the notary
public who conducted the sale to the Clerk of Court before the
issuance of the certificate of sale.
It is contended that this requirement is not found in Act No.
3135 and that it is impractical and burdensome, considering
that not all auction sales are commercially attractive to
prospective bidders.
The observation is well taken. Neither Act No. 3135 nor the
previous circulars issued by the Court governing extrajudicial
foreclosures provide for a similar requirement. The two-bidder
rule is provided under P.D. No. 1594 and its implementing rules
with respect to contracts for government infrastructure projects
because of the public interest involved. Although there is a
public interest in the regularity of extrajudicial foreclosure of
mortgages, the private interest is predominant. The reason,
therefore, for the requirement that there must be at least two
bidders is not as exigent as in the case of contracts for
government infrastructure projects.
On the other hand, the new requirement will necessitate
republication of the notice of auction sale in case only one
bidder appears at the scheduled auction sale. This is not only
costly but, more importantly, it would render naught the binding
effect of the publication of the originally scheduled sale. Prior
publication of the extrajudicial foreclosure sale in a newspaper
of general circulation operates as constructive notice to the
whole world. (Bold underscoring supplied for emphasis only)
Conformably with the foregoing, the foreclosure sale of the
mortgaged properties at the public auction held on June 27,
2007 could not be invalidated for its non-compliance with the
two-bidder rule.
II.
Publication of the notice of the foreclosure sale
in Maharlika Pilipinas was not void
The respondents submit that the publication of the notice of the
foreclosure sale in the newspaper Maharlika Pilipinas was
ineffectual because Maharlika Pilipinas was not a newspaper of
general circulation as required by Section 3 of Act No. 3135,
supra.14 In support of their submission, they cite Metropolitan
Bank and Trust Company, Inc. v. Penajiel,15 where the Court
held that Maharlika Pilipinas was not a newspaper of general
circulation. The petitioners counter that the publication had
been made in a newspaper of general circulation in Quezon
City.
The submission of the respondents fails to persuade.
The respondents, as the parties alleging the non-compliance
with the requisite of publication in the extrajudicial foreclosure
of the mortgage pursuant to Act No. 3135, had the burden of
proving their allegation. They failed in that regard, for a reading
of the ruling in Metropolitan Bank and Trust Company, Inc. v.
Peñafiel only indicates that Maharlika Pilipinas was not
considered a newspaper of general circulation in Mandaluyong
City, the place where the public auction of the property in
question took place.16 With the public auction involved herein
having been held in Quezon City, and there being no showing
by the respondents that Maharlika Pilipinas was not a
newspaper of general circulation in Quezon City, the publication
undertaken by Boston Equity was presumed as compliant with
Section 3 of Act No. 3135.17
III.
There was no need for an accounting
of Edgardo's obligation
before he could be held in default
The CA concluded that the petitioners had hastily considered
Edgardo to have been already in default despite the discrepancy
in the amount demandable from him; and that he was entitled
to a proper accounting in order to properly inform him of his
outstanding obligation.
The petitioners disagree with the CA's conclusions, and contend
that the discrepancy as to the amount of Edgardo's obligation
between the two demand letters given by Boston Equity to him
was reconcilable as ruled by the RTC. They dismiss the CA's
conclusions as predicated on surmises, conjectures, and
suppositions to the effect that he had not really known his total
obligations.18
The CA's conclusions were legally and factually unwarranted.
The foreclosure of the REM is proper once the debtor has
incurred default or delay in performing his obligation. Mora
solvendi, or debtor's default, is defined as the delay in the
fulfillment of an obligation by reason of a cause imputable to
the debtor. Three requisites are necessary to support a finding
of default - first, the obligation is already demandable and
liquidated; second, the debtor delays his performance; and
third, the creditor judicially or extrajudicially requires the
debtor's performance.19
"A debt is liquidated when the amount is known or is
determinable by inspection of the terms and conditions of the
relevant promissory notes and related documentation."20 Thus,
the failure of Boston Equity to furnish the detailed statement of
account to Edgardo did not ipso facto result in his obligation
being still unliquidated. Indeed, the terms and conditions of his
obligation were readily ascertainable and determinable from the
REM and its amendment; hence, the petitioners had properly
considered him in default upon his having failed to settle his
obligation despite their demand. For this reason, any
discrepancy in the amounts stated in the demand letters of
Boston Equity did not genuinely hinder the legitimate effort to
recover on the obligation.
IV.
The petitioners could not raise for the first time
on appeal the issue of Rosie's consent to the
mortgage contract and its amendment
The petitioners are submitting for the first time in this appeal
that Rosie had consented to the REM and its amendment by
affixing her signature as a witness thereto, as Edgardo's
spouse; and that the proceeds of the loan obtained by Edgardo
had redounded to the benefit of the family, and thus rendered
the mortgaged properties, albeit conjugal in character, liable for
the obligation. They argue that changing the legal theory of
one's defense was not altogether prohibited as long as the
factual basis of such theory would not require the presentation
of evidence that was not yet part of the records of the case.21
The respondents posit, however, that the documentary
evidence belatedly submitted by the petitioners to prove the
supposed consent of Rosie to the REM and its amendment was
inadmissible for lack of proper authentication;22 that the
petitioners' insistence that Rosie had known of the REM and its
amendment was a factual matter that went beyond the purview
of the Court's review in this appeal; that the petitioners thereby
changed their theory for the first time in this appeal; and that
the REM and its amendment were null and void for lack of the
written consent of Rosie as the mortgagor's spouse.23
We uphold the respondents' position.
The submission by the petitioners regarding Rosie's having
consented to the REM and its amendment by virtue of her
signature thereon as an instrumental witness was not among
the issues framed and joined by the parties during the trial in
the RTC. For the petitioners to make the submission only now is
impermissible. Questions raised on appeal must be within the
issues the parties framed at the start; hence, issues not raised
before the trial court cannot be raised for the first time on
appeal. The Court will not deal with and resolve issues not
properly raised and ventilated in the lower courts. To allow such
new issues on appeal contravenes the basic rule of fair play and
justice, and is violative of the adverse party's constitutional right
to due process.24 Verily, points of law, theories, issues, and
arguments not brought to the attention of the trial court are
barred by estoppels, and cannot be considered by a reviewing
court.25
The petitioners propose that this case falls within the exception,
and urge the Court to allow the change of legal theory on
appeal because the factual bases for the new theory would not
require the presentation of further evidence by the adverse
party as to enable it to properly meet the issue raised under the
new theory. They argue that their new theory could be verified
from documents already forming part of the records of the
case. They cite in support of their urging the ruling in
Homeowners Savings & Loan Bank v. Dailo.26
The petitioners' proposition is unacceptable.
The application of the exception allowing a change of theory on
appeal provided no additional evidence was necessary, has
been explained in Philippine Geothermal, Inc. Employees Union
v. Unocal Philippines, Inc. (now known as Chevron Geothermal
Philippines Holdings, Inc.)27 thusly:
Respondent's contention that it falls within the exception to the
rule likewise does not lie. Respondent cites Quasha Ancheta
Pena and Nolasco Law Office v. LCN Construction Corp. and
claims that it falls within the exception since it did not present
any additional evidence on the matter:
In the interest of justice and within the sound discretion of the
appellate court, a party may change his legal theory on appeal,
only when the factual bases thereof would not require
presentation of any further evidence by the adverse party in
order to enable it to properly meet the issue raised in the new
theory.
However, this paragraph states that it is the adverse party that
should no longer be required to present additional evidence to
contest the new claim, and not the party presenting the new
theory on appeal. Thus, it does not matter that respondent no
longer presented additional evidence to support its new claim.
The petitioner, as the adverse party, should not have to present
further evidence on the matter before the new issue may be
considered. x x x
The exception is still not proper. Although the respondents, who
are considered the adverse party, could belie the petitioners'
claim by merely maintaining their position that Rosie had not
consented to the REM and its amendment, the petitioners' new
contention would still entail the presentation of additional
evidence by the respondents to enable them to properly meet
and respond to the new theory. As such, allowing the
petitioners to raise the new theory was still not permissible.
Moreover, to allow the new theory to be pursued would also
necessarily involve the Court in the consideration and
ascertainment of factual issues, a task that the Court could not
discharge through this mode of appeal that is limited to the
consideration and determination of questions of law.
As a consequence, the findings of the CA on the lack of Rosie's
written consent to the REM and its amendment stand
unrefuted.1âwphi1 Such findings warrant the nullification not
only of the REM and its amendment, but also of all the
proceedings taken to foreclose the REM. Such invalidity applied
to the entire mortgage, even to the portion corresponding to
the share of Edgardo in the conjugal estate.28 Article 124 of the
Family Code clearly so provides:
Art. 124. The administration and enjoyment of the conjugal
partnership shall belong to both spouses jointly. In case of
disagreement, the husband's decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which
must be availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or otherwise
unable to participate in the administration of the conjugal
properties, the other spouse may assume sole powers of
administration. These powers do not include disposition or
encumbrance without authority of the court or the written
consent of the other spouse. In the absence of such authority
or consent, the disposition or encumbrance shall be void.
However, the transaction shall be construed as a continuing
offer on the part of the consenting spouse and the third person,
and may be perfected as a binding contract upon the
acceptance by the other spouse or authorization by the court
before the offer is withdrawn by either or both offerors. (165a)
The petitioners' assertion that the mortgaged properties could
be made liable for the obligation contracted solely by Eduardo
on the basis that the proceeds of the loan had redounded to the
benefit of the family is also unwarranted. The mortgage was
but an accessory agreement, and was distinct from the principal
contract of loan. What the CA declared void was the REM. Since
the REM was an encumbrance on the conjugal properties, the
contracting thereof by Edgardo sans the written consent of
Rosie rendered only the REM void and legally inexistent.29 The
petitioners could still recover the loan from the conjugal
partnership in a proper case for the purpose.30 Where the
mortgage was not valid, the principal obligation that the
mortgage guaranteed was not thereby rendered null and void.
The liability of the debtor under the principal contract of the
loan subsisted despite the illegality of the REM. That obligation
matured and became demandable in accordance with the
stipulation pertaining to it. What was lost was only the right to
foreclose the REM as a special remedy for satisfying or settling
the debt that was the principal obligation. In case of its nullity,
the mortgage deed remained as evidence or proof of the
debtor's personal obligation, and the amount due to the creditor
could be enforced in an ordinary action.31
WHEREFORE, the Court DENIES the petition for review on
certiorari; AFFIRMS the decision promulgated on April 28, 2010;
and ORDERS the petitioners to pay the costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
FIRST DIVISION
November 22, 2017
G.R. No. 209544
SPOUSES ELLIS R. MILES and CAROLINA RONQUILLO-MILES,
Petitioners
vs.
BONNIE BAUTISTA LAO, Respondent
DECISION
TIJAM, J.:
This resolves the Petition for Review on Certiorari1 under Rule
45 asasiling the Decision2 dated May 24, 2013 and Resolution3
dated September 30, 2013 of the Court of Appeals (CA) in CA-
G.R. CV No. 95973.
The Antecedents
This case stemmed from a complaint4 filed by petitioner
Spouses Ellis and Carolina Miles (Petitioners) against spouses
Ricardo and Cresencia Ocampo (spouses Ocampo), spouses
Rodora and Reynaldo Jimenez, Bonnie Bautista Lao
(respondent), Atty. Mila Flores, in her capacity as the Register
of Deeds, Makati City and Atty. Engracio M. Escasinas, Jr., in his
capacity as the Clerk of Court VII and Ex-Officio Sheriff of the
Regional Trial Court (RTC), Makati City.
Petitioners claimed that on March 28, 1983, they became
registered owners in fee simple of a parcel of land in Makati
City, covered by Transfer Certificate of Title (TCT) No. 1204275
(subject property). They averred that before they left for the
United States, they entrusted the duplicate of the TCT of the
subject property to their niece, defendant Rodora Jimenez
(Rodora) so that she may offer it to interested buyers. They
claimed that no written Special Power of Attorney (SPA) to sell
the property was given to Rodora.
They alleged that Rodora and spouses Ocampo conspired and
made it appear, through a falsified Deed of Donation dated April
21, 1998, that petitioners were donating the subject property to
spouses Ocampo. As a result, TCT No. 120427 was cancelled
and a new one, TCT No. 2123146 was issued in the name of
spouses Ocampo.
Later on, petitioners claimed that through falsification, evident
bad faith and fraud, spouses Ocampo caused the execution of a
falsified Real Estate Mortgage7 in favor of respondent Lao, with
the subject property as security, in exchange of a loan in the
amount of Php2,500,000. Since the spouses Ocampo failed to
pay the loan, respondent foreclosed the mortgage.
Alleging that there was collusion among the defendants,
petitioners prayed that TCT No. 21234 in the name of spouses
Ocampo be cancelled, and TCT No. 120427 under their name
be restored. They also prayed for the nullification of the Deed of
Donation8 dated April 21, 1998, the mortgage executed by
spouses Ocampo in favor of respondent and the cancellation of
the mortgage inscription on the title of the property.
For their part, all the defendants denied petitioners' claim that
there was collusion among them.
For defendant Rodora, she claimed that she is related to
petitioners by consanguinity, and by affinity to spouses
Ocampo. She admitted to the sale of the subject property to
spouses Ocampo. She however claimed that the sale was with
petitioners' knowledge and consent through a SPA9 dated July
10, 1997. She claimed that petitioners communicated the same
via overseas call. She claimed that the agreement was for
spouses Ocampo to pay the consideration within two months
from the execution of the Deed of Sale on February 13, 1998.10
Spouses Ocampo maintained that they acquired the property in
good faith and for value. They offered in evidence a SPA
purportedly executed by petitioners authorizing Rodora to sell
the property and a Deed of Sale11 purportedly executed by
Rodora in their favor.12
Meanwhile, respondent alleged that she entered into a
mortgage contract with spouses Ocampo without knowledge
that their title thereon was defective. She claimed that at the
time of the mortgage, the subject property was in the name of
spouses Ocampo and there was nothing in the title which
suggested that it was fraudulently acquired. She even claimed
that she conducted an ocular inspection on the property to
determine if there were other occupants thereon but none were
found.13
The Ruling of the RTC
In a Decision14 dated January 14, 2009, the RTC ruled in favor
of petitioners. The dispositive portion of the Decision reads:
In view of the foregoing antecedents, judgment is rendered in
favor of the plaintiffs and against the defendants, as follows:
1. Declaring Transfer Certificate of Title No. 21234 in the name
of [Spouses Ocampo] as null and void and of no legal force and
effect and TCT No. 120427 in the name of Ellis Miles is hereby
restored;
2. The Deed of Donation dated 21 April 1998, Deed of Absolute
Sale, Special Power of Attorney and all other documents
resulting to the cancellation of TCT No. 120427 as well as the
Real Estate Mortgage dated 22 December 1998 inscribed under
Entry No. 21772/T-212314, they are declared null and void and
of no legal force and effect whatsoever;
3. [Respondent] is hereby ordered to voluntarily and peacefully
surrender to the Court the Owner's Duplicate of TCT No.
212314 within fifteen (15) days from finality of the judgment for
purposes of cancellation;
4. Ordering the Register of Deeds of Makati City to cancel all of
the entries appearing at the dorsal portion of TCT No. 120427,
5. Ordering defendants [Rodora] and [spouses Ocampo] jointly
and severally to pay [petitioners] the amount of ₱572,940.00
(sic) representing their airfare from the USA to the Philippines;
6. Ordering defendants Jimenez and [spouses Ocampo] jointly
and severally to pay [petitioners] the amount of ₱l,000,000.00
as moral and exemplary damages; and
7. Ordering defendants Jimenez and [spouses Ocampo] jointly
and severally to pay [petitioners] the amount of ₱500,000.00 as
and for attorney's fees.
The compulsory counterclaim of defendants are denied for lack
of merit. Likewise, for failure to prove the same, [respondent]'s
cross-claim against defendants Jimenez and [spouses Ocampo]
are denied.
SO ORDERED.15
Only respondent appealed to the CA. Meanwhile, it appears that
the trial court issued a writ of execution16 dated July 8, 2010,
implementing paragraphs 4 to 7 of its January 14, 2009
Decision.
The Ruling of the CA
The appellate court reversed the trial court and ruled that
respondent is a mortgagee in good faith. The dispositive portion
of its Decision17 states:
WHEREFORE, premises considered, the instant Appeal is
GRANTED and the Decision dated 14 January 2009 of the
Regional Trial Court of Makati City, Branch 146, in Civil Case No.
99-1986 is REVERSED and SET ASIDE in so far as defendant-
appellant Bonnie S. Lao is concerned.
Accordingly, the Real Estate Mortgage dated 22 December 1998
between defendant Spouses Ricardo Ocampo and Cresencia
Ocampo and defendant-appellant Bonnie S. Lao is hereby
declared VALID and with LEGAL FORCE and EFFECT.
SO ORDERED.18
Petitioners' motion for reconsideration was likewise denied in
the CA's Resolution dated September 30, 2013.
Hence, this petition.
The Ruling of the Court
The only issue for Our resolution is whether or not the CA erred
in ruling that respondent is a mortgagee in good faith.1âwphi1
In this petition, petitioners alleged that respondent never
conducted an investigation on the title of spouses Ocampo and
the status of the subject property when she entered into a
mortgage contract with the spouses Ocampo. They also
conclude that respondent was not diligent when she dealt with
the spouses Ocampo through one Carlos Talay.
At the outset, We note that the issue of whether a mortgagee is
in good faith generally cannot be entertained in a petition filed
under Rule 45 of the 1997 Rules of Civil Procedure, as
amended.19 This is because the ascertainment of good faith or
the lack thereof, and the determination of negligence are
factual matters which lay outside the scope of a petition for
review on certiorari.20 However, a recognized exception to this
rule is when the RTC and the CA have divergent findings of fact
as in the case at bar.21
There is indeed a situation where, despite the fact that the
mortgagor is not the owner of the mortgaged property, his title
being fraudulent, the mortgage contract and any foreclosure
sale arising therefrom are given effect by reason of public
policy.22 This is the doctrine of "the mortgagee in good faith"
based on the rule that buyers or mortgagees dealing with
property covered by a Torrens Certificate of Title are not
required to go beyond what appears on the face of the title.
Indeed, a mortgagee has a right to rely in good faith on the
certificate of title of the mortgagor of the property given as
security, and in the absence of any sign that might arouse
suspicion, the mortgagee has no obligation to undertake further
investigation. This doctrine presupposes, however, that the
mortgagor, who is not the rightful owner of the property, has
already succeeded in obtaining Torrens title over the property in
his name and that, after obtaining the said title, he succeeds in
mortgaging the property to another who relies on what appears
on the title.
The Court, in the case of Andres, et al. v. Philippine National
Bank23 ,explained the dynamics of the burden of discovery in
said doctrine, to wit:
The doctrine protecting mortgagees and innocent purchasers in
good faith emanates from the social interest embedded in the
legal concept granting indefeasibility of titles. The burden of
discovery of invalid transactions relating to the property covered
by a title appearing regular on its face is shifted from the third
party relying on the title to the co-owners or the predecessors
of the title holder. Between the third party and the co-owners, it
will be the latter that will be more intimately knowledgeable
about the status of the property and its history. The costs of
discovery of the basis of invalidity, thus, are better borne by
them because it would naturally be lower. A reverse
presumption will only increase costs for the economy, delay
transactions, and, thus, achieve a less optimal welfare level for
the entire society.24
In cases where the mortgagee does not directly deal with the
registered owner of real property, the law requires that a higher
degree of prudence be exercised by the mortgagee.25
In this case, the title of the property under the name of spouses
Ocampo was already registered as early as May 6, 1998, while
the real estate mortgage was executed December 16, 1998.
Hence, it is clear that respondent had every right to rely on the
TCT presented to her insofar as the mortgagors' right of
ownership over the subject property is concerned.
Petitioners and the RTC however claims that respondent is in
bad faith considering that she did not directly deal with the
mortgagors, and dealt with them only through respondent's
agent, Carlos Talay.
We find otherwise.
Petitioners' line of argument is non-sequitur and is simply
insufficient to controvert respondent's good faith as mortgagee.
In ascertaining good faith, or the lack of it, which is a question
of intention, courts are necessarily controlled by the evidence as
to the conduct and outward acts by which alone the inward
motive may, with safety, be determined. Good faith, or want of
it, is capable of being ascertained only from the acts of one
claiming its presence, for it is a condition of the mind which can
be judged by actual or fancied token or signs.26 Good faith, or
want of it, is not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which can only
be judged by actual or fancied token or signs.27 Good faith
connotes an honest intention to abstain from taking
unconscientious advantage of another.28 In Manaloto, et al. v.
Veloso III29, the Court defined good faith as"an honest
intention to abstain from taking any unconscientious advantage
of another, even through the forms or technicalities of the law,
together with an absence of all information or belief of fact
which would render the transaction unconscientious. In
business relations, it means good faith as understood by men of
affairs. "30
In this case, respondent's decision to deal with the mortgagors
through a middleman, does not equate to bad faith. At the
outset, it bears to stress that the spouses Ocampo were already
the registered owners of the property at the time they entered
into a mortgage contract with respondent. Hence, respondent
was justified in relying on the contents of TCT No. 212314 and
is under no legal" obligation to further investigate. Likewise,
there is nothing in the records, and neither did petitioners point
to anything in the title which would arouse suspicions as to the
spouses Ocampo's defective title to the subject property.
While arguably, respondent's decision to use a middleman in
her transactions with the mortgagors could be characterized as
risky or reckless, the same does not establish a corrupt motive
on the part of respondent, nor an intention to take advantage
of another person. Indeed, bad faith does not simply connote
bad judgment or negligence.31
We also note respondent's insistence that she conducted an
ocular inspection on the subject property and found that the lot
was vacant before she decided to enter into a mortgage
contract with spouses Ocampo. This fact remained
uncontroverted throughout the trial before the RTC. We agree
with respondent that the allegation set forth in spouses
Ocampo's Manifestation and Motion to Set Aside Decision32
against Defendants Spouses Ocampo dated November 3, 2009
cannot be appreciated to contradict the established fact that
respondent made an ocular inspection of the subject property.
The pertinent portion of the said manifestation states:
2. However, long before the said decision was rendered, the
plaintiffs have already taken possession of the property subject
of this litigation by way of recovering their ownership thereof;
3. In fact, plaintiffs had long been leasing the subject property
to a certain JUAN ARMAMENTO, a barangay kagawad of Pio del
Pilar;
4. The foregoing facts render the decision of the Court moot
and academic insofar as defendants Spouses Ocampo are
concerned, no longer enforceable against them, having in effect
been satisfied.33
Suffice it to state that the aforesaid statements are mere
allegations, not presented during trial, and are unsupported by
any evidence.34 Hence, We cannot accord weight to them.
Certainly, it is plausible that the lease to the aforesaid
Armamento could have occurred after the mortgage was
already executed, and even during the pendency of the case.
Neither is respondent's act of filing a foreclosure suit instead of
a criminal case against spouses Ocampo indicative of her bad
faith. In Sps. Yap and Guevarra v. First e-Bank Corp.,35 this
Court already recognized that if the debtor fails (or unjustly
refuses) to pay his debt when it falls due and the debt is
secured by a mortgage and by a check, the creditor has three
options against the debtor and the exercise of one will bar the
exercise of the others. The remedies include foreclosure and
filing of a criminal case for violation of BP 22 (Bouncing Checks
Law). Verily, when respondent opted to foreclose, he merely
exercised a privilege granted to him by law as a secured
creditor. Hence, without sufficient justification, We cannot
impute bad faith on respondent by her exercise of such right.
WHEREFORE, the petition is DENIED for lack of merit. The the
Decision dated May 24, 2013 and Resolution dated September
30, 2013 of the Court of Appeals in CA-G.R. CV No. 95973 are
hereby AFFIRMED.
SO ORDERED.
NOEL GIMENEZ TIJAM
Associate Justice
First DIVISION
November 20, 2017
G.R. No. 211564
BENJAMIN EVANGELISTA, Petitioner
vs.
SCREENEX,1 INC., represented by ALEXANDER G, YU,
Respondent
DECISION
SERENO, CJ.:
This is a Petition2 for Review on Certiorari seeking to set aside
the Decision3 and Resolution4 rendered by the Court of Appeals
(CA) Manila, Fifth Division, in CA-G.R. SP No. 110680.
ANTECEDENT FACTS
The facts as summarized by the CA are as follows:
Sometime in 1991, [Evangelista] obtained a loan from
respondent Screenex, Inc. which issued two (2) checks to
[Evangelista]. The first check was UCPB Check No. 275345 for
₱l,000,000 and the other one is China Banking Corporation
Check No. BDO 8159110 for ₱500,000. There were also
vouchers of Screenex that were signed by the accused
evidencing that he received the 2 checks in acceptance of the
loan granted to him.
As security for the payment of the loan, [Evangelista] gave two
(2) open-dated checks: UCPB Check Nos. 616656 and 616657,
both pay to the order of Screenex, Inc. From the time the
checks were issued by [Evangelista], they were held in safe
keeping together with the other documents and papers of the
company by Philip Gotuaco, Sr., father-in-law of respondent
Alexander Yu, until the former's death on 19 November 2004.
Before the checks were deposited, there was a personal
demand from the family for [Evangelista] to settle the loan and
likewise a demand letter sent by the family lawyer.5
On 25 August 2005, petitioner was charged with violation of
Batas Pambansa (BP) Blg. 22 in Criminal Case Nos. 343615-16
filed with the Metropolitan Trial Court (MeTC) of Makati City,
Branch 61.6 The Information reads:
That sometime in 1991, in the City of Makati, Metro Manila,
Philippines, a place within the jurisdiction of this Honorable
Court, the above-named accused, did then and there, willfully,
unlawfully and feloniously make out, draw, and issue to
SCREENEX INC., herein represented by ALEXANDER G. YU, to
apply on account or for value the checks described below:
Check No. Date Amount
United Coconut AGR 616656 12-22-04 ₱l
,000,000.00
Planters Bank AGR 616657 12-22-04 500,000.00
said accused well knowing that at the time of issue thereof, said
accused did not have sufficient funds in or credit with the
drawee bank for the payment in full of the face amount of such
check upon its presentment which check when presented for
payment within ninety (90) days from the date thereof, was
subsequently dishonored by the drawee bank for the reason
"ACCOUNT CLOSED" and despite receipt of notice of such
dishonor, the said accused failed to pay said payee the face
amount of said checks or to make arrangement for full payment
thereof within five (5) banking days after receiving notice.
CONTRARY TO LAW.7
Petitioner pleaded not guilty when arraigned, and trial
proceeded.8
THE RULING OF THE METC
The MeTC found that the prosecution had indeed proved the
first two elements of cases involving violation of BP 22: i.e. the
accused makes, draws or issues any check to apply to account
or for value, and the check is subsequently dishonored by the
drawee bank for insufficiency of funds or credit; or the check
would have been dishonored for the same reason had not the
drawer, without any valid reason, ordered the bank to stop
payment. The trial court pointed out, though, that the
prosecution failed to prove the third element; i.e. at the time of
the issuance of the check to the payee, the latter did not have
sufficient funds in, or credit with, the drawee bank for payment
of the check in full upon its presentment.9 In the instant case,
the court held that while prosecution witness Alexander G. Yu
declared that the lawyer had sent a demand letter to
Evangelista, Yu failed to prove that the letter had actually been
received by addressee. Because there was no way to determine
when the five-day period should start to toll, there was a failure
to establish prima facie evidence of knowledge of the
insufficiency of funds on the part of Evangelista.10 Hence, the
court acquitted him of the criminal charges.
Ruling on the civil aspect of the cases, the court held that while
Evangelista admitted to having issued and delivered the checks
to Gotuaco and to having fully paid the amounts indicated
therein, no evidence of payment was presented.11 It further
held that the creditor's possession of the instrument of credit
was sufficient evidence that the debt claimed had not yet been
paid.12 In the end, Evangelista was declared liable for the
corresponding civil obligation.13
The dispositive portion of the Decision14 reads:
WHEREFORE, judgment is rendered acquitting the accused
BENJAMIN EVANGELISTA for failure of the prosecution to
establish all the elements constituting the offense of Violation of
B.P. 22 for two (2) counts. However, accused is hereby ordered
to pay his civil obligation to the private complainant in the total
amount of ONE MILLION FIVE HUNDRED THOUSAND PESOS
(₱l,500,000) plus twelve (12%) percent interest per annum
from the date of the filing of the two sets of Information until
fully paid and to pay the costs of suit.
SO ORDERED.15
THE RULING OF THE RTC
Evangelista filed a timely Notice of Appeal16 and raised two
errors of the MeTC before the Regional Trial Court (RTC) of
Makati City, Branch 147. Docketed therein as Criminal Case Nos.
08-1723 and 08-1724, the appeal posed the following issues:
(1) the lower court erred in not appreciating the fact that the
prosecution failed to prove the civil liability of Evangelista to
private complainant; and (2) any civil liability attributable to
Evangelista had been extinguished and/or was barred by
prescription.17
After the parties submitted their respective Memoranda,18 the
R TC ruled that the checks should be taken as evidence of
Evangelista's indebtedness to Gotuaco, such that even if the
criminal aspect of the charge had not been established, the
obligation subsisted.19 Also, the alleged payment by
Evangelista was an affirmative defense that he had the burden
of proving, but that he failed to discharge.20 With respect to
the defense of prescription, the RTC ruled in this wise:
As to the defense of prescription, the same cannot be
successfully invoked in this appeal. The 10-year prescriptive
period of the action under Art. 1144 of the New Civil Code is
computed from the time the right of action accrues. The terms
and conditions of the loan obligation have not been shown, as
only the checks evidence the same. It has not been shown
when the loan obligation was to mature such that there is no
basis to show or from which to infer, when the cause of action
(non-payment of the loan) which would give the obligee the
right to seek redress for the non-payment of the obligation,
accrued. In other words, the reckoning point of prescription has
not been established.
Prosecution witness Alexander G. Yu was not competent to
state that the loan was contracted in 1991 as in fact, Yu
admitted that it was a few months before his father-in-law
(Philip Gotuaco) died when the latter told him about accused's
failure to pay his obligation. That was a few months before
November 19, 2004, date of death of his father-in-law.
At any rate, the right of action in this case is not upon a written
contract, for which reason, Art. 1144, New Civil Code, on
prescription does not apply.21
In a Decision22 dated 18 December 2008, the R TC dismissed
the appeal and affirmed the MeTC decision in toto.23 The
Motion for Reconsideration24 was likewise denied in an Order25
dated 19 August 2009.
THE RULING OF THE CA
Evangelista filed a petition for review26 before the CA insisting
that the lower court erred in finding him liable to pay the sum
with interest at 12% per annum from the date of filing until full
payment. He further alleged that witness Yu was not competent
to testify on the loan transaction; that the insertion of the date
on the checks without the knowledge of the accused was an
alteration that avoided the checks; and that the obligation had
been extinguished by prescription.27
Screenex, Inc., represented by Yu, filed its Comment.28 Yu
claimed that he had testified on the basis of his personal
dealings with his father-in-law, whom Evangelista dealt with in
obtaining the loan. He further claimed that during the trial,
petitioner never raised the competence of the witness as an
issue.29 Moreover, Yu argued that prescription set in from the
accrual of the obligation; hence, while the loan was transacted
in 1991, the demand was made in February 2005, which was
within the 10-year prescriptive period.30 Yu also argued that
while Evangelista claimed under oath that the loan had been
paid in 1992, he was not able to present any proof of
payment.31 Meanwhile, Yu insisted that the material alteration
invoked by Evangelista was unavailing, since the checks were
undated; hence, nothing had been altered.32 Finally, Yu argued
that Evangelista should not be allowed to invoke prescription,
which he was raising for the first time on appeal, and for which
no evidence was adduced in the court of origin.33
The CA denied the petition.34 It held that (1) the reckoning
time for the prescriptive period began when the instrument was
issued and the corresponding check returned by the bank to its
depositor;35 (2) the issue of prescription was raised for the first
time on appeal with the RTC;36 (3) the writing of the date on
the check cannot be considered as an alteration, as the checks
were undated, so there was nothing to change to begin with;37
(4) the loan obligation was never denied by petitioner, who
claimed that it was settled in 1992, but failed to show any proof
of payment.38 Quoting the MeTC Decision, the CA declared:
[t]he mere possession of a document evidencing an obligation
by the person in whose favor it was executed, merely raises a
presumption of nonpayment which may be overcome by proof
of payment, or by satisfactory explanation of the fact that the
instrument is found in the hands of the original creditor not
inconsistent with the fact of payment.39
The dispositive portion reads:
WHEREFORE, premises considered, the petition is DENIED. The
assailed August 19, 2009 Order of the Regional Trial Court,
Branch 147, Makati City, denying petitioner's Motion for
Reconsideration of the Court's December 18, 2008 Decision in
Crim. Case Nos. 08-1723 and 08- 1724 are AFFIRMED.
SO ORDERED.40
Petitioner filed a Motion for Reconsideration,41 which was
similarly denied in a Resolution42 dated 27 February 2014.
Hence, this Petition,43 in which petitioner contends that the
lower court erred in ordering the accused to pay his alleged civil
obligation to private complainant. In particular, he argues that
the court did not consider the prosecution's failure to prove his
civil liability to respondent, and that any civil liability there might
have been was already extinguished and/or barred by
prescription.44
Meanwhile, respondent filed its Comment,45 arguing that the
date of prescription was reckoned from the date of the check,
22 December 2004. So when the complaint was filed on 25
August 2005, it was supposedly well within the prescriptive
period of ten (10) years under Article 1144 of the New Civil
Code.46
OUR RULING
With petitioner's acquittal of the criminal charges for violation of
BP 22, the only issue to be resolved in this petition is whether
the CA committed a reversible error in holding that petitioner is
still liable for the total amount of ₱l.5 million indicated in the
two checks.
We rule in favor of petitioner.
A check is discharged by any other
act which will discharge a simple
contract for the payment of money.
In BP 22 cases, the action for the corresponding civil obligation
is deemed instituted with the criminal action.47 The criminal
action for violation of BP 22 necessarily includes the
corresponding civil action, and no reservation to file such civil
action separately shall be allowed or recognized.48
The rationale for this rule has been elucidated in this wise:
Generally, no filing fees are required for criminal cases, but
because of the inclusion of the civil action in complaints for
violation of B.P. 22, the Rules require the payment of docket
fees upon the filing of the complaint. This rule was enacted to
help declog court dockets which are filled with B.P. 22 cases as
creditors actually use the courts as collectors. Because ordinarily
no filing fee is charged in criminal cases for actual damages, the
payee uses the intimidating effect of a criminal charge to collect
his credit gratis and sometimes. upon being paid, the trial court
is not even informed thereof. The inclusion of the civil action in
the criminal case is expected to significantly lower the number
of cases filed before the courts for collection based on
dishonored checks. It is also expected to expedite the
disposition of these cases. Instead of instituting two separate
cases, one for criminal and another for civil, only a single suit
shall be filed and tried. It should be stressed that the policy laid
down by the Rules is to discourage the separate filing of the
civil action. The Rules even prohibit the reservation of a
separate civil action, which means that one can no longer file a
separate civil case after the criminal complaint is filed in court.
The only instance when separate proceedings are allowed is
when the civil action is filed ahead of the criminal case. Even
then, the Rules encourage the consolidation of the civil and
criminal cases. We have previously observed that a separate
civil action for the purpose of recovering the amount of the
dishonored checks would only prove to be costly, burdensome
and time-consuming for both parties and would further delay
the final disposition of the case. This multiplicity of suits must
be avoided.49 (Citations omitted)
This notwithstanding, the civil action deemed instituted with the
criminal action is treated as an "independent civil liability based
on contract."50
By definition, a check is a bill of exchange drawn on a bank
'payable on demand.51 It is a negotiable instrument - written
and signed by a drawer containing an unconditional order to
pay on demand a sum certain in money.52 It is an undertaking
that the drawer will pay the amount indicated thereon. Section
119 of the NIL, however, states that a negotiable instrument
like a check may be discharged by any other act which will
discharge a simple contract for the payment of money, to wit:
Sec. 119. Instrument; how discharged. - A negotiable
instrument is discharged:
(a) By payment in due course by or on behalf of the principal
debtor;
(b) By payment in due course by the party accommodated,
where the instrument is made or accepted for his
accommodation;
(c) By the intentional cancellation thereof by the holder;
(d) By any other act which will discharge a simple contract for
the payment of money;
(e) When the principal debtor becomes the holder of the
instrument at or after maturity in his own right. (Emphasis
supplied)
A check therefore is subject to prescription of actions upon a
written contract. Article 1144 of the Civil Code provides:
Article 1144. The following actions must be brought within ten
years from the time the right of action accrues:
1) Upon a written contract;
2) Upon an obligation created by law;
3) Upon a judgment. (Emphasis supplied)
Barring any extrajudicial or judicial demand that may toll the
10-year prescription period and any evidence which may
indicate any other time when the obligation to pay is due, the
cause of action based on a check is reckoned from the date
indicated on the check.
If the check is undated, however, as in the present petition, the
cause of action is reckoned from the date of the issuance of the
check. This is so because regardless of the omission of the date
indicated on the check, Section 1753 of the Negotiable
Instruments Law instructs that an undated check is presumed
dated as of the time of its issuance.
While the space for the date on a check may also be filled, it
must, however, be filled up strictly in accordance with the
authority given and within a reasonable time.54 Assuming that
Yu had authority to insert the dates in the checks, the fact that
he did so after a lapse of more than 10 years from their
issuance certainly cannot qualify as changes made within a
reasonable time.
Given the foregoing, the cause of action on the checks has
become stale, hence, time-barred. No written extrajudicial or
judicial demand was shown to have been made within 10 years
which could have tolled the period. Prescription has indeed set
in.

Prescription allows the court to
dismiss the case motu proprio.
We therefore have no other recourse but to grant the instant
petition on the ground of prescription. Even if that defense was
belatedly raised before the RTC for the first time on appeal from
the ruling of the Me TC, we nonetheless dismiss the complaint,
seeking to enforce the civil liability of Evangelista based on the
undated checks, by applying Section 1 of Rule 9 of the Rules of
Court, to wit:
Section 1. Defenses and objections not pleaded. - Defenses and
objections not pleaded either in a motion to dismiss or in the
answer are deemed waived. However, when it appears from the
pleadings or the evidence on record that the court has no
jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that
the action is barred by a prior judgment or by statute of
limitations, the court shall dismiss the claim.
While it was on appeal before the RTC that petitioner invoked
the defense of prescription, we find that the pleadings and the
evidence on record indubitably establish that the action to hold
petitioner liable for the two checks has already prescribed.
The delivery of the check produces
the effect of payment when through
the fault of the creditor they have
been impaired
It is a settled rule that the creditor's possession of the evidence
of debt is proof that the debt has not been discharged by
payment.55 It is likewise an established tenet that a negotiable
instrument is only a substitute for money and not money, and
the delivery of such an instrument does not, by itself, operate
as payment.56 Thus, in BPI v. Spouses Royeca,57 we ruled that
despite the lapse of three years from the time the checks were
issued, the obligation still subsisted and was merely suspended
until the payment by commercial document could actually be
realized.58
However, payment is deemed effected and the obligation for
which the check was given as conditional payment is treated
discharged, if a period of 10 years or more has elapsed from
the date indicated on the check until the date of encashment or
presentment for payment. The failure to encash the checks
within a reasonable time after issue, or more than 10 years in
this instance, not only results in the checks becoming stale but
also in the obligation to pay being deemed fulfilled by operation
of law.
Art. 1249 of the Civil Code specifically provides that checks
should be presented for payment within a reasonable period
after their issuance, to wit:
Art. 1249. The payment of debts in money shall be made in the Similarly in this case, we find that the delivery of the checks,
currency stipulated, and if it is not possible to deliver such despite the subsequent failure to encash them within a period
currency, then in the currency which is legal tender in the of 10 years or more, had the effect of payment. Petitioner is
Philippines. considered discharged from his obligation to pay and can no
longer be pronounced civilly liable for the amounts indicated
The delivery of promissory notes payable to order, or bills of thereon.
exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or when WHEREFORE, the instant Petition is GRANTED. The Decision
through the fault of the creditor they have been impaired. dated 1 October 2013 and Resolution dated 27 February 2014
in CA-G.R. SP No. 110680 are SET ASIDE. The Complaint
In the meantime, the action derived from the original obligation against petitioner is hereby DISMISSED.
shall be held in the abeyance. (Emphasis supplied)
SO ORDERED.
This rule is similarly stated in the Negotiable Instruments Law
as follows: MARIA LOURDES P.A. SERENO
Chief Justice, Chairperson
Sec. 186. Within what time a check must be presented. - A
check must be presented for p:iyment within a reasonable time
after its issue or the drawer will be discharged from liability
thereon to the extent of the loss caused by the delay.
(Emphasis supplied)
These provisions were the very same ones we cited when we
discharged a check by reason of the creditor's unreasonable or
unexplained delay in encashing it. In Papa v. Valencia,59 the
respondents supposedly paid the petitioner the purchase price
of the lots in cash and in check. The latter disputed this claim
and argued that he had never encashed the checks, and that he
could no longer recall the transaction that happened 10 years
earlier. This Court ruled:
Granting that petitioner had never encashed the check, his
failure to do so for more than ten (10) years undoubtedly
resulted in the impairment of the check through his
unreasonable and unexplained delay.
While it is true that the delivery of a check produces the effect
of payment only when it is cashed, pursuant to Art. 1249 of the
Civil Code, the rule is otherwise if the debtor is prejudiced by
the creditor's unreasonable delay in presentment. The
acceptance of a check implies an undertaking of due diligence
in presenting it for payment, and if he from whom it is received
sustains loss by want of such diligence, it will be held to operate
as actual payment of the debt or obligation for which it was
given. It has, likewise, been held that if no presentment is
made at all, the drawer cannot be held liable irrespective of loss
or injury unless presentment is otherwise excused. This is in
harmony with Article 1249 of the Civil Code under which
payment by way of check or other negotiable instrument is
conditioned on its being cashed, except when through the fault
of the creditor, the instrument is impaired. The payee of a
check would be a creditor under this provision and if its no-
payment is caused by his negligence, payment will be deemed
effected and the obligation for which the check was given as
conditional payment will be discharged.60 (Citations omitted
and emphasis supplied)