Obl Icon

88 Civil Code; Book IV; Title I, Obligations, Chapter 2.Nature and effe ts. Obligation to give (see 1246; 1163; 1166 1164. Generic thing- 1246) Obligation to do; not to do (see 1244) 1163 standard- diligence of a good father of a family • anlas v o!rt of "##eals$ G.%. &o. 11216'$ (ebr!ary 2)$ 2''' • *isho# of +aro v ,e la -ena; G.%. &o. .-6/13$ &ovember 21$ 1/13 • Obe0era v 1ga 2y; .". &o. 34$ "#ril 2/$ 1/46 • "frica v alte3; G.%. &o. .-12/)6$ 4arch 31$ 1/66 also disting!ish from e3traordinary diligence • -hili##ine "irlines v o!rt of "##eals; G.%. &o. /25'1 4arch 6$ 1//2 • 2!l#icio .ines v o!rt of "##eals; G.%. &o. 11356) +!ly 14$ 1//5 (see also 1163; 1244; 1246; 134/; 1633) (incidental7accessory) d!ties of debtor to deliver a determinate thing 1164 8hat are fr!its9 (see 442; e3am#les) 8hen is it time to deliver (tradition)9 :inds of ,elivery. "ct!al and constr!ctive delivery. ,isting!ish #ersonal and real rights (in personam ; in rem). • r!<ado v *!stos ; =scaler; G.%. &o. .-1'244$ (ebr!ary 2/$ 1/16 1165 %emedies of a creditor (obligations to give). 2#ecific #erformance (see also 116'; 2215 >4?; gen r!le >1164?); s!bstit!ted #erformance. • +immy o v o!rt of "##eals; G.%. &o. 124/22 +!ne 22$ 1//) • @! AeB v Gon<ales; G.%. &o. .-//35$ (ebr!ary 1$ 1/15 1166 ,efinition of accessories; accessions (see 44') 1166; 116) %emedies of creditor (obligations to do; not to do). Cndoing of #oor DorB. • have< v Gon<ales; .-26454. "#ril 3'$ 1/6' Other remedies. %escission. 11/1$ 11/2 116/ Binds of moraE a) solvendi; b) acci#iendi (see 126)); c) com#ensatio morae reF!isites for delay. need for demand. 8hen not necessary. =ffects of delay. • et!s ,evGt 1nc. v "; G.%. &o. 6664)$ "!g!st 6$ 1/)/ • "eros#ace hemical 1nd!stries$ 1nc.$ v "; G.%. &o. 1')12/$ 2e#tember 23$ 1///

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2antos Hent!ra Iocorma (o!ndation$ 1nc. v. 2antos; G.%. &o. 153''4$ &ovember 5$ 2''4 Ha<F!e< v "yala or#.$ G.%. &o. 14/634$ &ovember 1/$ 2''4 ,e la r!< v .egas#i ; 2am#eroy; G.%. &o. .-)'24$ &ovember 2/$ 1/55 4an!el v "; G.%. &o. /546/ +!ly 25$ 1//1 (mora acci#iendi) entral *anB v "; G.%. &o. .-4561'; October 3$ 1/)5 (com#ensatio morae)

116' 4odes of *reach. ,efinitions. (ra!d (dolo incidente ;disting!ish from dolo ca!sante in 133); 13/')$ negligence (c!l#a contract!al; disting!ish from c!l#a aF!iliana in 2166 and c!l#a criminal)$ delay (mora; see 116/)$ contravene tenor ,amages (21/6). *reach of obligations ,istinction betDeen s!bstantial breach and cas!al7slight breach. • *arredo v .eano; G.%. &o. 156626$ +!ne 4$ 2''4 • Helarde v "; G.%. &o. 1')346$ +!ly 11$ 2''1 • "ngeles v alasan<; G.%. &o. .-422)3$ 4arch 1)$ 1/)5 • ,elta 4otor or#. v Gen!ino; G.%. &o. .-55665$ (ebr!ary )$ 1/)/ • Hermen %ealty v "; G.%. &o. 1'1662$ +!ly 6$ 1//3 (ra!d (see 1161 non-Daiver) • 8oodho!se v Ialili; G.%. &o. .-4)11$ +!ly 31$ 1/53 • Geralde< v " ; :enstar; G.%. &o. 1')253$ (ebr!ary 23$ 1//4 • @!tivo 2ons v A"; G.%. &o. .-132'3$ +an!ary 2)$ 1/61 &eglience (see 1162$ 1163$ 22'1). ,isting!ish dolo from c!l#a. • G!tierre< v G!tierre<; 56 -hil 6'6 • HasF!e< v de *or0a; G.%. &o. .-4)/3'$ (ebr!ary 23$ 1/44 (standard of care) • ,e G!ia v 4anila =lectric; G.%. &o. .-14335$ +an!ary 2)$ 1/2' • C.2. v *arias; G.%. &o. .-6566$ &ovember 12$ 1/12 • 2armiento v abrido; G.%. &o. 14125)$ "#ril /$ 2''3 • risostomo v "; 4'/ 2 %" 52) (2''3) ontravention of tenor. • have< v Gon<ales; 32 2 %" 546 (1/6') • Aelefast v astro; G.%. &o. 63)66 (ebr!ary 2/$ 1/)) • "rrieta v &"%1 ; G.%. &o. .-15645$ +an!ary 31$ 1/64 • 4agat v 4edialdea; G.%. &o. .-3612' "#ril 2'$ 1/)3 1164 (ort!ito!s event (conce#t- acts of god; acts of man. =ffects of conc!rrent fa!lt. =3ting!ishment of liability- 1164$ 1165$ 552$ 1/42$ 1/6/$ 2''1$ 2146) • Aang!ilig v o!rt of "##eals; G.%. &o. 1161/' +an!ary 2$ 1//6 • +!an &aB#il ; 2ons v "; G.%. &o. .-46)51 October 3$ 1/)6 • %e#!blic v .!<on 2tevedoring; G.%. &o. .-2164/$ 2e#tember 2/$ 1/66

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,ioF!ino v .a!reano; G.%. &o. .-25/'6$ 4ay 2)$ 1/6' "!stria v "; G.%. &o. .-2/64' +!ne 1'$ 1/61 &atGl -oDer or# v "; G.%. &o. .-4636/ 4ay 16$ 1/)) @obido v "; G.%. &o. 113''3$ October 16$ 1//6 *acolod 4!rcia v " ; Gat!slao; G.%. &os. )11''-'1 (ebr!ary 6$ 1//' -hilcomsat v Globe Aelecom; G.%. &o. 146324$ 4ay 25$ 2''4

1165 (!s!rio!s transactions; 1413; 1/61; -, )5); -, 16)5; * irc. 416; 4onetary *oard irc /'5) • =astern 2hi##ing v "; G.%. &o. /6412 +!ly 12$ 1//4 • rismina Garments v "; G.%. &o. 12)621 4arch /$ 1/// • :eng I!a -rods v "; G.%. &o. 116)63 (ebr!ary 12$ 1//) • 2ec!rity *anB v %A 4anila; G.%. &o. 113/26 October 23$ 1//6 • "lmeda v "; G.%. &o. 113412 "#ril 16$ 1//6 • "ngel +ose 8areho!sing v helda =nt.; G.%. &o. .-256'4; "#ril 24$ 1/6) • (irst 4etro 1nvestment v =ste del 2ol; G.%. &o. 141)11 &ovember 15$ 2''1 1166 -res!m#tions in #ayment of interest and installments • Iill v Heloso; 31 -hil 16' • 4agdalena =states v %odrig!e<; .-1)411$ ,ec 16$ 1/66 (1) 2 %" /66) • 4anila Arading ; 2!##ly v 4edina; .-16466 4ay 31$ 1/61 1166 2!bsidiary remedies of creditor. "ccion s!brogatoria disting!ish from accion #a!liana 13)1(3). Other s#ecific remedies 1652; 162/; 16'); 1)/5. • :he Iong heng v "; G.%. &o. 14416/ 4arch 2)$ 2''1 • 2ig!an v .im; G.%. &o. 1346)5 &ovember 1/$ 1/// 116) Aransmissibility of rights (see also 1311) • =state of Iernande< v .!<on 2!rety; .-)436$ &ov 2)$ 1/56 JJJ (to be contin!ed) Obligations ; ontracts !ifferent "inds of Obligations #$rts. %%&' to %2(), NCC* 1. -!re ; conditional ondition. • • once#t. ondition v. #eriod7term

Gaite v (onacier 2 2 %" )3' Gon<ales v Ieirs of Ahomas 314 2 %" 5)5

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:inds of onditions "s to effect on obligation 2!s#ensive (condition #recedent) -retroactive effect Dhen condition is f!lfilled • oronel v " ; "lcara< G.%. &o. 1'3566 Oct. 6$ 1//6 -rights of creditor and debtor before f!lfillment of condition %esol!tory • -arBs v -rovince of Aarlac 4/ -hil 142 • entral -hil Cniv. v " 246 2 %" 511 • K!i0ada v " G.%. &o. 126444 ,ec. 4$ 1//) "s to ca!se or origin --otestative • .im v " G.%. &o. )6'46 Oct. 31$ 1//' - as!al • &aga Aele#hone v " G.%. &o. 1'6112 (eb. 24$ 1//4. -4i3ed • Osmena v %ama 14 -hil // • Iermosa v .ongora /3 -hil /61 • Aaylor v Cy Aieng -iao 43 -hil )63 • 2mith *ell v 2otelo 4atti 44 -hil )65 • %!stan -!l# v 1" 214 2 %" 665 • %omero v " G.%. &o. 1'62'6 &ov. 23$ 1//5 "s to -ossibility -#ossible -im#ossible • %oman atholic v " 1/) 2 %" 3'' "s to mode -#ositive -negative %!les in case of loss$ deterioration or im#rovement #ending the ha##ening of the condition • Ieirs of 4oreno v 4actan G.%. &o. 156263 Oct. 15$ 2''3 =ffect of #revention of the f!lfillment of the condition by the obligor +ose Ierrera v .eviste G.%. &o. 55644 (eb. 2)$ 1/)5 2. %eci#rocal obligations. once#t. -alternative remedies of in0!red #arty in case of breach action for f!lfillment. 8hen f!lfillment no longer #ossible. action for rescission 3. Obligation Dith a #eriod (11/3 et seF.) -Binds of #eriod7term as toE

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effect- s!s#ensive; resol!tory e3#ression- e3#ress; im#lied definiteness- definite; indefinite so!rce- vol!ntary; legal; 0!dicial =ffect of #ayment in advance. *enefit of #eriod. (or Dhose benefit. =ffect. -res!m#tion. 8hen debtor loses right to maBe !se of #eriod. 8hen co!rt may fi3 #eriod. • -once de .eon v 2y0!co /' -hil 311 • *!ce v " 332 2 %" 151 • "raneta v -hil 2!gar =state 2' 2 %" 33' • entral -hil. Cniversity v " 246 2 %" 511 4. "lternative obligations. (ac!ltative obligation. (11//; 12'' et seF) 5. +oint ; solidary obligations. (12'6; 12')) +oint indivisible obligations. (12'/; 121') • @ncha!sti v @!lo 34 -hil /6) • .afarge ement v ontinental ement G.%. &o. 155163 &ov. 23$ 2''4 • +a!cian v K!erol 3) -hil 61) • K!iombing v " 1)/ 2 %" 325 • 1nciong v " 256 2 %" 56) • "li#io v " 341 2 %" 441 6. ,ivisible ; indivisible obligations. (1225). =ffects. 6. Obligations Dith a #enal cla!se. (1226 et seF) -as to effect; so!rce; #!r#ose • 4aBati ,evGt or#. v =m#ire 1ns. o. 2' 2 %" 556 • Aan v " 366 2 %" 561 • o!ntry *anBers v "; G.%. &o. )5161$ 2e#t. /$ 1//1. 2'1 2 %". JJJ OB+I,$TION- . CONT/$CTha#ter 4 =3ting!ishment of Obligations 1. 4odes of =3ting!ishment ("rt. 1231) ". -ayment or -erformance *. .oss or 1m#ossibility . ondonation or %emission ,. onf!sion or 4erger =. om#ensation (. &ovation G. Other a!ses 11. -ayment or -erformance

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". once#t-"rt. 1232 *. %eF!isites 1. 8ho can #ay a. in general b. third #erson Dho is an interested #arty i. meaning of Linterested #arty ii. effects-"rt. 13'2 >3? c. third #erson Dho is not an interested #arty b!t Dith consent of debtor i. effects - "rt. 1236 #ar. 2$ 1236$ 1236 #ar. 1 d. third #erson Dho is not an interested #arty and Ditho!t BnoDledge or against the Dill of the debtor i. effects - "rt. 1236 #ar. 2$ 1236$ 1236 #ar. 1 e. third #erson Dho does not intend to be reimb!rsed -"rt. 123) f. in obligation to give - "rt. 123/$ 1426 i. effect of inca#acity g. in case of active solidarity - "rt. 1214 2. Ao Dhom #ayment may be made a. in general - "rt. 124' b. inca#acitated #erson - "rt. 1241 #ar. 1 i. reF!isites c. third #erson-"rt. 1241 #ar. 2 i. reF!isites ii. Dhen #roof of benefit not reF!ired - "rt. 1241 #ar. 3 d. in case of active solidarity 3. 8hat is to be #aid (L1dentityL) a. in general b. in obligations toE i. give a s#ecific thing - "rt 1244 ii. give a generic thing - "rt. 1246 iii. #ay monthly - "rt. 124/$ 125'$ %.%. 52/$ %.". 41'' asesE $rrieta vs. N$/IC, #,/ No. +0%1231, 4an (%, %'23* "alalo vs. +u5, (3 -C/$ (&& #%'&)* -t. 6aul 7ire and 8arine Insuran e vs. 8a ondra9, &) -C/$ %22 #%'&2* 6apa vs. $.V. Valen ia, et al., 283 -C/$ 23( #%''8* 6$+ vs. C$, %8% -C/$ 11& #%'')* c. #ayment of interest-"rt. 1/56 4. IoD is #ayment to be made (L1ntegrityL) a. in general-"rt. 1233. General %!leE -artial #ayment is not alloDed - "rt. 124) =3ce#tionsE - "rt. 124) b. s!bstantial #erformance in good faith -"rt. 1234 c. esto##el - "rt. 1235 d. #res!m#tions in #ayment of interests and installments-"rt 1166 5. 8hen #ayment is to be made a. in general - "rt. 116/ b. see ha#ter 2E ,elay 6. 8here #ayment is to be made - "rt. 1251 #ar. 1

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a. if no #lace is e3#ressly designated - "rt. 1251 #ar. 2 to #ar. 4 6. =3#enses of maBing #ayment - "rt. 1246 . "##lication of -ayments 1. once#t-"rt 1252 asesE /eparations Co::ission vs. ;niversal !eep -ea 7ishing, 8( -C/$ &23 #%'&8* 6a uldo vs. /egalado, (31 -C/$ %(3 #2)))* 2. %eF!isites 3. %!les in a##lication of #ayments - "rt. 1252$ 1253 a. if r!les ina##licable and a##lication cannot be inferred - "rt. 1254 i. meaning of Lmost onero!s to debtor ,. -ayment by ession 1. once#t-"rt. 1255 2. %eF!isites 3. =ffects =. ,ation in -ayment 1. once#t-"rt. 1245 a. disting!ished from -ayment by ession aseE !B7 vs. C$, ,./. No. %%8(32, 4anuar9 1, %''8. 2. %eF!isites 3. =ffects aseE 7ilinvest Credit <Corporation vs. 6hilippine $ et9lene, ,./. +01)33', 4anuar9 (), %'82 (. Aender of -ayment and onsignation 1. Aender of -ayment a. once#t b. %eF!isites 2. onsignation a. once#t i. #!r#ose b. %eF!isites i. Dhen tender and ref!sal not reF!ired - "rt. 1256 #ar. 2 ii. tDo notice reF!irement - "rt. 1256 #ar. 1$ 125) #ar. 2 effects of noncom#liance c. =ffects-"rt. 126' #ar. 1 d. 8ithdraDal by debtor before acce#tance by creditor or a##roval by co!rt; effects - "rt. 126' #ar. 2 e. 8ithdraDal by debtor after #ro#er consignation - "rt. 1261 i. Dith creditorMs a##roval; effects ii. Ditho!t creditorMs a##roval; effects f. =3#enses of consignation - "rt. 125/ asesE !e ,u5:an vs. C$, %(& -C/$ &() #%'81* T+, International Continental =nterprising, In . vs.7lores,%&-C/$3(&#%'&2*

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8 +aughtia vs. C$, %33 -C/$ 2'( #%'82* -o o vs. 8ilitante, %2( -C/$ %2) #%'8(* -otto vs. 8i>ares, 28 -C/$ %& #%'2'* 8eat 6a king Corp. vs. -andiganba9an, ,./. NO. %)()28, 4une 22, 2))% 6abugais vs. -ahi>?ani, ,./. No. %12832, 7ebruar9 2(, 2))3 111. .oss or 1m#ossibility ". .oss of Ahing ,!e 1. once#t-"rt. 11)/ >2? 2. :inds a. "s to e3tent i. Aotal ii. -artial 3. %eF!isites-"rt. 1262 4. -res!m#tion-"rt. 1265$ 1165 a. Dhen not a##licable 5. =ffects a. in obligation to give a s#ecific thing - "rt. 1262$ 126) b. in obligation to give a generic ting - "rt. 1263 c. in case of #artial loss - "rt. 1264 d. action against third #ersons - "rt. 126/ *. 1m#ossibility of -erformance 1. once#t-"rt. 1266$ 1266 2. :inds a. "s to e3tent i. Aotal ii. -artial b. "s to so!rce i. legal ii. #hysical 3. %eF!isites-"rt. 1266 4. =ffects a. in obligations fo do -"rt. 1266$ 1266$ 1262 #ar. 2 (by analogy) i.Nim#ossibilityL disting!ished from diffic!ltyN casesE O ena vs. C$, &( -C/$ 2(& #%'&2* Naga Telephone Co. vs. C$, 2() -C/$ (1% #%''3* 6NCC vs. C$, ,./. No. %%28'2, 8a9 1, %''& b. in case of #artial im#ossibility - "rt. 1264 1H. ondonation or %emission ". conce#t *. :inds 1. "s to e3tent a. Aotal b. -artial 2. "s to form -"rt. 126' #ar. 1 a. =3#ress b. 1m#lied . %eF!isites

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a. Dhen formalities reF!ired - "rt. 126' #ar. 2 caseE @a: vs. C$, ,./. No. %'3&22, 7eb. %%.%''' ,. -res!m#tions -"rt. 1261$ 1262$ 1264 =. =ffects 1. in general 2. in case of 0oint or solidary obligations (. Governing %!les-"rt. 126' G. %en!nciation of -rinci#al or "ccessory Obligation 1. effects-"rt. 1263 2. rationale H. onf!sion or 4erger of %ights ". once#t *. %eF!isites . =ffects 1. in general-"rt. 1265 2. in case of 0oint ("rt. 1266) or solidary obligations ,. onf!sion in -rinci#al or "ccessory Obligation - "rt. 1266 H1. om#ensation ". once#t-"rt. 126) 1. ,isting!ished from onf!sion *. :inds 1. "s to e3tent a. Aotal b. -artial 2. "s to origin a. .egal b. onventional c. +!dicial-"rt. 12)3 d. (ac!ltative . .egal om#ensation 1. %eF!isites-"rt. 126/$ 12)' a. Ld!eL disting!ished from LdemandableL asesE ,an Tion vs. C$, 28 -C/$ 2(1 #%'2'* -ilahis 8arketing Corp. vs. I$C, ,./. No. &3)2&, !e e:ber &, %'8' B6= vs. /e9es, 211 -C/$ 1&% #%''2* 6NB vs. -apphire -hipping, 21' -C/$ %&3 #%''2* B6I vs. C$, ,./. No. %%2&'2, 8ar h 2', %''2 8irasol vs. C$, ,./. No. %28338, 7ebruar9 %,2))% 2. =ffects-"rt. 12/'$ 12)/ ,. 8hen om#ensation is &ot "lloDed - "rt. 12)6$ 12)) =. com#ensation of ,ebts -ayable in ,ifferent -laces - "rt. 12)6 (. =ffect of &!llity of ,ebts to be com#ensated - "rt. 12)4 G. =ffects of "ssignment of redit 1. Dith consent of debtor - "rt. 12)5 #ar. 1 2. Dith BnoDledge b!t Ditho!t consent of debtor - "rt. 12)5 #ar.2 3. Ditho!t BnoDledge of debtor - "rt. 12)5 #ar. 3 a. rationale H11. &ovation

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". once#t-"rt. 12/1 *. :inds 1. "s to form a. =3#ress b. 1m#lied 2. "s to origin a. onventional b. .egal 3. "s to ob0ect a. Ob0ective or %eal b. 2!b0ective or -ersonal . %eF!isites-"rt. 12/2 asesE 8illar vs. C$, (8 -C/$ 232 #%'&%* !or:itorio vs. 7ernande5, &2 -C/$ (88 #%'&2* 8agdalena =state vs. /odrigue5, %8 -C/$ '2& #%'22* /e9es vs. -e retar9 of 4usti e, 223 -C/$ (1 #%''2* Cou hing9an vs. /B -uret9 and Insuran e, ,./. No. +03&(2', 4une (), %'8& Broad?a9 Centru: Condo:iniu: Corp. vs. Tropi al Aut, ,./. No. &'232, 4ul9 1, %''(* California Bus +ine vs. -tate Invest:ent, ,./. No.%3&'1), !e .%%,2))( ,. =ffects 1. in general-"rt. 12/6 2. Dhen accessory obligation may s!bsist - "rt. 12/6 =. =ffect of the 2tat!s of the Original or &eD Obligation 1. n!llity or voidability of original obligation - "rt. 12/) 2. n!llity or voidability of neD obligation - "rt. 12/6 3. s!s#ensive or resol!tory condition of original obligation - "rt. 12// (. Ob0ective &ovation 1. meaning of L#rinci#al conditionsL G. 2!b0ective &ovation 1. *y change of debtor a. =3#romision i. reF!isites-"rt. 12/3 ii. effects - "rt. 12/5 asesE ,ar ia vs. +la:as, 3%& -C/$ 2'2 #2))(* Buinto vs. 6eople, ,./. No. %22&%1, $pril %3, %'''. 2. *y change of creditorE 2!brogation of a third #erson in the rights of the creditor - "rt. 13'' a. onventional s!brogation i. reF!isites-"rt 13'1 ii. disting!ished from "ssignment of redit iii. effects-"rt 13'3$ 13'4 aseE +i aros vs. ,at:aitan, ,./. No. %328(8, $ugust ', 2))% b. .egal s!brogation i. reF!isites

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ii. Dhen #res!med - "rt. 13'2 iii. effects-"rt. 13'3$ 13'4 aseE $stro =le troni s Corp. vs. 6hilippine =Cport and 7oreign +oan ,uarantee Corporation, ,./. No. %(2&2', -epte:ber 2(, 2))(.

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila =& *"& ,./. No. +0%%82& 4ul9 (%, %'2%

7=/N$N!O $. ,$IT=, #laintiff-a##ellee$ vs. I-$B=+O 7ON$CI=/, ,=O/,= "/$"OD=/, +$/$6 8IN=- . -8=+TIN, CO., INC., -=,;N!IN$ VIV$-, 7/N$CI-CO !$NT=, 6$CI7ICO =-C$N!O/ and 7=/N$N!O T@, defendants-a##ellants. Alejo Mabanag for plaintiff-appellee. Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for defendants-appellants. /=@=-, 4.B.+., J.E Ahis a##eal comes to !s directly from the o!rt of (irst 1nstance beca!se the claims involved aggregate more than -2''$'''.''.

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,efendant-a##ellant 1sabelo (onacier Das the oDner and7or holder$ either by himself or in a re#resentative ca#acity$ of 11 iron lode mineral claims$ BnoDn as the ,aDahan Gro!#$ sit!ated in the m!nici#ality of +ose -anganiban$ #rovince of amarines &orte. *y a L,eed of "ssignmentL dated 2e#tember 2/$ 1/52(=3hibit L3L)$ (onacier constit!ted and a##ointed #laintiff-a##ellee (ernando ". Gaite as his tr!e and laDf!l attorney-in-fact to enter into a contract Dith any individ!al or 0!ridical #erson for the e3#loration and develo#ment of the mining claims aforementioned on a royalty basis of not less than -'.5' #er ton of ore that might be e3tracted therefrom. On 4arch 1/$ 1/54$ Gaite in t!rn e3ec!ted a general assignment (%ecord on "##eal$ ##. 16-1/) conveying the develo#ment and e3#loitation of said mining claims into the .ara# 1ron 4ines$ a single #ro#rietorshi# oDned solely by and belonging to him$ on the same royalty basis #rovided for in =3hibit L3L. Ahereafter$ Gaite embarBed !#on the develo#ment and e3#loitation of the mining claims in F!estion$ o#ening and #aving roads Dithin and o!tside their bo!ndaries$ maBing other im#rovements and installing facilities therein for !se in the develo#ment of the mines$ and in time e3tracted therefrom Dhat he claim and estimated to be a##ro3imately 24$''' metric tons of iron ore. (or some reason or another$ 1sabelo (onacier decided to revoBe the a!thority granted by him to Gaite to e3#loit and develo# the mining claims in F!estion$ and Gaite assented thereto s!b0ect to certain conditions. "s a res!lt$ a doc!ment entitled L%evocation of -oDer of "ttorney and ontractL Das e3ec!ted on ,ecember )$ 1/54 (=3hibit L"L)$Dherein Gaite transferred to (onacier$ for the consideration of -2'$'''.''$ #l!s 1'O of the royalties that (onacier Do!ld receive from the mining claims$ all his rights and interests on all the roads$ im#rovements$ and facilities in or o!tside said claims$ the right to !se the b!siness name L.ara# 1ron 4inesL and its goodDill$ and all the records and doc!ments relative to the mines. 1n the same doc!ment$ Gaite transferred to (onacier all his rights and interests over the L24$''' tons of iron ore$ more or lessL that the former had already e3tracted from the mineral claims$ in consideration of the s!m of -65$'''.''$ -1'$'''.'' of Dhich Das #aid !#on the signing of the agreement$ and b. Ahe balance of 21PA@-(1H= AIOC2"&, -=2O2 (-65$'''.'') Dill be #aid from and o!t of the first letter of credit covering the first shi#ment of iron ores and of the first amo!nt derived from the local sale of iron ore made by the .ara# 4ines ; 2melting o. 1nc.$ its assigns$ administrators$ or s!ccessors in interests. Ao sec!re the #ayment of the said balance of -65$'''.''$ (onacier #romised to e3ec!te in favor of Gaite a s!rety bond$ and #!rs!ant to the #romise$ (onacier delivered to Gaite a s!rety bond dated ,ecember )$ 1/54 Dith himself ((onacier) as #rinci#al and the .ara# 4ines and 2melting o. and its stocBholders George :raBoDer$ 2eg!ndina Hivas$ -acifico =scandor$ (rancisco ,ante$ and (ernando Ay as s!reties (=3hibit L"-1L). Gaite testified$ hoDever$ that Dhen this bond Das #resented to him by (onacier together Dith the L%evocation of -oDer of "ttorney and ontractL$ =3hibit L"L$ on ,ecember )$ 1/54$ he ref!sed to sign said =3hibit L"L !nless another bond !nder Dritten by a bonding com#any Das #!t !# by defendants to sec!re the #ayment of the -65$'''.'' balance of their #rice of the iron ore in the stocB#iles in the mining claims. Ience$ a second bond$ also dated ,ecember )$ 1/54 (=3hibit L*L)$Das e3ec!ted by the same #arties to the first bond =3hibit L"-1L$ Dith the (ar =astern 2!rety and 1ns!rance o. as additional s!rety$ b!t it #rovided that the liability of the s!rety com#any Do!ld attach only Dhen there had been an act!al sale of iron ore by the .ara# 4ines ; 2melting o. for an amo!nt of not

12

less then -65$'''.''$ and that$ f!rthermore$ the liability of said s!rety com#any Do!ld a!tomatically e3#ire on ,ecember )$ 1/55. *oth bonds Dere attached to the L%evocation of -oDer of "ttorney and ontractL$ =3hibit L"L$ and made integral #arts thereof. On the same day that (onacier revoBed the #oDer of attorney he gave to Gaite and the tDo e3ec!ted and signed the L%evocation of -oDer of "ttorney and ontractL$ =3hibit L"L$ (onacier entered into a L ontract of 4ining O#erationL$ ceding$ transferring$ and conveying !nto the .ara# 4ines and 2melting o.$ 1nc. the right to develo#$ e3#loit$ and e3#lore the mining claims in F!estion$ together Dith the im#rovements therein and the !se of the name L.ara# 1ron 4inesL and its good Dill$ in consideration of certain royalties. (onacier liBeDise transferred$ in the same doc!ment$ the com#lete title to the a##ro3imately 24$''' tons of iron ore Dhich he acF!ired from Gaite$ to the .ara# ; 2melting o.$ in consideration for the signing by the com#any and its stocBholders of the s!rety bonds delivered by (onacier to Gaite (%ecord on "##eal$ ##. )2-/4). C# to ,ecember )$ 1/55$ Dhen the bond =3hibit L*L e3#ired Dith res#ect to the (ar =astern 2!rety and 1ns!rance om#any$ no sale of the a##ro3imately 24$''' tons of iron ore had been made by the .ara# 4ines ; 2melting o.$ 1nc.$ nor had the -65$'''.'' balance of the #rice of said ore been #aid to Gaite by (onacier and his s!reties #ayment of said amo!nt$ on the theory that they had lost right to maBe !se of the #eriod given them Dhen their bond$ =3hibit L*L a!tomatically e3#ired (=3hibits L L to L -24L). "nd Dhen (onacier and his s!reties failed to #ay as demanded by Gaite$ the latter filed the #resent com#laint against them in the o!rt of (irst 1nstance of 4anila ( ivil ase &o. 2/31') for the #ayment of the -65$'''.'' balance of the #rice of the ore$ conseF!ential damages$ and attorneyMs fees. "ll the defendants e3ce#t (rancisco ,ante set !# the !niform defense that the obligation s!ed !#on by Gaite Das s!b0ect to a condition that the amo!nt of -65$'''.'' Do!ld be #ayable o!t of the first letter of credit covering the first shi#ment of iron ore and7or the first amo!nt derived from the local sale of the iron ore by the .ara# 4ines ; 2melting o.$ 1nc.; that !# to the time of the filing of the com#laint$ no sale of the iron ore had been made$ hence the condition had not yet been f!lfilled; and that conseF!ently$ the obligation Das not yet d!e and demandable. ,efendant (onacier also contended that only 6$563 tons of the estimated 24$''' tons of iron ore sold to him by Gaite Das act!ally delivered$ and co!nterclaimed for more than -2''$'''.'' damages. "t the trial of the case$ the #arties agreed to limit the #resentation of evidence to tDo iss!esE (1) 8hether or not the obligation of (onacier and his s!reties to #ay Gaite -65$'''.'' become d!e and demandable Dhen the defendants failed to reneD the s!rety bond !nderDritten by the (ar =astern 2!rety and 1ns!rance o.$ 1nc. (=3hibit L*L)$ Dhich e3#ired on ,ecember )$ 1/55; and (2) 8hether the estimated 24$''' tons of iron ore sold by #laintiff Gaite to defendant (onacier Dere act!ally in e3istence in the mining claims Dhen these #arties e3ec!ted the L%evocation of -oDer of "ttorney and ontractL$ =3hibit L".L

13

On the first F!estion$ the loDer co!rt held that the obligation of the defendants to #ay #laintiff the -65$'''.'' balance of the #rice of the a##ro3imately 24$''' tons of iron ore Das one Dith a termE i.e.$ that it Do!ld be #aid !#on the sale of s!fficient iron ore by defendants$ s!ch sale to be effected Dithin one year or before ,ecember )$ 1/55; that the giving of sec!rity Das a condition #recedent to GaitMs giving of credit to defendants; and that as the latter failed to #!t !# a good and s!fficient sec!rity in lie! of the (ar =astern 2!rety bond (=3hibit L*L) Dhich e3#ired on ,ecember )$ 1/55$ the obligation became d!e and demandable !nder "rticle 11/) of the &eD ivil ode. "s to the second F!estion$ the loDer co!rt fo!nd that #laintiff Gaite did have a##ro3imately 24$''' tons of iron ore at the mining claims in F!estion at the time of the e3ec!tion of the contract =3hibit L".L +!dgment Das$ accordingly$ rendered in favor of #laintiff Gaite ordering defendants to #ay him$ 0ointly and severally$ -65$'''.'' Dith interest at 6O #er ann!m from ,ecember /$ 1/55 !ntil #ayment$ #l!s costs. (rom this 0!dgment$ defendants 0ointly a##ealed to this o!rt. ,!ring the #endency of this a##eal$ several incidental motions Dere #resented for resol!tionE a motion to declare the a##ellants .ara# 4ines ; 2melting o.$ 1nc. and George :raBoDer in contem#t$ filed by a##ellant (onacier$ and tDo motions to dismiss the a##eal as having become academic and a motion for neD trial and7or to taBe 0!dicial notice of certain doc!ments$ filed by a##ellee Gaite. Ahe motion for contem#t is !nmeritorio!s beca!se the main allegation therein that the a##ellants .ara# 4ines ; 2melting o.$ 1nc. and :raBoDer had sold the iron ore here in F!estion$ Dhich allegedly is L#ro#erty in litigationL$ has not been s!bstantiated; and even if tr!e$ does not maBe these a##ellants g!ilty of contem#t$ beca!se Dhat is !nder litigation in this a##eal is a##ellee GaiteMs right to the #ayment of the balance of the #rice of the ore$ and not the iron ore itself. "s for the several motions #resented by a##ellee Gaite$ it is !nnecessary to resolve these motions in vieD of the res!lts that De have reached in this case$ Dhich De shall hereafter disc!ss. Ahe main iss!es #resented by a##ellants in this a##eal areE (1) that the loDer co!rt erred in holding that the obligation of a##ellant (onacier to #ay a##ellee Gaite the -65$'''.'' (balance of the #rice of the iron ore in F!estion)is one Dith a #eriod or term and not one Dith a s!s#ensive condition$ and that the term e3#ired on ,ecember )$ 1/55; and (2) that the loDer co!rt erred in not holding that there Dere only 1'$/54.5 tons in the stocB#iles of iron ore sold by a##ellee Gaite to a##ellant (onacier. Ahe first iss!e involves an inter#retation of the folloDing #rovision in the contract =3hibit L"LE 6. Ahat (ernando Gaite or .ara# 1ron 4ines hereby transfers to 1sabelo (. (onacier all his rights and interests over the 24$''' tons of iron ore$ more or less$ above-referred to together Dith all his rights and interests to o#erate the mine in consideration of the s!m of 2=H=&A@-(1H= AIOC2"&, -=2O2 (-65$'''.'') Dhich the latter binds to #ay as folloDsE

14

a. A=& AIOC2"&, -=2O2 (-1'$'''.'') Dill be #aid !#on the signing of this agreement. b. Ahe balance of 21PA@-(1H= AIOC2"&, -=2O2 (-65$'''.'')Dill be #aid from and o!t of the first letter of credit covering the first shi#ment of iron ore made by the .ara# 4ines ; 2melting o.$ 1nc.$ its assigns$ administrators$ or s!ccessors in interest. 8e find the co!rt beloD to be legally correct in holding that the shi#ment or local sale of the iron ore is not a condition #recedent (or s!s#ensive) to the #ayment of the balance of -65$'''.''$ b!t Das only a s!s#ensive #eriod or term. 8hat characteri<es a conditional obligation is the fact that its efficacy or obligatory force (as disting!ished from its demandability) is s!bordinated to the ha##ening of a f!t!re and !ncertain event; so that if the s!s#ensive condition does not taBe #lace$ the #arties Do!ld stand as if the conditional obligation had never e3isted. Ahat the #arties to the contract =3hibit L"L did not intend any s!ch state of things to #revail is s!##orted by several circ!mstancesE 1) Ahe Dords of the contract e3#ress no contingency in the b!yerMs obligation to #ayE LAhe balance of 2i3ty-(ive Aho!sand -esos (-65$'''.'') ill be paid o!t of the first letter of credit covering the first shi#ment of iron ores . . .L etc. Ahere is no !ncertainty that the #ayment Dill have to be made sooner or later; Dhat is !ndetermined is merely the e!act date at Dhich it Dill be made. *y the very terms of the contract$ therefore$ the e3istence of the obligation to #ay is recogni<ed; only its maturit" or demandabilit" is deferred. 2) " contract of sale is normally comm!tative and onero!sE not only does each one of the #arties ass!me a correlative obligation (the seller to deliver and transfer oDnershi# of the thing sold and the b!yer to #ay the #rice)$b!t each #arty antici#ates #erformance by the other from the very start. 8hile in a sale the obligation of one #arty can be laDf!lly s!bordinated to an !ncertain event$ so that the other !nderstands that he ass!mes the risB of receiving nothing for Dhat he gives (as in the case of a sale of ho#es or e3#ectations$ emptio spei)$ it is not in the !s!al co!rse of b!siness to do so; hence$ the contingent character of the obligation m!st clearly a##ear. &othing is fo!nd in the record to evidence that Gaite desired or ass!med to r!n the risB of losing his right over the ore Ditho!t getting #aid for it$ or that (onacier !nderstood that Gaite ass!med any s!ch risB. Ahis is #roved by the fact that Gaite insisted on a bond a to g!arantee #ayment of the -65$'''.''$ an not only !#on a bond by (onacier$ the .ara# 4ines ; 2melting o.$ and the com#anyMs stocBholders$ b!t also on one by a s!rety com#any; and the fact that a##ellants did #!t !# s!ch bonds indicates that they admitted the definite e3istence of their obligation to #ay the balance of -65$'''.''. 3) Ao s!bordinate the obligation to #ay the remaining -65$'''.'' to the sale or shi#ment of the ore as a condition #recedent$ Do!ld be tantamo!nt to leaving the #ayment at the discretion of the debtor$ for the sale or shi#ment co!ld not be made !nless the a##ellants tooB ste#s to sell the ore. "##ellants Do!ld th!s be able to #ost#one #ayment indefinitely. Ahe desireability of avoiding s!ch a constr!ction of the contract =3hibit L"L needs no stressing. 4) "ss!ming that there co!ld be do!bt Dhether by the Dording of the contract the #arties indented a s!s#ensive condition or a s!s#ensive #eriod (dies ad #uem) for the #ayment

15

of the -65$'''.''$ the r!les of inter#retation Do!ld incline the scales in favor of Lthe greater reci#rocity of interestsL$ since sale is essentially onero!s. Ahe ivil ode of the -hili##ines$ "rticle 136)$ #aragra#h 1$ in fine$ #rovidesE 1f the contract is onero!s$ the do!bt shall be settled in favor of the greatest reci#rocity of interests. and there can be no F!estion that greater reci#rocity obtains if the b!yerM obligation is deemed to be act!ally e3isting$ Dith only its mat!rity (d!e date) #ost#oned or deferred$ that if s!ch obligation Dere vieDed as non-e3istent or not binding !ntil the ore Das sold. Ahe only rational vieD that can be taBen is that the sale of the ore to (onacier Das a sale on credit$ and not an aleatory contract Dhere the transferor$ Gaite$ Do!ld ass!me the risB of not being #aid at all; and that the #revio!s sale or shi#ment of the ore Das not a s!s#ensive condition for the #ayment of the balance of the agreed #rice$ b!t Das intended merely to fi3 the f!t!re date of the #ayment. Ahis iss!e settled$ the ne3t #oint of inF!iry is Dhether a##ellants$ (onacier and his s!reties$ still have the right to insist that Gaite sho!ld Dait for the sale or shi#ment of the ore before receiving #ayment; or$ in other Dords$ Dhether or not they are entitled to taBe f!ll advantage of the #eriod granted them for maBing the #ayment. 8e agree Dith the co!rt beloD that the a##ellant have forfeited the right co!rt beloD that the a##ellants have forfeited the right to com#el Gaite to Dait for the sale of the ore before receiving #ayment of the balance of -65$'''.''$ beca!se of their fail!re to reneD the bond of the (ar =astern 2!rety om#any or else re#lace it Dith an eF!ivalent g!arantee. Ahe e3#iration of the bonding com#anyMs !ndertaBing on ,ecember )$ 1/55 s!bstantially red!ced the sec!rity of the vendorMs rights as creditor for the !n#aid -65$'''.''$ a sec!rity that Gaite considered essential and !#on Dhich he had insisted Dhen he e3ec!ted the deed of sale of the ore to (onacier (=3hibit L"L). Ahe case sF!arely comes !nder #aragra#hs 2 and 3 of "rticle 11/) of the ivil ode of the -hili##inesE L"%A. 11/). Ahe debtor shall lose every right to maBe !se of the #eriodE (1) . . . (2) 8hen he does not f!rnish to the creditor the g!aranties or sec!rities Dhich he has #romised. (3) 8hen by his oDn acts he has im#aired said g!aranties or sec!rities after their establishment$ and Dhen thro!gh fort!ito!s event they disa##ear$ !nless he immediately gives neD ones eF!ally satisfactory. "##ellantsM fail!re to reneD or e3tend the s!rety com#anyMs bond !#on its e3#iration #lainly im#aired the sec!rities given to the creditor (a##ellee Gaite)$ !nless immediately reneDed or re#laced. Ahere is no merit in a##ellantsM arg!ment that GaiteMs acce#tance of the s!rety com#anyMs bond Dith f!ll BnoDledge that on its face it Do!ld a!tomatically e3#ire Dithin

16

one year Das a Daiver of its reneDal after the e3#iration date. &o s!ch Daiver co!ld have been intended$ for Gaite stood to lose and had nothing to gain barely; and if there Das any$ it co!ld be rationally e3#lained only if the a##ellants had agreed to sell the ore and #ay Gaite before the s!rety com#anyMs bond e3#ired on ,ecember )$ 1/55. *!t in the latter case the defendants-a##ellantsM obligation to #ay became absol!te after one year from the transfer of the ore to (onacier by virt!e of the deed =3hibit L".L. "ll the alternatives$ therefore$ lead to the same res!ltE that Gaite acted Dithin his rights in demanding #ayment and instit!ting this action one year from and after the contract (=3hibit L"L) Das e3ec!ted$ either beca!se the a##ellant debtors had im#aired the sec!rities originally given and thereby forfeited any f!rther time Dithin Dhich to #ay; or beca!se the term of #ayment Das originally of no more than one year$ and the balance of -65$'''.'' became d!e and #ayable thereafter. oming noD to the second iss!e in this a##eal$ Dhich is Dhether there Dere really 24$''' tons of iron ore in the stocB#iles sold by a##ellee Gaite to a##ellant (onacier$ and Dhether$ if there had been a short-delivery as claimed by a##ellants$ they are entitled to the #ayment of damages$ De m!st$ at the o!tset$ stress tDo thingsE first$ that this is a case of a sale of a s#ecific mass of f!ngible goods for a single #rice or a l!m# s!m$ the F!antity of L24$''' tons of iron ore$ more or less$L stated in the contract =3hibit L"$L being a mere estimate by the #arties of the total tonnage Deight of the mass; and second$ that the evidence shoDs that neither of the #arties had act!ally meas!red of Deighed the mass$ so that they both tried to arrive at the total F!antity by maBing an estimate of the vol!me thereof in c!bic meters and then m!lti#lying it by the estimated Deight #er ton of each c!bic meter. Ahe sale betDeen the #arties is a sale of a s#ecific mass or iron ore beca!se no #rovision Das made in their contract for the meas!ring or Deighing of the ore sold in order to com#lete or #erfect the sale$ nor Das the #rice of -65$'''$'' agreed !#on by the #arties based !#on any s!ch meas!rement.(see "rt. 14)'$ second #ar.$ &eD ivil ode). Ahe s!b0ect matter of the sale is$ therefore$ a determinate ob0ect$ the mass$ and not the act!al n!mber of !nits or tons contained therein$ so that all that Das reF!ired of the seller Gaite Das to deliver in good faith to his b!yer all of the ore fo!nd in the mass$ notDithstanding that the F!antity delivered is less than the amo!nt estimated by them (4obile 4achinery ; 2!##ly o.$ 1nc. vs. @orB Oilfield 2alvage o.$ 1nc. 161 2o. )62$ a##lying art. 245/ of the .o!isiana ivil ode). Ahere is no charge in this case that Gaite did not deliver to a##ellants all the ore fo!nd in the stocB#iles in the mining claims in F!estions; Gaite had$ therefore$ com#lied Dith his #romise to deliver$ and a##ellants in t!rn are bo!nd to #ay the l!m# #rice. *!t ass!ming that #laintiff Gaite !ndertooB to sell and a##ellants !ndertooB to b!y$ not a definite mass$ b!t a##ro3imately 24$''' tons of ore$ so that any s!bstantial difference in this F!antity delivered Do!ld entitle the b!yers to recover damages for the short-delivery$ Das there really a short-delivery in this case9 8e thinB not. "s already stated$ neither of the #arties had act!ally meas!red or Deighed the Dhole mass of ore c!bic meter by c!bic meter$ or ton by ton. *oth #arties #redicate their res#ective claims only !#on an estimated n!mber of c!bic meters of ore m!lti#lied by the average tonnage factor #er c!bic meter.

17

&oD$ a##ellee Gaite asserts that there Das a total of 6$365 c!bic meters in the stocB#iles of ore that he sold to (onacier$ Dhile a##ellants contend that by act!al meas!rement$ their Ditness ir#riano 4anlaQgit fo!nd the total vol!me of ore in the stocB#iles to be only 6.6'/ c!bic meters. "s to the average Deight in tons #er c!bic meter$ the #arties are again in disagreement$ Dith a##ellants claiming the correct tonnage factor to be 2.1) tons to a c!bic meter$ Dhile a##ellee Gaite claims that the correct tonnage factor is abo!t 3.6. 1n the face of the conflict of evidence$ De taBe as the most reliable estimate of the tonnage factor of iron ore in this case to be that made by .eo#oldo (. "bad$ chief of the 4ines and 4etall!rgical ,ivision of the *!rea! of 4ines$ a government #ensionado to the 2tates and a mining engineering grad!ate of the Cniversities of &evada and alifornia$ Dith almost 22 years of e3#erience in the *!rea! of 4ines. Ahis Ditness #laced the tonnage factor of every c!bic meter of iron ore at betDeen 3 metric tons as minim!m to 5 metric tons as ma3im!m. Ahis estimate$ in t!rn$ closely corres#onds to the average tonnage factor of 3.3 ado#ted in his corrected re#ort (=3hibits L((L and ((-1L) by engineer &emesio Gamatero$ Dho Das sent by the *!rea! of 4ines to the mining claims involved at the reF!est of a##ellant :raBoDer$ #recisely to maBe an official estimate of the amo!nt of iron ore in GaiteMs stocB#iles after the dis#!te arose. =ven granting$ then$ that the estimate of 6$6'/ c!bic meters of ore in the stocB#iles made by a##ellantMs Ditness i#riano 4anlaQgit is correct$ if De m!lti#ly it by the average tonnage factor of 3.3 tons to a c!bic meter$ the #rod!ct is 21$)'/.6 tons$ Dhich is not very far from the estimate of 24$''' tons made by a##ellee Gaite$ considering that act!al Deighing of each !nit of the mass Das #ractically im#ossible$ so that a reasonable #ercentage of error sho!ld be alloDed anyone maBing an estimate of the e3act F!antity in tons fo!nd in the mass. 1t m!st not be forgotten that the contract =3hibit L"L e3#ressly stated the amo!nt to be 24$''' tons$ more or less. (ch. -ine %iver .ogging ; 1m#rovement o. vs C.2.$ 26/$ 46 .. =d. 1164). Ahere Das$ conseF!ently$ no short-delivery in this case as Do!ld entitle a##ellants to the #ayment of damages$ nor co!ld Gaite have been g!ilty of any fra!d in maBing any misre#resentation to a##ellants as to the total F!antity of ore in the stocB#iles of the mining claims in F!estion$ as charged by a##ellants$ since GaiteMs estimate a##ears to be s!bstantially correct. 8I=%=(O%=$ finding no error in the decision a##ealed from$ De hereby affirm the same$ Dith costs against a##ellants.

AI1%, ,1H121O&

F,./. No. %(%&83. -epte:ber %2, %'''G

7=+IH +. ,ONI$+=-, petitioner, vs. TA= A=I/- O7 TAO8$- and 6$;+$ C/;I, herein represented b9 =+=N$ C. T$+=N-, respondents.

18

!=CI-ION 6$N,$NIB$N, J.E 1f a sti#!lation in a contract admits of several meanings$ it shall be !nderstood as bearing that im#ort most adeF!ate to render it effect!al. "n obligation cannot be enforced !nless the #laintiff has f!lfilled the condition !#on Dhich it is #remised. Ience$ an obligation to #!rchase cannot be im#lemented !nless and !ntil the sellers have shoDn their title to the s#ecific #ortion of the #ro#erty being sold.

The Case

*efore !s is a -etition for %evieD on $ertiorari assailing the "!g!st 13$ 1//6 ,ecision>1? of the o!rt of "##eals>2? in "-G% H &o. 3'3654$ Dhich dis#osed as folloDsE R8I=%=(O%=$ the decision of the trial co!rt dated &ovember 16$ 1//' is hereby %=H=%2=,. Ahe a##ellee (=.1P GO&S".=2 is hereby ordered to s!rrender #ossession of the #ro#erty covered by the ontract of .ease7-!rchase to the a##ellants$ Ieirs of Ahomas and -a!la r!<$ and to #ay to the a##ellants the folloDing amo!ntsE 1. -15$'''.'' #er ann!m as rentals co!nted from ,ecember 1$ 1/)4 !ntil the a##ellants shall have recovered #ossession of the #ro#erty s!b0ect of the ontract of .ease7-!rchase; 2. -15$'''.'' as attorneyGs fees; and 3. osts of s!it.N>3? "$ r!led On the other hand$ the trial co!rt>4? ,ecision$>5? Dhich Das reversed by the as folloDsE

R8I=%=(O%=$ #remises considered$ this o!rt hereby renders 0!dgment in favor of the defendant$ (eli3 Gon<ales$ and against the #laintiffs$ as folloDsE (1) Ordering the dismissal of the case; (2) 2entencing the #laintiffs$ 0ointly and severally$ the s!m of -2'$'''.'' as moral damages and the other s!m of -1'$'''.'' as and for attorneyGs fees; and (3) Ao #ay the costs.N>6?

The 7a ts

8e hereby re#rod!ce$ !nedited$ the case as folloDsE

o!rt of "##ealsG s!mmary of the facts of this

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ROn ,ecember 1$ 1/)3$ -a!la "Qo r!< together Dith the #laintiffs heirs of Ahomas and -a!la r!<$ namely %icardo ". r!<$ armelita 4. r!<$ 2alome ". r!<$ 1renea . Hictoria$ .eticia . 2alvador and =lena . Aalens$ entered into a ontract of .ease7-!rchase Dith the defendant$ (eli3 .. Gon<ales$ the sole #ro#rietor and manager of (elgon (arms$ of a half-#ortion of a T#arcel of land containing an area of 12 hectares$ more or less$ and an accretion of 2 hectares$ more or less$ sit!ated in %odrig!e< AoDn$ -rovince of %i<alG and covered by Aransfer ertificate of Aitle &o. 12111 (=3hibit "$ #. 156$ %ecords). Ahe contract of .ease7-!rchase contains the folloDing #rovisionsE T1. Ahe terms of this ontract is for a #eriod of one year !#on the signing thereof. "fter the #eriod of this ontract$ the .=22== shall #!rchase the #ro#erty on the agreeable #rice of One 4illion -esos (-1$'''$'''.'') #ayable Dithin ADo (2) @ears #eriod Dith an interest of 12O #er ann!m s!b0ect to the deval!ed amo!nt of the -hili##ine -eso$ according to the folloDing sched!le of #aymentE C#on the e3ec!tion of the ,eed of 2ale 5'O - and thereafter 25O every si3 (6) months thereafter$ #ayable Dithin the first ten (1') days of the beginning of each #eriod of si3 (6) months. T2. Ahe .=22== shall #ay by Day of ann!al rental an amo!nt eF!ivalent to ADo Aho!sand (ive I!ndred (-2$5''.'') -esos #er hectare$ !#on the signing of this contract on ,ec. 1$ 1/)3. 333 333 333

T/. Ahe .=22O%2 hereby commit themselves and shall !ndertaBe to obtain a se#arate and distinct A. .A. over the herein leased #ortion to the .=22== Dithin a reasonable #eriod of time Dhich shall not in any case e3ceed fo!r (4) years$ after Dhich a neD ontract shall be e3ec!ted by the herein #arties Dhich shall be the same in all res#ects Dith this ontract of .ease7-!rchase insofar as the terms and conditions are concerned. 333 (=3hibits "$ "-1; ##. 156-15). %ecords)G RAhe defendant Gon<ales #aid the -2$5''.'' #er hectare or -15$'''.'' ann!al rental on the half-#ortion of the #ro#erty covered by Aransfer ertificate of Aitle &o. 12111 in accordance Dith the second #rovision of the ontract of .ease7-!rchase (#. 12$ A2&$ 2e#tember 14$ 1/)/) and thereafter tooB #ossession of the #ro#erty$ installing thereon the defendant +es!s 2ambrano as his caretaBer (##. 16-16$ 26$ A2&$ ,ecember 12$ 1/)/). Ahe defendant Gon<ales did not$ hoDever$ e3ercise his o#tion to #!rchase the #ro#erty immediately after the e3#iration of the one-year lease on &ovember 3'$ 1/)4 (##. 1/-2'$ A2&$ 2e#tember 14$ 1/)/). Ie remained in #ossession of the #ro#erty Ditho!t #aying the #!rchase #rice #rovided for in the ontract of .ease7-!rchase (1bid.) and Ditho!t #aying any f!rther rentals thereon (#. 36$ A2&$ &ovember 6$ 1/)/). R" letter Das sent by one of the #laintiffs-heirs %icardo r!< to the defendant Gon<ales informing him of the lessorsG decision to rescind the ontract of .ease7-!rchase d!e to a breach thereof committed by the defendant (=3hibit ; #. 162$ %ecords). Ahe letter also 333 3 3 3G

20

served as a demand on the defendant to vacate the #remises Dithin 1' days from recei#t of said letter (1bid.). RAhe defendant Gon<ales ref!sed to vacate the #ro#erty and contin!ed #ossession thereof (#. 2$ %ecord). Ahe matter Das therefore bro!ght before the barangay ca#tain of 2an 1sidro$ b!t oDing to the defendantGs ref!sal to a##ear before the barangay$ a certification alloDing the case to be bro!ght to o!rt Das iss!ed on 4arch 1)$ 1/)6 (=3hibit =; #. 165$ %ecords). RAhe lessor$ -a!la "Qo 2e#tember 14$ 1/)/). r!< died the folloDing day$ 4arch 1/$ 1/)6 (#. /$ A2&$

R" final demand letter to vacate the #remises Das sent by the remaining lessors Dho are also the heirs of the deceased lessor -a!la "Qo r!<$ thro!gh their co!nsel on "!g!st 24$ 1/)6 Dhich the defendant Gon<ales received b!t did not heed (=3hibits , and ,-1; ##. 163-164$ %ecords). RAhe #ro#erty s!b0ect of the ontract of .ease7-!rchase is c!rrently the s!b0ect of an =3tra-+!dicial -artition (=3hibits G and G-1; ##. 16)-16/$ %ecords). Aitle to the #ro#erty remains in the name of the #laintiffsG #redecessors-in-interest$ *ernardina ali3to and 2evero r!< (=3hibit *; #. 16'$ %ecords). R"lleging breach of the #rovisions of the ontract of .ease7-!rchase$ the #laintiffs filed a com#laint for recovery of #ossession of the #ro#erty - s!b0ect of the contract Dith damages$ both moral and com#ensatory and attorneyGs fees and litigation e3#enses (#. 3$ %ecords). R"lleging breach of #aragra#h nine of the ontract of .ease7-!rchase$ and #ayment of only -5'$'''.'' of the -5''$'''.'' agreed doDn #ayment on the #!rchase #rice of -1$'''$'''.''$ the defendant Gon<ales filed his ansDer on &ovember 23$ 1/)6 #raying for a dismissal of the com#laint filed against him and an aDard of moral$ e3em#lary and act!al damages$ as Dell as litigation e3#enses (##. 1/-22$ %ecords). RAhe defendant 2ambrano Das$ !#on motion$ declared in defa!lt for fail!re to file an ansDer des#ite valid service of s!mmons (#. 3'$ %ecords). RAhe #arties limited the iss!es to be resolved toE (1) 8hether or not #aragra#h / of the contract is a condition #recedent before the defendant is to #ay the doDn #ayment; (2) 8hether or not #laintiffs can rescind the ontract of .ease7-!rchase; and (3) 8hether or not #laintiffs can terminate the ,ecision; #. 262$ %ecords) ontract of .ease. (#. 4$

R"fter the termination of the #re-trial conference$ the trial co!rt #roceeded to hear the case on the merits and arrived at its a##ealed decision based on the folloDing findings and concl!sionsE

21

T-aragra#h / of the contract clearly indicates that the lessors-#laintiffs shall obtain a Aransfer ertificate of Aitle in the name of the lessee Dithin 4 years before a neD contract is to be entered into !nder the same terms and conditions as the original ontract of .ease7-!rchase. Ah!s$ before a deed of 2ale can be entered into betDeen the #laintiffs and the defendant$ the #laintiffs have to obtain the Aransfer ertificate of Aitle in favor of the defendant. "rticle 11)1 of the &eD ivil ode states thatE T1n conditional obligations$ the acF!isition of rights$ as Dell as the e3ting!ishment or loss of those already acF!ired$ shall de#end !#on the ha##ening of the event Dhich constit!tes the condition.G 8hen the obligation ass!med by a #arty to a contract is e3#ressly s!b0ected to a condition$ the obligation cannot be enforced against him !nless the condition is com#lied Dith (8ise ; o. vs. :elly$ 36 -hil. 6/5; -&* vs. -hili##ine Ar!st o.$ 6) -hil. 4)). TAhe fail!re of the #laintiffs to sec!re the Aransfer ertificate of Aitle$ as #rovided for in the contract$ does not entitle them to rescind the contract>.? "rticle 11/1 of the &eD ivil ode states thatE TAhe #oDer to rescind obligations is im#lied in reci#rocal ones$ in case one of the obligors sho!ld not com#ly Dith Dhat is inc!mbent !#on him. Ahe in0!red #arty may choose betDeen the f!lfillment of the obligation$ Dith the #ayment of damages in either case. Ie may seeB rescission$ even after he has chosen f!lfillment$ if the latter sho!ld become im#ossible 3 3 3.G Ahe #oDer to rescind is given to the in0!red #arty. 8here the #laintiff is the #arty Dho did not #erform$ he is not entitled to insist !#on the #erformance of the contract by the defendant or recover damages by reason of his oDn breach (4ateos vs. .o#e<$ 6 -hil. 2'6; *orF!e vs. @! hi#co$ 14 -hil. /5). "n action for s#ecific #erformance of a contract is an eF!itable #roceeding$ and he Dho seeBs to enforce it m!st himself be fair and reasonable$ and do eF!ity (2eva vs. *erDin$ 4) -hil. 5)1). 1n this case$ #laintiffs failed to com#ly Dith the conditions #recedent after 2-172 years from the e3ec!tion of the contract so as to entitle them to rescind the contract. "ltho!gh the contract stated that the same be done Dithin 4 years from e3ec!tion$ still$ the defendant has to be ass!red that the land s!b0ect of the case Dill be transferred in his name Ditho!t any enc!mbrances$ as the =3tra-+!dicial -artition dated +!ly 16$ 1/)/ Das being #rocessed$ and contin!es to be in #rocess to this date. Ahe fail!re to sec!re the Aransfer ertificate of Aitle in favor of the defendant entitles not the #laintiffs b!t$ rather$ the defendant to either rescind or to asB for s#ecific #erformances. T"re the #laintiffs entitled to terminate the ontract of .ease9 "rticle 166' of the &eD ivil ode states thatE 1f at the end of the contract the lessee sho!ld contin!e en0oying the thing leased for fifteen days Dith the acF!ies>c?ence of the lessor and !nless a notice to the contrary by either #arty has #revio!sly been given$ it is !nderstood that there is an im#lied neD lease$ not for the #eriod of the original contract$ b!t for the time established in "rticles 16)2 and 16)6. Ahe other terms of the original contract shall be revived. T"rticle 16)2 of the &eD ivil ode states thatE

Ahe lease of a #iece of r!ral land$ Dhen its d!ration has not been fi3ed$ is !nderstood to have been made for all the time necessary for the gathering of the fr!its Dhich the Dhole estate leased may yield in one year$ or Dhich it may yield once$ altho!gh tDo or more years may have to ela#se for the #!r#ose.

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TAhe #laintiffs filed the com#laint on October 12$ 1/)6 after maBing an e3tra-0!dicial demand on +!ly 2$ 1/)6. Ahe contract Das entered into on ,ecember 1$ 1/)3. Ahe demand Das th!s made more than a year and a half from the e3#iry date of the original lease considering that there Das no #ayment made for the second year of the lease. 1f one has to consider the fact that the defendant Das given the o#tion to #!rchase the #ro#erty after tDo years$ then$ the lease Do!ld #res!mably r!n for at least tDo years. 1f that is so$ then$ the demand Das made seven months after the e3#iration of the tDo-year lease. 2till$ this demand by the #laintiffs Dill come !nder the im#lied neD lease of "rticles 16)2 and 166' so that the #laintiffs are not entitled to terminate the ontract of .ease. T1n s!m$ the #laintiffs cannot terminate the ontract of .ease d!e to their fail!re to notify the defendant in d!e time of their intention to that effect. &or can they rescind the ontract of -!rchase in vieD of the fact that there is a condition #recedent Dhich the #laintiffs have not f!lfilled. 1t is the defendant noD Dho has the o#tion to either rescind or demand the #erformance of the contract. 4oreover$ according to "rticle 1654 of the &eD ivil ode$ the lessor is obliged to deliver the thing Dhich is the ob0ect of the contract in s!ch condition as to render it fit for the !se intended. onsidering that the lessors-#laintiffs have not delivered the #ro#erty in Dhole over the #rotest of the defendant$ the latter s!ffered damages therefor.G (#. 4-6$ ,ecision; ##. 262-264$ %ecords) RAheir com#laint th!s dismissed$ the #laintiffs$ noD a##ellants$ assign the trial co!rt of having committed the folloDing errorsE I AI= A%1". OC%A G%"H=.@ =%%=, 1& IO.,1&G AI"A -."1&A1((2"--=.."&A2 OC., &OA H".1,.@ %=2 1&, "&, A=%41&"A= AI= .="2=7-C% I"2= O&A%" A (=PI1*1A T"G) "&, AI=%="(A=% AO A":= -O22=221O& O( AI= ."&, 1& KC=2A1O& "&, =+= A AI=%=(%O4 ,=(=&,"&A2-"--=..==2. II AI= A%1". OC%A =KC"..@ =%%=, 1& &OA G%"&A1&G AI= %=.1=(2 -.=",=, "&, -%"@=, (O% *@ -."1&A1((2-"--=.."&A2 1& AI=1% O4-."1&A. (#. 42$ %ollo) RAhe case Das s!bmitted for decision Ditho!t the a##elleeGs brief as #er the o!rtGs resol!tion dated +!ly )$ 1//2 (#. 61$ %ollo).N

/uling of the Court of $ppeals

Ahe o!rt of "##eals reversed the trial co!rt in this DiseE RAhe trial co!rt$ in its decision inter#reted the ninth #rovision of the ontract of .ease7-!rchase to mean that before the a##ellee e3ercises his o#tion to #!rchase the

23

#ro#erty by #aying the 5'O #l!s interest on the -1$'''$'''.'' #!rchase #rice$ the a##ellants m!st first transfer the title to the #ro#erty in the a##elleeGs name. Ahe o!rt finds this inter#retation of the #rovision strained if not altogether abs!rd. Ahe transfer of title to the #ro#erty in the a##elleeGs name cannot be inter#reted as a condition #recedent to the #ayment of the agreed #!rchase #rice beca!se s!ch inter#retation not only r!ns co!nter >to? the e3#licit #rovisions of the contract b!t also is contrary to the normal co!rse of things anent the sale of real #ro#erties. Ahe terms of the contract >are? e3#licit and reF!ire no inter#retation. C#on the e3#iration of the lease$ the lessee shall #!rchase the #ro#erty. *esides$ the normal co!rse of things anent the sale of real #ro#erties dictates that there m!st first be #ayment of the agreed #!rchase #rice before transfer of title to the vendeeGs name can be made. RAhis Das #recisely Dhat the a##ellants and -a!la "Qo r!< had in mind Dhen they had the ninth #rovision incor#orated in the ontract of .ease7-!rchase. Ahey had asBed for a #eriod of 4 years from the time they receive the doDn#ayment of 5'O Dithin Dhich to have >the? title to the #ro#erty transferred in the name of the a##ellee. Ahe reason for this fo!r (4) year #eriod is >that? title to the #ro#erty still remains in the name of the original oDners$ the #redecessors-in-interest of the herein a##ellants and >transferring? the title to their names and event!ally to the lessee-#!rchaser$ a##ellee herein$ Do!ld taBe F!ite some time. RAhe a##ellee Danted to have the title to the #ro#erty transferred in his name first before he e3ercises his o#tion to #!rchase allegedly in accordance Dith the ninth #rovision of the contract. *!t the ninth #rovision does not give him this right. " reading of the contract in its entirety shoDs that the 4 year #eriod asBed for by the a##ellants Dithin Dhich to have title to the #ro#erty transferred in the a##elleeGs name Dill only start to r!n Dhen the a##ellee e3ercises his o#tion to #!rchase. 2ince the a##ellee never e3ercised his o#tion to #!rchase$ then a##ellee is not entitled to have the title to the #ro#erty transferred in his name.N "ttrib!ting reversible errors to the a##ellate co!rt$ #etitioner elevated the case to this o!rt.>6?

The Issues

1n his 4emorand!m$>)? #etitioner s!bmits the RfolloDing main iss!esNE R1. 8hether or not the o!rt of "##eals has gravely erred and committed grave ab!se of discretion in the inter#retation of >the? laD betDeen the #arties. R11. 8hether or not the o!rt of "##eals committed serio!s mistaBes in the finding of facts Dhich res!lted >in? de#arting from the !s!al co!rse of 0!dicial #roceedings.N (or these iss!es to be resolved$ #etitioner asBs this F!estionsE o!rt to ansDer the folloDing

R1. 1s there a conflict betDeen the statement in #aragra#h 1 of the .ease7-!rchase ontract and that >in? #aragra#h &o. / thereof9

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R2. 1s #aragra#h / of the .ease7-!rchase ontract a condition #recedent before #etitioner co!ld e3ercise his o#tion to b!y the #ro#erty9 R3. an #laintiff rescind or terminate the ontract of .ease after the one-year #eriod9N

1n fine$ the resol!tion of this case de#ends !#on the #ro#er inter#retation of #aragra#h nine of the ontract.

The CourtJs /uling

Ahe -etition is meritorio!s.

8ain IssueE Interpretation of Paragraph Nine

1n its first #aragra#h$ the dis#!ted agreement #rovides that #etitioner shall lease the #ro#erty for one year$ after Dhich he Rshall #!rchaseN it. -aragra#h nine$ on the other hand$ reF!ires herein res#ondents to obtain a se#arate and distinct Aransfer ertificate of Aitle (A A) over the #ro#erty$ vi&.E R/. Ahe .=22O%2 hereby commit themselves and shall !ndertaBe to obtain a se#arate and distinct A. .A. over the lease #ortion to the .=22== Dithin a reasonable #eriod of time Dhich shall not in any case e3ceed fo!r (4) years$ after Dhich a neD

25

ontract shall be e3ec!ted by the herein #arties Dhich shall be the same in all res#ects Dith this ontract of .ease7-!rchase insofar as the terms and conditions are concerned.N "lleging that #etitioner has not #!rchased the #ro#erty after the la#se of one year$ res#ondents seeB to rescind the ontract and to recover the #ro#erty. -etitioner$ on the other hand$ arg!es that he co!ld not be com#elled to #!rchase the #ro#erty$ beca!se res#ondents have not com#lied Dith #aragra#h nine$ Dhich obligates them to obtain a se#arate and distinct title in t'eir names. Ie contends that #aragra#h nine Das a condition #recedent to the #!rchase of the #ro#erty. Ao be s!re$ this #aragra#h U and the entire agreement$ for that matter -- is not a model of hoD a contract sho!ld be Dorded. 1t is an invitation to a litigation$ as in fact the #arties had to go all to Day !# to this o!rt to #lead for a resol!tion of their conflict Dhich is rooted in their fail!re to e3#ress themselves clearly. 2mall Donder$ even the tDo loDer co!rts gave contradictory !nderstanding of this #rovision$ thereby necessitating the intervention of the highest co!rt of the land. *oth the trial co!rt and the o!rt of "##eals ( ") inter#reted this #rovision to mean that the res#ondents had obliged themselves to obtain a A A in the name of petitionerlessee. Ahe trial co!rt held that this obligation Das a condition #recedent to #etitionerGs #!rchase of the #ro#erty. 2ince res#ondents had not #erformed their obligation$ they co!ld not com#el #etitioner to b!y the #arcel of land. Ahe " tooB the o##osite vieD$ holding that the #ro#erty sho!ld be #!rchased first before res#ondents may be obliged to obtain a A A in the name of #etitioner-lessee-b!yer. "s earlier noted$ #etitioner disagrees Dith the inter#retation of the tDo co!rts and maintains that res#ondents Dere obligated to #roc!re a A A in t'eir names before he co!ld be obliged to #!rchase the #ro#erty in F!estion. *asic is the r!le in the inter#retation of contracts that if some sti#!lation therein sho!ld admit of several meanings$ it shall be !nderstood as bearing that im#ort most adeF!ate to render it effect!al.>/? onsidering the antecedents of the oDnershi# of the dis#!ted lot$ it a##ears that #etitionerGs inter#retation renders cla!se nine most effect!al. Ahe record shoDs that at the time the contract Das e3ec!ted$ the land in F!estion Das still registered in the name of *ernardina ali3to and 2evero r!<$ res#ondentsG #redecessors-in-interest. Ahere is no shoDing Dhether res#ondents Dere the only heirs of 2evero r!< or Dhether the other half of the land in the name of *ernardina ali3to Das ad0!dicated to them by any means. 1n fact$ they admit that e3tra0!dicial #roceedings Dere still ongoing. Ience$ Dhen the ontract of .ease7-!rchase Das e3ec!ted$ there Das no ass!rance that the res#ondents Dere indeed the oDners of the s#ecific #ortion of the lot that #etitioner Danted to b!y$ and if so$ in Dhat conce#t and to Dhat e3tent. Ah!s$ the clear intent of the ninth #aragra#h Das for res#ondents to obtain a se#arate and distinct A A in t'eir names. Ahis Das necessary to enable them to shoD their oDnershi# of the sti#!lated #ortion of the land and their concomitant right to dis#ose of it. "bsent any title in their names$ they co!ld not have sold the dis#!ted #arcel of land. 1t is a Dell-settled #rinci#le in laD that no one can give Dhat one does not have -- nemo dat #uod non 'abet. "ccordingly$ one can sell only Dhat one oDns or is

26

a!thori<ed to sell$ and the b!yer can acF!ire no more than Dhat the seller can transfer legally.>1'? *eca!se the #ro#erty remained registered in the names of their #redecessors-ininterest$ #rivate res#ondents co!ld validly sell only their !ndivided interest in the estate of 2evero r!<$ the e3tent of Dhich Das hoDever not shoDn in the records. Ahere being no #artition of the estate th!s far$ there Das no g!arantee as to hoD m!ch and Dhich #ortion Do!ld be ad0!dicated to res#ondents. 1n a contract of sale$ the title to the #ro#erty #asses to the vendee !#on the delivery of the thing sold.>11? 1n this case$ the res#ondent co!ld not deliver oDnershi# or title to a specific #ortion of the yet !ndivided #ro#erty. Ar!e$ they co!ld have intended to sell their hereditary interest$ b!t in the conte3t of the ontract of .ease7-!rchase$ the #arties !nder #aragra#h nine Danted the s#ecific #ortion of the land to be segregated$ identified and s#ecifically titled. Ience$ by the said ontract$ the res#ondents as sellers Dere given a ma3im!m of fo!r years Dithin Dhich to acF!ire a se#arate A A in their names$ #re#aratory to the e3ec!tion of the deed of sale and the #ayment of the agreed #rice in the manner described in #aragra#h nine. Ahis inter#retation is bolstered by the -5'$''' #etitioner advanced to res#ondents in order to hel# them e3#edite the transfer of the A A to their names. 1nel!ctably$ the intention of the #arties Das to have the title transferred first to res#ondentsG names as a condition for the com#letion of the #!rchase. 1n holding that cla!se nine Das not a condition #recedent to the #!rchase of the #ro#erty$ the " relied on a literal inter#retation to the effect that the A A sho!ld be obtained in t'e name of t'e petitioner-vendee. 1t reasoned that the title co!ld be transferred to the name of the b!yer only after the com#letion of the #!rchase. Ah!s$ #etitioner sho!ld first #!rchase the #ro#erty before res#ondents co!ld be obliged to transfer the A A to his name. 8e disagree. Ahe literal inter#retation not only ignores the fact!al bacBdro# of the case; it also !tili<es a fa!lty #arsing of #aragra#h nine$ Dhich sho!ld #!r#ortedly read as folloDsE RAhe lessors 3 3 3 shall !ndertaBe to obtain a separate and distinct T$T !!! to t'e ()SS)) Dithin a reasonable #eriod of time Dhich shall not in any case e3ceed fo!r (4) years 3 3 3.N %ead in its entirety$ hoDever$ #aragra#h nine does not say that the A A sho!ld be obtained in t'e name of t'e lessee. 1n fact$ #aragra#h nine reF!ires res#ondents to obtain a RA A over the herein leased #ortion to the .=22==$N thereby shoDing that the cr!cial #hrase Rto the .=22==N adverts to Rthe leased #ortionN and not to the name Dhich sho!ld a##ear in the neD A A. (!rthermore$ the " inter#retation ignores the other #art of #aragra#h nine$ stating that after a se#arate A A had been obtained$ Ra neD contract shall be e3ec!ted by the herein #arties Dhich shall be the same in all res#ects Dith this ontract of .ease7-!rchase insofar as the terms and conditions are concerned.N 1f$ as the " held$ #etitioner sho!ld #!rchase the #ro#erty first before the title can be transferred to his name$ Dhy sho!ld there be a Daiting #eriod of fo!r years before the #arties can e3ec!te the neD contract evidencing the sale9 8hy sho!ld the #etitioner still be reF!ired to #ay rentals after it #!rchases and #ays for the #ro#erty9 Ahe ontract co!ld not have envisioned this abs!rd scenario. learly$ the a##ellate co!rtGs literal inter#retation of the first #ortion of #aragra#h nine renders the latter #ortion thereof ineffect!al. 1n other Dords$ that #ortion can only

27

mean that the res#ondents sho!ld first obtain a A A in their names$ after Dhich #etitioner is given time to #!rchase and #ay for the #ro#erty. %es#ondents insist that Rthe obligation of #etitioner to b!y the dis#!ted land immediately after the termination of the one year lease #eriod is e3#licit.N >12? IoDever$ it is more reasonable to state that the first #aragra#h Das effectively modified by the ninth. Ao re#eat$ #etitioner can be com#elled to #erform his obligation !nder the first #aragra#h$ only after res#ondents have com#lied Dith the ninth. Cnless and !ntil res#ondents have done so$ the first #aragra#h cannot be enforced against #etitioner. 1n s!m$ De hold that the ninth #rovision Das intended to ens!re that res#ondents Do!ld have a valid title over the s#ecific #ortion they Dere selling to #etitioner. Only after the title is ass!red may the obligation to b!y the land and to #ay the s!ms stated in the ontract be enforced Dithin the #eriod sti#!lated. Herily$ the #etitionerGs obligation to #!rchase has not yet ri#ened and cannot be enforced !ntil and !nless res#ondents can #rove their title to the #ro#erty s!b0ect of the ontract.

-e ondar9 Issues

Ninth Clause Was a Condition Precedent

*eca!se the ninth cla!se reF!ired res#ondents to obtain a se#arate and distinct A A in their names and not in the name of #etitioner$ it logically folloDs that s!ch !ndertaBing Das a condition precedent to the latterGs obligation to #!rchase and #ay for the land. -!t differently$ #etitionerGs obligation to #!rchase the land is a conditional one and is governed by "rticle 11)1 of the ivil ode.>13? $ondition has been defined as Revery f!t!re and !ncertain event !#on Dhich an obligation or #rovision is made to de#end. 1t is a f!t!re and !ncertain event !#on Dhich the acF!isition or resol!tion of rights is made to de#end by those Dho e3ec!te the 0!ridical act.N>14? 8itho!t it$ the sale of the #ro#erty !nder the ontract cannot be #erfected$ and #etitioner cannot be obliged to #!rchase the #ro#erty. R8hen the consent of a #arty to a contract is given s!b0ect to the f!lfillment of a s!s#ensive condition$ the contract is not #erfected !nless that condition is first com#lied Dith.N>15? Ahe o!rt has held that R>D?hen the obligation ass!med by a #arty to a contract is e3#ressly s!b0ected to a condition$ the obligation cannot be enforced against him !nless the condition is com#lied Dith.N>16? (!rthermore$ R>t?he obligatory force of a conditional obligation is s!bordinated to the ha##ening of a f!t!re and !ncertain event$ so that if that event does not taBe #lace$ the #arties Do!ld stand as if the conditional obligation had never e3isted.N>16? 1n this case$ the obligation of the #etitioner to b!y the land cannot be enforced !nless res#ondents com#ly Dith the s!s#ensive condition that they acF!ire first a se#arate and distinct A A in their names. Ahe s!s#ensive condition not having been f!lfilled$ then the obligation of the #etitioner to #!rchase the land has not arisen.

Respondents Cannot Rescind the Contract

28

1n the same vein$ res#ondents cannot rescind the contract$ beca!se they have not ca!sed the transfer of the A A to their names$ Dhich is a condition #recedent to #etitionerGs obligation. Ahis o!rt has held that Rthere can be no rescission (or more #ro#erly$ resol!tion) of an obligation as yet non-e3istent$ beca!se the s!s#ensive condition has not ha##ened.N>1)? 2ince the reversal of the " ,ecision is inevitable$ the trial co!rtGs 0!dgment sho!ld be reinstated. IoDever$ De find no s!fficient fact!al or legal 0!stifications for the aDard of moral damages and attorneyGs fees. DA=/=7O/=$ the #etition is G%A*T)+ and the a##ealed ,ecision is %),)%S)+ and S)T AS-+). Ahe ,ecision of the trial co!rt is %)-*STAT)+$ b!t the aDard of moral damages and attorneyGs fees is +)()T)+ for lacB of basis. &o costs. -O O/!=/=!. Melo, .$'airman/, Purisima, and Gon&aga-%e"es, 00., conc!r. ,itug, 0., no #art; did not #artici#ate in deliberations (in -I1.+" on official b!siness). AI1%, ,1H121O&

F,./. No. %)(1&&. O tober &, %''2G

/O8;+O $. CO/ON=+, $+$/ICO $. CO/ON=+, $NN=TT= $. CO/ON=+, $NN$B=++= C. ,ONI$+=- #for herself and on behalf of 7loraida C. Tupper, as attorne90in0fa t*, CI=+ITO $. CO/ON=+, 7+O/$I!$ $. $+8ONT=, and C$T$+IN$ B$+$I- 8$B$N$,, petitioners, vs. TA= CO;/T O7 $66=$+-, CONC=6CION !. $+C$/$I and /$8ON$ 6$T/ICI$ $+C$/$I, assisted b9 ,+O/I$ 7. NO=+ as attorne90in0fa t, respondents. !=CI-ION 8=+O, J.E Ahe #etition before !s has its roots in a com#laint for s#ecific #erformance to com#el herein #etitioners (e3ce#t the last named$ atalina *alais 4abanag) to cons!mmate the sale of a #arcel of land Dith its im#rovements located along %oosevelt "ven!e in K!e<on ity entered into by the #arties sometime in +an!ary 1/)5 for the #rice of -1$24'$'''.''. Ahe !ndis#!ted facts of the case Dere s!mmari<ed by res#ondent co!rt in this DiseE On +an!ary 1/$ 1/)5$ defendants-a##ellants %om!lo oronel$ et. al. (hereinafter referred to as oronels) e3ec!ted a doc!ment entitled R%ecei#t of ,oDn -aymentN (=3h. R"N) in favor of #laintiff %amona -atricia "lcara< (hereinafter referred to as %amona) Dhich is re#rod!ced here!nderE %)$)-PT 12 +13* PA4M)*T

29

P5,678,888.88 - Total amount 98,888.88 - +o n pa"ment -----------------------------------------P5,5:8,888.88 - Balance %eceived from Miss %amona Patricia Alcara& of 57; Timog, <ue&on $it", t'e sum of 2ift" T'ousand Pesos purc'ase price of our in'erited 'ouse and lot, covered b" T$T *o. 55:;6= of t'e %egistr" of +eeds of <ue&on $it", in t'e total amount of P5,678,888.88. 3e bind ourselves to effect t'e transfer in our names from our deceased fat'er, $onstancio P. $oronel, t'e transfer certificate of title immediatel" upon receipt of t'e do n pa"ment above-stated. 1n our presentation of t'e T$T alread" in or name, 3e ill immediatel" e!ecute t'e deed of absolute sale of said propert" and Miss %amona Patricia Alcara& s'all immediatel" pa" t'e balance of t'e P5,5:8,888.88. learly$ the conditions a##!rtenant to the sale are the folloDingE 1. %amona Dill maBe a doDn #ayment of (ifty Aho!sand (-5'$'''.'') #esos !#on e3ec!tion of the doc!ment aforestated; 2. Ahe oronels Dill ca!se the transfer in their names of the title of the #ro#erty registered in the name of their deceased father !#on recei#t of the (ifty Aho!sand (-5'$'''.'') -esos doDn #ayment; 3. C#on the transfer in their names of the s!b0ect #ro#erty$ the oronels Dill e3ec!te the deed of absol!te sale in favor of %amona and the latter Dill #ay the former the Dhole balance of One 4illion One I!ndred &inety Aho!sand (-1$1/'$'''.'') -esos. On the same date (+an!ary 15$ 1/)5)$ #laintiff-a##ellee once#cion ,. "lcara< (hereinafter referred to as once#cion)$ mother of %amona$ #aid the doDn #ayment of (ifty Aho!sand (-5'$'''.'') -esos (=3h. R*N$ =3h. R2N). On (ebr!ary 6$ 1/)5$ the #ro#erty originally registered in the name of the oronelGs father Das transferred in their names !nder A A &o. 326'43 (=3h. R,N; =3h R4N) On (ebr!ary 1)$ 1/)5$ the oronels sold the #ro#erty covered by A A &o. 326'43 to intervenor-a##ellant atalina *. 4abanag (hereinafter referred to as atalina) for One 4illion (ive I!ndred =ighty Aho!sand (-1$5)'$'''.'') -esos after the latter has #aid Ahree I!ndred Aho!sand (-3''$'''.'') -esos (=3hs. R(-3N; =3h. R6- N) (or this reason$ oronels canceled and rescinded the contract (=3h. R"N) Dith %amona by de#ositing the doDn #ayment #aid by once#cion in the banB in tr!st for %amona -atricia "lcara<.

30

On (ebr!ary 22$ 1/)5$ once#cion$ et. al.$ filed a com#laint for a s#ecific #erformance against the oronels and ca!sed the annotation of a notice of lis pendens at the bacB of A A &o. 3264'3 (=3h. R=N; =3h. R5N). On "#ril 2$ 1/)5$ atalina ca!sed the annotation of a notice of adverse claim covering the same #ro#erty Dith the %egistry of ,eeds of K!e<on ity (=3h. R(N; =3h. R6N). On "#ril 25$ 1/)5$ the oronels e3ec!ted a ,eed of "bsol!te 2ale over the s!b0ect #ro#erty in favor of atalina (=3h. RGN; =3h. R6N). On +!ne 5$ 1/)5$ a neD title over the s!b0ect #ro#erty Das iss!ed in the name of atalina !nder A A &o. 3515)2 (=3h. RIN; =3h. R)N). (%ollo$ ##. 134-136) 1n the co!rse of the #roceedings before the trial co!rt (*ranch )3$ %A $ K!e<on ity) the #arties agreed to s!bmit the case for decision solely on the basis of doc!mentary e3hibits. Ah!s$ #laintiffs therein (noD #rivate res#ondents) #roffered their doc!mentary evidence accordingly marBed as =3hibits R"N thro!gh R+N$ incl!sive of their corres#onding s!bmarBings. "do#ting these same e3hibits as their oDn$ then defendants (noD #etitioners) accordingly offered and marBed them as =3hibits R1N thro!gh R1'N$ liBeDise incl!sive of their corres#onding s!bmarBings. C#on motion of the #arties$ the trial co!rt gave them thirty (3') days Dithin Dhich to sim!ltaneo!sly s!bmit their res#ective memoranda$ and an additional 15 days Dithin Dhich to s!bmit their corres#onding comment or re#ly thereto$ after Dhich$ the case Do!ld be deemed s!bmitted for resol!tion. On "#ril 14$ 1/))$ the case Das s!bmitted for resol!tion before +!dge %eynaldo %o!ra$ Dho Das then tem#orarily detailed to #reside over *ranch )2 of the %A of K!e<on ity. On 4arch 1$ 1/)/$ 0!dgment Das handed doDn by +!dge %o!ra from his reg!lar bench at 4acabebe$ -am#anga for the K!e<on ity branch$ dis#osing as folloDsE 8I=%=(O%=$ 0!dgment for s#ecific #erformance is hereby rendered ordering defendant to e3ec!te in favor of #laintiffs a deed of absol!te sale covering that #arcel of land embraced in and covered by Aransfer ertificate of Aitle &o. 3264'3 (noD A A &o. 3315)2) of the %egistry of ,eeds for K!e<on ity$ together Dith all the im#rovements e3isting thereon free from all liens and enc!mbrances$ and once accom#lished$ to immediately deliver the said doc!ment of sale to #laintiffs and !#on recei#t thereof$ the #laintiffs are ordered to #ay defendants the Dhole balance of the #!rchase #rice amo!nting to-1$1/'$'''.'' in cash. Aransfer ertificate of Aitle &o. 3315)2 of the %egistry of ,eeds for K!e<on ity in the name of intervenor is hereby canceled and declared to be Ditho!t force and effect. ,efendants and intervenor and all other #ersons claiming !nder them are hereby ordered to vacate the s!b0ect #ro#erty and deliver #ossession thereof to #laintiffs. -laintiffsG claim for damages and attorneyGs fees$ as Dell as the co!nterclaims of defendants and intervenors are hereby dismissed. &o #rono!ncement as to costs. 2o Ordered.

31

4acabebe$ -am#anga for K!e<on ity$ 4arch 1$ 1/)/. (%ollo$ #. 1'6) " motion for reconsideration Das filed by #etitioners before the neD #residing 0!dge of the K!e<on ity %A b!t the same Das denied by +!dge =strella A. =strada$ th!slyE Ahe #rayer contained in the instant motion$ i.e.$ to ann!l the decision and to render aneD decision by the !ndersigned -residing +!dge sho!ld be denied for the folloDing reasonsE (1) Ahe instant case became s!bmitted for decision as of "#ril 14$ 1/)) Dhen the #arties terminated the #resentation of their res#ective doc!mentary evidence and Dhen the -residing +!dge at that time Das +!dge %eynaldo %o!ra. Ahe fact that they Dere alloDed to file memoranda at some f!t!re date did not change the fact that the hearing of the case Das terminated before +!dge %o!ra and therefore the same sho!ld be s!bmitted to him for decision; (2) 8hen the defendants and intervenor did not ob0ect to the a!thority of +!dge %eynaldo %o!ra to decide the case #rior to the rendition of the decision$ Dhen they met for the first time before the !ndersigned -residing +!dge at the hearing of a #ending incident in ivil ase &o. K-46145 on &ovember 11$ 1/))$ they Dere deemed to have acF!iesced thereto and they are noD esto##ed from F!estioning said a!thority of +!dge %o!ra after they received the decision in F!estion Dhich ha##ens to be adverse to them; (3) 8hile it is tr!e that +!dge %eynaldo %o!ra Das merely a +!dge-on-detail at this *ranch of the o!rt$ he Das in all res#ects the -residing +!dge Dith f!ll a!thority to act on any #ending incident s!bmitted before this o!rt d!ring his inc!mbency. 8hen he ret!rned to his Official 2tation at 4acabebe$ -am#anga$ he did not lose his a!thority to decide or resolve cases s!bmitted to him for decision or resol!tion beca!se he contin!ed as +!dge of the %egional Arial o!rt and is of co-eF!al ranB Dith the !ndersigned -residing +!dge. Ahe standing r!le and s!##orted by 0!ris#r!dence is that a +!dge to Dhom a case is s!bmitted for decision has the a!thority to decide the case notDithstanding his transfer to another branch or region of the same co!rt (2ec. /$ %!le 135$ %!le of o!rt). oming noD to the tDin #rayer for reconsideration of the ,ecision dated 4arch 1$ 1/)/ rendered in the instant case$ resol!tion of Dhich noD #ertains to the !ndersigned -residing +!dge$ after a metic!lo!s e3amination of the doc!mentary evidence #resented by the #arties$ she is convinced that the ,ecision of 4arch 1$ 1/)/ is s!##orted by evidence and$ therefore$ sho!ld not be dist!rbed. 1& H1=8 O( AI= (O%=GO1&G$ the R4otion for %econsideration and7or to "nn!l ,ecision and %ender "neD ,ecision by the 1nc!mbent -residing +!dgeN dated 4arch 2'$ 1/)/ is hereby ,=&1=,. 2O O%,=%=,. K!e<on ity$ -hili##ines$ +!ly 12$ 1/)/. (%ollo$ ##. 1')-1'/) -etitioners there!#on inter#osed an a##eal$ b!t on ,ecember 16$ 1//1$ the o!rt of "##eals (*!ena$ Gon<aga-%eyes$ "bad-2antos (-)$ ++.) rendered its decision f!lly agreeing Dith the trial co!rt.

32

Ience$ the instant #etition Dhich Das filed on 4arch 5$ 1//2. Ahe last #leading$ #rivate res#ondentsG %e#ly 4emorand!m$ Das filed on 2e#tember 15$ 1//3. Ahe case Das$ hoDever$ re-raffled to !ndersigned ponente only on "!g!st 2)$ 1//6$ d!e to the vol!ntary inhibition of the +!stice to Dhom the case Das last assigned. 8hile De deem it necessary to introd!ce certain refinements in the disF!isition of res#ondent co!rt in the affirmance of the trial co!rtGs decision$ De definitely find the instant #etition bereft of merit. Ahe heart of the controversy Dhich is the !ltimate Bey in the resol!tion of the other iss!es in the case at bar is the #recise determination of the legal significance of the doc!ment entitled R%ecei#t of ,oDn -aymentN Dhich Das offered in evidence by both #arties. Ahere is no dis#!te as to the fact that the said doc!ment embodied the binding contract betDeen %amona -atricia "lcara< on the one hand$ and the heirs of onstancio -. oronel on the other$ #ertaining to a #artic!lar ho!se and lot covered by A A &o. 11/626$ as defined in "rticle 13'5 of the ivil ode of the -hili##ines Dhich reads as folloDsE $rt. %()1. " contract is a meeting of minds betDeen tDo #ersons Dhereby one binds himself$ Dith res#ect to the other$ to give something or to render some service. 8hile$ it is the #osition of #rivate res#ondents that the R%ecei#t of ,oDn -aymentN embodied a #erfected contract of sale$ Dhich #erforce$ they seeB to enforce by means of an action for s#ecific #erformance$ #etitioners on their #art insist that Dhat the doc!ment signified Das a mere e3ec!tory contract to sell$ s!b0ect to certain s!s#ensive conditions$ and beca!se of the absence of %amona -. "lcara<$ Dho left for the Cnited 2tates of "merica$ said contract co!ld not #ossibly ri#en into a contract of absol!te sale. -lainly$ s!ch variance in the contending #artiesG contention is bro!ght abo!t by the Day each inter#rets the terms and7or conditions set forth in said #rivate instr!ment. 8ithal$ based on Dhatever relevant and admissible evidence may be available on record$ this o!rt$ as Dere the co!rts beloD$ is noD called !#on to ad0!dge Dhat the real intent of the #arties Das at the time the said doc!ment Das e3ec!ted. Ahe ivil ode defines a contract of sale$ th!sE

$rt. %318. *y the contract of sale one of the contracting #arties obligates himself to transfer the oDnershi# of and to deliver a determinate thing$ and the other to #ay therefor a #rice certain in money or its eF!ivalent. 2ale$ by its very nat!re$ is a consens!al contract beca!se it is #erfected by mere consent. Ahe essential elements of a contract of sale are the folloDingE a) onsent or meeting of the minds$ that is$ consent to transfer oDnershi# in e3change for the #rice; b) c) ,eterminate s!b0ect matter; and -rice certain in money or its eF!ivalent.

Cnder this definition$ a ontract to 2ell may not be considered as a ontract of 2ale beca!se the first essential element is lacBing. 1n a contract to sell$ the

33

#ros#ective seller e3#licitly reserves the transfer of title to the #ros#ective b!yer$ meaning$ the #ros#ective seller does not as yet agree or consent to transfer oDnershi# of the #ro#erty s!b0ect of the contract to sell !ntil the ha##ening of an event$ Dhich for #resent #!r#oses De shall taBe as the f!ll #ayment of the #!rchase #rice. 8hat the seller agrees or obliges himself to do is to f!lfill his #romise to sell the s!b0ect #ro#erty Dhen the entire amo!nt of the #!rchase #rice is delivered to him. 1n other Dords the f!ll #ayment of the #!rchase #rice #artaBes of a s!s#ensive condition$ the non-f!lfillment of Dhich #revents the obligation to sell from arising and th!s$ oDnershi# is retained by the #ros#ective seller Ditho!t f!rther remedies by the #ros#ective b!yer. 1n %o#ue vs. (apu& .:; S$%A =75 >5:?8@/$ this o!rt had occasion to r!leE Ience$ 8e hold that the contract betDeen the #etitioner and the res#ondent Das a contract to sell Dhere the oDnershi# or title is retained by the seller and is not to #ass !ntil the f!ll #ayment of the #rice$ s!ch #ayment being a #ositive s!s#ensive condition and fail!re of Dhich is not a breach$ cas!al or serio!s$ b!t sim#ly an event that #revented the obligation of the vendor to convey title from acF!iring binding force. 2tated #ositively$ !#on the f!lfillment of the s!s#ensive condition Dhich is the f!ll #ayment of the #!rchase #rice$ the #ros#ective sellerGs obligation to sell the s!b0ect #ro#erty by entering into a contract of sale Dith the #ros#ective b!yer becomes demandable as #rovided in "rticle 146/ of the ivil ode Dhich statesE $rt. %3&'. " #romise to b!y and sell a determinate thing for a #rice certain is reci#rocally demandable. "n acce#ted !nilateral #romise to b!y or to sell a determinate thing for a #rice certain is binding !#on the #romissor of the #romise is s!##orted by a consideration distinct from the #rice. " contract to sell may th!s be defined as a bilateral contract Dhereby the #ros#ective seller$ Dhile e3#ressly reserving the oDnershi# of the s!b0ect #ro#erty des#ite delivery thereof to the #ros#ective b!yer$ binds himself to sell the said #ro#erty e3cl!sively to the #ros#ective b!yer !#on f!lfillment of the condition agreed !#on$ that is$ f!ll #ayment of the #!rchase #rice. " contract to sell as defined hereinabove$ may not even be considered as a conditional contract of sale Dhere the seller may liBeDise reserve title to the #ro#erty s!b0ect of the sale !ntil the f!lfillment of a s!s#ensive condition$ beca!se in a conditional contract of sale$ the first element of consent is #resent$ altho!gh it is conditioned !#on the ha##ening of a contingent event Dhich may or may not occ!r. 1f the s!s#ensive condition is not f!lfilled$ the #erfection of the contract of sale is com#letely abated (cf. Aomesite and Aousing $orp. vs. $ourt of Appeals, 5BB S$%A === >5:?7@). IoDever$ if the s!s#ensive condition is f!lfilled$ the contract of sale is thereby #erfected$ s!ch that if there had already been #revio!s delivery of the #ro#erty s!b0ect of the sale to the b!yer$ oDnershi# thereto a!tomatically transfers to the b!yer by o#eration of laD Ditho!t any f!rther act having to be #erformed by the seller. 1n a contract to sell$ !#on the f!lfillment of the s!s#ensive condition Dhich is the f!ll #ayment of the #!rchase #rice$ oDnershi# Dill not a!tomatically transfer to the b!yer altho!gh the #ro#erty may have been #revio!sly delivered to him. Ahe #ros#ective

34

seller still has to convey title to the #ros#ective b!yer by entering into a contract of absol!te sale. 1t is essential to disting!ish betDeen a contract to sell and a conditional contract of sale s#ecially in cases Dhere the s!b0ect #ro#erty is sold by the oDner not to the #arty the seller contracted Dith$ b!t to a third #erson$ as in the case at bench. 1n a contract to sell$ there being no #revio!s sale of the #ro#erty$ a third #erson b!ying s!ch #ro#erty des#ite the f!lfillment of the s!s#ensive condition s!ch as the f!ll #ayment of the #!rchase #rice$ for instance$ cannot be deemed a b!yer in bad faith and the #ros#ective b!yer cannot seeB the relief of reconveyance of the #ro#erty. Ahere is no do!ble sale in s!ch case. Aitle to the #ro#erty Dill transfer to the b!yer after registration beca!se there is no defect in the oDner-sellerGs title per se$ b!t the latter$ of co!rse$ may be s!ed for damages by the intending b!yer. 1n a conditional contract of sale$ hoDever$ !#on the f!lfillment of the s!s#ensive condition$ the sale becomes absol!te and this Dill definitely affect the sellerGs title thereto. 1n fact$ if there had been #revio!s delivery of the s!b0ect #ro#erty$ the sellerGs oDnershi# or title to the #ro#erty is a!tomatically transferred to the b!yer s!ch that$ the seller Dill no longer have any title to transfer to any third #erson. "##lying "rticle 1544 of the ivil ode$ s!ch second b!yer of the #ro#erty Dho may have had act!al or constr!ctive BnoDledge of s!ch defect in the sellerGs title$ or at least Das charged Dith the obligation to discover s!ch defect$ cannot be a registrant in good faith. 2!ch second b!yer cannot defeat the first b!yerGs title. 1n case a title is iss!ed to the second b!yer$ the first b!yer may seeB reconveyance of the #ro#erty s!b0ect of the sale. 8ith the above #ost!lates as g!idelines$ De noD #roceed to the tasB of deci#hering the real nat!re of the contract entered into by #etitioners and #rivate res#ondents. 1t is a canon in the inter#retation of contracts that the Dords !sed therein sho!ld be given their nat!ral and ordinary meaning !nless a technical meaning Das intended (Tan vs. $ourt of Appeals, 656 S$%A 9?; >5::6@). Ah!s$ Dhen #etitioners declared in the said R%ecei#t of ,oDn -aymentN that they -%eceived from 4iss %amona -atricia "lcara< of 146 Aimog$ K!e<on ity$ the s!m of (ifty Aho!sand -esos pur hase pri e of our inherited house and lot$ covered by A A &o. 11//626 of the %egistry of ,eeds of K!e<on ity$ in the total amo!nt of -1$24'$'''.''. Ditho!t any reservation of title !ntil f!ll #ayment of the entire #!rchase #rice$ the nat!ral and ordinary idea conveyed is that they sold their #ro#erty. 8hen the R%ecei#t of ,oDn #aymentN is considered in its entirety$ it becomes more manifest that there Das a clear intent on the #art of #etitioners to transfer title to the b!yer$ b!t since the transfer certificate of title Das still in the name of #etitionerGs father$ they co!ld not f!lly effect s!ch transfer altho!gh the b!yer Das then Dilling and able to immediately #ay the #!rchase #rice. Aherefore$ #etitioners-sellers !ndertooB !#on recei#t of the doDn #ayment from #rivate res#ondent %amona -. "lcara<$ to ca!se the iss!ance of a neD certificate of title in their names from that of their father$ after Dhich$ they #romised to #resent said title$ noD in their names$ to the latter and to e3ec!te the deed of absol!te sale Dhere!#on$ the latter shall$ in t!rn$ #ay the entire balance of the #!rchase #rice.

35

Ahe agreement co!ld not have been a contract to sell beca!se the sellers herein made no e3#ress reservation of oDnershi# or title to the s!b0ect #arcel of land. (!rthermore$ the circ!mstance Dhich #revented the #arties from entering into an absol!te contract of sale #ertained to the sellers themselves (the certificate of title Das not in their names) and not the f!ll #ayment of the #!rchase #rice. Cnder the established facts and circ!mstances of the case$ the o!rt may safely #res!me that$ had the certificate of title been in the names of #etitioners-sellers at that time$ there Do!ld have been no reason Dhy an absol!te contract of sale co!ld not have been e3ec!ted and cons!mmated right there and then. 4oreover$ !nliBe in a contract to sell$ #etitioners in the case at bar did not merely #romise to sell the #ro#erty to #rivate res#ondent !#on the f!lfillment of the s!s#ensive condition. On the contrary$ having already agreed to sell the s!b0ect #ro#erty$ they !ndertooB to have the certificate of title change to their names and immediately thereafter$ to e3ec!te the Dritten deed of absol!te sale. Ah!s$ the #arties did not merely enter into a contract to sell Dhere the sellers$ after com#liance by the b!yer Dith certain terms and conditions$ #romised to sell the #ro#erty to the latter. 8hat may be #erceived from the res#ective !ndertaBings of the #arties to the contract is that #etitioners had already agreed to sell the ho!se and lot they inherited from their father$ com#letely Dilling to transfer oDnershi# of the s!b0ect ho!se and lot to the b!yer if the doc!ments Dere then in order. 1t 0!st so ha##ened$ hoDever$ that the transfer certificate of title Das then still in the name of their father. 1t Das more e3#edient to first effect the change in the certificate of title so as to bear their names. Ahat is Dhy they !ndertooB to ca!se the iss!ance of a neD transfer of the certificate of title in their names !#on recei#t of the doDn #ayment in the amo!nt of -5'$'''.''. "s soon as the neD certificate of title is iss!ed in their names$ #etitioners Dere committed to immediately e3ec!te the deed of absol!te sale. Only then Dill the obligation of the b!yer to #ay the remainder of the #!rchase #rice arise. Ahere is no do!bt that !nliBe in a contract to sell Dhich is most commonly entered into so as to #rotect the seller against a b!yer Dho intends to b!y the #ro#erty in installment by Dithholding oDnershi# over the #ro#erty !ntil the b!yer effects f!ll #ayment therefor$ in the contract entered into in the case at bar$ the sellers Dere the ones Dho Dere !nable to enter into a contract of absol!te sale by reason of the fact that the certificate of title to the #ro#erty Das still in the name of their father. 1t Das the sellers in this case Dho$ as it Dere$ had the im#ediment Dhich #revented$ so to s#eaB$ the e3ec!tion of an contract of absol!te sale. 8hat is clearly established by the #lain lang!age of the s!b0ect doc!ment is that Dhen the said R%ecei#t of ,oDn -aymentN Das #re#ared and signed by #etitioners %om!lo ". oronel$ et. al., the #arties had agreed to a conditional contract of sale$ cons!mmation of Dhich is s!b0ect only to the s!ccessf!l transfer of the certificate of title from the name of #etitionersG father$ onstancio -. oronel$ to their names. Ahe o!rt significantly notes that this s!s#ensive condition Das$ in fact$ f!lfilled on (ebr!ary 6$ 1/)5 (=3h. R,N; =3h. R4N). Ah!s$ on said date$ the conditional contract of sale betDeen #etitioners and #rivate res#ondent %amona -. "lcara< became obligatory$ the only act reF!ired for the cons!mmation thereof being the delivery of the #ro#erty by means of the e3ec!tion of the deed of absol!te sale in a #!blic instr!ment$ Dhich #etitioners !neF!ivocally committed themselves to do as evidenced by the R%ecei#t of ,oDn -ayment.N

36

"rticle 1465$ in correlation Dith "rticle 11)1$ both of the ivil the case at bench. Ah!s$

ode$ #lainly a##lies to

$rt. %3&1. Ahe contract of sale is #erfected at the moment there is a meeting of minds !#on the thing Dhich is the ob0ect of the contract and !#on the #rice. (rom that moment$ the #arties may reci#rocally demand #erformance$ s!b0ect to the #rovisions of the laD governing the form of contracts. $rt. %%8%. 1n conditional obligations$ the acF!isition of rights$ as Dell as the e3ting!ishment or loss of those already acF!ired$ shall de#end !#on the ha##ening of the event Dhich constit!tes the condition. 2ince the condition contem#lated by the #arties Dhich is the iss!ance of a certificate of title in #etitionerGs names Das f!lfilled on (ebr!ary 6$ 1/)5$ the res#ective obligations of the #arties !nder the contract of sale became m!t!ally demandable$ that is$ #etitioners$ as sellers$ Dere obliged to #resent the transfer certificate of title already in their names to #rivate res#ondent %amona -. "lcara<$ the b!yer$ and to immediately e3ec!te the deed of absol!te sale$ Dhile the b!yer on her #art$ Das obliged to forthDith #ay the balance of the #!rchase #rice amo!nting to -1$1/'$'''.''. 1t is also significant to note that in the first #aragra#h in #age / of their #etition$ #etitioners concl!sively admitted thatE 3. Ahe #etitioners-sellers oronel bo!nd themselves Rto effect the transfer in o!r names from o!r deceased father onstancio -. oronel$ the transfer certificate of title immediately !#on recei#t of the doDn#ayment abovestatedL. The sale ?as still sub>e t to this suspensive ondition. (=m#hasis s!##lied.) (%ollo$ #. 16) -etitioners themselves recogni<ed that they entered into a contract of sale s!b0ect to a s!s#ensive condition. Only$ they contend$ contin!ing in the same #aragra#h$ thatE . . . Iad #etitioners-sellers not o:plied Dith this condition of first transferring the title to the #ro#erty !nder their names$ there co!ld be no #erfected contract of sale. (=m#hasis s!##lied.) (-bid.) not aDare that they have set their oDn tra# for themselves$ for "rticle 11)6 of the ode e3#ressly #rovides thatE ivil

$rt. %%82. Ahe condition shall be deemed f!lfilled Dhen the obligor vol!ntarily #revents its f!lfillment. *esides$ it sho!ld be stressed and em#hasi<ed that Dhat is more controlling than these mere hy#othetical arg!ments is the fact that the ondition herein referred to

37

?as a tuall9 and indisputabl9 fulfilled on 7ebruar9 2, %'81 $ Dhen a neD title Das iss!ed in the names of #etitioners as evidenced by A A &o. 3264'3 (=3h. R,N; =3h. R4N). Ahe inevitable concl!sion is that on +an!ary 1/$ 1/)5$ as evidenced by the doc!ment denominated as R%ecei#t of ,oDn -aymentN (=3h. R"N; =3h. R1N)$ the #arties entered into a contract of sale s!b0ect to the s!s#ensive condition that the sellers shall effect the iss!ance of neD certificate title from that of their fatherGs name to their names and that$ on (ebr!ary 6$ 1/)5$ this condition Das f!lfilled (=3h. R,N; =3h. R4N). 8e$ therefore$ hold that$ in accordance Dith "rticle 11)6 Dhich #ertinently #rovides $rt. %%8&. Ahe effects of conditional obligation to give$ once the condition has been f!lfilled$ shall retroact to the day of the constit!tion of the obligation . . . 1n obligations to do or not to do$ the co!rts shall determine$ in each case$ the retroactive effect of the condition that has been com#lied Dith. the rights and obligations of the #arties Dith res#ect to the #erfected contract of sale became m!t!ally d!e and demandable as of the time of f!lfillment or occ!rrence of the s!s#ensive condition on (ebr!ary 6$ 1/)5. "s of that #oint in time$ reci#rocal obligations of both seller and b!yer arose. -etitioners also arg!e there co!ld been no #erfected contract on +an!ary 1/$ 1/)5 beca!se they Dere then not yet the absol!te oDners of the inherited #ro#erty. 8e cannot s!stain this arg!ment. "rticle 664 of the oDnershi# as folloDsE ivil ode defines 2!ccession as a mode of transferring

$rt. &&3. 2!ccession is a mode of acF!isition by virt!e of Dhich the #ro#erty$ rights and obligations to the e3tent and val!e of the inheritance of a #erson are transmitted thro!gh his death to another or others by his Dill or by o#eration of laD. -etitioners-sellers in the case at bar being the sons and da!ghters of the decedent onstancio -. oronel are com#!lsory heirs Dho Dere called to s!ccession by o#eration of laD. Ah!s$ at the #oint their father dreD his last breath$ #etitioners ste##ed into his shoes insofar as the s!b0ect #ro#erty is concerned$ s!ch that any rights or obligations #ertaining thereto became binding and enforceable !#on them. 1t is e3#ressly #rovided that rights to the s!ccession are transmitted from the moment of death of the decedent ("rticle 666$ ivil ode; $uison vs. ,illanueva, :8 P'il. ?98 >5:96@). *e it also noted that #etitionersG claim that s!ccession may not be declared !nless the creditors have been #aid is rendered moot by the fact that they Dere able to effect the transfer of the title to the #ro#erty from the decedentGs name to their names on (ebr!ary 6$ 1/)5. "side from this$ #etitioners are #recl!ded from raising their s!##osed lacB of ca#acity to enter into an agreement at that time and they cannot be alloDed to noD taBe a #ost!re contrary to that Dhich they tooB Dhen they entered into the agreement Dith #rivate res#ondent %amona -. "lcara<. Ahe ivil ode e3#ressly states thatE

38

$rt. %3(%. Ahro!gh esto##el an admission or re#resentation is rendered concl!sive !#on the #erson maBing it$ and cannot be denied or dis#roved as against the #erson relying thereon. Iaving re#resented themselves as the tr!e oDners of the s!b0ect #ro#erty at the time of sale$ #etitioners cannot claim noD that they Dere not yet the absol!te oDners thereof at that time. -etitioners also contend that altho!gh there Das in fact a #erfected contract of sale betDeen them and %amona -. "lcara<$ the latter breach her reci#rocal obligation Dhen she rendered im#ossible the cons!mmation thereof by going to the Cnited 2tates of "merica$ Ditho!t leaving her address$ tele#hone n!mber$ and 2#ecial -oDer of "ttorney (Paragrap's 57 and 59, Ans er it' $ompulsor" $ounterclaim to t'e Amended $omplaint, p. 6C %ollo, p. 7B)$ for Dhich reason$ so #etitioners concl!de$ they Dere correct in !nilaterally rescinding the contract of sale. 8e do not agree Dith #etitioners that there Das a valid rescission of the contract of sale in the instant case. 8e note that these s!##osed gro!nds for #etitionerGs rescission$ are mere allegations fo!nd only in their res#onsive #leadings$ Dhich by e3#ress #rovision of the r!les$ are deemed controverted even if no re#ly is filed by the #laintiffs (Sec. 55, %ule ;, %evised %ules of $ourt). Ahe records are absol!tely bereft of any s!##orting evidence to s!bstantiate #etitionersG allegations. 8e have stressed time and again that allegations m!st be #roven by s!fficient evidence ( *g $'o $io vs. *g +iong, 558 P'il. ??6 >5:;5@C %ecaro vs. )mbisan, 6 S$%A 9:? >5:;5@ ). 4ere allegation is not an evidence ((agasca vs. +e ,era, =: P'il. B=; >5:7=@). =ven ass!ming arguendo that %amona -. "lcara< Das in the Cnited 2tates of "merica on (ebr!ary 6$ 1/)5$ De cannot 0!stify #etitioners-sellersG act of !nilaterally and e3tra0!dicially rescinding the contract of sale$ there being no e3#ress sti#!lation a!thori<ing the sellers to e3tra0!dicially rescind the contract of sale. (cf. +ignos vs. $A, 59? S$%A B=9 >5:??@C Taguba vs. ,da. +e (eon, 5B6 S$%A =66 >5:?7@) 4oreover$ #etitioners are esto##ed from raising the alleged absence of %amona -. "lcara< beca!se altho!gh the evidence on record shoDs that the sale Das in the name of %amona -. "lcara< as the b!yer$ the sellers had been dealing Dith once#cion ,. "lcara<$ %amonaGs mother$ Dho had acted for and in behalf of her da!ghter$ if not also in her oDn behalf. 1ndeed$ the doDn #ayment Das made by once#cion ,. "lcara< Dith her oDn #ersonal hecB (=3h. R*N; =3h. R2N) for and in behalf of %amona -. "lcara<. Ahere is no evidence shoDing that #etitioners ever F!estioned once#cionGs a!thority to re#resent %amona -. "lcara< Dhen they acce#ted her #ersonal checB. &either did they raise any ob0ection as regards #ayment being effected by a third #erson. "ccordingly$ as far as #etitioners are concerned$ the #hysical absence of %amona -. "lcara< is not a gro!nd to rescind the contract of sale. orollarily$ %amona -. "lcara< cannot even be deemed to be in defa!lt$ insofar as her obligation to #ay the f!ll #!rchase #rice is concerned. -etitioners Dho are #recl!ded from setting !# the defense of the #hysical absence of %amona -. "lcara< as abovee3#lained offered no #roof Dhatsoever to shoD that they act!ally #resented the neD transfer certificate of title in their names and signified their Dillingness and readiness to e3ec!te the deed of absol!te sale in accordance Dith their agreement. %amonaGs corres#onding obligation to #ay the balance of the #!rchase #rice in the amo!nt of -1$1/'$'''.'' (as b!yer) never became d!e and demandable and$ therefore$ she cannot be deemed to have been in defa!lt.

39

"rticle 116/ of the ivil ode defines Dhen a #arty in a contract involving reci#rocal obligations may be considered in defa!lt$ to DitE $rt. %%2'. Ahose obliged to deliver or to do something$ inc!r in delay from the time the obligee 0!dicially or e3tra0!dicially demands from them the f!lfillment of their obligation. 333 1n reci#rocal obligations$ neither #arty inc!rs in delay if the other does not o:pl9 or is not read9 to o:pl9 in a proper :anner ?ith ?hat is in u:bent upon hi:. (rom the moment one of the #arties f!lfill his obligation$ delay by the other begins. (=m#hasis s!##lied.) Ahere is th!s neither fact!al nor legal basis to rescind the contract of sale betDeen #etitioners and res#ondents. 8ith the foregoing concl!sions$ the sale to the other #etitioner$ atalina *. 4abanag$ gave rise to a case of do!ble sale Dhere "rticle 1544 of the ivil ode Dill a##ly$ to DitE $rt. %133. 1f the same thing sho!ld have been sold to different vendees$ the oDnershi# shall be transferred to the #erson Dho may have first taBen #ossession thereof in good faith$ if it sho!ld be movable #ro#erty. 2ho!ld it be immovable #ro#erty$ the oDnershi# shall belong to the #erson acF!iring it Dho in good faith first recorded it in the %egistry of -ro#erty. 2ho!ld there be no inscri#tion$ the oDnershi# shall #ertain to the #erson Dho in good faith Das first in the #ossession; and$ in the absence thereof to the #erson Dho #resents the oldest title$ #rovided there is good faith. Ahe record of the case shoDs that the ,eed of "bsol!te 2ale dated "#ril 25$ 1/)5 as #roof of the second contract of sale Das registered Dith the %egistry of ,eeds of K!e<on ity giving rise to the iss!ance of a neD certificate of title in the name of atalina *. 4abanag on +!ne 5$ 1/)5. Ah!s$ the second #aragra#h of "rticle 1544 shall a##ly. Ahe above-cited #rovision on do!ble sale #res!mes title or oDnershi# to #ass to the b!yer$ the e3ce#tions beingE (a) Dhen the second b!yer$ in good faith$ registers the sale ahead of the first b!yer$ and (b) sho!ld there be no inscri#tion by either of the tDo b!yers$ Dhen the second b!yer$ in good faith$ acF!ires #ossession of the #ro#erty ahead of the first b!yer. Cnless$ the second b!yer satisfies these reF!irements$ title or oDnershi# Dill not transfer to him to the #re0!dice of the first b!yer. 1n his commentaries on the ivil ode$ an acce#ted a!thority on the s!b0ect$ noD a disting!ished member of the o!rt$ +!stice +ose . Hit!g$ e3#lainsE Ahe governing #rinci#le is prius tempore, potior jure (first in time$ stronger in right). :noDledge by the first b!yer of the second sale cannot defeat the first b!yerGs rights e3ce#t Dhen the second b!yer first registers in good faith the second sale (1livares vs. Gon&ales, 59: S$%A BB). onversely$ BnoDledge gained by the second

40

b!yer of the first sale defeats his rights even if he is first to register$ since BnoDledge taints his registration Dith bad faith (see also Astorga vs. $ourt of Appeals, G.%. *o. 9?9B8, 6; +ecember 5:?7). 1n $ru& vs. $abana .G.%. *o. 9;6B6, 66 0une 5:?7, 56: S$%A ;9;/$ it Das held that it is essential$ to merit the #rotection of "rt. 1544$ second #aragra#h$ that the second realty b!yer m!st act in good faith in registering his deed of sale (citing $arbonell vs. $ourt of Appeals, ;: S$%A ::, $risostomo vs. $A, G.%. *o. :9?7B, 86 September 5::6). .0. ,itug, $ompendium of $ivil (a and 0urisprudence, 5::B )dition, p. ;87). -etitioners #oint o!t that the notice of lis pendens in the case at bar Das annotated on the title of the s!b0ect #ro#erty only on (ebr!ary 22$ 1/)5$ Dhereas$ the second sale betDeen #etitioners oronels and #etitioner 4abanag Das s!##osedly #erfected #rior thereto or on (ebr!ary 1)$ 1/)5. Ahe idea conveyed is that at the time #etitioner 4abanag$ the second b!yer$ bo!ght the #ro#erty !nder a clean title$ she Das !naDare of any adverse claim or #revio!s sale$ for Dhich reason she is a b!yer in good faith. 8e are not #ers!aded by s!ch arg!ment. 1n a case of do!ble sale$ Dhat finds relevance and materiality is not Dhether or not the second b!yer in good faith b!t Dhether or not said second b!yer registers s!ch second sale in good faith$ that is$ Ditho!t BnoDledge of any defect in the title of the #ro#erty sold. "s clearly borne o!t by the evidence in this case$ #etitioner 4abanag co!ld not have in good faith$ registered the sale entered into on (ebr!ary 1)$ 1/)5 beca!se as early as (ebr!ary 22$ 1/)5$ a notice of lis pendens had been annotated on the transfer certificate of title in the names of #etitioners$ Dhereas #etitioner 4abanag registered the said sale sometime in "#ril$ 1/)5. "t the time of registration$ therefore$ #etitioner 4abanag BneD that the same #ro#erty had already been #revio!sly sold to #rivate res#ondents$ or$ at least$ she Das charged Dith BnoDledge that a #revio!s b!yer is claiming title to the same #ro#erty. -etitioner 4abanag cannot close her eyes to the defect in #etitionersG title to the #ro#erty at the time of the registration of the #ro#erty. Ahis o!rt had occasions to r!le thatE 1f a vendee in a do!ble sale registers the sale after he has acF!ired BnoDledge that there Das a #revio!s sale of the same #ro#erty to a third #arty or that another #erson claims said #ro#erty in a #revio!s sale$ the registration Dill constit!te a registration in bad faith and Dill not confer !#on him any right. (Salvoro vs. Tanega, ?= S$%A B7: >5:=?@C citing Palarca vs. +irector of (and, 7B P'il. 57;C $agaoan vs. $agaoan, 7B P'il. 997C 2ernande& vs. Mercader, 7B P'il. 9?5.) Ah!s$ the sale of the s!b0ect #arcel of land betDeen #etitioners and %amona -. "lcara<$ #erfected on (ebr!ary 6$ 1/)5$ #rior to that betDeen #etitioners and atalina *. 4abanag on (ebr!ary 1)$ 1/)5$ Das correctly !#held by both the co!rts beloD. "ltho!gh there may be am#le indications that there Das in fact an agency betDeen %amona as #rinci#al and once#cion$ her mother$ as agent insofar as the s!b0ect contract of sale is concerned$ the iss!e of Dhether or not once#cion Das also acting in her oDn behalf as a co-b!yer is not sF!arely raised in the instant #etition$ nor in s!ch ass!m#tion dis#!ted betDeen mother and da!ghter. Ah!s$ 8e Dill not to!ch this iss!e and no longer dist!rb the loDer co!rtsG r!ling on this #oint.

41

DA=/=7O/=$ #remises considered$ the instant #etition is hereby ,124122=, and the a##ealed 0!dgment "((1%4=,. -O O/!=/=!. *arvasa, $.0. .$'airman/, +avide, 0r., and 2rancisco, 00., conc!r. %e#!blic of the -hili##ines -;6/=8= CO;/T 4anila =& *"& ,./. No. +023%') 4ul9 %(, %'22

,=O/,= +. 6$/"-, #laintiff-a##ellant$ vs. 6/OVINC= O7 T$/+$C, 8;NICI6$+IT@ O7 T$/+$C, CONC=6CION CI/=/, and 4$8=- AI++, her husband,defendants-a##ellees. 0os. *. 3olfson for appellant. Provincial 2iscal (ope& de 0esus for t'e Province and Municipalit" of Tarlac. *o appearance for t'e ot'er appellees. $V$NC=K$, C. J.: On October 1)$ 1/1'$ once#cion irer and +ames Iill$ the oDners of #arcel of land &o. 2 referred to in the com#laint$ donated it #er#et!ally to the m!nici#ality of Aarlac$ -rovince of Aarlac$ !nder certain conditions s#ecified in the #!blic doc!ment in Dhich they made this donation. Ahe donation Das acce#ted by 4r. 2antiago de +es!s in the same doc!ment on behalf of the m!nici#al co!ncil of Aarlac of Dhich he Das the m!nici#al #resident. Ahe #arcel th!s donated Das later registered in the name of the donee$ the m!nici#ality of Aarlac. On +an!ary 15$ 1/21$ once#cion irer and +ames Iill sold this #arcel to the herein #laintiff George .. -arBs. On "!g!st 24$ 1/23$ the m!nici#ality of Aarlac transferred the #arcel to the -rovince of Aarlac Dhich$ by reason of this transfer$ a##lied for and obtained the registration thereof in its name$ the corres#onding certificate of title having been iss!ed to it. Ahe #laintiff$ George .. -arBs$ alleging that the conditions of the donation had not been com#lied Dith and invoBing the sale of this #arcel of land made by once#cion irer and +ames Iill in his favor$ bro!ght this action against the -rovince of Aarlac$ the m!nici#ality of Aarlac$ once#cion irer and +ames Iill and #rayed that he be declared the absol!te oDner entitled to the #ossession of this #arcel$ that the transfer of the same by the m!nici#ality of Aarlac to the -rovince of Aarlac be ann!lled$ and the transfer certificate iss!ed to the -rovince of Aarlac cancelled. Ahe loDer co!rt dismissed the com#laint. Ahe #laintiff has no right of action. 1f he has any$ it is only by virt!e of the sale of this #arcel made by once#cion irer and +ames Iill in his favor on +an!ary 15$ 1/21$ b!t that sale cannot have any effect. Ahis #arcel having been donated by once#cion irer

42

and +ames Iill to the m!nici#ality of Aarlac$ Dhich donation Das acce#ted by the latter$ the title to the #ro#erty Das transferred to the m!nici#ality of Aarlac. 1t is tr!e that the donation might have been revoBed for the ca!ses$ if any$ #rovided by the laD$ b!t the fact is that it Das not revoBed Dhen once#cion irer and +ames Iill made the sale of this #arcel to the #laintiff. =ven s!##osing that ca!ses e3isted for the revocation of this donation$ still$ it Das necessary$ in order to consider it revoBed$ either that the revocation had been consented to by the donee$ the m!nici#ality of Aarlac$ or that it had been 0!dicially decreed. &one of these circ!mstances e3isted Dhen once#cion irer and +ames Iill sold this #arcel to the #laintiff. onseF!ently$ Dhen the sale Das made once#cion irer and +ames Iill Dere no longer the oDners of this #arcel and co!ld not have sold it to the #laintiff$ nor co!ld the latter have acF!ired it from them. *!t the a##ellant contends that a condition #recedent having been im#osed in the donation and the same not having been com#lied Dith$ the donation never became effective. 8e find no merit in this contention. Ahe a##ellant refers to the condition im#osed that one of the #arcels donated Das to be !sed absol!tely and e3cl!sively for the erection of a central school and the other for a #!blic #arB$ the DorB to commence in both cases Dithin the #eriod of si3 months from the date of the ratification by the #artes of the doc!ment evidencing the donation. 1t is tr!e that this condition has not been com#lied Dith. Ahe allegation$ hoDever$ that it is a condition #recedent is erroneo!s. Ahe characteristic of a condition #recedent is that the acF!isition of the right is not effected Dhile said condition is not com#lied Dith or is not deemed com#lied Dith. 4eanDhile nothing is acF!ired and there is only an e3#ectancy of right. onseF!ently$ Dhen a condition is im#osed$ the com#liance of Dhich cannot be effected e3ce#t Dhen the right is deemed acF!ired$ s!ch condition cannot be a condition #recedent. 1n the #resent case the condition that a #!blic school be erected and a #!blic #arB made of the donated land$ DorB on the same to commence Dithin si3 months from the date of the ratification of the donation by the #arties$ co!ld not be com#lied Dith e3ce#t after giving effect to the donation. Ahe donee co!ld not do any DorB on the donated land if the donation had not really been effected$ beca!se it Do!ld be an invasion of anotherMs title$ for the land Do!ld have contin!ed to belong to the donor so long as the condition im#osed Das not com#lied Dith. Ahe a##ellant also contends that$ in any event$ the condition not having been com#lied Dith$ even s!##osing that it Das not a condition #recedent b!t s!bseF!ent$ the noncom#liance thereof is s!fficient ca!se for the revocation of the donation. Ahis is correct. *!t the #eriod for bringing an action for the revocation of the donation has #rescribed. Ahat this action is #rescri#tible$ there is no do!bt. Ahere is no legal #rovision Dhich e3cl!des this class of action from the stat!te of limitations. "nd not only this$ V the laD itself recogni<es the #rescri#tibility of the action for the revocation of a donation$ #roviding a s#ecial #eriod of five years for the revocation by the s!bseF!ent birth of children (art. 646$ ivil ode)$ and one year for the revocation by reason of ingratit!de. 1f no s#ecial #eriod is #rovided for the #rescri#tion of the action for revocation for noncom#liance of the conditions of the donation (art. 646$ ivil ode)$ it is beca!se in this res#ect the donation is considered onero!s and is governed by the laD of contracts and the general r!les of #rescri#tion. Cnder the laD in force (sec. 43$ ode of iv. -roc.) the #eriod of #rescri#tion of this class of action is ten years. Ahe action for the revocation of the donation for this ca!se arose on "#ril 1/$ 1/11$ that is si3 months after the ratification of the instr!ment of donation of October 1)$ 1/1'. Ahe com#laint in this action Das #resented +!ly 5$ 1/24$ more than ten years after this ca!se accr!ed.

43

*y virt!e of the foregoing$ the 0!dgment a##ealed from is affirmed$ Dith the costs against the a##ellant. 2o ordered. Street, ,illamor, 1strand, 0o'ns, %omualde& and ,illa-%eal, 00., concur. %e#!blic of the -hili##ines -;6/=8= CO;/T 4anila (1%2A ,1H121O&

,./. No. %%2%2& 4ul9 %&, %''1 C=NT/$+ 6AI+I66IN= ;NIV=/-IT@, #etitioner$ vs. CO;/T O7 $66=$+-, /=8=!IO- 7/$NCO, 7/$NCI-CO N. +O6=I, C=CI+I$ 6. V!$. != +O6=I, /=!$N +O6=I $N! /=8$/=N= +O6=I, res#ondents.

B=++O-I++O, J.: =&A%". -I1.1--1&= C&1H=%21A@ filed this #etition for revieD on certiorari of the decision of the o!rt of "##eals Dhich reversed that of the %egional Arial o!rt of 1loilo ity directing #etitioner to reconvey to #rivate res#ondents the #ro#erty donated to it by their #redecessor-in-interest. 2ometime in 1/3/$ the late ,on %amon .o#e<$ 2r.$ Dho Das then a member of the *oard of Ar!stees of the entral -hili##ine ollege (noD entral -hili##ine Cniversity > -C?)$ e3ec!ted a deed of donation in favor of the latter of a #arcel of land identified as .ot &o. 3164-*-1 of the s!bdivision #lan -sd-1144$ then a #ortion of .ot &o. 3164-*$ for Dhich Aransfer ertificate of Aitle &o. A-3/1'-" Das iss!ed in the name of the donee -C Dith the folloDing annotations co#ied from the deed of donation V 1. Ahe land described shall be !tili<ed by the -C e3cl!sively for the establishment and !se of a medical college Dith all its b!ildings as #art of the c!rric!l!m; 2. Ahe said college shall not sell$ transfer or convey to any third #arty nor in any Day enc!mber said land; 3. Ahe said land shall be called L%"4O& .O-=S "4-C2L$ and the said college shall be !nder obligation to erect a cornerstone bearing that name. "ny net income from the land or any of its #arBs shall be #!t in a f!nd to be BnoDn as the L%"4O& .O-=S "4-C2 (C&,L to be !sed for im#rovements of said cam#!s and erection of a b!ilding thereon. %

44

On 31 4ay 1/)/$ #rivate res#ondents$ Dho are the heirs of ,on %amon .o#e<$ 2r.$ filed an action for ann!lment of donation$ reconveyance and damages against -C alleging that since 1/3/ !# to the time the action Das filed the latter had not com#lied Dith the conditions of the donation. -rivate res#ondents also arg!ed that #etitioner had in fact negotiated Dith the &ational Io!sing "!thority (&I") to e3change the donated #ro#erty Dith another land oDned by the latter. 1n its ansDer #etitioner alleged that the right of #rivate res#ondents to file the action had #rescribed; that it did not violate any of the conditions in the deed of donation beca!se it never !sed the donated #ro#erty for any other #!r#ose than that for Dhich it Das intended; and$ that it did not sell$ transfer or convey it to any third #arty. On 31 4ay 1//1$ the trial co!rt held that #etitioner failed to com#ly Dith the conditions of the donation and declared it n!ll and void. Ahe co!rt a #uo f!rther directed #etitioner to e3ec!te a deed of the reconveyance of the #ro#erty in favor of the heirs of the donor$ namely$ #rivate res#ondents herein. -etitioner a##ealed to the o!rt of "##eals Dhich on 1) +!ne 1//3 r!led that the annotations at the bacB of #etitionerMs certificate of title Dere resol!tory conditions breach of Dhich sho!ld terminate the rights of the donee th!s maBing the donation revocable. Ahe a##ellate co!rt also fo!nd that Dhile the first condition mandated #etitioner to !tili<e the donated #ro#erty for the establishment of a medical school$ the donor did not fi3 a #eriod Dithin Dhich the condition m!st be f!lfilled$ hence$ !ntil a #eriod Das fi3ed for the f!lfillment of the condition$ #etitioner co!ld not be considered as having failed to com#ly Dith its #art of the bargain. Ah!s$ the a##ellate co!rt rendered its decision reversing the a##ealed decision and remanding the case to the co!rt of origin for the determination of the time Dithin Dhich #etitioner sho!ld com#ly Dith the first condition annotated in the certificate of title. -etitioner noD alleges that the o!rt of "##eals erredE (a) in holding that the F!oted annotations in the certificate of title of #etitioner are onero!s obligations and resol!tory conditions of the donation Dhich m!st be f!lfilled non-com#liance of Dhich Do!ld render the donation revocable; (b) in holding that the iss!e of #rescri#tion does not deserve LdisF!isition;L and$ (c) in remanding the case to the trial co!rt for the fi3ing of the #eriod Dithin Dhich #etitioner Do!ld establish a medical college. 2 8e find it diffic!lt to s!stain the #etition. " clear #er!sal of the conditions set forth in the deed of donation e3ec!ted by ,on %amon .o#e<$ 2r.$ gives !s no alternative b!t to concl!de that his donation Das onero!s$ one e3ec!ted for a val!able consideration Dhich is considered the eF!ivalent of the donation itself$ e.g.$ Dhen a donation im#oses a b!rden eF!ivalent to the val!e of the donation. " gift of land to the ity of 4anila reF!iring the latter to erect schools$ constr!ct a childrenMs #laygro!nd and o#en streets on the land Das considered an onero!s donation. ( 2imilarly$ Dhere ,on %amon .o#e< donated the s!b0ect #arcel of land to #etitioner b!t im#osed an obligation !#on the latter to establish a medical college thereon$ the donation m!st be for an onero!s consideration. Cnder "rt. 11)1 of the ivil ode$ on conditional obligations$ the acF!isition of rights$ as Dell as the e3ting!ishment or loss of those already acF!ired$ shall de#end !#on the

45

ha##ening of the event Dhich constit!tes the condition. Ah!s$ Dhen a #erson donates land to another on the condition that the latter Do!ld b!ild !#on the land a school$ the condition im#osed Das not a condition #recedent or a s!s#ensive condition b!t a resol!tory one. 3 1t is not correct to say that the schoolho!se had to be constr!cted before the donation became effective$ that is$ before the donee co!ld become the oDner of the land$ otherDise$ it Do!ld be invading the #ro#erty rights of the donor. Ahe donation had to be valid before the f!lfillment of the condition. 1 1f there Das no f!lfillment or com#liance Dith the condition$ s!ch as Dhat obtains in the instant case$ the donation may noD be revoBed and all rights Dhich the donee may have acF!ired !nder it shall be deemed lost and e3ting!ished. Ahe claim of #etitioner that #rescri#tion bars the instant action of #rivate res#ondents is !navailing. Ahe condition im#osed by the donor$ i.e.$ the b!ilding of a medical school !#on the land donated$ de#ended !#on the e3cl!sive Dill of the donee as to Dhen this condition shall be f!lfilled. 8hen #etitioner acce#ted the donation$ it bo!nd itself to com#ly Dith the condition thereof. 2ince the time Dithin Dhich the condition sho!ld be f!lfilled de#ended !#on the e3cl!sive Dill of the #etitioner$ it has been held that its absol!te acce#tance and the acBnoDledgment of its obligation #rovided in the deed of donation Dere s!fficient to #revent the stat!te of limitations from barring the action of #rivate res#ondents !#on the original contract Dhich Das the deed of donation. 2 4oreover$ the time from Dhich the ca!se of action accr!ed for the revocation of the donation and recovery of the #ro#erty donated cannot be s#ecifically determined in the instant case. " ca!se of action arises Dhen that Dhich sho!ld have been done is not done$ or that Dhich sho!ld not have been done is done. & 1n cases Dhere there is no s#ecial #rovision for s!ch com#!tation$ reco!rse m!st be had to the r!le that the #eriod m!st be co!nted from the day on Dhich the corres#onding action co!ld have been instit!ted. 1t is the legal #ossibility of bringing the action Dhich determines the starting #oint for the com#!tation of the #eriod. 1n this case$ the starting #oint begins Dith the e3#iration of a reasonable #eriod and o##ort!nity for #etitioner to f!lfill Dhat has been charged !#on it by the donor. Ahe #eriod of time for the establishment of a medical college and the necessary b!ildings and im#rovements on the #ro#erty cannot be F!antified in a s#ecific n!mber of years beca!se of the #resence of several factors and circ!mstances involved in the erection of an ed!cational instit!tion$ s!ch as government laDs and reg!lations #ertaining to ed!cation$ b!ilding reF!irements and #ro#erty restrictions Dhich are beyond the control of the donee. Ah!s$ Dhen the obligation does not fi3 a #eriod b!t from its nat!re and circ!mstances it can be inferred that a #eriod Das intended$ the general r!le #rovided in "rt. 11/6 of the ivil ode a##lies$ Dhich #rovides that the co!rts may fi3 the d!ration thereof beca!se the f!lfillment of the obligation itself cannot be demanded !ntil after the co!rt has fi3ed the #eriod for com#liance thereDith and s!ch #eriod has arrived. 8 Ahis general r!le hoDever cannot be a##lied considering the different set of circ!mstances e3isting in the instant case. 4ore than a reasonable #eriod of fifty (5')

46

years has already been alloDed #etitioner to avail of the o##ort!nity to com#ly Dith the condition even if it be b!rdensome$ to maBe the donation in its favor forever valid. *!t$ !nfort!nately$ it failed to do so. Ience$ there is no more need to fi3 the d!ration of a term of the obligation Dhen s!ch #roced!re Do!ld be a mere technicality and formality and Do!ld serve no #!r#ose than to delay or lead to an !nnecessary and e3#ensive m!lti#lication of s!its. ' 4oreover$ !nder "rt. 11/1 of the ivil ode$ Dhen one of the obligors cannot com#ly Dith Dhat is inc!mbent !#on him$ the obligee may seeB rescission and the co!rt shall decree the same !nless there is 0!st ca!se a!thori<ing the fi3ing of a #eriod. 1n the absence of any 0!st ca!se for the co!rt to determine the #eriod of the com#liance$ there is no more obstacle for the co!rt to decree the rescission claimed. (inally$ since the F!estioned deed of donation herein is basically a grat!ito!s one$ do!bts referring to incidental circ!mstances of a grat!ito!s contract sho!ld be resolved in favor of the least transmission of rights and interests.%) %ecords are clear and facts are !ndis#!ted that since the e3ec!tion of the deed of donation !# to the time of filing of the instant action$ #etitioner has failed to com#ly Dith its obligation as donee. -etitioner has sle#t on its obligation for an !nreasonable length of time. Ience$ it is only 0!st and eF!itable noD to declare the s!b0ect donation already ineffective and$ for all #!r#oses$ revoBed so that #etitioner as donee sho!ld noD ret!rn the donated #ro#erty to the heirs of the donor$ #rivate res#ondents herein$ by means of reconveyance. 8I=%=(O%=$ the decision of the %egional Arial o!rt of 1loilo$ *r. 34$ of 31 4ay 1//1 is %=1&2A"A=, and "((1%4=,$ and the decision of the o!rt of "##eals of 1) +!ne 1//3 is accordingly 4O,1(1=,. onseF!ently$ #etitioner is directed to reconvey to #rivate res#ondents .ot &o. 3164-*-1 of the s!bdivision #lan -sd-1144 covered by Aransfer ertificate of Aitle &o. A-3/1'-" Dithin thirty (3') days from the finality of this 0!dgment. osts against #etitioner. 2O O%,=%=,. <uiason and Dapunan, 00., concur.

-eparate Opinions

!$VI!=, 4/., J., dissentingE

47

1 agree Dith the vieD in the ma0ority o#inion that the donation in F!estion is onero!s considering the conditions im#osed by the donor on the donee Dhich created reci#rocal obligations !#on both #arties. *eyond that$ 1 beg to disagree. (irst of all$ may 1 #oint o!t an inconsistency in the ma0ority o#inionMs descri#tion of the donation in F!estion. 1n one #art$ it says that the donation in F!estion is onerous. Ah!s$ on #age 4 it statesE 8e find it diffic!lt to s!stain the #etition. " clear #er!sal of the conditions set forth in the deed of donation e3ec!ted by ,on %amon .o#e<$ 2r.$ give !s no alternative b!t to concl!de that 'is donation as onerous, one e3ec!ted for a val!able consideration Dhich is considered the eF!ivalent of the donation itself$ e.g.$ Dhen a donation im#oses a b!rden eF!ivalent to the val!e of the donation . . . . (em#hasis s!##lied) @et$ in the last #aragra#h of #age ) it states that the donation is basically a grat!ito!s one. Ahe #ertinent #ortion thereof readsE (inally$ since the F!estioned deed of donation herein is basicall" a gratuitous one$ do!bts referring to incidental circ!mstances of a gratuitous contract sho!ld be resolved in favor of the least transmission of rights and interest . . . (em#hasis s!##lied) 2econd$ the disc!ssion on conditional obligations is !nnecessary. Ahere is no conditional obligation to s#eaB of in this case. 1t seems that the LconditionsL im#osed by the donor and as the Dord is !sed in the laD of donations is conf!sed Dith LconditionsL as !sed in the laD of obligations. 1n his annotation of "rticle 664 of the ivil ode on ,onations$ "rt!ro 4. Aolentino$ citing the Dell-BnoDn civilists s!ch as astan$ -ere< Gon<ale< and "lg!er$ and olin ; a#itant$ states clearly the conte3t Dithin Dhich the term LconditionsL is !sed in the laD of donations$ to DitE Ahe Dord LconditionsL in this article does not refer to !ncertain events on Dhich the birth or e3ting!ishment of a 0!ridical relation de#ends$ b!t is !sed in the v!lgar sense of obligations or c'arges imposed b" t'e donor on t'e donee. 1t is !sed$ not in its technical or strict legal sense$ b!t in its broadest sense. % (em#hasis s!##lied) learly then$ Dhen the laD and the deed of donation s#eaBs of LconditionsL of a donation$ Dhat are referred to are act!ally the obligations$ charges or b!rdens im#osed by the donor !#on the donee and Dhich Do!ld characteri<e the donation as onero!s. 1n the #resent case$ the donation is$ F!ite obvio!sly$ onero!s$ b!t it is more #ro#erly called a Lmodal donation.L " modal donation is one in Dhich the donor im#oses a #restation !#on the donee. Ahe establishment of the medical college as the condition of the donation in the #resent case is one s!ch #restation. Ahe conditions im#osed by the donor ,on %amon .o#e< determines neither the e3istence nor the e3ting!ishment of the obligations of the donor and the donee Dith res#ect to the donation. 1n fact$ the conditions im#osed by ,on %amon .o#e< !#on the donee are the very obligations of the donation V to b!ild the medical college and !se the #ro#erty for the #!r#oses s#ecified in the deed of donation. 1t is very clear that those

48

obligations are !nconditional$ the f!lfillment$ #erformance$ e3istence or e3ting!ishment of Dhich is not de#endent on any f!t!re or !ncertain event or #ast and !nBnoDn event$ as the ivil ode Do!ld define a conditional obligation. 2 %eliance on the case of ParEs vs. Province of Tarlac ( as cited on #age 5 of the ma0ority o#inion is erroneo!s in so far as the latter stated that the condition in ParEs is a resol!tory one and a##lied this to the #resent case. " more caref!l reading of this o!rtMs decision Do!ld reveal that noDhere did De say$ Dhether e3#licitly or im#liedly$ that the donation in that case$ Dhich also has a condition im#osed to b!ild a school and a #!blic #arB !#on the #ro#erty donated$ is a resol!tory condition. 3 1t is incorrect to say that the LconditionsL of the donation there or in the #resent case are resol!tory conditions beca!se$ a##lying "rticle 11)1 of the ivil ode$ that Do!ld mean that !#on f!lfillment of the conditions$ the rights already acF!ired Dill be e3ting!ished. Obvio!sly$ that co!ld not have been the intention of the #arties. 8hat the ma0ority o#inion #robably had in mind Das that the conditions are resol!tory beca!se if they are notcom#lied Dith$ the rights of the donee as s!ch Dill be e3ting!ished and the donation Dill be revoBed. Ao my mind$ tho!gh$ it is more acc!rate to state that the conditions here are not resol!tory conditions b!t$ for the reasons stated above$ are t'e obligations im#osed by the donor. Ahird$ 1 cannot s!bscribe to the vieD that the #rovisions of "rticle 11/6 cannot be a##lied here. Ahe conditions7obligations im#osed by the donor herein are s!b0ect to a #eriod. 1 draD this concl!sion based on o!r #revio!s r!ling Dhich$ altho!gh made almost /' years ago$ still finds a##lication in the #resent case. 1n Barretto vs. $it" of Manila$ 1 De said that Dhen the contract of donation$ as the one involved therein$ has no fi3ed #eriod in Dhich the condition sho!ld be f!lfilled$ the #rovisions of Dhat is noD "rticle 11/6 (then "rticle 112)) are a##licable and it is the d!ty of the co!rt to fi3 a s!itable time for its f!lfillment. 1ndeed$ from the nat!re and circ!mstances of the conditions7obligations of the #resent donation$ it can be inferred that a #eriod Das contem#lated by the donor. ,on %amon .o#e< co!ld not have intended his #ro#erty to remain idle for a long #eriod of time Dhen in fact$ he s#ecifically b!rdened the donee Dith the obligation to set !# a medical college therein and th!s #!t his #ro#erty to good !se. Ahere is a need to fi3 the d!ration of the time Dithin Dhich the conditions im#osed are to be f!lfilled. 1t is also im#ortant to fi3 the d!ration or #eriod for the #erformance of the conditions7obligations in the donation in resolving the #etitionerMs claim that #rescri#tion has already barred the #resent action. 1 disagree once more Dith the r!ling of the ma0ority that the action of the #etitioners is not barred by the stat!te of limitations. Ahere is mis#laced reliance again on a #revio!s decision of this o!rt in 1smeFa vs. %ama. 2 Ahat case does not s#eaB of a deed of donation as erroneo!sly F!oted and cited by the ma0ority o#inion. 1t s#eaBs of a contract for a s!m of money Dhere the debtor herself im#osed a condition Dhich Dill determine Dhen she Dill f!lfill her obligation to #ay the creditor$ th!s$ maBing the f!lfillment of her obligation de#endent !#on her Dill. 8hat De have here$ hoDever$ is not a contract for a s!m of money b!t a donation Dhere the donee has not im#osed any conditions on the f!lfillment of its obligations. "ltho!gh it is admitted that the f!lfillment of the conditions7obligations of the #resent donation may be de#endent on the Dill of the donee as to Dhen it Dill com#ly thereDith$ this did not arise o!t of a condition Dhich the donee itself im#osed. 1t is believed that the donee Das not meant to and does not have absol!te control over the

49

time Dithin Dhich it Dill #erform its obligations. 1t m!st still do so Dithin a reasonable time. 8hat that reasonable time is$ !nder the circ!mstances$ for the co!rts to determine. Ah!s$ the mere fact that there is no time fi3ed as to Dhen the conditions of the donation are to be f!lfilled does not ipso factomean that the stat!te of limitations Dill not a##ly anymore and the action to revoBe the donation becomes im#rescri#tible. "dmittedly$ the donation noD in F!estion is an onero!s donation and is governed by the laD on contracts ("rticle 633) and the case of OsmeQa$ being one involving a contract$ may a##ly. *!t De m!st not lose sight of the fact that it is still a donation for Dhich this o!rt itself a##lied the #ertinent laD to resolve sit!ations s!ch as this. Ahat the action to revoBe the donation can still #rescribe has been the #rono!ncement of this o!rt as early as 1/26 in the case of ParEs Dhich$ on this #oint$ finds relevance in this case. Ahere$ this o!rt said$ >that? this action >for the revocation of the donation? is #rescri#tible$ there is no do!bt. Ahere is no legal #rovision Dhich e3cl!des this class of action from the stat!te of limitations. "nd not only this$ the laD itself recogni<es the #rescri#tibility of the action for the revocation of a donation$ #roviding a s#ecial #eriod of >fo!r? years for the revocation by the s!bseF!ent birth of children >"rt. 646$ noD "rt. 663?$ and . . . by reason of ingratit!de. 1f no s#ecial #eriod is #rovided for the #rescri#tion of the action for revocation for noncom#liance of the conditions of the donation >"rt. 646$ noD "rt. 664?$ it is beca!se in this res#ect the donation is considered onero!s and is governed by the laD of contracts and the general r!les of #rescri#tion. & 4ore recently$ in +e (una v. Abrigo$ 8 this o!rt reiterated the r!ling in ParEs and said thatE 1t is tr!e that !nder "rticle 664 of the &eD ivil ode$ actions for the revocation of a donation m!st be bro!ght Dithin fo!r (4) years from the non-com#liance of the conditions of the donation. IoDever$ it is O!r o#inion that said article does not a##ly to onero!s donations in vieD of the s#ecific #rovision of "rticle 633 #roviding that onero!s donations are governed by the r!les on contracts. 1n the light of the above$ the r!les on contracts and the general r!les on #rescri#tion and not the r!les on donations are a##licable in the case at bar. Ahe laD a##lied in both cases is "rticle 1144(1). 1t refers to the #rescri#tion of an action !#on a Dritten contract$ Dhich is Dhat the deed of an onero!s donation is. Ahe #rescri#tive #eriod is ten years from the time the ca!se of action accr!es$ and that is$ from the e3#iration of the time Dithin Dhich the donee m!st com#ly Dith the conditions7obligations of the donation. "s to Dhen this e3actly is remains to be determined$ and that is for the co!rts to do as re#osed !#on them by "rticle 11/6. (or the reasons e3#ressed above$ 1 register my dissent. "ccordingly$ the decision of the o!rt of "##eals m!st be !#held$ e3ce#t its r!ling that the conditions of the donation are resol!tory.

50

Padilla, 0., dissents

-eparate Opinions !$VI!=, 4/., J., dissentingE 1 agree Dith the vieD in the ma0ority o#inion that the donation in F!estion is onero!s considering the conditions im#osed by the donor on the donee Dhich created reci#rocal obligations !#on both #arties. *eyond that$ 1 beg to disagree. (irst of all$ may 1 #oint o!t an inconsistency in the ma0ority o#inionMs descri#tion of the donation in F!estion. 1n one #art$ it says that the donation in F!estion is onerous. Ah!s$ on #age 4 it statesE 8e find it diffic!lt to s!stain the #etition. " clear #er!sal of the conditions set forth in the deed of donation e3ec!ted by ,on %amon .o#e<$ 2r.$ give !s no alternative b!t to concl!de that 'is donation as onerous, one e3ec!ted for a val!able consideration Dhich is considered the eF!ivalent of the donation itself$ e.g.$ Dhen a donation im#oses a b!rden eF!ivalent to the val!e of the donation . . . . (em#hasis s!##lied) @et$ in the last #aragra#h of #age ) it states that the donation is basically a grat!ito!s one. Ahe #ertinent #ortion thereof readsE (inally$ since the F!estioned deed of donation herein is basicall" a gratuitous one$ do!bts referring to incidental circ!mstances of a gratuitous contract sho!ld be resolved in favor of the least transmission of rights and interest . . . (em#hasis s!##lied) 2econd$ the disc!ssion on conditional obligations is !nnecessary. Ahere is no conditional obligation to s#eaB of in this case. 1t seems that the LconditionsL im#osed by the donor and as the Dord is !sed in the laD of donations is conf!sed Dith LconditionsL as !sed in the laD of obligations. 1n his annotation of "rticle 664 of the ivil ode on ,onations$ "rt!ro 4. Aolentino$ citing the Dell-BnoDn civilists s!ch as astan$ -ere< Gon<ale< and "lg!er$ and olin ; a#itant$ states clearly the conte3t Dithin Dhich the term LconditionsL is !sed in the laD of donations$ to DitE Ahe Dord LconditionsL in this article does not refer to !ncertain events on Dhich the birth or e3ting!ishment of a 0!ridical relation de#ends$ b!t is !sed in the v!lgar sense of obligations or c'arges imposed b" t'e donor on t'e donee. 1t is !sed$ not in its technical or strict legal sense$ b!t in its broadest sense. % (em#hasis s!##lied) learly then$ Dhen the laD and the deed of donation s#eaBs of LconditionsL of a donation$ Dhat are referred to are act!ally the obligations$ charges or b!rdens im#osed by the donor !#on the donee and Dhich Do!ld characteri<e the donation as onero!s. 1n the #resent case$ the donation is$ F!ite obvio!sly$ onero!s$ b!t it is more #ro#erly called a Lmodal donation.L " modal donation is one in Dhich the donor im#oses a #restation

51

!#on the donee. Ahe establishment of the medical college as the condition of the donation in the #resent case is one s!ch #restation. Ahe conditions im#osed by the donor ,on %amon .o#e< determines neither the e3istence nor the e3ting!ishment of the obligations of the donor and the donee Dith res#ect to the donation. 1n fact$ the conditions im#osed by ,on %amon .o#e< !#on the donee are the very obligations of the donation V to b!ild the medical college and !se the #ro#erty for the #!r#oses s#ecified in the deed of donation. 1t is very clear that those obligations are !nconditional$ the f!lfillment$ #erformance$ e3istence or e3ting!ishment of Dhich is not de#endent on any f!t!re or !ncertain event or #ast and !nBnoDn event$ as the ivil ode Do!ld define a conditional obligation. 2 %eliance on the case of ParEs vs. Province of Tarlac ( as cited on #age 5 of the ma0ority o#inion is erroneo!s in so far as the latter stated that the condition in ParEs is a resol!tory one and a##lied this to the #resent case. " more caref!l reading of this o!rtMs decision Do!ld reveal that noDhere did De say$ Dhether e3#licitly or im#liedly$ that the donation in that case$ Dhich also has a condition im#osed to b!ild a school and a #!blic #arB !#on the #ro#erty donated$ is a resol!tory condition. 3 1t is incorrect to say that the LconditionsL of the donation there or in the #resent case are resol!tory conditions beca!se$ a##lying "rticle 11)1 of the ivil ode$ that Do!ld mean that !#on f!lfillment of the conditions$ the rights already acF!ired Dill be e3ting!ished. Obvio!sly$ that co!ld not have been the intention of the #arties. 8hat the ma0ority o#inion #robably had in mind Das that the conditions are resol!tory beca!se if they are notcom#lied Dith$ the rights of the donee as s!ch Dill be e3ting!ished and the donation Dill be revoBed. Ao my mind$ tho!gh$ it is more acc!rate to state that the conditions here are not resol!tory conditions b!t$ for the reasons stated above$ are t'e obligations im#osed by the donor. Ahird$ 1 cannot s!bscribe to the vieD that the #rovisions of "rticle 11/6 cannot be a##lied here. Ahe conditions7obligations im#osed by the donor herein are s!b0ect to a #eriod. 1 draD this concl!sion based on o!r #revio!s r!ling Dhich$ altho!gh made almost /' years ago$ still finds a##lication in the #resent case. 1n Barretto vs. $it" of Manila$ 1 De said that Dhen the contract of donation$ as the one involved therein$ has no fi3ed #eriod in Dhich the condition sho!ld be f!lfilled$ the #rovisions of Dhat is noD "rticle 11/6 (then "rticle 112)) are a##licable and it is the d!ty of the co!rt to fi3 a s!itable time for its f!lfillment. 1ndeed$ from the nat!re and circ!mstances of the conditions7obligations of the #resent donation$ it can be inferred that a #eriod Das contem#lated by the donor. ,on %amon .o#e< co!ld not have intended his #ro#erty to remain idle for a long #eriod of time Dhen in fact$ he s#ecifically b!rdened the donee Dith the obligation to set !# a medical college therein and th!s #!t his #ro#erty to good !se. Ahere is a need to fi3 the d!ration of the time Dithin Dhich the conditions im#osed are to be f!lfilled. 1t is also im#ortant to fi3 the d!ration or #eriod for the #erformance of the conditions7obligations in the donation in resolving the #etitionerMs claim that #rescri#tion has already barred the #resent action. 1 disagree once more Dith the r!ling of the ma0ority that the action of the #etitioners is not barred by the stat!te of limitations. Ahere is mis#laced reliance again on a #revio!s decision of this o!rt in 1smeFa vs. %ama. 2 Ahat case does not s#eaB of a deed of donation as erroneo!sly F!oted and cited by the ma0ority o#inion. 1t s#eaBs of a contract for a s!m of money Dhere the

52

debtor herself im#osed a condition Dhich Dill determine Dhen she Dill f!lfill her obligation to #ay the creditor$ th!s$ maBing the f!lfillment of her obligation de#endent !#on her Dill. 8hat De have here$ hoDever$ is not a contract for a s!m of money b!t a donation Dhere the donee has not im#osed any conditions on the f!lfillment of its obligations. "ltho!gh it is admitted that the f!lfillment of the conditions7obligations of the #resent donation may be de#endent on the Dill of the donee as to Dhen it Dill com#ly thereDith$ this did not arise o!t of a condition Dhich the donee itself im#osed. 1t is believed that the donee Das not meant to and does not have absol!te control over the time Dithin Dhich it Dill #erform its obligations. 1t m!st still do so Dithin a reasonable time. 8hat that reasonable time is$ !nder the circ!mstances$ for the co!rts to determine. Ah!s$ the mere fact that there is no time fi3ed as to Dhen the conditions of the donation are to be f!lfilled does not ipso factomean that the stat!te of limitations Dill not a##ly anymore and the action to revoBe the donation becomes im#rescri#tible. "dmittedly$ the donation noD in F!estion is an onero!s donation and is governed by the laD on contracts ("rticle 633) and the case of OsmeQa$ being one involving a contract$ may a##ly. *!t De m!st not lose sight of the fact that it is still a donation for Dhich this o!rt itself a##lied the #ertinent laD to resolve sit!ations s!ch as this. Ahat the action to revoBe the donation can still #rescribe has been the #rono!ncement of this o!rt as early as 1/26 in the case of ParEs Dhich$ on this #oint$ finds relevance in this case. Ahere$ this o!rt said$ >that? this action >for the revocation of the donation? is #rescri#tible$ there is no do!bt. Ahere is no legal #rovision Dhich e3cl!des this class of action from the stat!te of limitations. "nd not only this$ the laD itself recogni<es the #rescri#tibility of the action for the revocation of a donation$ #roviding a s#ecial #eriod of >fo!r? years for the revocation by the s!bseF!ent birth of children >"rt. 646$ noD "rt. 663?$ and . . . by reason of ingratit!de. 1f no s#ecial #eriod is #rovided for the #rescri#tion of the action for revocation for noncom#liance of the conditions of the donation >"rt. 646$ noD "rt. 664?$ it is beca!se in this res#ect the donation is considered onero!s and is governed by the laD of contracts and the general r!les of #rescri#tion. & 4ore recently$ in +e (una v. Abrigo$ 8 this o!rt reiterated the r!ling in ParEs and said thatE 1t is tr!e that !nder "rticle 664 of the &eD ivil ode$ actions for the revocation of a donation m!st be bro!ght Dithin fo!r (4) years from the non-com#liance of the conditions of the donation. IoDever$ it is O!r o#inion that said article does not a##ly to onero!s donations in vieD of the s#ecific #rovision of "rticle 633 #roviding that onero!s donations are governed by the r!les on contracts. 1n the light of the above$ the r!les on contracts and the general r!les on #rescri#tion and not the r!les on donations are a##licable in the case at bar. Ahe laD a##lied in both cases is "rticle 1144(1). 1t refers to the #rescri#tion of an action !#on a Dritten contract$ Dhich is Dhat the deed of an onero!s donation is. Ahe #rescri#tive #eriod is ten years from the time the ca!se of action accr!es$ and that is$

53

from the e3#iration of the time Dithin Dhich the donee m!st com#ly Dith the conditions7obligations of the donation. "s to Dhen this e3actly is remains to be determined$ and that is for the co!rts to do as re#osed !#on them by "rticle 11/6. (or the reasons e3#ressed above$ 1 register my dissent. "ccordingly$ the decision of the o!rt of "##eals m!st be !#held$ e3ce#t its r!ling that the conditions of the donation are resol!tory. Padilla, 0., dissents -=CON! !IVI-ION

F,./. No. %22333. !e e:ber 3, %''8G

$+7ON-O B;I4$!$, C/=-=NT= B;I4$!$, /=@N=+!$ B;I4$!$, !=8=T/IO B;I4$!$, =+I;T=/I$ B;I4$!$, =;+$+IO B;I4$!$, and D$/+ITO B;I4$!$, petitioners, vs. CO;/T O7 $66=$+-, /=,$+$!O 8ON!=4$/, /O!;+7O ,O+O/$N, $+B=/TO $-I-, -=,;N!INO /$-, =/N=-TO ,O+O/$N, C=+-O $BI-O, 7=/N$N!O B$;TI-T$, $NTONIO 8$C$-=/O, and N=-TO/ 8$,;IN-$@, respondents. !=CI-ION 8$/TIN=I, J.E -etitioners$ as heirs of the late Arinidad K!i0ada$ filed a com#laint against #rivate res#ondents for F!ieting of title$ recovery of #ossession and oDnershi# of #arcels of land Dith claim for attorneyMs fees and damages. Ahe s!it Das #remised on the folloDing facts fo!nd by the o!rt of "##eals$ Dhich is materially the same as that fo!nd by the trial co!rtE L-laintiffs-a##ellees (petitioners) are the children of the late Arinidad orvera Hda. de K!i0ada. Arinidad Das one of the heirs of the late -edro orvera and inherited from the latter the tDo-hectare #arcel of land s!b0ect of the case$ sit!ated in the barrio of 2an "g!stin$ Aalacogon$ "g!san del 2!r. On "#ril 5$ 1/56$ Arinidad K!i0ada together Dith her sisters .eonila orvera Hda. de 2eF!eQa and -a< orvera abiltes and brother =#a#iadito orvera e3ec!ted a conditional deed of donation (=3h. ) of the tDo-hectare #arcel of land s!b0ect of the case in favor of the 4!nici#ality of Aalacogon$ the condition being that the #arcel of land shall be !sed solely and e3cl!sively as #art of the cam#!s of the #ro#osed #rovincial high school in Aalacogon. "##arently$ Arinidad remained in #ossession of the #arcel of land des#ite the donation. On +!ly 2/$ 1/62$ Arinidad sold one (1) hectare of the s!b0ect #arcel of land to defendant-a##ellant %egalado 4onde0ar (=3h. 1). 2!bseF!ently$ Arinidad verbally sold the remaining one (1) hectare to defendant-a##ellant (respondent/ %egalado 4onde0ar Ditho!t the benefit of a Dritten deed of sale and evidenced solely by recei#ts of #ayment. 1n 1/)'$ the heirs of Arinidad$ Dho at that time Das already dead$ filed a com#laint for forcible entry (=3h. =) against defendant-a##ellant (respondent) %egalado 4onde0ar$ Dhich com#laint Das$ hoDever$

54

dismissed for fail!re to #rosec!te (=3h. (). 1n 1/)6$ the #ro#osed #rovincial high school having failed to materiali<e$ the 2angg!niang *ayan of the m!nici#ality of Aalacogon enacted a resol!tion reverting the tDo (2) hectares of land donated bacB to the donors (=3h. ,). 1n the meantime$ defendant-a##ellant (respondent) %egalado 4onde0ar sold #ortions of the land to defendants-a##ellants (respondents) (ernando *a!tista (=3h. 5)$ %odolfo Goloran (=3h. 6)$ =fren G!den (=3h. 6) and =rnesto Goloran (=3h. )). LOn +!ly 5$ 1/))$ #laintiffs-a##ellees (petitioners) filed this action against defendantsa##ellants (respondents). 1n the com#laint$ #laintiffs-a##ellees (petitioners) alleged that their deceased mother never sold$ conveyed$ transferred or dis#osed of the #ro#erty in F!estion to any #erson or entity m!ch less to %egalado 4onde0ar save the donation made to the 4!nici#ality of Aalacogon in 1/56; that at the time of the alleged sale to %egalado 4onde0ar by Arinidad K!i0ada$ the land still belongs to the 4!nici#ality of Aalacogon$ hence$ the s!##osed sale is n!ll and void. L,efendants-a##ellants (respondents)$ on the other hand$ in their ansDer claimed that the land in dis#!te Das sold to %egalado 4onde0ar$ the one (1) hectare on +!ly 2/$ 1/62$ and the remaining one (1) hectare on installment basis !ntil f!lly #aid. "s affirmative and7or s#ecial defense$ defendants-a##ellants (respondents) alleged that #laintiffsM action is barred by laches or has #rescribed. LAhe co!rt a #uo rendered 0!dgment in favor of #laintiffs-a##ellees (petitioners)E firstly beca!se MArinidad K!i0ada had no legal title or right to sell the land to defendant 4onde0ar in 1/62$ 1/66$ 1/66 and 1/6)$ the same not being hers to dis#ose of beca!se oDnershi# belongs to the 4!nici#ality of AalacogonM (,ecision$ #. 4; %ollo$ #. 3/) and$ secondly$ that the deed of sale e3ec!ted by Arinidad K!i0ada in favor of 4onde0ar did not carry Dith it the conformity and acF!iescence of her children$ more so that she Das already 63 years old at the time$ and a DidoD (,ecision$ #. 6; %ollo$ #. 41).L>1? Ahe dis#ositive #ortion of the trial co!rtMs decision readsE L8I=%=(O%=$ vieDed from the above #erce#tions$ the scale of 0!stice having tilted in favor of the #laintiffs$ 0!dgment is$ as it is hereby renderedE 1) ordering the ,efendants to ret!rn and vacate the tDo (2) hectares of land to -laintiffs as described in Aa3 ,eclaration &o. 12'/ in the name of Arinidad K!i0ada; 2) ordering any #erson acting in ,efendantsM behalf to vacate and restore the #eacef!l #ossession of the land in F!estion to -laintiffs; 3) ordering the cancellation of the ,eed of 2ale e3ec!ted by the late Arinidad K!i0ada in favor of ,efendant %egalado 4onde0ar as Dell as the ,eeds of 2ale7%elinF!ishments e3ec!ted by 4onde0ar in favor of the other ,efendants; 4) ordering ,efendants to remove their im#rovements constr!cted on the F!estioned lot; 5) ordering the ,efendants to #ay -laintiffs$ 0ointly and severally$ the amo!nt of -1'$'''.'' re#resenting attorneyMs fees;

55

6) ordering ,efendants to #ays the amo!nt of -)$'''.'' as e3#enses of litigation; and 6) ordering ,efendants to #ay the s!m of -3'$'''.'' re#resenting moral damages. 2O O%,=%=,.L>2? On a##eal$ the o!rt of "##eals reversed and set aside the 0!dgment a #uo>3? r!ling that the sale made by Arinidad K!i0ada to res#ondent 4onde0ar Das valid as the4 former retained an inchoate interest on the lots by virt!e of the a!tomatic reversion cla!se in the deed of donation.>4? Ahereafter$ #etitioners filed a motion for reconsideration. 8hen the " denied their motion$>5? #etitioners instit!ted a #etition for revieD to this o!rt arg!ing #rinci#ally that the sale of the s!b0ect #ro#erty made by Arinidad K!i0ada to res#ondent 4onde0ar is void$ considering that at that time$ oDnershi# Das already transferred to the 4!nici#ality of Aalacogon. On the contrary$ #rivate res#ondents contend that the sale Das valid$ that they are b!yers in good faith$ and that #etitionersM case is barred by laches.>6? 8e affirm the decision of the res#ondent co!rt. Ahe donation made on "#ril 5$ 1/56 by Arinidad K!i0ada and her brother and sisters>6? Das s!b0ect to the condition that the donated #ro#erty shall be L!sed solely and e3cl!sively as a #art of the cam#!s of the #ro#osed -rovincial Iigh 2chool in Aalacogon.L>)? Ahe donation f!rther #rovides that sho!ld Lthe #ro#osed -rovincial Iigh 2chool be discontin!ed or if the same shall be o#ened b!t for some reason or another$ the same may in the f!t!re be closedL the donated #ro#erty shall a!tomatically revert to the donor.>/? 2!ch condition$ not being contrary to laD$ morals$ good c!stoms$ #!blic order or #!blic #olicy Das validly im#osed in the donation.>1'? 8hen the 4!nici#alityMs acce#tance of the donation Das made BnoDn to the donor$ the former became the neD oDner of the donated #ro#erty -- donation being a mode of acF!iring and transmitting oDnershi# >11? - notDithstanding the condition im#osed by the donee. Ahe donation is #erfected once the acce#tance by the donee is made BnoDn to the donor.>12? "ccordingly$ oDnershi# is immediately transferred to the latter and that oDnershi# Dill only revert to the donor if the resol!tory condition is not f!lfilled. 1n this case$ that resol!tory condition is the constr!ction of the school. 1t has been r!led that Dhen a #erson donates land to another on the condition that the latter Do!ld b!ild !#on the land a school$ the condition im#osed is not a condition #recedent or a s!s#ensive condition b!t a resol!tory one.>13? Ah!s$ at the time of the sales made in 1/62 toDards 1/6)$ the alleged seller (Arinidad) co!ld not have sold the lots since she had earlier transferred oDnershi# thereof by virt!e of the deed of donation. 2o long as the resol!tory condition s!bsists and is ca#able of f!lfillment$ the donation remains effective and the donee contin!es to be the oDner s!b0ect only to the rights of the donor or his s!ccessors-in-interest !nder the deed of donation. 2ince no #eriod Das im#osed by the donor on Dhen m!st the donee com#ly Dith the condition$ the latter remains the oDner so long as he has tried to com#ly Dith the condition Dithin a reasonable #eriod. 2!ch #eriod$ hoDever$ became irrelevant herein Dhen the donee-4!nici#ality manifested thro!gh a resol!tion that it cannot com#ly Dith the condition of b!ilding a school and the same Das made BnoDn to the donor. Only then - Dhen the non-f!lfillment of the resol!tory condition Das bro!ght to the donorMs BnoDledge - that oDnershi# of the

56

donated #ro#erty reverted to the donor as #rovided in the a!tomatic reversion cla!se of the deed of donation. Ahe donor may have an inchoate interest in the donated #ro#erty d!ring the time that oDnershi# of the land has not reverted to her. 2!ch inchoate interest may be the s!b0ect of contracts incl!ding a contract of sale. 1n this case$ hoDever$ Dhat the donor sold Das the land itself Dhich she no longer oDns. 1t Do!ld have been different if the donor-seller sold her interests over the #ro#erty !nder the deed of donation Dhich is s!b0ect to the #ossibility of reversion of oDnershi# arising from the non-f!lfillment of the resol!tory condition. "s to laches$ #etitionersM action is not yet barred thereby. .aches #res!##oses fail!re or neglect for an !nreasonable and !ne3#lained length of time$ to do that Dhich$ by e3ercising d!e diligence$ co!ld or sho!ld have been done earlier; >14? Lit is negligence or omission to assert a right Dithin a reasonable time$ th!s$ giving rise to a #res!m#tion that the #arty entitled to assert it either has abandoned or declined to assert it.L>15? 1ts essential elements ofE a) ond!ct on the #art of the defendant$ or of one !nder Dhom he claims$ giving rise to the sit!ation com#lained of;

b) ,elay in asserting com#lainantMs right after he had BnoDledge of the defendantMs cond!ct and after he has an o##ort!nity to s!e; c) .acB of BnoDledge or notice on the #art of the defendant that the com#lainant Do!ld assert the right on Dhich he bases his s!it; and$ d) 1n0!ry or #re0!dice to the defendant in the event relief is accorded to the com#lainant.L>16? are absent in this case. -etitionersM ca!se of action to F!iet title commenced only Dhen the #ro#erty reverted to the donor and7or his s!ccessors-in-interest in 1/)6. ertainly$ Dhen the s!it Das initiated the folloDing year$ it cannot be said that #etitioners had sle#t on their rights for a long time. Ahe 1/6'Ms sales made by Arinidad K!i0ada cannot be the recBoning #oint as to Dhen #etitionersM ca!se of action arose. Ahey had no interest over the #ro#erty at that time e3ce#t !nder the deed of donation to Dhich #rivate res#ondents Dere not #rivy. 4oreover$ #etitioners had #revio!sly filed an e0ectment s!it against #rivate res#ondents only that it did not #ros#er on a technicality. *e that at it may$ there is one thing Dhich militates against the claim of #etitioners. 2ale$ being a consens!al contract$ is #erfected by mere consent$ Dhich is manifested the moment there is a meeting of the minds >16? as to the offer and acce#tance thereof on three (3) elementsE s!b0ect matter$ #rice and terms of #ayment of the #rice. >1)? oDnershi# by the seller on the thing sold at the time of the #erfection of the contract of sale is not an element for its #erfection. 8hat the laD reF!ires is that the seller has the right to transfer oDnershi# at the time the thing sold is delivered. >1/? -erfection per se does not transfer oDnershi# Dhich occ!rs !#on the act!al or constr!ctive delivery of the thing sold.>2'? " #erfected contract of sale cannot be challenged on the gro!nd of nonoDnershi# on the #art of the seller at the time of its #erfection; hence$ the sale is still valid. Ahe cons!mmation$ hoDever$ of the #erfected contract is another matter. 1t occ!rs !#on the constr!ctive or act!al delivery of the s!b0ect matter to the b!yer Dhen the seller or her s!ccessors-in-interest s!bseF!ently acF!ires oDnershi# thereof. 2!ch circ!mstance ha##ened in this case Dhen #etitioners -- Dho are Arinidad K!i0adaMs heirs

57

and s!ccessors-in-interest -- became the oDners of the s!b0ect #ro#erty !#on the reversion of the oDnershi# of the land to them. onseF!ently$ oDnershi# is transferred to res#ondent 4onde0ar ands those Dho claim their right from him. "rticle 1434 of the &eD ivil ode s!##orts the r!ling that the sellerMs Ltitle #asses by o#eration of laD to the b!yer.L>21? Ahis r!le a##lies not only Dhen the s!b0ect matter of the contract of sale is goods$>22? b!t also to other Binds of #ro#erty$ incl!ding real #ro#erty.>23? Ahere is also no merit in #etitionersM contention that since the lots Dere oDned by the m!nici#ality at the time of the sale$ they Dere o!tside the commerce of men !nder "rticle 14'/ (4) of the & ; >24?th!s$ the contract involving the same is ine3istent and void from the beginning. IoDever$ noDhere in "rticle 14'/ (4) is it #rovided that the #ro#erties of a m!nici#ality$ Dhether it be those for #!blic !se or its #atrimonial #ro#erty>25? are o!tside the commerce of men. *esides$ the lots in this case Dere conditionally oDned by the m!nici#ality. Ao r!le that the donated #ro#erties are o!tside the commerce of men Do!ld render n!gatory the !nchallenged reasonableness and 0!stness of the condition Dhich the donor has the right to im#ose as oDner thereof. 4oreover$ the ob0ects referred to as o!tsides the commerce of man are those Dhich cannot be a##ro#riated$ s!ch as the o#en seas and the heavenly bodies. 8ith res#ect to the trial co!rtGs aDard of attorneyGs fees$ litigation e3#enses and moral damages$ there is neither fact!al nor legal basis thereof. "ttorneyGs fees and e3#enses of litigation cannot$ folloDing the general r!le in "rticle 22') of the &eD ivil ode$ be recovered in this case$ there being no sti#!lation to that effect and the case does not fall !nder any of the e3ce#tions. >26? 1t cannot be said that #rivate res#ondents had com#elled #etitioners to litigate Dith third #ersons. &either can it be r!led that the former acted in Rgross and evident bad faithN in ref!sing to satisfy the latterGs claims considering that #rivate res#ondents Dere !nder an honest belief that they have a legal right over the #ro#erty by virt!e of the deed of sale. 4oral damages cannot liBeDise be 0!stified as none of the circ!mstances en!merated !nder "rticles 221/ >26? and 222'>2)? of the &eD ivil ode conc!r in this case. DA=/=7O/=$ by virt!e of the foregoing$ the assailed decision of the "##eals is "((1%4=,. -O O/!=/=!. Melo .Acting $'airman/, Puno, and Mendo&a, 00., conc!r. o!rt of

58

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila (1%2A ,1H121O&

,./. No. 81&(( 7ebruar9 2(, %'') -ps. =N/IB;= and CON-;=+O +I8, #etitioners$ vs. TA= AONO/$B+= CO;/T O7 $66=$+-, -ps. T=/=-IT$ and O-C$/ ,;=V$//$, -ps. 8$/CO- and $NIT$ O/+INO, -ps. /O8;+O and CON-;=+O O/+INO and -ps. 7=+IH and !O+O/=- O/+INO, res#ondents. Salonga, Andres, Aernande& G Allado for petitioners. 1campo, +i&on G +omingo for private respondent Pacific BanEing $orporation.

C/;I, J.: Ahe s!b0ect of this controversy is a #arcel of land consisting of 1$1'1 sF!are meters and located in ,iliman$ K!e<on ity. 1t Das originally oDned by (eli3$ 4an!el and 4aria once#cion Orlino$ Dho mortgaged it to the -rogressive ommercial *anB as sec!rity for a -1''$'''.'' loan on +!ly 1$ 1/65. Ahe loan not having been #aid$ the mortgage Das foreclosed and the banB acF!ired the #ro#erty as the highest bidder at the a!ction sale on 4arch 2)$ 1/6/. Ahe mortgagee thereafter transferred all its assets$ incl!ding the said land$ to the -acific *anBing or#oration (-* ). On 4ay 22$ 1/65$ the Orlinos$ and their res#ective s#o!ses (hereinafter referred to as the #rivate res#ondents)$ Dho had remained in #ossession of the land$ made a Dritten offer to -* to re#!rchase the #ro#erty. 1n res#onse$ the banB$ thro!gh its "ssistant Hice--resident$ sent the folloDing letter dated &ovember /$ 1/66$ to the #rivate res#ondentsM co!nselE

59

Ahis Dill confirm o!r agreement concerning the re#!rchase by yo!r clients$ 4r. and 4rs. Oscar . G!evarra of that certain #ro#erty sit!ated at 26 +ose "bad 2antos$ Ieroes Iills$ K!e<on ity Dith an area of 1$1 '1 sF!are meters$ more or less$ !nder the folloDing terms and conditionsE a) Ahe cash consideration shall be -16'$'''.'' #ayable in f!ll !#on signing of the ,eed of "bsol!te 2ale; b) Ahe additional consideration shall consist of yo!r clientMs conveyance to !s of their share of 2$/'1.15 sF!are meters on the #ro#erty sit!ated at amarin$ aloocan ity. 8e !nderstand that yo!r clients Dill be a##lying for a loan Dith a banB. 1n this connection$ De are enclosing a 3ero3 co#y of the Aransfer ertificate of Aitle &o. 21)661 K!e<on ity$ Aa3 ,eclaration &o. 3'/2 and Official %ecei#t &o. =-4'4623 covering #ayment of real estate ta3es for 1/66. :indly reF!est yo!r clients to e3#edite the loan so that De can cons!mmate the transaction as soon as #ossible. -lease reF!est yo!r clients to sign their conformity beloD and ret!rn the d!#licate thereof for o!r files. % Oscar . G!evarra$ one of the #rivate res#ondents$ indicated the reF!ired conformity. One year later$ on &ovember 2$ 1/6)$ -* advised the #rivate res#ondents that if the transaction Das not finali<ed Dithin 3' days$ it Do!ld consider the offer of other b!yers. 2 Ahe record does not shoD any f!rther develo#ment !ntil +!ne )$ 1/6/$ Dhen the #rivate res#ondents reF!ested -* to alloD them to sec!re a certified tr!e co#y of its Aorrens certificate over the land for #!r#oses of its s!rvey and #artition among them #re#aratory to the act!al transfer of title to them. ( -* granted the reF!est s!b0ect to the condition that title Do!ld remain Dith it !ntil the e3ec!tion of the necessary deed of conveyance. 3 On "#ril )$ 1/)'$ or tDo years later$ -* reminded the #rivate res#ondents of its letter of &ovember 2$ 1/6)$ b!t again no action Das taBen to deliver to it the sti#!lated consideration for the sale. (inally$ on 4ay 14$ 1/)'$ -* e3ec!ted a deed of sale over the land in favor of the herein #etitioners$ the s#o!ses =nriF!e and ons!elo .im$ for the s!m of -3''$'''.''. 1 On 2e#tember 3'$ 1/)'$ the #rivate res#ondents filed a com#laint in the %egional Arial o!rt of K!e<on ity against the #etitioners and -* for the ann!lment of the deed of sale on the gro!nd that the s!b0ect land had been earlier sold to them. 1n its 0!dgment for the #laintiffs$ the co!rt held that both -* and the s#o!ses .im had acted in bad faith Dhen they concl!ded the sale BnoDing that Lthere Das a clo!d in the stat!s of the #ro#erty in F!estion.L 2 Ahe decision Das affirmed in toto by the res#ondent co!rt$ & and the #etitioners are noD before !s$ !rging reversal. Ahe #etitioners claim they are #!rchasers in good faith$ having relied on the ass!rances of -* as verified from the records in the %egistry of ,eeds of K!e<on ity that the land belonged to -* and Das !nenc!mbered. Ahey therefore sho!ld have #referential right

60

to the dis#!ted land$ Dhich they had registered in their name !nder A A &o. 26)623. (or their #art$ the #rivate res#ondents insist that as they had a valid and binding earlier deed of sale in their favor$ the land co!ld no longer be sold by -* to the #etitioners$ Dho Dere aDare of their #rior right. 1n s!##ort of their #osition that it Das not inc!mbent !#on them to go beyond the land records to checB the real stat!s of the land$ the #etitioners cite SeFo v. Mangubat 8 Dhere the o!rt saidE 1n order that a #!rchaser of land Dith a Aorrens title may be considered as a #!rchaser in good faith$ it is eno!gh that he e3amines the latest certificate of title Dhich in this case is that iss!ed in the name of the immediate transferor. Ahe #!rchaser is not bo!nd by the original certificate of title b!t only by the certificate of title of the #erson from Dhom he has #!rchased the #ro#erty. 333 333 333 Ah!s$ Dhere innocent third #ersons relying on the correctness of the certificate of title iss!ed$ acF!ire rights over the #ro#erty$ the co!rt cannot disregard s!ch rights and order the total cancellation of the certificate for that Do!ld im#air #!blic confidence in the certificate of title; otherDise everyone dealing Dith #ro#erty registered !nder the torrens system Do!ld have to inF!ire in every instance as to Dhether the title had been reg!larly or irreg!larly iss!ed by the co!rt. 1ndeed$ this is contrary to the evident #!r#ose of the laD. =very #erson dealing Dith registered land may safely rely on the correctness of the certificate of title iss!ed therefore and the laD Dill in no Day oblige him to go behind the certificate to determine the condition of the #ro#erty. 2tated differently$ an innocent #!rchaser for val!e relying on a torrens title iss!ed is #rotected. "nd even ass!ming that there Das an earlier valid sale of the #ro#erty to the #rivate res#ondents$ the #etitioners add$ they Do!ld still #revail !nder "rticle 1544 of the ivil ode$ #roviding as folloDsE 1f the same thing sho!ld have been sold to different vendees$ the oDnershi# shall be transferred to the #erson Dho may have first taBen #ossession thereof in good faith$ if it sho!ld be movable #ro#erty. 2ho!ld it be immovable #ro#erty$ the oDnershi# shall belong to the #erson acF!iring it Dho in good faith first recorded it in the %egistry of -ro#erty. 2ho!ld there be no inscri#tion$ the oDnershi# shall #ertain to the #erson Dho in good faith Das first in the #ossession; and$ in the absence thereof$ to the #erson Dho #resents the oldest title$ #rovided there is good faith. Ahe #rivate res#ondents$ hoDever$ deny that the #etitioners had acted in good faith$ #ointing to the evidence that ons!elo .im had$ before the e3ec!tion of the dis#!ted

61

deed of sale$ visited the #ro#erty and been informed of their e3isting adverse claim thereto. ' *esides$ the said deed contained the folloDing sti#!lationE Ahat the H=&,== is aDare of the fact that the aforementioned #ro#erty is #resently occ!#ied by the former oDners and that clearing of the #ro#erty of its occ!#ants shall be for the e3cl!sive res#onsibility and acco!nt of the vendee. "nd$ indeed$ the o!rt also said in 2eno thatE Ahe Dell-BnoDn r!le in this 0!risdiction is that a #erson dealing Dith a registered land has a right to rely !#on the face of the Aorrens ertificate of Aitle and to dis#ense Dith the need of inF!iring f!rther$e!cept 'en t'e part" concerned 'as actual Eno ledge of facts and circumstances t'at ould impel a reasonabl" cautious man to maEe suc' in#uir". (=m#hasis s!##lied.) "s the o!rt sees it$ the real iss!e is not Dhether the #etitioner acted in good faith b!t Dhether there Das in fact a #rior sale of the same #ro#erty to the #rivate res#ondents. Only if it is established that there Das indeed a do!ble sale of the #ro#erty Dill it be necessary to ascertain if "rticle 1544 is a##licable. 2tated differently$ the F!estion isE 8as the transaction betDeen #rivate res#ondents and -* $ as embodied in the letter of &ovember /$ 1/66$ a contract to sell or a contract of sale9 1t is not eno!gh to say that the contract of sale being consens!al$ it became effective betDeen the banB and the #rivate res#ondents as of &ovember /$ 1/66. Ahere is no F!estion abo!t that; b!t s!ch agreement is liBe #!tting the cart before the horse. -recisely$ o!r #!r#ose is to ascertain to Dhat #artic!lar !ndertaBings the #arties have given their m!t!al consent so De can determine the nat!re of their agreement. "ccording to Sing 4ee v. SantosE %) ... " distinction m!st be made betDeen a contract of sale in Dhich title #asses to the b!yer !#on delivery of the thing sold and a contract to sell (or of e3cl!sive right and #rivilege to #!rchase as in this case) Dhere by agreement the oDnershi# is reserved in the seller and is not to #ass !ntil the f!ll #ayment of the #!rchase #rice is made. 1n the first case$ non#ayment of the #rice is a negative resol!tory condition; in the second case$ f!ll #ayment is a #ositive s!s#ensive condition. *eing contraries$ their effect in laD cannot be 1dentical. 1n the first case$ the vendor has lost and cannot recover the oDnershi# of the land sold !ntil and !nless the contract of sale is itself resolved and set aside. 1n the second case$ hoDever$ the title remains in the vendor if the vendee does not com#ly Dith the condition #recedent of maBing #ayment at the time s#ecified in the contract.

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"##lying these distinctions$ the o!rt finds that the agreement betDeen -* and the #rivate res#ondents Das only a contract to sell$ not a contact of sale. "nd the reasons are obvio!s. Ahere Das no immediate transfer of title to the #rivate res#ondents as Do!ld have ha##ened if there had been a sale at the o!tset. Ahe s!##osed sale Das never registered and A A &o. 21)661 in favor of -* Das not re#laced Dith another certificate of title in favor of the #rivate res#ondents. 1n their letter to -* on +!ne )$ 1/6/$ they acBnoDledged that title to the #ro#erty Do!ld remain Dith the banB !ntil their transaction shall have been finali<ed. 1n res#onse$ -* reiterated the same condition. &o less im#ortant$ the consideration agreed !#on by the #arties Das never #aid by the #rivate res#ondents$ to convert the agreement into a contract of sale. 1n fact$ -* reminded them tDice V on &ovember 2$ 1/6)$ and on "#ril )$ 1/)' V to com#ly Dith their obligations. Ahey did not. Aheir defa!lt Das not$ as the res#ondent co!rt described it$ La slight delayL b!t lasted for all of three years and in fact contin!ed !# to the rendition of the decision in the trial co!rt. "s #ayment of the consideration Das a #ositive s!s#ensive condition$ title to the s!b0ect #ro#erty never #assed to the #rivate res#ondents. Ience$ the #ro#erty Das legally !nenc!mbered and still belonged to -* on 4ay 14$ 1/)'$ Dhen it Das sold by the banB to the #etitioners. 1t is tr!e that the contract to sell im#oses reci#rocal obligations and so cannot be terminated !nilaterally by either #arty. +!dicial rescission is reF!ired !nder "rticle 11/1 of the ivil ode. IoDever$ this r!le is not absol!te. 8e have held that in #ro#er cases$ a #arty may taBe it !#on itself to consider the contract rescinded and act accordingly albeit s!b0ect to 0!dicial confirmation$ Dhich may or may not be given. 1t is tr!e that the rescinding #arty taBes a risB that its action may not be a##roved by the co!rt. *!t as De said in Universit" of t'e P'ilippines v. +e los AngelesE %% Of co!rse$ it m!st be !nderstood that the act of a #arty in treating a contract as cancelled or resolved on acco!nt of infractions by the other contracting #arty m!st be made BnoDn to the other and is alDays #rovisional$ being ever s!b0ect to scr!tiny and revieD by the #ro#er co!rt. 1f the other #arty denies that rescission is 0!stified$ it is free to resort to 0!dicial action in its oDn behalf$ and bring the matter to co!rt. Ahen$ sho!ld the co!rt$ after d!e hearing$ decide that the resol!tion of the contract Das not Darranted$ the res#onsible #arty Dill be sentenced to damages; in the contrary case$ the resol!tion Dill be affirmed$ and the conseF!ent indemnity aDarded to the #arty #re0!diced. 1n other Dords$ the #arty Dho deems the contract violated may consider it resolved or rescinded$ and act accordingly$ Ditho!t #revio!s co!rt action$ b!t it #roceeds at its oDn risB. (or it is only the final 0!dgment of the corres#onding co!rt that Dill concl!sively and finally settle Dhether the action taBen Das or Das not correct in laD. *!t the laD definitely does not reF!ire that the contracting #arty Dho believes itself in0!red m!st first file s!it and Dait for a 0!dgment before taBing e3tra0!dicial ste#s to #rotect its interest. OtherDise$ the #arty in0!red by the otherMs breach Dill have to #assively sit and Datch its damages acc!m!late d!ring the #endency of the s!it !ntil final 0!dgment of rescission is rendered Dhen the laD itself

63

reF!ires that he sho!ld e3ercise d!e diligence to minimi<e its oDn damages. 1n the case at bar$ the #rivate res#ondents obligated themselves to deliver to the banB the s!m of -16'$'''.'' and their share of 2$/'1.15 sF!are meters on a #ro#erty sit!ated in aloocan ity. 1n the letter of -* dated &ovember /$ 1/66$ they Dere reF!ested to Le3#edite the loan (they Dere negotiating for this #!r#ose) so De can cons!mmate the transaction as soon as #ossibleL. Ahat Das in 1/66. 1n 1/6)$ they Dere reminded of their obligation and asBed to com#ly Dithin thirty days. Ahey did not. On "#ril )$ 1/)'$ they Dere reminded of that letter of &ovember 2$ 1/6)$ and again asBed to com#ly; b!t again they did not. 2!rely$ the banB co!ld not be reF!ired to Dait for them forever$ es#ecially so since they remained in #ossession of the #ro#erty and there is no record that they Dere #aying rentals. Cnder the circ!mstances$ -* had the right to consider the contract to sell betDeen them terminated for non-#ayment of the sti#!lated consideration. 8e hereby confirm that rescission. Iaving arrived at these concl!sions$ the o!rt no longer finds it necessary to determine if the #etitioners acted in bad faith Dhen they #!rchased the s!b0ect #ro#erty. Ahe #rivate res#ondents lost all legal interest in the land Dhen their contract to sell Das rescinded by -* for their non-com#liance Dith its #rovisions. "s that contract Das rito longer effective Dhen the land Das sold by -* to the #etitioners$ the #rivate res#ondents had no legal standing to assail that s!bseF!ent transaction. Ahe deed of sale betDeen -* and the #etitioners m!st therefore be s!stained. 8I=%=(O%=$ the #etition is G%"&A=, and the challenged decision of the o!rt of "##eals is %=H=%2=,. A A &o. 26)623 in favor of the #etitioners is recogni<ed as valid and the com#laint for the ann!lment of the deed of sale dated 4ay 14$ 1/)'$ is hereby dismissed. osts against the #rivate res#ondents. 2O O%,=%=,. *arvasa, Ganca"co, GriFo-A#uino and Medialdea, 00., concur.

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila 2= O&, ,1H121O&

,./. No. %)&%%2 7ebruar9 23, %''3

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N$,$ T=+=6AON= CO., INC. #N$T=+CO* $N! +;CI$NO 8. 8$,,$@, #etitioners$ vs. TA= CO;/T O7 $66=$+- $N! C$8$/IN=- -;/ II =+=CT/IC COO6=/$TIV=, INC. #C$-;/=CO II*,res#ondents. )rnesto P. Pangalangan for petitioners. (uis General, 0r. for private respondent.

NOCON, J.: Ahe case of %eyes v. alte3 (-hili##ines)$ 1nc. % en!nciated the doctrine that Dhere a #erson by his contract charges himself Dith an obligation #ossible to be #erformed$ he m!st #erform it$ !nless its #erformance is rendered im#ossible by the act of God$ by the laD$ or by the other #arty$ it being the r!le that in case the #arty desires to be e3c!sed from #erformance in the event of contingencies arising thereto$ it is his d!ty to #rovide the basis therefor in his contract. 8ith the enactment of the &eD ivil ode$ a neD #rovision Das incl!ded therein$ namely$ "rticle 1266 Dhich #rovidesE 8hen the service has become so diffic!lt as to be manifestly beyond the contem#lation of the #arties$ the obligor may also be released therefrom$ in Dhole or in #art. 1n the re#ort of the ode ommission$ the rationale behind this innovation Das e3#lained$ th!sE Ahe general r!le is that im#ossibility of #erformance releases the obligor. IoDever$ it is s!bmitted that Dhen the service has become so diffic!lt as to be manifestly beyond the contem#lation of the #arties$ the co!rt sho!ld be a!thori<ed to release the obligor in Dhole or in #art. Ahe intention of the #arties sho!ld govern and if it a##ears that the service t!rns o!t to be so diffic!lt as to have been beyond their contem#lation$ it Do!ld be doing violence to that intention to hold their contem#lation$ it Do!ld be doing violence to that intention to hold the obligor still res#onsible. 2 1n other Dords$ fair and sF!are consideration !nderscores the legal #rece#t therein. &aga Aele#hone o.$ 1nc. remonstrates mainly against the a##lication by the o!rt of "##eals of "rticle 1266 in favor of amarines 2!r 11 =lectric oo#erative$ 1nc. in the case before !s. 2tated differently$ the former insists that the com#laint sho!ld have been dismissed for fail!re to state a ca!se of action. Ahe antecedent facts$ as narrated by res#ondent o!rt of "##eals are$ as folloDsE

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-etitioner &aga Aele#hone o.$ 1nc. (&"A=. O) is a tele#hone com#any rendering local as Dell as long distance tele#hone service in &aga ity Dhile #rivate res#ondent amarines 2!r 11 =lectric oo#erative$ 1nc. ( "2C%= O 11) is a #rivate cor#oration established for the #!r#ose of o#erating an electric #oDer service in the same city. On &ovember 1$ 1/66$ the #arties entered into a contract (=3h. L"L) for the !se by #etitioners in the o#eration of its tele#hone service the electric light #osts of #rivate res#ondent in &aga ity. 1n consideration therefor$ #etitioners agreed to install$ free of charge$ ten (1') tele#hone connections for the !se by #rivate res#ondent in the folloDing #lacesE (a) 3 !nits V Ahe 4ain Office of (#rivate res#ondent); (b) 2 Cnits V Ahe 8areho!se of (#rivate res#ondent); (c) 1 Cnit V Ahe 2!b-2tation of (#rivate res#ondent) at -eF!eQa; once#cion

(d) 1 Cnit V Ahe %esidence of (#rivate res#ondentMs) -resident; (e) 1 Cnit V Ahe %esidence of (#rivate res#ondentMs) "cting General 4anager; ; (f) 2 Cnits V Ao be determined by the General 4anager. ( 2aid contract also #rovidedE (a) Ahat the term or #eriod of this contract shall be as long as the #arty of the first #art has need for the electric light #osts of the #arty of the second #art it being !nderstood that this contract shall terminate Dhen for any reason Dhatsoever$ the #arty of the second #art is forced to sto#$ abandoned >sic? its o#eration as a #!blic service and it becomes necessary to remove the electric light#ost; (sic) 3 1t Das #re#ared by or Dith the assistance of the other #etitioner$ "tty. .!ciano 4. 4aggay$ then a member of the *oard of ,irectors of #rivate res#ondent and at the same time the legal co!nsel of #etitioner. "fter the contract had been enforced for over ten (1') years$ #rivate res#ondent filed on +an!ary 2$ 1/)/ Dith the %egional Arial o!rt of &aga ity (*r. 2)) . . &o. )/-1642 against #etitioners for reformation of the contract Dith damages$ on the gro!nd that it is too one-sided in favor of #etitioners; that it is not in conformity Dith the g!idelines of the &ational =lectrification "dministration (&=") Dhich direct that the reasonable com#ensation for the !se of the #osts is -1'.'' #er #ost$ #er month; that after eleven (11) years of #etitionersM !se of the #osts$ the tele#hone cables str!ng by them thereon have become m!ch heavier Dith the increase in the vol!me of their s!bscribers$ Dorsened by the fact that their linemen bore holes thro!gh the #osts at Dhich #oints those #osts Dere broBen d!ring ty#hoons; that a #ost noD costs as m!ch as -2$63'.''; so that 0!stice and eF!ity demand that the contract be reformed to abolish the ineF!ities thereon.

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"s second ca!se of action$ #rivate res#ondent alleged that starting Dith the year 1/)1$ #etitioners have !sed 31/ #osts in the toDns of -ili$ anaman$ 4agarao and 4ilaor$ amarines 2!r$ all o!tside &aga ity$ Ditho!t any contract Dith it; that at the rate of -1'.'' #er #ost$ #etitioners sho!ld #ay #rivate res#ondent for the !se thereof the total amo!nt of -266$/6'.'' from 1/)1 !# to the filing of its com#laint; and that #etitioners had ref!sed to #ay #rivate res#ondent said amo!nt des#ite demands. "nd as third ca!se of action$ #rivate res#ondent com#lained abo!t the #oor servicing by #etitioners of the ten (1') tele#hone !nits Dhich had ca!sed it great inconvenience and damages to the t!ne of not less than -1''$'''.'' 1n #etitionersM ansDer to the first ca!se of action$ they averred that it sho!ld be dismissed beca!se (1) it does not s!fficiently state a ca!se of action for reformation of contract; (2) it is barred by #rescri#tion$ the same having been filed more than ten (1') years after the e3ec!tion of the contract; and (3) it is barred by esto##el$ since #rivate res#ondent seeBs to enforce the contract in the same action. -etitioners f!rther alleged that their !tili<ation of #rivate res#ondentMs #osts co!ld not have ca!sed their deterioration beca!se they have already been in !se for eleven (11) years; and that the val!e of their e3#enses for the ten (1') tele#hone lines long en0oyed by #rivate res#ondent free of charge are far in e3cess of the amo!nts claimed by the latter for the !se of the #osts$ so that if there Das any ineF!ity$ it Das s!ffered by them. %egarding the second ca!se of action$ #etitioners claimed that #rivate res#ondent had asBed for tele#hone lines in areas o!tside &aga ity for Dhich its #osts Dere !sed by them; and that if #etitioners had ref!sed to com#ly Dith #rivate res#ondentMs demands for #ayment for the !se of the #osts o!tside &aga ity$ it Das #robably beca!se Dhat is d!e to them from #rivate res#ondent is more than its claim against them. "nd Dith res#ect to the third ca!se of action$ #etitioners claimed$ inter alia$ that their tele#hone service had been categori<ed by the &ational Aelecomm!nication or#oration (&A ) as Lvery highL and of Ls!#erior F!ality.L ,!ring the trial$ #rivate res#ondent #resented the folloDing DitnessesE (1) ,ioscoro %agragio$ one of the tDo officials Dho signed the contract in its behalf$ declared that it Das #etitioner 4aggay Dho #re#ared the contract; that the !nderstanding betDeen #rivate res#ondent and #etitioners Das that the latter Do!ld only !se the #osts in &aga ity beca!se at that time$ #etitionersM ca#ability Das very limited and they had no e3#ectation of e3#ansion beca!se of legal sF!abbles Dithin the com#any; that #rivate res#ondent agreed to alloD #etitioners to !se its #osts in &aga ity beca!se there Dere many s!bscribers therein Dho co!ld not be served by them beca!se of lacB of facilities; and that Dhile the tele#hone lines str!ng to the #osts Dere very light in 1/66$ said #osts have become heavily loaded in 1/)/. (2) =ngr. "ntonio *or0a$ hief of #rivate res#ondentMs .ine O#eration and 4aintenance ,e#artment$ declared that the #osts being !sed by #etitioners totalled 1$4'3 as of "#ril 16$ 1/)/$ 1/2 of Dhich Dere in the toDns of -ili$ anaman$ and 4agarao$ all o!tside &aga ity (=3hs. L*L and L*-1L); that #etitionersM cables str!ng to the #osts in 1/)/ are m!ch bigger than those in &ovember$ 1/66; that in 1/)6$ almost 1'' #osts Dere destroyed by ty#hoon 2isangE aro!nd 2' #osts Dere located betDeen &aga ity and the

67

toDn of -ili Dhile the #osts in barangay once#cion$ &aga ity Dere broBen at the middle Dhich had been bored by #etitionerMs linemen to enable them to string bigger tele#hone lines; that Dhile the cost #er #ost in 1/66 Das only from -6''.'' to -1$'''.''$ their costs in 1/)/ Dent !# from -1$5''.'' to -2$'''.''$ de#ending on the si<e; that some lines that Dere str!ng to the #osts did not folloD the minim!m vertical clearance reF!ired by the &ational *!ilding ode$ so that there Dere cases in 1/)) Dhere$ beca!se of the loD clearance of the cables$ #assing tr!cBs Do!ld accidentally to!ch said cables ca!sing the #osts to fall and res!lting in broDn-o!ts !ntil the electric lines Dere re#aired. (3) ,ario *ernarde<$ -ro0ect 2!#ervisor and "cting General 4anager of #rivate res#ondent and 4anager of %egion H of &="$ declared that according to &=" g!idelines in 1/)5 (=3h. L L)$ for the !se by #rivate tele#hone systems of electric coo#erativesM #osts$ they sho!ld #ay a minim!m monthly rental of -4.'' #er #ost$ and considering the escalation of #rices since 1/)5$ electric coo#eratives have been charging from -1'.'' to -15.'' #er #ost$ Dhich is Dhat #etitioners sho!ld #ay for the !se of the #osts. (4) =ngineer "ntonio 4acandog$ ,e#artment Iead of the Office of 2ervices of #rivate res#ondent$ testified on the #oor service rendered by #etitionerMs tele#hone lines$ liBe the tele#hone in their om#laints 2ection Dhich Das !s!ally o!t of order s!ch that they co!ld not res#ond to the calls of their c!stomers. 1n case of disr!#tion of their tele#hone lines$ it Do!ld taBe tDo to three ho!rs for #etitioners to reactivate them notDithstanding their calls on the emergency line. (5) (inally$ "tty. .!is General$ +r.$ #rivate res#ondentMs co!nsel$ testified that the *oard of ,irectors asBed him to st!dy the contract sometime d!ring the latter #art of 1/)2 or in 1/)3$ as it had a##eared very disadvantageo!s to #rivate res#ondent. &otDithstanding his recommendation for the filing of a co!rt action to reform the contract$ the former general managers of #rivate res#ondent Danted to ado#t a soft a##roach Dith #etitioners abo!t the matter !ntil the term of General 4anager Ienry -asc!al Dho$ after failing to settle the matter amicably Dith #etitioners$ finally agreed for him to file the #resent action for reformation of contract. On the other hand$ #etitioner 4aggay testified to the folloDing effectE (1) 1t is tr!e that he Das a member of the *oard of ,irectors of #rivate res#ondent and at the same time the laDyer of #etitioner Dhen the contract Das e3ec!ted$ b!t "tty. Ga!dioso Aena$ Dho Das also a member of the *oard of ,irectors of #rivate res#ondent$ Das the one Dho saD to it that the contract Das fair to both #arties. (2) 8ith regard to the first ca!se of actionE (a) -rivate res#ondent has the right !nder the contract to !se ten (1') tele#hone !nits of #etitioners for as long as it Dishes Ditho!t #aying anything therefor e3ce#t for long distance calls thro!gh -.,A o!t of Dhich the latter get only 1'O of the charges. (b) 1n most cases$ only dro# Dires and not tele#hone cables have been str!ng to the #osts$ Dhich #osts have remained erect !# to the #resent;

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(c) -etitionerMs linemen have str!ng only small messenger Dires to many of the #osts and they need only small holes to #ass thro!gh; and (d) ,oc!ments e3isting in the &A shoD that the stringing of #etitionersM cables in &aga ity are according to standard and com#arable to those of -.,A. Ahe accidents mentioned by #rivate res#ondent involved tr!cBs that Dere either overloaded or had loads that #rotr!ded !#Dards$ ca!sing them to hit the cables. (3) oncerning the second ca!se of action$ the intention of the #arties Dhen they entered into the contract Das that the coverage thereof Do!ld incl!de the Dhole area serviced by #etitioners beca!se at that time$ they already had s!bscribers o!tside &aga ity. -rivate res#ondent$ in fact$ had asBed for tele#hone connections o!tside &aga ity for its officers and em#loyees residing there in addition to the ten (1') tele#hone !nits mentioned in the contract. -etitioners have not been charging #rivate res#ondent for the installation$ transfers and re-connections of said tele#hones so that nat!rally$ they !se the #osts for those tele#hone lines. (4) 8ith res#ect to the third ca!se of action$ the &A has fo!nd #etitionersM cable installations to be in accordance Dith engineering standards and #ractice and com#arable to the best in the co!ntry. On the basis of the foregoing co!ntervailing evidence of the #arties$ the trial co!rt fo!nd$ as regards #rivate res#ondentMs first ca!se of action$ that Dhile the contract a##eared to be fair to both #arties Dhen it Das entered into by them d!ring the first year of #rivate res#ondentMs o#eration and Dhen its *oard of ,irectors did not yet have any e3#erience in that b!siness$ it had become disadvantageo!s and !nfair to #rivate res#ondent beca!se of s!bseF!ent events and conditions$ #artic!larly the increase in the vol!me of the s!bscribers of #etitioners for more than ten (1') years Ditho!t the corres#onding increase in the n!mber of tele#hone connections to #rivate res#ondent free of charge. Ahe trial co!rt concl!ded that Dhile in an action for reformation of contract$ it cannot maBe another contract for the #arties$ it can$ hoDever$ for reasons of 0!stice and eF!ity$ order that the contract be reformed to abolish the ineF!ities therein. Ah!s$ said co!rt r!led that the contract sho!ld be reformed by ordering #etitioners to #ay #rivate res#ondent com#ensation for the !se of their #osts in &aga ity$ Dhile #rivate res#ondent sho!ld also be ordered to #ay the monthly bills for the !se of the tele#hones also in &aga ity. "nd taBing into consideration the g!idelines of the &=" on the rental of #osts by tele#hone com#anies and the increase in the costs of s!ch #osts$ the trial co!rt o#ined that a monthly rental of -1'.'' for each #ost of #rivate res#ondent !sed by #etitioners is reasonable$ Dhich rental it sho!ld #ay from the filing of the com#laint in this case on +an!ary 2$ 1/)/. "nd in liBe manner$ #rivate res#ondent sho!ld #ay #etitioners from the same date its monthly bills for the !se and transfers of its tele#hones in &aga ity at the same rate that the #!blic are #aying. On #rivate res#ondentMs second ca!se of action$ the trial co!rt fo!nd that the contract does not mention anything abo!t the !se by #etitioners of #rivate res#ondentMs #osts o!tside &aga ity. Aherefore$ the trial co!rt held that for reason of eF!ity$ the contract sho!ld be reformed by incl!ding therein the #rovision that for the !se of #rivate res#ondentMs #osts o!tside &aga ity$ #etitioners sho!ld #ay a monthly rental of -1'.'' #er #ost$ the #ayment to start on the date this case Das filed$ or on +an!ary 2$ 1/)/$ and

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#rivate res#ondent sho!ld also #ay #etitioners the monthly d!es on its tele#hone connections located o!tside &aga ity beginning +an!ary$ 1/)/. "nd Dith res#ect to #rivate res#ondentMs third ca!se of action$ the trial co!rt fo!nd the claim not s!fficiently #roved. Ah!s$ the folloDing decretal #ortion of the trial co!rtMs decision dated +!ly 2'$ 1//'E 8I=%=(O%=$ in vieD of all the foregoing$ decision is hereby rendered ordering the reformation of the agreement (=3h. "); ordering the defendants to #ay #laintiffMs electric #oles in &aga ity and in the toDns of 4ilaor$ anaman$ 4agarao and -ili$ amarines 2!r and in other #laces Dhere defendant &"A=. O !ses #laintiffMs electric #oles$ the s!m of A=& (-1'.'') -=2O2 #er #laintiffMs #ole$ #er month beginning +an!ary$ 1/)/ and ordering also the #laintiff to #ay defendant &"A=. O the monthly d!es of all its tele#hones incl!ding those installed at the residence of its officers$ namely; =ngr. +oventino r!<$ =ngr. "ntonio *or0a$ =ngr. "ntonio 4acandog$ 4r. +es!s O#iana and "tty. .!is General$ +r. beginning +an!ary$ 1/)/. -laintiffMs claim for attorneyMs fees and e3#enses of litigation and defendantsM co!nterclaim are both hereby ordered dismissed. 8itho!t #rono!ncement as to costs. ,isagreeing Dith the foregoing 0!dgment$ #etitioners a##ealed to res#ondent o!rt of "##eals. 1n the decision dated 4ay 2)$ 1//2$ res#ondent co!rt affirmed the decision of the trial co!rt$ 1 b!t based on different gro!nds to DitE (1) that "rticle 1266 of the &eD ivil ode is a##licable and (2) that the contract Das s!b0ect to a #otestative condition Dhich rendered said condition void. Ahe motion for reconsideration Das denied in the resol!tion dated 2e#tember 1'$ 1//2. 2Ience$ the #resent #etition. -etitioners assign the folloDing #ertinent errors committed by res#ondent co!rtE 1) in maBing a contract for the #arties by invoBing "rticle 1266 of the &eD ivil ode; 2) in r!ling that #rescri#tion of the action for reformation of the contract in this case commenced from the time it became disadvantageo!s to #rivate res#ondent; and 3) in r!ling that the contract Das s!b0ect to a #otestative condition in favor of #etitioners. -etitioners assert earnestly that "rticle 1266 of the &eD ivil ode is not a##licable #rimarily beca!se the contract does not involve the rendition of service or a #ersonal #restation and it is not for f!t!re service Dith f!t!re !n!s!al change. 1nstead$ the r!ling in the case of 1cceFa, et al. v. 0abson, etc., et al.$ & Dhich inter#reted the article$ sho!ld be folloDed in resolving this case. *esides$ said article Das never raised by the #arties in their #leadings and Das never the s!b0ect of trial and evidence. 1n a##lying "rticle 1266$ res#ondent co!rt rationali<edE

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8e agree Dith a##ellant that in order that an action for reformation of contract Do!ld lie and may #ros#er$ there m!st be s!fficient allegations as Dell as #roof that the contract in F!estion failed to e3#ress the tr!e intention of the #arties d!e to error or mistaBe$ accident$ or fra!d. 1ndeed$ in embodying the eF!itable remedy of reformation of instr!ments in the &eD ivil ode$ the ode ommission gave its reasons as folloDsE =F!ity dictates the reformation of an instr!ment in order that the tr!e intention of the contracting #arties may be e3#ressed. Ahe co!rts by the reformation do not attem#t to maBe a neD contract for the #arties$ b!t to maBe the instr!ment e3#ress their real agreement. Ahe rationale of the doctrine is that it Do!ld be !n0!st and ineF!itable to alloD the enforcement of a Dritten instr!ment Dhich does not reflect or disclose the real meeting of the minds of the #arties. Ahe rigor of the legalistic r!le that a Dritten instr!ment sho!ld be the final and infle3ible criterion and meas!re of the rights and obligations of the contracting #arties is th!s tem#ered to forestall the effects of mistaBe$ fra!d$ ineF!itable cond!ct$ or accident. (##. 55-56$ %e#ort of ode ommission) Ah!s$ "rticles 135/$ 1361$ 1362$ 1363 and 1364 of the &eD ivil ode #rovide in essence that Dhere thro!gh mistaBe or accident on the #art of either or both of the #arties or mistaBe or fra!d on the #art of the clerB or ty#ist Dho #re#ared the instr!ment$ the tr!e intention of the #arties is not e3#ressed therein$ then the instr!ment may be reformed at the instance of either #arty if there Das m!t!al mistaBe on their #art$ or by the in0!red #arty if only he Das mistaBen. Iere$ #laintiff-a##ellee did not allege in its com#laint$ nor does its evidence #rove$ that there Das a mistaBe on its #art or m!t!al mistaBe on the #art of both #arties Dhen they entered into the agreement =3h. L"L$ and that beca!se of this mistaBe$ said agreement failed to e3#ress their tr!e intention. %ather$ #laintiffMs evidence shoDs that said agreement Das #re#ared by "tty. .!ciano 4aggay$ then a member of #laintiffMs *oard of ,irectors and its legal co!nsel at that time$ Dho Das also the legal co!nsel for defendant-a##ellant$ so that as legal co!nsel for both com#anies and #res!mably Dith the interests of both com#anies in mind Dhen he #re#ared the aforesaid agreement$ "tty. 4aggay m!st have considered the same fair and eF!itable to both sides$ and this Das affirmed by the loDer co!rt Dhen it fo!nd said contract to have been fair to both #arties at the time of its e3ec!tion. 1n fact$ there Dere no com#laints on the #art of both sides at the time of and after the e3ec!tion of said contract$ and according to 63-year old +!stino de +es!s$ Hice -resident and General manager of a##ellant at the time Dho signed the agreement =3h. L"L in its behalf and Dho Das one of the Ditnesses for the #laintiff (sic)$ both #arties com#lied Dith said contract Lfrom the very beginningL (#. 5$ tsn$ "#ril 16$ 1/)/).

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Ahat the aforesaid contract has become ineF!ito!s or !nfavorable or disadvantageo!s to the #laintiff Dith the e3#ansion of the b!siness of a##ellant and the increase in the vol!me of its s!bscribers in &aga ity and environs thro!gh the years$ necessitating the stringing of more and bigger tele#hone cable Dires by a##ellant to #laintiffMs electric #osts Ditho!t a corres#onding increase in the ten (1') tele#hone connections given by a##ellant to #laintiff free of charge in the agreement =3h. L"L as consideration for its !se of the latterMs electric #osts in &aga ity$ a##ear$ hoDever$ !ndis#!ted from the totality of the evidence on record and the loDer co!rt so fo!nd. "nd it Das for this reason that in the later (sic) #art of 1/)2 or 1/)3 (or five or si3 years after the s!b0ect agreement Das entered into by the #arties)$ #laintiffMs *oard of ,irectors already asBed "tty. .!is General Dho had become their legal co!nsel in 1/)2$ to st!dy said agreement Dhich they believed had become disadvantageo!s to their com#any and to maBe the #ro#er recommendation$ Dhich st!dy "tty. General did$ and thereafter$ he already recommended to the *oard the filing of a co!rt action to reform said contract$ b!t no action Das taBen on "tty. GeneralMs recommendation beca!se the former general managers of #laintiff Danted to ado#t a soft a##roach in disc!ssing the matter Dith a##ellant$ !ntil$ d!ring the term of General 4anager Ienry -asc!al$ the latter$ after failing to settle the #roblem Dith "tty. .!ciano 4aggay Dho had become the #resident and general manager of a##ellant$ already agreed for "tty. GeneralMs filing of the #resent action. Ahe fact that said contract has become ineF!ito!s or disadvantageo!s to #laintiff as the years Dent by did not$ hoDever$ give #laintiff a ca!se of action for reformation of said contract$ for the reasons already #ointed o!t earlier. *!t this does not mean that #laintiff is com#letely Ditho!t a remedy$ for De believe that the allegations of its com#laint herein and the evidence it has #resented s!fficiently maBe o!t a ca!se of action !nder "rt. 1266 of the &eD ivil ode for its release from the agreement in F!estion. 333 333 333 Ahe !nderstanding of the #arties Dhen they entered into the "greement =3h. L"L on &ovember 1$ 1/66 and the #revailing circ!mstances and conditions at the time$ Dere described by ,ioscoro %agragio$ the -resident of #laintiff in 1/66 and one of its tDo officials Dho signed said agreement in its behalf$ as folloDsE O!r !nderstanding at that time is that De Dill alloD &"A=. O to !tili<e the #osts of "2C%= O 11 only in the ity of &aga beca!se at that time the ca#ability of &"A=. O Das very limited$ as a matter of fact De do >sic? not e3#ect to be able to e3#and beca!se of the legal sF!abbles going on in the &"A=. O. 2o$ even at that time there Dere so many s!bscribers in &aga ity that cannot be served by the &"A=. O$ so as a mater of #!blic service De alloDed them to s!e (sic) o!r #osts Dithin the &aga ity. (#. )$ tsn "#ril 3$ 1/)/)

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%agragio also declared that Dhile the tele#hone Dires str!ng to the electric #osts of #laintiff Dere very light and that very feD tele#hone lines Dere attached to the #osts of "2C%= O 11 in 1/66$ said #osts have become Lheavily loadedL in 1/)/ (tsn$ id.). 1n tr!th$ as also correctly fo!nd by the loDer co!rt$ des#ite the increase in the vol!me of a##ellantMs s!bscribers and the corres#onding increase in the tele#hone cables and Dires str!ng by it to #laintiffMs electric #osts in &aga ity for the more 1' years that the agreement =3h. L"L of the #arties has been in effect$ there has been no corres#onding increase in the ten (1') tele#hone !nits connected by a##ellant free of charge to #laintiffMs offices and other #laces chosen by #laintiffMs general manager Dhich Das the only consideration #rovided for in said agreement for a##ellantMs !se of #laintiffs electric #osts. &ot only that$ a##ellant even started !sing #laintiffMs electric #osts o!tside &aga ity altho!gh this Das not #rovided for in the agreement =3h. L"L as it e3tended and e3#anded its tele#hone services to toDns o!tside said city. Ience$ Dhile very feD of #laintiffMs electric #osts Dere being !sed by a##ellant in 1/66 and they Dere all in the ity of &aga$ the n!mber of #laintiffMs electric #osts that a##ellant Das !sing in 1/)/ had 0!m#ed to 1$4'3$1/2 of Dhich are o!tside &aga ity (=3h. L*L). "dd to this the destr!ction of some of #laintiffMs #oles d!ring ty#hoons liBe the strong ty#hoon 2isang in 1/)6 beca!se of the heavy tele#hone cables attached thereto$ and the escalation of the costs of electric #oles from 1/66 to 1/)/$ and the concl!sion is indeed inel!ctable that the agreement =3h. L"L has already become too one-sided in favor of a##ellant to the great disadvantage of #laintiff$ in short$ the contin!ed enforcement of said contract has manifestly gone far beyond the contem#lation of #laintiff$ so m!ch so that it sho!ld noD be released therefrom !nder "rt. 1266 of the &eD ivil ode to avoid a##ellantMs !n0!st enrichment at its (#laintiffMs) e3#ense. "s stated by Aolentino in his commentaries on the ivil ode citing foreign civilist %!ggiero$ He#uit" demands a certain economic e#uilibrium bet een t'e prestation and t'e counter-prestation, and does not permit t'e unlimited impoveris'ment of one part" for t'e benefit of t'e ot'er b" t'e e!cessive rigidit" of t'e principle of t'e obligator" force of contracts (1H Aolentino$ ivil ode of the -hili##ines$ 1/)6 ed.$ ##. 246-24)). 8e therefore$ find nothing Drong Dith the r!ling of the trial co!rt$ altho!gh based on a different and Drong #remise (i.e.$ reformation of contract)$ that from the date of the filing of this case$ a##ellant m!st #ay for the !se of #laintiffMs electric #osts in &aga ity at the reasonable monthly rental of -1'.'' #er #ost$ Dhile #laintiff sho!ld #ay a##ellant for the tele#hones in the same ity that it Das formerly !sing free of charge !nder the terms of the agreement =3h. L"L at the same rate being #aid by the general #!blic. 1n affirming said r!ling$ De are not maBing a neD contract for the #arties herein$ b!t De find it necessary to do so in order not to disr!#t the basic and essential services being rendered by both #arties herein to the #!blic and to avoid !n0!st enrichment by a##ellant at the e3#ense of #laintiff$ said arrangement to contin!e only !ntil s!ch time as said #arties can renegotiate another agreement over the same

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s!b0ect-matter covered by the agreement =3h. L"L. Once said agreement is reached and e3ec!ted by the #arties$ the aforesaid r!ling of the loDer co!rt and affirmed by !s shall cease to e3ist and shall be s!bstit!ted and s!#erseded by their neD agreement. . . .. 8 "rticle 1266 s#eaBs of LserviceL Dhich has become so diffic!lt. AaBing into consideration the rationale behind this #rovision$ ' the term LserviceL sho!ld be !nderstood as referring to the L#erformanceL of the obligation. 1n the #resent case$ the obligation of #rivate res#ondent consists in alloDing #etitioners to !se its #osts in &aga ity$ Dhich is the service contem#lated in said article. (!rthermore$ a bare reading of this article reveals that it is not a reF!irement there!nder that the contract be for f!t!re service Dith f!t!re !n!s!al change. "ccording to 2enator "rt!ro 4. Aolentino$ %) "rticle 1266 states in o!r laD the doctrine of !nforseen events. Ahis is said to be based on the discredited theory of rebus sic stantibus in #!blic international laD; !nder this theory$ the #arties sti#!late in the light of certain #revailing conditions$ and once these conditions cease to e3ist the contract also ceases to e3ist. onsidering #ractical needs and the demands of eF!ity and good faith$ the disa##earance of the basis of a contract gives rise to a right to relief in favor of the #arty #re0!diced. 1n a n!tshell$ #rivate res#ondent in the OcceQa case filed a com#laint against #etitioner before the trial co!rt #raying for modification of the terms and conditions of the contract that they entered into by fi3ing the #ro#er shares that sho!ld #ertain to them o!t of the gross #roceeds from the sales of s!bdivided lots. 8e ordered the dismissal of the com#laint therein for fail!re to state a s!fficient ca!se of action. 8e rationali<ed that the o!rt of "##eals misa##lied "rticle 1266 beca!seE . . . res#ondentMs com#laint seeBs not release from the s!bdivision contract b!t that the co!rt Lrender 0!dgment modif"ing the terms and conditions of the contract . . . by fi!ing the proper s'ares that sho!ld pertain to the herein #arties o!t of the gross proceeds from the sales of s!bdivided lots of s!b0ect s!bdivisionL. Ahe cited article ("rticle 1266) does not grant the co!rts (the) a!thority to remaBe$ modify or revise the contract or to fi3 the division of shares betDeen the #arties as contract!ally sti#!lated Dith the force of laD betDeen the #arties$ so as to s!bstit!te its oDn terms for those covenanted by the #arties themselves. %es#ondentMs com#laint for modification of contract manifestly has no basis in laD and therefore states no ca!se of action. Cnder the #artic!lar allegations of res#ondentMs com#laint and the circ!mstances therein averred$ the co!rts cannot even in eF!ity grant the relief so!ght. %% Ahe r!ling in the OcceQa case is not a##licable beca!se De agree Dith res#ondent co!rt that the allegations in #rivate res#ondentMs com#laint and the evidence it has #resented s!fficiently made o!t a ca!se of action !nder "rticle 1266. 8e$ therefore$ release the #arties from their correlative obligations !nder the contract. IoDever$ o!r dis#osition of the #resent controversy does not end here. 8e have to taBe into acco!nt the #ossible conseF!ences of merely releasing the #arties therefromE #etitioners Dill remove the tele#hone Dires7cables in the #osts of #rivate res#ondent$ res!lting in disr!#tion of their service to the #!blic; Dhile #rivate res#ondent$ in consonance Dith the contract %2 Dill ret!rn all the tele#hone !nits to #etitioners$ ca!sing #re0!dice to its b!siness. 8e shall not alloD s!ch event!ality. %ather$ De reF!ire$ as ordered by the trial co!rtE 1) #etitioners

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to #ay #rivate res#ondent for the !se of its #osts in &aga ity and in the toDns of 4ilaor$ anaman$ 4agarao and -ili$ amarines 2!r and in other #laces Dhere #etitioners !se #rivate res#ondentMs #osts$ the s!m of ten (-1'.'') #esos #er #ost$ #er month$ beginning +an!ary$ 1/)/; and 2) #rivate res#ondent to #ay #etitioner the monthly d!es of all its tele#hones at the same rate being #aid by the #!blic beginning +an!ary$ 1/)/. Ahe #ec!liar circ!mstances of the #resent case$ as disting!ished f!rther from the OcceQa case$ necessitates e3ercise of o!r eF!ity 0!risdiction. %( *y Day of em#hasis$ De reiterate the rationali<ation of res#ondent co!rt thatE . . . 1n affirming said r!ling$ De are not maBing a neD contract for the #arties herein$ b!t De find it necessary to do so in order not to disr!#t the basic and essential services being rendered by both #arties herein to the #!blic and to avoid !n0!st enrichment by a##ellant at the e3#ense of #laintiff . . . . %3 -etitionersM assertion that "rticle 1266 Das never raised by the #arties in their #leadings and Das never the s!b0ect of trial and evidence has been #assed !#on by res#ondent co!rt in its Dell reasoned resol!tion$ Dhich De here!nder F!ote as o!r oDnE (irst$ De do not agree Dith defendant-a##ellant that in a##lying "rt. 1266 of the &eD ivil ode to this case$ De have changed its theory and decided the same on an iss!e not invoBed by #laintiff in the loDer co!rt. (or basically$ the main and #ivotal iss!e in this case is Dhether the contin!ed enforcement of the contract =3h. L"L betDeen the #arties has$ thro!gh the years (since 1/66)$ become too ineF!ito!s or disadvantageo!s to the #laintiff and too one-sided in favor of defendanta##ellant$ so that a sol!tion m!st be fo!nd to relieve #laintiff from the contin!ed o#eration of said agreement and to #revent defendanta##ellant from f!rther !n0!stly enriching itself at #laintiffMs e3#ense. 1t is indeed !nfort!nate that defendant had t!rned deaf ears to #laintiffs reF!ests for renegotiation$ constraining the latter to go to co!rt. *!t altho!gh #laintiff cannot$ as De have held$ correctly invoBe reformation of contract as a #ro#er remedy (there having been no shoDing of a mistaBe or error in said contract on the #art of any of the #arties so as to res!lt in its fail!re to e3#ress their tr!e intent)$ this does not mean that #laintiff is absol!tely Ditho!t a remedy in order to relieve itself from a contract that has gone far beyond its contem#lation and has become so highly ineF!ito!s and disadvantageo!s to it thro!gh the years beca!se of the e3#ansion of defendant-a##ellantMs b!siness and the increase in the vol!me of its s!bscribers. "nd as it is the d!ty of the o!rt to administer 0!stice$ it m!st do so in this case in the best Day and manner it can in the light of the #roven facts and the laD or laDs a##licable thereto. 1t is settled that Dhen the trial co!rt decides a case in favor of a #arty on a certain gro!nd$ the a##ellant co!rt may !#hold the decision beloD !#on some other #oint Dhich Das ignored or erroneo!sly decided by the trial co!rt (Garcia Halde< v. A!a<on$ 4' -hil. /43; %elativo v. astro$ 66 -hil. 563; arillo v. 2alaB de -a<$ 1) 2 %" 466). (!rthermore$ the a##ellate co!rt has the discretion to consider an !nassigned error that is closely related to an error #ro#erly assigned (-aterno v. +ao @an$ 1 2 %" 631;

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Iernande< v. "ndal$ 6) -hil. 1/6). 1t has also been held that the 2!#reme o!rt (and this o!rt as Dell) has the a!thority to revieD matters$ even if they are not assigned as errors in the a##eal$ if it is fo!nd that their consideration is necessary in arriving at a 0!st decision of the case (2a!ra 1m#ort ; =3#ort o.$ 1nc. v. -hil. 1nternational 2!rety o. and -&*$ ) 2 %" 143). (or it is the material allegations of fact in the com#laint$ not the legal concl!sion made therein or the #rayer$ that determines the relief to Dhich the #laintiff is entitled$ and the #laintiff is entitled to as m!ch relief as the facts Darrant altho!gh that relief is not s#ecifically #rayed for in the com#laint (%osales v. %eyes and Ordove<a$ 25 -hil. 4/5; abigao v. .im$ 5' -hil. )44; *ag!ioro v. *arrios$ 66 -hil. 12'). Ao F!ote an old b!t very ill!minating decision of o!r 2!#reme o!rt thro!gh the #en of "merican 0!rist "dam . arsonE LCnder o!r system of #leading it is the d!ty of the co!rts to grant the relief to Dhich the #arties are shoDn to be entitled by the allegations in their #leadings and the facts #roven at the trial$ and the mere fact that they themselves misconstr!e the legal effect of the facts th!s alleged and #roven Dill not #revent the co!rt from #lacing the 0!st constr!ction thereon and ad0!dicating the iss!es accordingly.L ("l<!a v. +ohnson$ 21 -hil. 3')) "nd in the fairly recent case of alte3 -hil.$ 1nc. v 1" $ 166 2 %" 641$ the Ionorable 2!#reme o!rt also heldE 8e r!le that the res#ondent co!rt did not commit any error in taBing cogni<ance of the aforesaid iss!es$ altho!gh not raised before the trial co!rt. Ahe #resence of strong consideration of s!bstantial 0!stice has led this o!rt to rela3 the Dell-entrenched r!le that$ e3ce#t F!estions on 0!risdiction$ no F!estion Dill be entertained on a##eal !nless it has been raised in the co!rt beloD and it is Dithin the iss!es made by the #arties in their #leadings ( ordero v. abral$ .-366)/$ +!ly 25$ 1/)3$ 123 2 %" 532). . . . 8e believe that the above a!thorities s!ffice to shoD that this o!rt did not err in a##lying "rt. 1266 of the &eD ivil ode to this case. ,efendant-a##ellant stresses that the a##licability of said #rovision is a #uestion of fact$ and that it sho!ld have been given the o##ort!nity to #resent evidence on said F!estion. *!t defendant-a##ellant cannot honestly and tr!thf!lly claim that it (did) not (have) the o##ort!nity to #resent evidence on the iss!e of Dhether the contin!ed o#eration of the contract =3h. L"L has noD become too one-sided in its favor and too ineF!ito!s$ !nfair$ and disadvantageo!s to #laintiff. "s held in o!r decision$ the ab!ndant and co#io!s evidence #resented by both #arties in this case and s!mmari<ed in said decision established the folloDing essential and vital facts Dhich led !s to a##ly "rt. 1266 of the &eD ivil ode to this caseE

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333 333 333 %1 On the iss!e of #rescri#tion of #rivate res#ondentMs action for reformation of contract$ #etitioners allege that res#ondent co!rtMs r!ling that the right of action Larose only after said contract had already become disadvantageo!s and !nfair to it d!e to s!bseF!ent events and conditions$ Dhich m!st be sometime d!ring the latter #art of 1/)2 or in 1/)3 . . .L %2 is erroneo!s. 1n reformation of contracts$ Dhat is reformed is not the contract itself$ b!t the instr!ment embodying the contract. 1t folloDs that Dhether the contract is disadvantageo!s or not is irrelevant to reformation and therefore$ cannot be an element in the determination of the #eriod for #rescri#tion of the action to reform. "rticle 1144 of the &eD ivil ode #rovides$ inter alia$ that an action !#on a Dritten contract m!st be bro!ght Dithin ten (1') years from the time the right of action accr!es. learly$ the ten (1') year #eriod is to be recBonedfrom t'e time t'e rig't of action accrues Dhich is not necessarily the date of e3ec!tion of the contract. "s correctly r!led by res#ondent co!rt$ #rivate res#ondentMs right of action arose Lsometime d!ring the latter #art of 1/)2 or in 1/)3 Dhen according to "tty. .!is General$ +r. . . .$ he Das asBed by (#rivate res#ondentMs) *oard of ,irectors to st!dy said contract as it already a##eared disadvantageo!s to (#rivate res#ondent) (#. 31$ tsn$ 4ay )$ 1/)/). (-rivate res#ondentMs) ca!se of action to asB for reformation of said contract sho!ld th!s be considered to have arisen only in 1/)2 or 1/)3$ and from 1/)2 to +an!ary 2$ 1/)/ Dhen the com#laint in this case Das filed$ ten (1') years had not yet ela#sed.L %& %egarding the last iss!e$ #etitioners allege that there is nothing #!rely #otestative abo!t the #restations of either #arty beca!se #etitionerMs #ermission for free !se of tele#hones is not made to de#end #!rely on their Dill$ neither is #rivate res#ondentMs #ermission for free !se of its #osts de#endent #!rely on its Dill. "#art from a##lying "rticle 1266$ res#ondent co!rt cited another legal remedy available to #rivate res#ondent !nder the allegations of its com#laint and the #re#onderant evidence #resented by itE . . . De believe that the #rovision in said agreement V (a) Ahat the term or #eriod of this contract shall be as long as t'e part" of t'e first part>herein a##ellant? has need for the electric light #osts of the #arty of the second #art >herein #laintiff? it being !nderstood that this contract shall terminate Dhen for any reason Dhatsoever$ the #arty of the second #art is forced to sto#$ abandoned >sic? its o#eration as a #!blic service and it becomes necessary to remove the electric light #ost >sic?L; (=m#hasis s!##lied) is invalid for being #!rely #otestative on the #art of a##ellant as it leaves the contin!ed effectivity of the aforesaid agreement to the latterMs sole and e3cl!sive Dill as long as #laintiff is in o#eration. " similar #rovision in a contract of lease Dherein the #arties agreed that the lessee co!ld stay on the leased #remises Lfor as long as the defendant needed the #remises and can meet and #ay said increasesL Das recently held by the 2!#reme o!rt in .im v. .".$ 1/1 2 %" 15'$ citing the m!ch earlier case of

77

=ncarnacion v. *aldomar$ 66 -hil. 46'$ as invalid for being La #!rely #otestative condition beca!se it leaves the effectivity and en0oyment of leasehold rights to the sole and e3cl!sive Dill of the lessee.L (!rther held the Iigh o!rt in the .im caseE Ahe contin!ance$ effectivity and f!lfillment of a contract of lease cannot be made to de#end e3cl!sively !#on the free and !ncontrolled choice of the lessee betDeen contin!ing the #ayment of the rentals or not$ com#letely de#riving the oDner of any say in the matter. 4!t!ality does not obtain in s!ch a contract of lease of no eF!ality e3ists betDeen the lessor and the lessee since the life of the contract is dictated solely by the lessee. Ahe above can also be said of the agreement =3h. L"L betDeen the #arties in this case. Ahere is no m!t!ality and eF!ality betDeen them !nder the afore-F!oted #rovision thereof since the life and contin!ity of said agreement is made to de#end as long as a##ellant needs #laintiffMs electric #osts. "nd this is #recisely Dhy$ since 1/66 Dhen said agreement Das e3ec!ted and !# to 1/)/ Dhen this case Das finally filed by #laintiff$ it co!ld do nothing to be released from or terminate said agreement notDithstanding that its contin!ed effectivity has become very disadvantageo!s and ineF!ito!s to it d!e to the e3#ansion and increase of a##ellantMs tele#hone services Dithin &aga ity and even o!tside the same$ Ditho!t a corres#onding increase in the ten (1') tele#hone !nits being !sed by #laintiff free of charge$ as Dell as the bad and inefficient service of said tele#hones to the #re0!dice and inconvenience of #laintiff and its c!stomers. . . . %8 -etitionersM allegations m!st be !#held in this regard. " #otestative condition is a condition$ the f!lfillment of Dhich de#ends !#on the sole Dill of the debtor$ in Dhich case$ the conditional obligation is void. %' *ased on this definition$ res#ondent co!rtMs finding that the #rovision in the contract$ to DitE (a) Ahat the term or #eriod of this contract shall be as long as the #arty of the first #art (#etitioner) has need for the electric light #osts of the #arty of the second #art (#rivate res#ondent) . . .. is a #otestative condition$ is correct. IoDever$ it m!st have overlooBed the other conditions in the same #rovision$ to DitE . . . it being !nderstood that this contract shall terminate Dhen for any reason Dhatsoever$ the #arty of the second #art (#rivate res#ondent) is forced to sto#$ abandoned (sic) its o#eration as a #!blic service and it becomes necessary to remove the electric light #ost (sic); Dhich are cas!al conditions since they de#end on chance$ ha<ard$ or the Dill of a third #erson. 2) 1n s!m$ the contract is s!b0ect to mi3ed conditions$ that is$ they de#end #artly on the Dill of the debtor and #artly on chance$ ha<ard or the Dill of a third #erson$ Dhich do not invalidate the aforementioned #rovision. 2% &evertheless$ in vieD of o!r

78

disc!ssions !nder the first and second iss!es raised by #etitioners$ there is no reason to set aside the F!estioned decision and resol!tion of res#ondent co!rt. 8I=%=(O%=$ the #etition is hereby ,=&1=,. Ahe decision of the o!rt of "##eals dated 4ay 2)$ 1//2 and its resol!tion dated 2e#tember 1'$ 1//2 are "((1%4=,. 2O O%,=%=,. *arvasa, $.0., Padilla, %egalado and Puno, 00., concur.

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila =& *"& ,./. No. 33(& -epte:ber ', %')'

TO8$- O-8=K$, #laintiff-a##ellee$ vs. C=NON$ /$8$, defendant-a##ellant. 2ilemon Sotto for appellant. 0. A. 0un#uera for appellee. 4OAN-ON, J.: 1t a##ears from the record that !#on the 15th day of &ovember$ 1)/'$ the defendant herein e3ec!ted and delivered to Hictoriano OsmeQa the folloDing contractE

79

=PI1*1A ". -2''.''. =*C$ *ovember 59, 5?:8. 1$ ,oQa enona %ama$ a resident of this city$ and of legal age$ have received from ,on Hictoriano OsmeQa the s!m of t o 'undred pesos in cash Dhich 1 Dill #ay in s!gar in the month of +an!ary or (ebr!ary of the coming year$ at the #rice r!ling on the day of delivering the s!gar into his Dareho!se$ and 1 Dill #ay him interest at the rate of half a cuartillo #er month on each #eso$ beginning on this date !ntil the day of the settlement; and if 1 can not #ay in f!ll$ a balance shall be str!cB$ shoDing the amo!nt o!tstanding at the end of each +!ne$ incl!ding interest$ and s!ch as may be o!tstanding against me shall be considered as ca#ital Dhich 1 Dill alDays #ay in s!gar$ together Dith the interest mentioned above. 1 f!rther #romise that 1 Dill sell to the said 2eQor OsmeQa all the s!gar that 1 may harvest$ and as a g!arantee$ #ledge as sec!rity all of my #resent and f!t!re #ro#erty$ and as s#ecial sec!rity the ho!se Dith tile roof and gro!nd floor of stone in Dhich 1 live in -agina; in #roof Dhereof$ 1 sign this doc!ment$ and he shall be entitled to maBe claim against me at the e3#iration of the term stated in this doc!ment. (2igned) =&O& %"4".

8itnessesE ("C2AO -=W".O2". (%"& 12 O 4=,"..=. On the 26th day of October$ 1)/1$ the defendant e3ec!ted and delivered to the said Hictoriano OsmeQa the folloDing contractE =PI1*1A *. =*C$ 1ctober 6=, 5?:5. On this date 1 have asBed for f!rther loan and have received from ,on Hictoriano OsmeQa the s!m of seventy #esos in cash$ fifty #esos of Dhich 1 have loaned to ,on =varisto -eQares$ Dhich De Dill #ay in s!gar in the month of +an!ary of the coming year according to the former conditions. (2igned) =&O&" %"4". -5' 2' -6'

(rom ,on =varisto -eQares ,oQa enona %ama

80

%eceived V =varisto -eQares. 2ome time after the e3ec!tion and delivery of the above contracts$ the said Hictoriano OsmeQa died. 1n the settlement and division of the #ro#erty of his estate the above contracts became the #ro#erty of one of his estate the above contracts became the #ro#erty of one of his heirs$ "g!stina %afols. .ater$ the date does not a##ear$ the said "g!stina %afols ceded to the #resent #laintiff all of her right and interest in said contracts. On the 15th day of 4arch$ 1/'2 the #laintiff #resented the contracts to the defendant for #ayment and she acBnoDledged her res#onsibility !#on said contracts by an indorsement !#on them in the folloDing lang!ageE =PI1*1A . =*C$ Marc' 59, 5:86. On this date 1 hereby #romise$ in the #resence of tDo Ditness$ that if the ho!se of strong materials in Dhich 1 live in -agina is sold$ 1 Dill #ay my indebtedness to ,on Aomas OsmeQa as set forth in this doc!ment. (2igned) =&O&" %"4".

Ahe defendant not having #aid the amo!nt d!e on said contracts; the #laintiff$ !#on the 26th day of +!ne$ 1/'6$ commenced the #resent action in the o!rt of (irst 1nstance of the -rovince of eb!. Ahe com#laint filed in said ca!se alleged the e3ec!tion and delivery of the above contracts$ the demand for #ayment$ and the fail!re to #ay on the #art of the defendant$ and the #rayer for a 0!dgment for the amo!nt d!e on the said contracts. Ahe defendant ansDered by filing a general denial and setting !# the s#ecial defense of #rescri#tion. Ahe case Das finally bro!ght on to trial in the o!rt of (irst 1nstance$ and the only Ditness #rod!ced d!ring the trial Das the #laintiff himself. Ahe defendant did not offer any #roof Dhatever in the loDer co!rt. "fter hearing the evidence add!ced d!ring the trial$ the loDer co!rt rendered a 0!dgment in favor of the #laintiff and against the defendant for the s!m of -2'' Dith interest at the rate of 1) 374 #er cent #er ann!m$ from the 15th day of &ovember$ 1)/'$ and for the s!m of -2' Dith interest at the rate of 1) 374 #er cent #er ann!m$ from the 26th day of October$ 1)/1$ !ntil the said s!ms Dere #aid. (rom this 0!dgment the defendant a##ealed. Ahe loDer co!rt fo!nd that -5' of the -6' mentioned in =3hibit * had been borroDed by the defendant$ b!t by one =varisto -eQares; therefore the defendant had no res#onsibility for the #ayment of the said -5'. Ahe only F!estions raised by the a##ellant Dere F!estions of fact. Ahe a##ellant alleges that the #roof add!ced d!ring the trial of the ca!se Das not s!fficient to s!##ort the findings of the loDer co!rt. 1t Das s!ggested d!ring the disc!ssion of the case in this co!rt that$ in the acBnoDledgment above F!oted of the indebtedness made by the

81

defendant$ she im#osed the condition that she Do!ld #ay the obligation if she sold her ho!se. 1f that statement fo!nd in her acBnoDledgment of the indebtedness sho!ld be regarded as a condition$ it Das a condition Dhich de#ended !#on her e3cl!sive Dill$ and is therefore$ void. ("rt. 1115$ ivil ode.) Ahe acBnoDledgment$ therefore$ Das an absol!te acBnoDledgment of the obligation and Das s!fficient to #revent the stat!te of limitation from barring the action !#on the original contract. 8e are satisfied$ from all of the evidence add!ced d!ring the trial$ that the 0!dgment of the loDer co!rt sho!ld be affirmed. 2o ordered. Arellano, $. 0., Torres, $arson, and Moreland, 00., conc!r.

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila =& *"& G.%. &o. .-5266 October 26$ 1/53

.CS I=%4O2"$ as administratri3 of the 1ntestate =state of (ernando Iermosa$ 2r.$ and (=%&"&,O I=%4O2"$ +%.$ #etitioners$ vs. =6I7$NIO 8. +ON,$/$, res#ondent.

82

Manuel 1. $'an for petitioners. 0acinto %. Bo'ol for respondent. +$B/$!O/, J.E Ahis is an a##eal by Day of certiorari against a decision of the o!rt of "##eals$ fo!rth division$ a##roving certain claims #resented by =#ifanio 4. .ongara against the testate estate of (ernando Iermosa$ 2r. Ahe claims are of three Binds$ namely$ -2$341.41 re#resenting credit advances made to the intestate from 1/32 to 1/44$ -12$/24.12 made to his son (rancisco Iermosa$ and -3$662 made to his grandson$ (ernando Iermosa$ +r. from 1/45 to 1/46$ after the death of the intestate$ Dhich occ!rred in ,ecember$ 1/44. Ahe claimant #resented evidence and the o!rt of "##eals fo!nd$ in accordance thereDith$ that the intestate had asBed for the said credit advances for himself and for the members of his family Lon condition that their #ayment sho!ld be made by (ernando Iermosa$ 2r. as soon as he receive f!nds derived from the sale of his #ro#erty in 2#ain.L laimant had testified Ditho!t o##osition that the credit advances Dere to be L#ayable as soon as (ernando Iermosa$ 2r.Ms #ro#erty in 2#ain Das sold and he receive money derived from the sale.L Ahe o!rt of "##eals held that #ayment of the advances did not become d!e !ntil the administratri3 received the s!m of -2'$''' from the b!yer of the #ro#erty. C#on a!thori<ation of the #robate co!rt in October$ 1/46$ and the same Das #aid for s!bseF!ently. Ahe laim Das filed on October 2$ 1/4). 1t is contended on this a##eal that the obligation contracted by the intestate Das s!b0ect to a condition e3cl!sively de#endent !#on the Dill of the debtor (a condicion potestativa) and therefore n!ll and void$ in accordance Dith article 1115 of the old ivil ode. Ahe case of 1smeFa vs. %ama$ (14 -hil. //) is cited to s!##ort a##ellants contention. 1n this case$ this co!rt seems to have filed that a #romise to #ay an indebtedness Lif a ho!se of strong materials is soldL is an obligation the #erformance of Dhich de#ended on the Dill of the debtor. 8e have e3amined this case and De find that the s!##osed r!ling Das merely an ass!m#tion and the same Das not the act!al r!ling of the case. " caref!l consideration of the condition !#on Dhich #ayment of the s!ms advanced Das made to de#end$ Las soon as he (intestate) receive f!nds derived from the sale of his #ro#erty in 2#ain$L discloses the fact that the condition in F!estion does not de#end e3cl!sively !#on the Dill of the debtor$ b!t also !#on other circ!mstances beyond his #oDer or control. 1f the condition Dere Lif he decides to sell his ho!se.L or Lif he liBes to #ay the s!ms advanced$L or any other condition of similar im#ort im#lying that !#on him (the debtor) alone #ayment Do!ld de#end$ the condition Do!ld be protestativa$ de#endent e3cl!sively !#on his Dill or discretion. 1n the form that the condition Das fo!nd by the o!rt of "##eals hoDever the condition im#lies that the intestate had already decided to sell his ho!se$ or at least that he had made his creditors believe that he had done so$ and that all that De needed to maBe his obligation (to #ay his indebtedness) demandable is that the sale be cons!mmated and the #rice thereof remitted to the islands. &ote that if the intestate Do!ld #revent or Do!ld have #revented the cons!mmation of the sale vol!ntarily$ the condition Do!ld be or Do!ld have been deemed or considered com#lied Dith (article 111/$ old ivil ode).Ahe Dill to sell on the #art of the intestate Das$ therefore$ #resent in fact$ or #res!med legally to e3ist$ altho!gh the #rice and other conditions thereof Dere still Dithin his discretion and final a##roval. *!t in addition of the sale to him (the intestate-vendor)$ there Dere still other conditions that had no conc!r to effect the sale$ mainly that of the #resence of a b!yer$ ready$ able

83

and Dilling to #!rchase the #ro#erty !nder the conditions demanded by the intestate. 8itho!t s!ch a b!yer the sale co!ld not be carried o!t or the #roceeds thereof sent to the islands. 1t is evident$ therefore sent to the islands. 1t is evident$ therefore$ that the condition of the obligation Das not a #!rely #rotestative one$ de#ending e3cl!sively !#on the Dill of the intestate$ b!t a mi3ed one$ de#ending #artly !#on the Dill of intestate and #artly !#on chance$ i.e.$ the #resence of a b!yer of the #ro#erty for the #rice and !nder the conditions desired by the intestate. Ahe obligation is clearly governed by the second sentence of article 1115 of the old ivil ode () 4anresa$ 126). Ahe condition is$ besides$ a s!s#ensive condition$ !#on the ha##ening of Dhich the obligation to #ay is made de#endent. "nd !#on the ha##ening of the condition$ the debt became immediately d!e and demandable. ("rticle 1114$ old ivil ode; ) 4anresa$ 11/). One other #oint needs to be considered$ and this is the fact that the sale Das not effected in the lifetime of the debtor (the intestate)$ b!t after his death and by his administrator$ the very Dife of the claimant. On this last circ!mstance De m!st bear in mind that the o!rt of "##eals fo!nd no evidence to shoD that the claim Das the #rod!ct of a coll!sion or connivance betDeen the administratri3 and the claimant. Ahat there Das really a #romise made by the intestate to #ay for the credit advances maybe im#lied from the fact that the recei#ts thereof had been #reserved. Iad the advances been made Ditho!t intention of demanding their #ayment later$ said recei#ts Do!ld not have been #reserved. %eg!larity of the advances and the close relationshi# betDeen the intestate and the claimant also s!##ort this concl!sion. "s to the fact that the s!s#ensive condition tooB #lace after the death of the debtor$ and that advances Dere made more than ten years before the sale$ De s!##orted in o!r concl!sion that the same is immaterial by 2anche< %oman$ Dho says$ among other things$ as to conditional obligationsE 1a .a obligacion contract!al afectada #or condicion s!s#ensiva. no es e3igible hasta F!e se c!m#la la condicion$ . . . 2 a =l c!m#limiento de la condicion s!s#ensiva retrotae los efectos del acto 0!ridico originario de la obligacion a F!e aF!ella afecta$ al tiem#o de lacelebracion de este; 3 a .a referida retroaccion$ no solo tiene l!gar c!ando el c!m#limiento de la condicion se verifica en vida de los contrayentes$ F!e tambien se #rod!ce c!ando aF!el se reali<a des#!es de la m!erte de estos. (4 2anche< %oman$ #. 122) (=m#hasis s!##lied.) "s the obligation retroacts to the date Dhen the contract Das entered into$ all amo!nts advanced from the time of the agreement became d!e$ !#on the ha##ening of the s!s#ensive condition. "s the obligation to #ay became d!e and demandable only Dhen the ho!se Das sold and the #roceeds received in the islands$ the action to recover the same only accr!ed$ Dithin the meaning of the stat!te of limitations$ on date the money became available here hence the action to recover the advances has not yet #rescribed. Ahe above considerations dis#ose of the most im#ortant F!estions raised on this a##eal. 1t is also contended that the third gro!# of claims$ i.e.$ credits f!rnished the intestateMs grandson after his (intestateMs) death in 1/44$ sho!ld have been alloDed. 8e find merit

84

in this contention. =ven if a!thori<ation to f!rnish necessaries to his grandson may have been given$ this a!thori<ation co!ld not be made to e3tend after his death$ for tDo obvio!s reasons. (irst beca!se the obligation to f!rnish s!##ort is #ersonal and is e3ting!ished !#on the death of the #erson obliged to give s!##ort(article 15'$ old ivil ode)$ and second beca!se !#on the death of a #rinci#al (the intestate in this case)$ his agentMs a!thority or a!thori<ation is deemed terminated (article 1632$ old ivil ode). Ahat #art of the decision alloDing this gro!# of claims$ amo!nting to -3$662 sho!ld be reversed. One last contention of the a##ellant is that the claims are barred by the stat!te of nonclaims. 1t does not a##ear from the record that this F!estion Das ever raised in any of the co!rts beloD. 8e are$ therefore$ Ditho!t a!thority !nder o!r r!les to consider this iss!e at this stage of the #roceedings. Ahe 0!dgment a##ealed from is hereby affirmed in so far as it a##roves the claims of a##ellee in the amo!nts of -2$341 and -12$/42.12$ and reversed as to that of -3$662. 8itho!t costs. Beng&on, Padilla, Tuason, Montema"or, %e"es, 0ugo, and Bautista Angelo, 00., conc!r.

-eparate Opinions 6$/$-, C. J., conc!rring and dissentingE 1 conc!r in the ma0ority decision insofar as it reverses the a##ealed 0!dgment alloDing the claim for -3$662$ b!t dissent therefrom insofar as it affirms the a##ealed 0!dgment a##roving a##elleeMs other claims. Ahe #rinci#al F!estion is Dhether the sti#!lation to #ay the advances Lon condition that their #ayment sho!ld be made by (ernando Iermosa$ 2r. as soon as he receives f!nds derived from the sale of his #ro#erty in 2#ain$ and maBing said advances L#ayable as soon as (ernando Iermosa$ 2r.Ms #ro#erty in 2#ain Das sold and he received money derived from the sale$L condicion potestativa and therefore n!ll and void in accordance Dith article 1115 of the old ivil ode. 4y ansDer is in the affirmative$ beca!se it is very obvio!s that the matter of the sale of the ho!se rested on the sole Dill of the debtor$ !naffected by any o!tside consideration or infl!ence. Ahe ma0ority admit that if the condition Dere Lif he decides to sell his ho!seL or Lif he liBes to #ay the s!ms advanced$ the same Do!ld be #otestative. 1 thinB a mere #lay or Dords is invoBed$ as 1 cannot see any s!bstantial difference. Cnder the condition im#osed by (ernando Iermosa$ 2r.$ it is immaterial Dhether or not he had already decided to sell his ho!se$ since there is no #retence that acce#table conditions of the sale had been made the s!b0ect of an agreement$ s!ch that if s!ch conditions #resented themselves the debtor Do!ld be bo!nd to #roceed Dith the sale. 1n the case at bar$ the terms are still s!b0ect to the sale 0!dgment V if not Dhims and ca#rice V of (ernando Iermosa$ 2r. 1n fact no sale Das effected d!ring his lifetime.

85

"s the condition above referred to is n!ll and void$ the debt res!lting from the advances made to (ernando Iermosa$ 2r. became either immediately demandable or #ayable Dithin a term to be fi3ed by the co!rt. 1n both cases the action has #rescribed after the la#se of ten years. 1n the case of Gon<ales vs. ,e +ose (66 -hil.$ 36/$ 361)$ this co!rt already held as folloDsE 8e hold that the tDo #romissory notes are governed by article 112) beca!se !nder the terms thereof the #laintiff intended to grant the defendant a #eriod Dithin Dhich to #ay his debts. "s the #romissory notes do not affi3 this #eriod$ it is for the co!rt to fi3 the same. ( iting cases.) Ahe action to asB the co!rt to fi3 the #eriod has already #rescribed in accordance Dith section 43 (1) of the ode of ivil -roced!re. Ahis #eriod of #rescri#tion is ten years$ Dhich has already ela#sed from the e3ec!tion of the #romissory notes !ntil the filing of the action on +!ne 1$ 1/34. Ahe action Dhich sho!ld be bro!ght in accordance Dith articles 112) is different from the action for the recovery of the amo!nt of the notes$ altho!gh the effects of both are the same$ being$ liBe other civil actions$ s!b0ect to the r!les of #rescri#tion. Ahe ma0ority also contend that the condition in F!estion de#ended on other factors than the sole Dill of the debtor$ and cite the #resence of a b!yer$ ready$ able and Dilling to #!rchase the #ro#erty. Ahis is of no moment$ beca!se$ as already stated$ in the absence of any contract setting forth the minim!m or ma3im!m terms Dhich Do!ld be acce#table to the debtor$ nobody co!ld legally com#el (ernando Iermosa$ 2r. to maBe any sale.

86

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila =& *"& ,./. No. +0%2%)' O tober 2, %'22

8. !. T$@+O/, #laintiff-a##ellant$ vs. ;@ TI=N, 6I$O and T$N +I;$N, doing business under the fir: na:e and st9le of Tan +iuan . Co:pan9,defendants. ;9 TI=N, 6I$O, defendant-a##ellant. $o'n, 2is'er and +e3itt and 3illiam $. Brad" for plaintiff-appellant. Gabriel (a 1 for defendant-appellant U" Tieng Piao. $rossfield and 1IBrien for Tan (iuan and Tan (i"an and $o.

-T/==T, J.: Ahis case comes by a##eal from the o!rt of (irst 1nstance of the city of 4anila$ in a case Dhere the co!rt aDarded to the #laintiff the s!m of -3''$ as damages for breach of contract. Ahe #laintiff a##eals on the gro!nd that the amo!nt of damages aDarded is inadeF!ate; Dhile the defendant Cy Aieng -iao a##eals on the gro!nd that he is not liable at all. Ahe 0!dgment having been heretofore affirmed by !s in a brief o#inion$ De noD avail o!rselves of the occasion of the filing of a motion to rehear by the attorneys for the #laintiff to modify the 0!dgment in a slight meas!re and to state more f!lly the reasons !nderlying o!r decision. 1t a##ears that on ,ecember 12$ 1/1)$ the #laintiff contracted his services to Aan .i!an and o.$ as s!#erintendent of an oil factory Dhich the latter contem#lated establishing in this city. Ahe #eriod of the contract e3tended over tDo years from the date mentioned; and the salary Das to be at the rate of -6'' #er month d!ring the first year and -6'' #er month d!ring the second$ Dith electric light and Dater for domestic cons!m#tion$ and a residence to live in$ or in lie! thereof -6' #er month. "t the time this agreement Das made the machinery for the contem#lated factory had not been acF!ired$ tho!gh ten e3#ellers had been ordered from the Cnited 2tates; and among the sti#!lations inserted in the contract Dith the #laintiff Das a #rovision to the folloDing effectE 1t is !nderstood and agreed that sho!ld the machinery to be installed in the said factory fail$ for any reason$ to arrive in the city of 4anila Dithin a #eriod of si3 months from date hereof$ this contract may be cancelled by the #arty of the second #art at its o#tion$ s!ch cancellation$ hoDever$ not to occ!r before the e3#iration of s!ch si3 months.

87

Ahe machinery above referred to did not arrive in the city of 4anila Dithin the si3 months s!cceeding the maBing of the contract; nor Das other eF!i#ment necessary for the establishment of the factory at any time #rovided by the defendants. Ahe reason for this does not a##ear Dith certainty$ b!t a #re#onderance of the evidence is to the effect that the defendants$ in the first months of 1/1/$ seeing that the oil b!siness no longer #romised large ret!rns$ either cancelled the order for the machinery from choice or Dere !nable to s!##ly the ca#ital necessary to finance the #ro0ect. "t any rate on +!ne 2)$ 1/1/$ availing themselves in #art of the o#tion given in the cla!se above F!oted$ the defendants comm!nicated in Driting to the #laintiff the fact that they had decided to rescind the contract$ effective +!ne 3'th then c!rrent$ !#on Dhich date he Das discharged. Ahe #laintiff there!#on instit!ted this action to recover damages in the amo!nt of -13$'''$ covering salary and #erF!isites d!e and to become d!e !nder the contract. Ahe case for the #laintiff #roceeds on the idea that the sti#!lation above F!oted$ giving to the defendants the right to cancel the contract !#on the contingency of the nonarrival of the machinery in 4anila Dithin si3 months$ m!st be !nderstood as a##licable only in those cases Dhere s!ch nonarrival is d!e to ca!ses not having their origin in the Dill or act of the defendants$ as delays ca!sed by striBes or !nfavorable conditions of trans#orting by land or sea; and it is !rged that the right to cancel cannot be admitted !nless the defendants affirmatively shoD that the fail!re of the machinery to arrive Das d!e to ca!ses of that character$ and that it did not have its origin in their oDn act or volition. 1n this connection the #laintiff relies on article 1256 of the ivil ode$ Dhich is to the effect that the validity and f!lfillment of contracts cannot be left to the Dill of one of the contracting #arties$ and to article 111/$ Dhich says that a condition shall be deemed f!lfilled if the obligor intentially im#edes its f!lfillment. 1t Dill be noted that the lang!age conferring the right of cancellation !#on the defendants is broad eno!gh to cover any case of the nonarrival of the machinery$ d!e to Dhatever ca!se; and the stress in the e3#ression Lfor any reasonL sho!ld evidently fall !#on the Dord Lany.L 1t m!st folloD of necessity that the defendants had the right to cancel the contract in the contingency that occ!rred$ !nless some clear and s!fficient reason can be add!ced for limiting the o#eration of the Dords conferring the right of cancellation. C#on this #oint it is o!r o#inion that the lang!age !sed in the sti#!lation sho!ld be given effect in its ordinary sense$ Ditho!t technicality or circ!mvention; and in this sense it is believed that the #arties to the contract m!st have !nderstood it. "rticle 1256 of the ivil ode in o!r o#inion creates no im#ediment to the insertion in a contract for #ersonal service of a resol!tory condition #ermitting the cancellation of the contract by one of the #arties. 2!ch a sti#!lation$ as can be readily seen$ does not maBe either the validity or the f!lfillment of the contract de#endent !#on the Dill of the #arty to Dhom is conceded the #rivilege of cancellation; for Dhere the contracting #arties have agreed that s!ch o#tion shall e3ist$ the e3ercise of the o#tion is as m!ch in the f!lfillment of the contract as any other act Dhich may have been the s!b0ect of agreement. 1ndeed$ the cancellation of a contract in accordance Dith conditions agreed !#on beforehands is f!lfillment. 1n this connection$ De note that the commentator 4anresa has the folloDing observation Dith res#ect to article 1256 of the ivil ode. 2ays heE L1t is entirely licit to leave f!lfillment to the Dill of either of the #arties in the negative form of rescission$ a case

88

freF!ent in certain contracts (the letting of service for hire$ the s!##lying of electrical energy$ etc.)$ for in s!ch s!##osed case neither is the article infringed$ nor is there any lacB of eF!ality betDeen the #ersons contracting$ since they remain Dith the same fac!lties in res#ect to f!lfillment.L (4anresa$ 2d ed.$ vol. )$ #. 61'.) 5a p'Jl.net Cndo!btedly one of the conseF!ences of this sti#!lation Das that the em#loyers Dere left in a #osition Dhere they co!ld dominate the contingency$ and the res!lt Das abo!t the same as if they had been given an !nF!alified o#tion to dis#ense Dith the services of the #laintiff at the end of si3 months. *!t this circ!mstance does not maBe the sti#!lation illegal. Ahe case of Iall vs. IardaBer (61 (la.$ 266) cited by the a##ellant Aaylor$ tho!gh s!#erficially someDhat analogo!s$ is not #recisely in #oint. 1n that case one IardaBer had contracted to render com#etent and efficient service as manager of a cor#oration$ to Dhich #osition it Das !nderstood he Das to be a##ointed. 1n the same contract it Das sti#!lated that if Lfor any reasonL IardaBer sho!ld not be given that #osition$ or if he sho!ld not be #ermitted to act in that ca#acity for a stated #eriod$ certain things Do!ld be done by Iall. C#on being installed in the #osition aforesaid$ IardaBer failed to render efficient service and Das discharged. 1t Das held that Iall Das released from the obligation to do the things that he had agreed to #erform. 2ome of the 0!dges a##ear to have tho!ght that the case t!rned on the meaning of the #hrase Lfor any reason$L and the familiar ma3im Das cited that no man shall taBe advantage of his oDn Drong. Ahe res!lt of the case m!st have been the same from Dhatever #oint of vieD$ as there Das an admitted fail!re on the #art of IardaBer to render com#etent service. 1n the #resent case there Das no breach of contract by the defendants; and the arg!ment to the contrary a##arently s!ffers from the logical defect of ass!ming the very #oint at iss!e. *!t it Dill be said that the F!estion is not so m!ch one concerning the legality of the cla!se referred to as one concerning the inter#retation of the resol!tory cla!se as Dritten$ the idea being that the co!rt sho!ld ad0!st its inter#retation of said cla!se to the s!##osed #rece#ts of article 1256$ by restricting its o#eration e3cl!sively to cases Dhere the nonarrival of the machinery may be d!e to e3traneo!s ca!ses not referable to the Dill or act of the defendants. *!t even Dhen the F!estion is vieDed in this as#ect their res!lt is the same$ beca!se the arg!ment for the restrictive inter#retation evidently #roceeds on the ass!m#tion that the cla!se in F!estion is illegal in so far as it #!r#orts to concede to the defendants the broad right to cancel the contract !#on nonarrival of the machinery d!e to an" ca!se; and the debate ret!rns again to the #oint Dhether in a contract for the #restation of service it is laDf!l for the #arties to insert a #rovision giving to the em#loyer the #oDer to cancel the contract in a contingency Dhich may be dominated by himself. C#on this #oint Dhat has already been said m!st s!ffice. "s De vieD the case$ there is nothing in article 1256 Dhich maBes it necessary for !s to Dar# the lang!age !sed by the #arties from its nat!ral meaning and thereby in legal effect to restrict the Dords Lfor any reason$L as !sed in the contract$ to mean Lfor any reason not 'aving its origin in t'e ill or acts of t'e defendants.L Ao im#ose this inter#retation !#on those Dords Do!ld in o!r o#inion constit!te an !n0!stifiable invasion of the #oDer of the #arties to establish the terms Dhich they deem advisable$ a right Dhich is e3#ressed in article 1255 of the ivil ode and constit!tes one of the most f!ndamental conce#tions of contract right enshrined in the ode.

89

Ahe vieD already e3#ressed Dith regard to the legality and inter#retation of the cla!se !nder consideration dis#oses in a great meas!re of the arg!ment of the a##ellant in so far as the same is based on article 111/ of the ivil ode. Ahis #rovision s!##oses a case Dhere the obligor intentionally im#edes the f!lfillment of a condition Dhich Do!ld entitle the obligee to e3act #erformance from the obligor; and an ass!m#tion !nderlying the #rovision is that the obligor #revents the obligee from #erforming some act Dhich the obligee is entitled to #erform as a condition #recedent to the e3action of Dhat is d!e to him. 2!ch an act m!st be considered !nDarranted and !nlaDf!l$ involving per se a breach of the im#lied terms of the contract. Ahe article can have no a##lication to an e3ternal contingency Dhich$ liBe that involved in this case$ is laDf!lly Dithin the control of the obligor. 1n 2#anish 0!ris#r!dence a condition liBe that here !nder disc!ssion is designated by 4anresa a fac!ltative condition (vol. )$ #. 611)$ and De gather from his comment on articles 1115 and 111/ of the ivil ode that a condition$ fac!ltative as to the debtor$ is obno3io!s to the first sentence contained in article 1115 and renders the Dhole obligation void (vol. )$ #. 131). Ahat statement is no do!bt correct in the sense intended by the learned a!thor$ b!t it m!st be remembered that he evidently has in mind the s!s#ensive condition$ s!ch as is contem#lated in article 1115. 2aid article can have no a##lication to the resol!tory condition$ the validity of Dhich is recogni<ed in article 1113 of the ivil ode. 1n other Dords$ a condition at once fac!ltative and resol!tory may be valid even tho!gh the condition is made to de#end !#on the Dill of the obligor. 1f it Dere a##arent$ or co!ld be demonstrated$ that the defendants Dere !nder a #ositive obligation to ca!se the machinery to arrive in 4anila$ they Do!ld of co!rse be liable$ in the absence of affirmative #roof shoDing that the nonarrival of the machinery Das d!e to some ca!se not having its origin in their oDn act or Dill. Ahe contract$ hoDever$ e3#resses no s!ch #ositive obligation$ and its e3istence cannot be im#lied in the fact of sti#!lation$ defining the conditions !nder Dhich the defendants can cancel the contract. O!r concl!sion is that the o!rt of (irst 1nstance committed no error in re0ecting the #laintiffMs claim in so far as damages are so!ght for the #eriod s!bseF!ent to the e3#iration of the first si3 months$ b!t in assessing the damages d!e for the si3-month #eriod$ the trial 0!dge evidently overlooBed the item of -6'$ s#ecified in the #laintiffMs fo!rth assignment of error$ Dhich re#resents comm!tation of ho!se rent for the month of +!ne$ 1/1/. Ahis amo!nt the #laintiff is clearly entitled to recover$ in addition to the -3'' aDarded in the co!rt beloD. 8e note that Cy Aieng -iao$ Dho is s!ed as a #artner Dith Aan .i!an$ a##ealed from the 0!dgment holding him liable as a member of the firm of Aan .i!an and o.; and it is insisted in his behalf that he Das not bo!nd by the act of Aan .i!an as manager of Aan .i!an and o. in em#loying the #laintiff. C#on this De Dill merely say that the concl!sion stated by the trial co!rt in the ne3t to the last #aragra#h of the decision Dith res#ect to the liability of this a##ellant in o!r o#inion in conformity Dith the laD and facts. Ahe 0!dgment a##ealed from Dill be modified by declaring that the defendants shall #ay to the #laintiff the s!m of -36'$ instead of -3''$ as alloDed by the loDer co!rt$ and as th!s modified the 0!dgment Dill be affirmed Dith interest from &ovember 4$ 1/1/$ as #rovided in section 51' of the ode of ivil -roced!re$ and Dith costs. 2o ordered.

90

Araullo, $.0., 0o'nson, Malcolm, AvanceFa, ,illamor, 1strand, 0o'ns and %omualde&, 00., concur.

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila =& *"& ,./. No. +0%21&) 8ar h ', %'22

-8ITA, B=++ . CO., +T!., #laintiff-a##ellant$ vs. VIC=NT= -OT=+O 8$TTI, defendant-a##ellant. %oss and (a rence and ) ald ). Selp' for plaintiff-appellant. %amon Sotelo for defendant-appellant. /O8;$+!=I, J.: 1n "!g!st$ 1/1)$ the #laintiff cor#oration and the defendant$ 4r. Hicente 2otelo$ entered into contracts Dhereby the former obligated itself to sell$ and the latter to #!rchase from it$ tDo steel tanBs$ for the total #rice of tDenty-one tho!sand #esos (-21$''')$ the same to be shi##ed from &eD @orB and delivered at 4anila LDithin three or fo!r months;L tDo e3#ellers at the #rice of tDenty five tho!sand #esos (-25$''') each$ Dhich Dere to be shi##ed from 2an (rancisco in the month of 2e#tember$ 1/1)$ or as soon as #ossible; and tDo electric motors at the #rice of tDo tho!sand #esos (-2$''') each$ as to the delivery of Dhich sti#!lation Das made$ co!ched in these DordsE L"##ro3imate delivery Dithin ninety days. V Ahis is not g!aranteed.L Ahe tanBs arrived at 4anila on the 26th of "#ril$ 1/1/E the e3#ellers on the 26th of October$ 1/1); and the motors on the 26th of (ebr!ary$ 1/1/. Ahe #laintiff cor#oration notified the defendant$ 4r. 2otelo$ of the arrival of these goods$ b!t 4r. 2otelo ref!sed to receive them and to #ay the #rices sti#!lated. Ahe #laintiff bro!ght s!it against the defendant$ based on fo!r se#arate ca!ses of action$ alleging$ among other facts$ that it immediately notified the defendant of the arrival of the goods$ and asBed instr!ctions from him as to the delivery thereof$ and that the defendant ref!sed to receive any of them and to #ay their #rice. Ahe #laintiff$ f!rther$ alleged that

91

the e3#ellers and the motors Dere in good condition. ("mended com#laint$ #ages 16-3'$ *ill of =3ce#tions.) 1n their ansDer$ the defendant$ 4r. 2otelo$ and the intervenor$ the 4anila Oil %efining and *y--rod!cts o.$ 1nc.$ denied the #laintiffMs allegations as to the shi#ment of these goods and their arrival at 4anila$ the notification to the defendant$ 4r. 2otelo$ the latterMs ref!sal to receive them and #ay their #rice$ and the good condition of the e3#ellers and the motors$ alleging as s#ecial defense that 4r. 2otelo had made the contracts in F!estion as manager of the intervenor$ the 4anila Oil %efining and *y--rod!cts o.$ 1nc Dhich fact Das BnoDn to the #laintiff$ and that Lit Das only in 4ay$ 1/1/$ that it notified the intervenor that said tanBs had arrived$ the motors and the e3#ellers having arrived incom#lete and long after the date sti#!lated.L "s a co!nterclaim or set-off$ they also allege that$ as a conseF!ence of the #laintiffMs delay in maBing delivery of the goods$ Dhich the intervenor intended to !se in the man!fact!re of cocoan!t oil$ the intervenor s!ffered damages in the s!ms of one h!ndred si3teen tho!sand seven h!ndred eightythree #esos and ninety-one centavos (-116$6)3./1) for the nondelivery of the tanBs$ and tDenty-one tho!sand tDo h!ndred and fifty #esos (-21$25') on acco!nt of the e3#ellers and the motors not having arrived in d!e time. Ahe case having been tried$ the co!rt beloD absolved the defendants from the com#laint insofar as the tanBs and the electric motors Dere concerned$ b!t rendered 0!dgment against them$ ordering them to Lreceive the aforesaid e3#ellers and #ay the #laintiff the s!m of fifty tho!sand #esos (-5'$'')$ the #rice of the said goods$ Dith legal interest thereon from +!ly 26$ 1/1/$ and costs.L *oth #arties a##eal from this 0!dgment$ each assigning several errors in the findings of the loDer co!rt. Ahe #rinci#al #oint at iss!e in this case is Dhether or not$ !nder the contracts entered into and the circ!mstances established in the record$ the #laintiff has f!lfilled$ in d!e time$ its obligation to bring the goods in F!estion to 4anila. 1f it has$ then it is entitled to the relief #rayed for; otherDise$ it m!st be held g!ilty of delay and liable for the conseF!ences thereof. Ao solve this F!estion$ it is necessary to determine Dhat #eriod Das fi3ed for the delivery of the goods. "s regards the tanBs$ the contracts " and * (#ages 61 and 62 of the record) are similar$ and in both of them De find this cla!seE Ao be delivered Dithin 3 or 4 months V Ahe #romise or indication of shi#ment carries Dith it absol!tely no obligation on o!r #art V Government reg!lations$ railroad embargoes$ lacB of vessel s#ace$ the e3igencies of the reF!irement of the Cnited 2tates Government$ or a n!mber of ca!ses may act to entirely vitiate the indication of shi#ment as stated. 1n other Dords$ the order is acce#ted on the basis of shi#ment at 4illMs convenience$ time of shi#ment being merely an indication of Dhat De ho#e to accom#lish. 1n the contract =3hibit (#age 63 of the record)$ Dith reference to the e3#ellers$ the folloDing sti#!lation a##earsE

92

Ahe folloDing articles$ hereinbeloD more #artic!larly described$ to be shi##ed at 2an (rancisco Dithin the month of 2e#tember 71)$ or as soon as #ossible. V ADo "nderson oil e3#ellers . . . . "nd in the contract relative to the motors (=3hibit ,$ #age 64$ rec.) the folloDing a##earsE "##ro3imate delivery Dithin ninety days. V Ahis is not g!aranteed. V Ahis sale is s!b0ect to o!r being able to obtain -riority ertificate$ s!b0ect to the Cnited 2tates Government reF!irements and also s!b0ect to confirmation of man!fact!res. 1n all these contracts$ there is a final cla!se as folloDsE Ahe sellers are not res#onsible for delays ca!sed by fires$ riots on land or on the sea$ striBes or other ca!ses BnoDn as L(orce 4a0e!reL entirely beyond the control of the sellers or their re#resentatives. Cnder these sti#!lations$ it cannot be said that any definite date Das fi3ed for the delivery of the goods. "s to the tanBs$ the agreement Das that the delivery Das to be made LDithin 3 or 4 months$L b!t that #eriod Das s!b0ect to the contingencies referred to in a s!bseF!ent cla!se. 8ith regard to the e3#ellers$ the contract says LDithin the month of 2e#tember$ 1/1)$L b!t to this is added Lor as soon as #ossible.L "nd Dith reference to the motors$ the contract contains this e3#ression$ L"##ro3imate delivery Dithin ninety days$L b!t right after this$ it is noted that Lthis is not g!aranteed.L Ahe oral evidence falls short of fi3ing s!ch #eriod. (rom the record it a##ears that these contracts Dere e3ec!ted at the time of the Dorld Dar Dhen there e3isted rigid restrictions on the e3#ort from the Cnited 2tates of articles liBe the machinery in F!estion$ and maritime$ as Dell as railroad$ trans#ortation Das diffic!lt$ Dhich fact Das BnoDn to the #arties; hence cla!ses Dere inserted in the contracts$ regarding LGovernment reg!lations$ railroad embargoes$ lacB of vessel s#ace$ the e3igencies of the reF!irements of the Cnited 2tates Government$L in connection Dith the tanBs and L-riority ertificate$ s!b0ect to the Cnited 2tate Government reF!irements$L Dith res#ect to the motors. "t the time of the e3ec!tion of the contracts$ the #arties Dere not !nmindf!l of the contingency of the Cnited 2tates Government not alloDing the e3#ort of the goods$ nor of the fact that the other foreseen circ!mstances therein stated might #revent it. onsidering these contracts in the light of the civil laD$ De cannot b!t concl!de that the term Dhich the #arties attem#ted to fi3 is so !ncertain that one cannot tell 0!st Dhether$ as a matter of fact$ those articles co!ld be bro!ght to 4anila or not. 1f that is the case$ as De thinB it is$ the obligations m!st be regarded as conditional. Obligations for the #erformance of Dhich a day certain has been fi3ed shall be demandable only Dhen the day arrives. " day certain is !nderstood to be one Dhich m!st necessarily arrive$ even tho!gh its date be !nBnoDn.

93

-f t'e uncertaint" s'ould consist in t'e arrival or non-arrival of t'e da", t'e obligation is conditional and s'all be governed b" t'e rules of t'e ne!t preceding section. (referring to #!re and conditional obligations). ("rt. 1125$ iv. ode.) "nd as the e3#ort of the machinery in F!estion Das$ as stated in the contract$ contingent !#on the sellers obtaining certificate of #riority and #ermission of the Cnited 2tates Government$ s!b0ect to the r!les and reg!lations$ as Dell as to railroad embargoes$ then the delivery Das s!b0ect to a condition the f!lfillment of Dhich de#ended not only !#on the effort of the herein #laintiff$ b!t !#on the Dill of third #ersons Dho co!ld in no Day be com#elled to f!lfill the condition. 1n cases liBe this$ Dhich are not e3#ressly #rovided for$ b!t im#liedly covered$ by the ivil ode$ the obligor Dill be deemed to have s!fficiently #erformed his #art of the obligation$ if he has done all that Das in his #oDer$ even if the condition has not been f!lfilled in reality. 1n s!ch cases$ the decisions #rior to the ivil ode have held that the obligee having done all that Das in his #oDer$ Das entitled to enforce #erformance of the obligation. Ahis #erformance$ Dhich is fictitio!s V not real V is not e3#ressly a!thori<ed by the ode$ Dhich limits itself only to declare valid those conditions and the obligation thereby affected; b!t it is neither disalloDed$ and the ode being th!s silent$ the old vieD can be maintained as a doctrine. (4anresaMs commentaries on the ivil ode >1/'6?$ vol. )$ #age 132.) Ahe decisions referred to by 4r. 4anresa are those rendered by the s!#reme co!rt of 2#ain on &ovember 1/$ 1)/6$ and (ebr!ary 23$ 1)61. 1n the former it is heldE (irst. Ahat Dhen the f!lfillment of the conditions does not de#end on the Dill of the obligor$ b!t on that of a third #erson Dho can in no Day be com#elled to carry it o!t$ and it is fo!nd by the loDer co!rt that the obligor has done all in his #oDer to com#ly Dith the obligation$ the 0!dgment of the said co!rt$ ordering the other #arty to com#ly Dith his #art of the contract$ is not contrary to the laD of contracts$ or to .aD 1$ Ait. 1$ *ooB 1'$ of the L&ovXsima %eco#ilaciYn$L or .aD 12$ Ait. 11$ of -artida 5$ Dhen in the said finding of the loDer co!rt$ no laD or #recedent is alleged to have been violated. (0urisprudencia $ivil #!blished by the directors of the %evista General de (egislacion " 0urisprudencia >1)66?$ vol. 14$ #age 656.) 1n the second decision$ the folloDing doctrine is laid doDnE 2econd. Ahat Dhen the f!lfillment of the condition does not de#end on the Dill of the obligor$ b!t on that of a third #erson$ Dho can in no Day be com#elled to carry it o!t$ the obligorMs #art of the contract is com#lied Dithalf *elisario not having e3ercised his right of re#!rchase reserved in the sale of *asilio *or0a mentioned in #aragra#h (13) hereof$ the affidavit of *asilio *or0a for the consolidacion de dominio Das #resented for record in the registry of deeds and recorded in the registry on the same date. (32) Ahe 4a3imo *elisario left a DidoD$ the o##onent "delina (errer and three minor children$ Hitaliana$ =!genio$ and "!reno *elisario as his only heirs.

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(33) Ahat in the e3ec!tion and sales there!nder$ in Dhich . I. 4c l!re a##ears as the 0!dgment creditor$ he Das re#resented by the o##onent -eter 8. "ddison$ Dho #re#ared and had charge of #!blication of the notices of the vario!s sales and that in none of the sales Das the notice #!blished more than tDice in a neDs#a#er. Ahe claims of the o##onent-a##ellant "ddison have been very f!lly and ably arg!ed by his co!nsel b!t may$ De thinB$ be dis#osed of in com#aratively feD Dords. "s Dill be seen from the foregoing statement of facts$ he rest his title (1) on the sales !nder the e3ec!tions iss!ed in cases &os. 435$ 45'$ 454$ and 4// of the co!rt of the 0!stice of the #eace of ,ag!#an Dith the #riority of inscri#tion of the last tDo sales in the registry of deeds$ and (2) on a #!rchase from the ,irector of .ands after the land in F!estion had been forfeited to the Government for non-#ayment of ta3es !nder "ct &o. 16/1. Ahe sheriffMs sales !nder the e3ec!tion mentioned are fatally defective for Dhat of s!fficient #!blication of the notice of sale. 2ection 454 of the ode of civil -roced!re reads in #art as folloDsE 2= . 454. *efore the sale of #ro#erty on e3ec!tion$ notice thereof m!st be given$ as folloDsE 1. 1n case of #erishable #ro#erty$ by #osing Dritten notice of the time and #lace of the sale in three #!blic #laces of the m!nici#ality or city Dhere the sale is to taBe #lace$ for s!ch time as may be reasonable$ considering the character and condition of the #ro#erty; 2. Z Z Z Z Z Z Z

3. 1n cases of real #ro#erty$ by #osting a similar notice #artic!larly describing the #ro#erty$ for tDenty days in three #!blic #laces of the m!nici#ality or city Dhere the #ro#erty is sit!ated$ and also Dhere the #ro#erty is to be sold$ and #!blishing a co#y thereof once a DeeB$ for the same #eriod$ in some neDs#a#er #!blished or having general circ!lation in the #rovince$ if there be one. 1f there are neDs#a#er #!blished in the #rovince in both the 2#anish and =nglish lang!ages$ then a liBe #!blication for a liBe #eriod shall be made in one neDs#a#er #!blished in the 2#anish lang!age$ and in one #!blished in the =nglish lang!ageEProvided, 'o ever, Ahat s!ch #!blication in a neDs#a#er Dill not be reF!ired Dhen the assessed val!ation of the #ro#erty does not e3ceed fo!r h!ndred #esos; 4. Z Z Z Z Z Z Z

=3amining the record$ De find that in cases &os. 435 and 45' the sales tooB #lace on October 14$ 1/16; the notice first #!blished gave the date of the sale as October 15th$ b!t !#on discovering that October 15th Das a 2!nday$ the date Das changed to October 14th. Ahe correct notice Das #!blished tDice in a local neDs#a#er$ the first #!blication Das made on October 6th and the second and last on October 14th$ the date of the sale itself. Ahe neDs#a#er is a DeeBly #eriodical #!blished every 2at!rday afternoon.

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1n case &o. 454 there Dere only tDo #!blications of the notice in a neDs#a#er$ the first #!blication being made only fo!rteen days before the date of the sale. 1n case &o. 4//$ there Dere also only tDo #!blications$ the first of Dhich Das made thirteen days before the sale. 1n the last case the sale Das advertised for the ho!rs of from )E3' in the morning !ntil 4E3' in the afternoon$ in violation of section 456 of the ode of ivil -roced!re. 1n cases &os. 435 and 45' the ho!rs advertised Dere from /E'' in the morning !ntil 4.3' in the afternoon. 1n all of the cases the notices of the sale Dere #re#ared by the 0!dgment creditor or his agent$ Dho also tooB charged of the #!blication of s!ch notices. 1n the case of $ampomanes vs. Bartolome and Germann G $o. (3) -hil.$ )'))$ this co!rt held that if a sheriff sells Ditho!t the notice #rescribe by the ode of ivil -roced!re ind!ced thereto by the 0!dgment creditor and the #!rchaser at the sale is the judgment creditor$ the sale is absol!tely void and not title #asses. Ahis m!st noD be regarded as the settled doctrine in this 0!risdiction Dhatever the r!le may be elseDhere. 1t a##ears affirmatively from the evidence in the #resent case that there is a neDs#a#er #!blished in the #rovince Dhere the sale in F!estion tooB #lace and that the assessed val!ation of the #ro#erty dis#osed of at each sale e3ceeded -4''. om#aring the reF!irements of section 454$ supra$ Dith Dhat Das act!ally done$ it is self-evident that notices of the sales mentioned Dere not given as #rescribed by the stat!te and taBing into consideration that in connection Dith these sales the a##ellant "ddison Das either the 0!dgment creditor or else occ!#ied a #osition analogo!s to that of a 0!dgment creditor$ the sales m!st be held invalid. Ahe conveyance or reconveyance of the land from the ,irector of .ands is eF!ally invalid. Ahe #rovisions of "ct &o. 16/1 #ertinent to the #!rchase or re#!rchase of land confiscated for non-#ayment of ta3es are fo!nd in section 1/ of the "ct and readE . . . 1n case s!ch redem#tion be not made Dithin the time above s#ecified the Government of the -hili##ine 1slands shall have an absol!te$ indefeasible title to said real #ro#erty. C#on the e3#iration of the said ninety days$ if redem#tion be not made$ the #rovincial treas!rer shall immediately notify the ,irector of .ands of the forfeit!re and f!rnish him Dith a descri#tion of the #ro#erty$ and said ,irector of .ands shall have f!ll control and c!stody thereof to lease or sell the same or any #ortion thereof in the same manner as other #!blic lands are leased or soldE Provided, Ahat the original oDner$ or his legal re#resentative$ shall have the right to re#!rchase the entire amo!nt of his said real #ro#erty$ at any time before a sale or contract of sale has been made by the director of .ands to a third #arty$ by #aying therefore the Dhole s!m d!e thereon at the time of e0ectment together Dith a #enalty of ten #er cent!m . . . . Ahe a##ellant "ddison re#!rchased !nder the final #roviso of the section F!oted and Das alloDed to do so as the s!ccessor in interest of the original oDner !nder the e3ec!tion sale above disc!ssed. "s De have seen$ he acF!ired no rights !nder these sales$ Das therefore not the s!ccessor of the original oDner and co!ld only have obtained a valid conveyance of s!ch titles as the Government might have by folloDing the #roced!re #rescribed by the -!blic .and "ct for the sale of #!blic lands. he is entitled to reimb!rsement for the money #aid for the redem#tion of the land$ Dith interest$ b!t has acF!ired no title thro!gh the redem#tion.

96

Ahe F!estion of the #riority of the record of the sheriffMs sales over that of the sale from *elisario to *or0a is e3tensively arg!ed in the briefs$ b!t from o!r #oint of vieD is of no im#ortance; void sheriffMs or e3ec!tion sales cannot be validated thro!gh inscri#tion in the 4ortgage .aD registry. Ahe o##osition of "delina (errer m!st also be overr!led. 2he maintained that the land in F!estion Das comm!nity #ro#erty of the marriage of =!lalio *elisario and -a!la 1raE that !#on the death of -a!la 1ra inealed from is modified$ and the defendant 4r. Hicente 2otelo 4atti$ sentenced to acce#t and receive from the #laintiff the tanBs$ the e3#ellers and the motors in F!estion$ and to #ay the #laintiff the s!m of ninety-si3 tho!sand #esos (-/6$''')$ Dith legal interest thereon from +!ly 16$ 1/1/$ the date of the filing of the com#laint$ !ntil f!lly #aid$ and the costs of both instances. 2o ordered. Araullo, $.0., 0o'nson, Street, Malcolm, AvanceFa, ,illamor, 1strand, and 0o'ns, 00., concur.

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila AI1%, ,1H121O&

,./. No. &)&8' O tober %', %''2 /;-T$N 6;+6 . 6$6=/ 8I++-, INC., BI=NV=NI!O /. T$NTOCO, -/., and /O8=O -. V=/,$/$, #etitioners$ vs. TA= INT=/8=!I$T= $66=++$T= CO;/T and I+I,$N !IV=/-I7I=! 6/O4=CT-, INC., /O8=O $. ++;CA and /OB=/TO ,. BO//O8=O, res#ondents.

8=+O, J.: 8hen #etitioners informed herein #rivate res#ondents to sto# the delivery of #!l# Dood s!##lied by the latter #!rs!ant to a contract of sale betDeen them$ #rivate res#ondents s!ed for breach of their covenant. Ahe co!rt of origin dismissed the com#laint b!t at the same time en0oined #etitioners to res#ect the contract of sale if circ!mstances Darrant the f!ll o#eration in a commercial scale of #etitionersM *aloi #lant and to contin!e

97

acce#ting and #aying for deliveries of #!l# Dood #rod!cts from %omeo .l!ch (#age 14$ -etition; #age 2'$ %ollo). On a##eal to the then 1ntermediate "##ellate o!rt$ -residing +!stice %amon G. Gaviola$ +r.$ Dho s#oBe for the (irst ivil ases ,ivision$ Dith +!stices ag!ioa$ K!et!lio-.osa$ and .!ciano$ conc!rring$ modified the 0!dgment by directing herein #etitioners to #ay #rivate res#ondents$ 0ointly and severally$ the s!m of -3'$'''.'' as moral damages and -15$'''.'' as attorneyMs fees (#ages 4)-5)$ %ollo). 1n the #etition at bar$ it is arg!ed that the "##ellate o!rt erred;

". . . . 1& IO.,1&G -=%2O&"..@ .1"*.= C&,=% AI= O&A%" A O( 2".= -=A1A1O&=% A"&AO O 8IO 21G&=, 4=%=.@ "2 %=-%=2=&A"A1H= O( -=A1A1O&=% %C2A"&$ "&, -=A1A1O&=% H=%G"%" 8IO ,1, &OA 21G& "A "..; *. . . . 1& IO.,1&G AI"A -=A1A1O&=% %C2A"&M2 ,= 121O& AO 2C2-=&, A":1&G ,=.1H=%@ O( -C.- 8OO, (%O4 %=2-O&,=&A ..C I$ 8I1 I 8"2 -%O4-A=, *@ 2=%1OC2 "&, C&(O%=2==& ,=(= A2 1& AI= 41..$ 8"2 &OA 1& AI= ."8(C. =P=% 12= O( 1A2 %1GIA2 C&,=% AI= O&A%" A O( 2".=; and . . . . 1& "8"%,1&G 4O%". ,"4"G=2 "&, "AAO%&=@M2 (==2 1& AI= "*2=& = O( (%"C, O% *", ("1AI. (#age 1)$ -etition; #age 24$ %ollo) Ahe generative facts of the controversy$ as gathered from the #leadings$ are fairly sim#le. 2ometime in 1/66$ #etitioner %!stan established a #!l# and #a#er mill in *aloi$ .ano del &orte. On 4arch 2'$ 1/66$ res#ondent .l!ch$ Dho is a holder of a forest #rod!cts license$ transmitted a letter to #etitioner %!stan for the s!##ly of raD materials by the former to the latter. 1n res#onse thereto$ #etitioner %!stan #ro#osed$ among other things$ in the letter-re#lyE 2. Ahat the contract to s!##ly is not e3cl!sive beca!se %!stan shall have the o#tion to b!y from other s!##liers Dho are F!alified and holder of a##ro#riate government a!thority or license to sell and dis#ose #!l# Dood. Ahese #refatory b!siness #ro#osals c!lminated in the e3ec!tion$ d!ring the month of "#ril$ 1/6)$ of a contract of sale Dhereby %omeo ". .l!ch agreed to sell$ and %!stan -!l# and -a#er 4ill$ 1nc. !ndertooB to #ay the #rice of -3'.'' #er c!bic meter of #!l# Dood raD materials to be delivered at the b!yerMs #lant in *aloi$ .anao del &orte. Of #ertinent significance to the iss!e at hand are the folloDing sti#!lations in the bilateral !ndertaBingE 3. Ahat *C@=% shall have the o#tion to b!y from other 2=..=%2 Dho are eF!ally F!alified and holders of a##ro#riate government a!thority or license to sell or dis#ose$ that *C@=% shall not b!y from any other seller

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Dhose #!l# Doods being sold shall have been established to have emanated from the 2=..=%M2 l!mber and7or fireDood concession. . . . "nd that 2=..=% has the #riority to s!##ly the #!l# Dood materials reF!irement of the *C@=%; 333 333 333 6. Ahat the *C@=% shall have the right to sto# delivery of the said raD materials by the seller covered by this contract Dhen s!##ly of the same shall become s!fficient !ntil s!ch time Dhen need for said raD materials shall have become necessarily #rovided$ hoDever$ that the 2=..=% is given s!fficient notice. (#ages )-/$ -etition; #ages 14-15$ %ollo) 1n the installation of the #lant facilities$ the technical staff of %!stan -!l# and -a#er 4ills$ 1nc. recommended the acce#tance of deliveries from other s!##liers of the #!l# Dood materials for Dhich the corres#onding deliveries Dere made. *!t d!ring the test r!n of the #!l# mill$ the machinery line thereat had ma0or defects Dhile deliveries of the raD materials #iled !#$ Dhich #rom#ted the +a#anese s!##lier of the machinery to recommend the sto##age of the deliveries. Ahe s!##liers Dere informed to sto# deliveries and the letter of similar advice sent by #etitioners to #rivate res#ondents readsE -rivate res#ondent %omeo .l!ch so!ght to clarify the tenor of the letter as to Dhether sto##age of delivery or termination of the contract of sale Das intended$ b!t the F!ery Das not ansDered by #etitioners. Ahis alleged ambig!ity notDithstanding$ .l!ch and the other s!##liers res!med deliveries after the series of talBs betDeen %omeo 2. Hergara and %omeo .l!ch. On +an!ary 23$ 1/6/$ the com#laint for contract!al breach Das filed Dhich$ as earlier noted$ Das dismissed. 1n the #rocess of disc!ssing the merits of the a##eal inter#osed therefrom$ res#ondent o!rt clarified the eleven errors assigned beloD by herein #etitioners and it seems that #etitioners Dere F!ite satisfied Dith the "##ellate o!rtMs in seriatim res#onse since #etitioners trimmed doDn their disco!rse before this o!rt to three basic matters$ relative to the nat!re of liability$ the #ro#riety of the sto##age$ and the feasibility of aDarding moral damages incl!ding attorneyMs fees. %es#ondent o!rt fo!nd it ironic that #etitioners had to e3ercise the #rerogative regarding the sto##age of deliveries via the letter addressed to 1ligan ,iversified -ro0ect$ 1nc. on 2e#tember 3'$ 1/6) beca!se #etitioners never really sto##ed acce#ting deliveries from #rivate res#ondents !ntil ,ecember 23$ 1/6). -etitionerMs #arado3ial stance #ortrayed in this mannerE . . . 8e cannot acce#t the reasons given by a##ellees as to Dhy they Dere sto##ing deliveries of #!l# Dood materials. (irst$ 8e find it #re#ostero!s for a b!siness com#any liBe the a##ellee to acc!m!late stocB#iles of c!t Dood even after its letter to a##ellants dated 2e#tember 3'$ 1/6) sto##ing the deliveries beca!se the s!##ly of raD materials has

99

become s!fficient. Ahe fact that a##ellees Dere b!ying and acce#ting #!l# Dood materials from other so!rces other than the a##ellants even after 2e#tember 3'$ 1/6) belies that they have more than s!fficient s!##ly of #!l# Dood materials$ or that they are !nable to go into f!ll commercial o#eration or that their machineries are defective or even that the #!l# Dood materials coming from a##ellants are s!bstandard. Second, 8e liBeDise find the co!rt a #uoIs finding that Leven Dith one #redicament in Dhich defendant %!stan fo!nd itself Dherein commercial o#eration Das delayed$ it accommodated all its s!##liers of raD materials$ incl!ding #laintiff$ %omeo .l!ch$ by alloDing them to deliver all its stocB#iles of c!t DoodL (,ecision$ #age 2'2$ %ecord on "##eal) to be both illogical and inconsistent. 1llogical$ beca!se as a##ellee %!stan itself claimed Lif the #lant co!ld not be o#erated on a commercial scale$ it Do!ld then be illogical for defendant %!stan to contin!e acce#ting deliveries of raD materials.L 1nconsistent beca!se this Bind of LconcernL or LaccommodationL is not !s!al or consistent Dith ordinary b!siness #ractice considering that this Do!ld mean adeF!ate losses to the com#any. 4ore so$ if 8e consider that a##ellee is a neD com#any and co!ld not therefore afford to absorb more losses than it already allegedly inc!rred by the conseF!ent defects in the machineries. learly therefore$ this is a breach of the contract entered into by and betDeen a##ellees and a##ellants Dhich Darrants the intervention of this o!rt. 333 333 333 . . . Ahe letter of 2e#tember 3'$ 1/6)$ =3h. L,L shoDs that defendants Dere terminating the contract of sale (=3h. L"L)$ and ref!sing any f!t!re or f!rther delivery V Dhether on the gro!nd that they had s!fficient s!##ly of #!l# Dood materials or that a##ellants cannot meet the standard of F!ality of #!l# Dood materials that %!stan needs or that there Dere defects in a##elleesM machineries res!lting in an inability to contin!e f!ll commercial o#erations. (!rthermore$ there is evidence on record that a##ellees have been acce#ting deliveries of #!l# Dood materials from other so!rces$ i.e. 2alem Csman$ (ermin Hillan!eva and -acas!m even after 2e#tember 3'$ 1/6). .astly$ it Do!ld be !n0!st for the co!rt a #uo to r!le that the contract of sale be tem#orarily s!s#ended !ntil %!stan$ et al.$ are ready to acce#t deliveries from a##ellants. Ahis Do!ld maBe the res!m#tion of the contract #!rely de#endent on the Dill of one #arty V the a##ellees$ and they co!ld alDays claim$ as they did in the instant case$ that they have more than s!fficient s!##ly of #!l# Dood Dhen in fact they have been acce#ting the same from other so!rces. "dded to this$ the co!rt a #uo Das im#osing a neD condition in the contract$ one that Das not agreed !#on by the #arties. (-ages *-1'$ ,ecision; -ages 55-56$ %ollo)

100

Ahe matter of AantocoMs and HergaraMs 0oint and several liability as a res!lt of the alleged breach of the contract is de#endent$ first of all$ on Dhether %!stan -!l# and -a#er 4ills may legally e3ercise the right of sto##age sho!ld there be a gl!t of raD materials at its #lant. "nd insofar as the e3#ress discretion on the #art of #etitioners is concerned regarding the right of sto##age$ 8e feel that there is cogent basis for #rivate res#ondentMs a##rehension on the ill!sory res!m#tion of deliveries inasm!ch as the #rerogative s!ggests a condition solely de#endent !#on the Dill of #etitioners. -etitioners can sto# delivery of #!l# Dood from #rivate res#ondents if the s!##ly at the #lant is s!fficient as ascertained by #etitioners$ s!b0ect to re-delivery Dhen the need arises as determined liBeDise by #etitioners. Ahis is O!r sim#le !nderstanding of the literal im#ort of #aragra#h 6 of the obligation in F!estion. " #!rely #otestative im#osition of this character m!st be obliterated from the face of the contract Ditho!t affecting the rest of the sti#!lations considering that the condition relates to the f!lfillment of an already e3isting obligation and not to its ince#tion ( ivil ode "nnotated$ by -adilla$ 1/)6 =dition$ Hol!me 4$ -age 16'). 1t is$ of co!rse$ a tr!ism in legal 0!ris#r!dence that a condition Dhich is both #otestative (or fac!ltative) and resol!tory may be valid$ even tho!gh the saving cla!se is left to the Dill of the obligor liBe Dhat this o!rt$ thro!gh +!stice 2treet$ said in Aaylor vs. Cy Aieng -iao and Aan .i!an (43 -hil. )63; )6/; cited in ommentaries and +!ris#r!dence on the ivil ode$ by Aolentino$ Hol!me 4$ 1//1 edition$ #age 152). *!t the concl!sion draDn from the Aaylor case$ Dhich alloDed a condition for !nilateral cancellation of the contract Dhen the machinery to be installed on the factory did not arrive in 4anila$ is certainly ina##ro#riate for a##lication to the case at hand beca!se the fact!al milie! in the legal t!ssle dissected by +!stice 2treet conveys that the #roviso relates to the birth of the !ndertaBing and not to the f!lfillment of an e3isting obligation. 1n s!##ort of the second gro!nd for alloDance of the #etition$ #etitioners are of the im#ression that the letter dated 2e#tember 3'$ 1/6) sent to #rivate res#ondents is Dell Dithin the right of sto##age g!aranteed to them by #aragra#h 6 of the contract of sale Dhich Das constr!ed by #etitioners to be a tem#orary s!s#ension of deliveries. Ahere is no do!bt that the contract s#eaBs lo!dly abo!t #etitionersM #rerogative b!t Dhat diminishes the legal efficacy of s!ch right is the condition attached to it Dhich$ as aforesaid$ is de#endent e3cl!sively on their Dill for Dhich reason$ 8e have no alternative b!t to treat the controversial sti#!lation as ino#erative ("rticle 13'6$ &eD ivil ode). 1t is for this same reason that 8e are not inclined to folloD the inter#retation of #etitioners that the s!s#ension of delivery Das merely tem#orary since the nat!re of the s!s#ension itself is again conditioned !#on #etitionerMs determination of the s!fficiency of s!##lies at the #lant. &either are 8e #re#ared to acce#t #etitionersM e3c!l#ation gro!nded on fr!stration of the commercial ob0ect !nder "rticle 1266 of the &eD ivil ode$ beca!se #etitioners contin!ed acce#ting deliveries from the s!##liers. Ahis cond!ct Dill esto# #etitioners from claiming that the breaBdoDn of the machinery line Das an e3traordinary obstacle to their com#liance to the #restation. 1t Das indeed incongr!o!s for #etitioners to have sent the letters calling for s!s#ension and yet$ they in effect disregarded their oDn advice by acce#ting the deliveries from the s!##liers. Ahe demeanor of #etitioners along this line Das so!ght to be 0!stified as an act of genero!s accommodation$ Dhich entailed greater loss to them and LDas not motivated by the !s!al b!sinessmanMs obsession Dith #rofitL

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(-age 34$ -etition; -age 4'$ %ollo). "ltr!ism may be a noble gest!re b!t #etitionersM stance in this res#ect hardly ins#ires belief for s!ch an e3c!se is inconsistent Dith a normal b!siness enter#rise Dhich taBes ordinary care of its concern in c!tting doDn on e3#enses (2ection 3$ (d)$ %!le 131$ %evised %!les of o!rt). :noDing f!lly Dell that they Dill enco!nter diffic!lty in #rod!cing o!t#!t beca!se of the defective machinery line$ #etitioners o#ted to o#en the #lant to greater loss$ th!s com#o!nding the costs by acce#ting additional s!##ly to the stocB#ile. Herily$ the #etitionerMs action Dhen they acBnoDledged that Lif the #lant co!ld not be o#erated on a commercial scale$ it Do!ld then be illogical for defendant %!stan to contin!e acce#ting deliveries of raD materials.L (-age 2'2$ %ecord on "##eal; -age )$ ,ecision; -age 55$ %ollo). -etitioners arg!e ne3t that Aantoco and Hergara sho!ld not have been ad0!dged to #ay moral damages and attorneyMs fees beca!se Aantoco merely re#resented the interest of %!stan -!l# and -a#er 4ills$ 1nc. Dhile %omeo 2. Hergara Das not #rivy to the contract of sale. On this score$ 8e have to agree Dith #etitionersM citation of a!thority to the effect that the -resident and 4anager of a cor#oration Dho entered into and signed a contract in his official ca#acity$ cannot be made liable there!nder in his individ!al ca#acity in the absence of sti#!lation to that effect d!e to the #ersonality of the cor#oration being se#arate and distinct from the #erson com#osing it (*ang!ed Generale *elge vs. 8alter *!ll and o.$ 1nc.$ )4 -hil. 164). "nd beca!se of this #rece#t$ HergaraMs s!##osed non#artici#ation in the contract of sale altho!gh he signed the letter dated 2e#tember 3'$ 1/6) is com#letely immaterial. Ahe tDo e3ce#tions contem#lated by "rticle 1)/6 of the &eD ivil ode Dhere agents are directly res#onsible are absent and Danting. 8I=%=(O%=$ the decision a##ealed from is hereby 4O,1(1=, in the sense that only #etitioner %!stan -!l# and -a#er 4ills is ordered to #ay moral damages and attorneyMs fees as aDarded by res#ondent o!rt.

%O4=%O vs.

OC%A O( "--=".2

G.%. &o. 1'62'6 &ovember 23$ 1//5 (actsE %omero$ a civil engineer$ Das engaged in the b!siness of #rod!ction$ man!fact!re and e3#ortation of #erlite filter aids$ #ermalite ins!lation and #rocessed #erlite ore. 1n 1/))$ he decided to #!t !# a central Dareho!se in 4etro 4anila. (lores and his Dife offered a #arcel of land meas!ring 1$/52 sF!are meters. Ahe lot Das covered in a A A in the name of #rivate res#ondent =nriF!eta h!a vda. de Ongsiong. -etitioner visited the #ro#erty and$ e3ce#t for the #resence of sF!atters in the area$ he fo!nd the #lace s!itable for a central Dareho!se. (lores called on #etitioner Dith a #ro#osal that sho!ld he advance the amo!nt of -5'$'''.'' Dhich co!ld be !sed in taBing !# an e0ectment case against the sF!atters$ #rivate res#ondent Do!ld agree to

102

sell the #ro#erty for only -)''7sF!are meter. %omero agreed. .ater$ a R,eed of onditional 2aleN Das e3ec!ted betDeen (lores and Ongsiong. -!rchase #rice [ -1$561$6''.''; ,oDn#ayment [ -5':; *alance [ to be #aid 45 days after the removal of all the sF!atters; !#on f!ll #ayment$ Ongsiong shall e3ec!te deed of absol!te sale in favo!r of %omero. Ongsiong so!ght to ret!rn the -5'$'''.'' she received from #etitioner since$ she said$ she co!ld not Rget rid of the sF!attersN on the lot. 2he o#ted to rescind the sale in vieD of her fail!re to get rid of the sF!atters. %egional Arial o!rt of 4aBati rendered decision holding that #rivate res#ondent had no right to rescind the contract since it Das she Dho Rviolated her obligation to e0ect the sF!atters from the s!b0ect #ro#ertyN and that #etitioner$ being the in0!red #arty$ Das the #arty Dho co!ld$ !nder "rticle 11/1 of the ivil ode$ rescind the agreement.

1ss!eE 8O& there Das a #erfected contract of sale9 @=2 IeldE " sale is at once #erfected Dhen a #erson (the seller) obligates himself$ for a #rice certain$ to deliver and to transfer oDnershi# of a s#ecified thing or right to another (the b!yer) over Dhich the latter agrees. (*1."A=%". and %= 1-%O ". I"%" A=%12A1 O( 2".=) 1n determining the real character of the contract$ the title given to it by the #arties is not as m!ch significant as its s!bstance. (or e3am#le$ a deed of sale$ altho!gh denominated as a deed of conditional sale$ may be treated as absol!te in nat!re$ if title to the #ro#erty sold is not reserved in the vendor or if the vendor is not granted the right to !nilaterally rescind the contract #redicated on the f!lfillment or non-f!lfillment$ as the case may be$ of the #rescribed condition. (rom the moment the contract is #erfected$ the #arties are bo!nd not only to the f!lfillment of Dhat has been e3#ressly sti#!lated b!t also to all the conseF!ences Dhich$ according to their nat!re$ may be in Bee#ing Dith good faith$ !sage and laD. Cnder the agreement$ #rivate res#ondent is obligated to evict the sF!atters on the #ro#erty. Ahe e0ectment of the sF!atters is a condition the o#erative act of Dhich sets into motion the

103

#eriod of com#liance by #etitioner of his oDn obligation$ i.e.$ to #ay the balance of the #!rchase #rice. -rivate res#ondentGs fail!re Rto remove the sF!atters from the #ro#ertyN Dithin the sti#!lated #eriod gives #etitioner the right to either ref!se to #roceed Dith the agreement or Daive that condition in consonance Dith "rticle 1545 of the ivil Ahis o#tion clearly belongs to #etitioner and not to #rivate res#ondent. Ahere Das no #otestative condition on the #art of Ongsiong b!t a Rmi3edN condition Rde#endent not on the Dill of the vendor alone b!t also of third #ersons liBe the sF!atters and government agencies and #ersonnel concerned. ode.

2= O&, ,1H121O&

F,./. No. %122&(. O tober %1, 2))(G

A=I/- O7 TI8OT=O 8O/=NO and 8$/I$ /OT=$, na:el9E =-6=/$NI$ /. =!4=C, B=/N$/!$ /. -;=+$, /;B@ C. /OT=$, B=/N$/!$ /. /OT=$, =+I$ /. V!$. != +I8B$,$, VI/,INI$ /. $/BON, /O-$+IN!$ /. $/B;I-O+$, CO/$ION /OT=$, 7= /. =BO/$, C$/I!$! /OT=$, $N,=+=- V!$. != /=N$CI$, 4O/,= /OT=$, 8$/I$ +;I-$ /OT=$0 VI++=,$-, $+7/=!O /. /OT=$, represented b9 his heirs +IIB=TA /OT=$ and =+=6=TA /OT=$; +;I- /OT=$, represented b9 his heir 4=NNI7=/ /OT=$; and /O+$N!O /. /OT=$, represented b9 his heir /O+$N!O /. /OT=$ 4/., petitioners, vs. 8$CT$N 0 C=B; INT=/N$TION$+ $I/6O/T $;TAO/IT@,respondent. !=CI-ION B=++O-I++O, J.E AI= I=1%2 O( A14OA=O 4O%=&O "&, 4"%1" %OA="$ #etitioners herein$ are the s!ccessors-in-interest of the former registered oDners of tDo (2) #arcels of land

104

sit!ated in.ah!g$ eb! ity$ designated as .ot &o. /16 Dith an area of 2$355 sF!are meters !nder A A &o. %A-6543 (1'6) A-136/4$ and .ot &o. /2' consisting of 3$'/6 sF!are meters !nder A A &o. %A-6544 (1'6) A-136/5.>1? 1n 1/4/ the &ational "ir#ort or#oration as the #redecessor agency of res#ondent 4actan- eb! 1nternational "ir#ort "!thority (4 1"") Danted to acF!ire .ots &os. /16 and /2' above described among other #arcels of land for the #ro#osed e3#ansion of .ah!g "ir#ort.>2? Ao entice the landoDners to cede their #ro#erties$ the government ass!red them that they co!ld re#!rchase their lands once .ah!g "ir#ort Das closed or its o#erations transferred to 4actan "ir#ort.>3? 2ome of the landoDners e3ec!ted deeds of sale Dith right of re#!rchase in favor of the government b!t many others$ incl!ding the oDners of .ots &os. /16 and /2' herein mentioned$ ref!sed the offer beca!se the #ayment Das #erceived to be Day beloD the marBet #rice.>4? On 16 "#ril 1/52$ as the negotiations for the #!rchase of the lots necessary for the e3#ansion and im#rovement of .ah!g "ir#ort irredeemably broBe doDn$ the ivil "erona!tics "dministration as the s!ccessor agency of the &ational "ir#ort or#oration filed a com#laint Dith the o!rt of (irst 1nstance of eb!$ for the e3#ro#riation of .ots &os. /16 and /2' and other s!b0ect realties$ docBeted as ivil ase &o. %-1))1. On 2/ ,ecember 1/61 the trial co!rt #rom!lgated its +ecision in ivil ase &o. %1))1 condemning .ots &os. /16 and /2' and other lots for #!blic !se !#on #ayment of 0!st com#ensation.>5? -etitionersG #redecessors Dere #aid -6$'65.'' for .ot &o. /16 and -/$2/1.'' for .ot &o. /2' Dith conseF!ential damages by Day of legal interest from 16 &ovember 1/46. &o a##eal Das taBen from the +ecision on .ots &os. /16 and /2'$ and the 0!dgment of condemnation became final and e3ec!tory.>6? Ahereafter$ the certificates of title for these #arcels of land Dere iss!ed in the name of the %e#!blic of the -hili##ines !nder A A &o. 5)6/1 for .ot &o. /16 and A A &o. 5)6/2 for .ot &o. /2'$ Dhich !nder %" 6/5) (1//') Dere s!bseF!ently transferred in favor of res#ondent 4 1"".>6? "t the end of 1//1$ or soon after the transfer of .ots &os. /16 and /2' to 4 1""$ .ah!g "ir#ort ceased o#erations as the 4actan "ir#ort Das o#ened for incoming and o!tgoing flights.>)? .ots &os. /16 and /2' Dhich had been e3#ro#riated for the e3tension of .ah!g "ir#ort Dere not !tili<ed.>/? 1n fact$ no e3#ansion of .ah!g "ir#ort Das !ndertaBen by 4 1"" and its #redecessors-in-interest.>1'? Ience$ #etitioners Drote then -resident (idel H. %amos and the air#ort manager begging them for the e3ercise of their alleged right to re#!rchase .ots &os. /16 and /2'. >11? Aheir #leas Dere not heeded.>12? On 11 4arch 1//6 #etitioners filed a com#laint for reconveyance and damages Dith %A of eb! ity against res#ondent 4 1"" to com#el the re#!rchase of .ots &os. /16 and /2'$ docBeted as ivil ase &o. =*-2''15. 1n the main$ #etitioners averred that they had been convinced by the officers of the #redecessor agency of res#ondent 4 1"" not to o##ose the e3#ro#riation #roceedings since in the f!t!re they co!ld re#!rchase the #ro#erties if the air#ort e3#ansion Do!ld not #!sh thro!gh. 4 1"" did not ob0ect to #etitionersG evidence establishing these allegations. 8hen the civil case Das #ending$ one %ichard =. =nch!an filed a Motion for Transfer of -nterest alleging that he acF!ired thro!gh deeds of assignment the rights of some of herein #etitioners over .ots &os. /16 and /2'.>13? Ahe ,e#artment of -!blic 8orBs and IighDays (,-8I) also so!ght to intervene in the civil case claiming that it

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leased in good faith .ot &o. /2' from the #redecessor agencies of res#ondent 4 1"" and that it b!ilt thereon its %egional =F!i#ment 2ervices and its %egion 6 Office.>14? On 12 "#ril 1/// the trial co!rt fo!nd merit in the claims of #etitioners and granted them the right to re#!rchase the #ro#erties at the amo!nt #egged as 0!st com#ensation in ivil ase &o. %-1))1 b!t s!b0ect to the alleged #ro#erty rights of %ichard =. =nch!an and the leasehold of ,-8I.>15? Ahe trial co!rt o#ined that the e3#ro#riation became illegal orfunctus officio Dhen the #!r#ose for Dhich it Das intended Das no longer there.>16? %es#ondent 4 1"" a##ealed the +ecision of the trial co!rt to the docBeted as "-G.%. H &o. 64456. o!rt of "##eals$

On 2' ,ecember 2''1 the o!rt of "##eals reversed the assailed +ecision on the gro!nd that the 0!dgment of condemnation in ivil ase &o. %-1))1 Das !nconditional so that the rights gained therefrom by res#ondent 4 1"" Dere indicative of oDnershi# in fee sim#le.>16? Ahe a##ellate co!rt cited 2er" v. Municpalit" of $abanatuan>1)? Dhich held that mere deviation from the #!blic #!r#ose for Dhich the #oDer of eminent domain Das e3ercised does not 0!stify the reversion of the #ro#erty to its former oDners$ and Mactan-$ebu-nternational Airport Aut'orit" v. $ourt of Appeals >1/? Dhich is allegedly stare decisis to the instant case to #revent the e3ercise of the right of re#!rchase as the former dealt Dith a #arcel of land similarly e3#ro#riated !nder ivil ase &o. %-1))1.>2'? On 2) &ovember 2''2 reconsideration of the +ecision Das denied. >21? Ience$ this #etition for revieD. -etitioners arg!e that 2er" v. Municpalit" of $abanatuan does not a##ly to the case at bar since Dhat Das involved therein Das the Rright of reversionN and not the Rright of re#!rchaseN Dhich they are invoBing. Ahey also differentiate Mactan-$ebu -nternational Airport Aut'orit" v. $ourt of Appeals>22? from the instant case in that the landoDners in the 4 1"" case offered inadmissible evidence to shoD their entitlement to a right of re#!rchase$ Dhile #etitioners herein offered evidence based on #ersonal BnoDledge for Dhich reason 4 1"" did not ob0ect and th!s Daived Dhatever ob0ection it might have had to the admissibility thereof. (inally$ #etitioners allege that their right to eF!al #rotection of the laDs Do!ld be infringed if some landoDners are given the right to re#!rchase their former #ro#erties even as they are denied the e3ercise of s!ch #rerogative. On the other hand$ res#ondent 4 1"" clings to o!r decisions in 2er" v. Municpalit" of $abanatuan and Mactan-$ebu -nternational Airport Aut'orit" v. $ourt of Appeals. "ccording to res#ondent 4 1"" Rthere is only one instance Dhen e3#ro#riated land may be re#!rchased by its #revio!s oDners$ and that is$ if the decision of e3#ro#riation itself #rovides >the? condition for s!ch re#!rchase.N %es#ondent asserts that the +ecision in ivil ase &o. %-1))1 is absol!te and Ditho!t conditions$ th!s$ no re#!rchase co!ld be validly e3ercised. Ahis is a diffic!lt case calling for a diffic!lt b!t 0!st sol!tion. Ao begin Dith$ there e3ists an !ndeniable historical narrative that the #redecessors of res#ondent 4 1"" had s!ggested to the landoDners of the #ro#erties covered by the .ah!g "ir#ort e3#ansion scheme that they co!ld re#!rchase their #ro#erties at the termination of the air#ortGs vent!re.>23? 2ome acted on this ass!rance and sold their #ro#erties;>24? other landoDners held o!t and Daited for the e3ercise of eminent domain to taBe its co!rse !ntil finally coming to terms Dith res#ondentGs #redecessors that they Do!ld not a##eal nor blocB

106

f!rther the 0!dgment of condemnation if the same right of re#!rchase Das e3tended to them.>25? " handf!l failed to #rove that they acted on s!ch ass!rance Dhen they #arted Dith the oDnershi# of their lands.>26? 1n resolving this dis#!te$ De m!st recBon Dith the r!lings of this o!rt in 2er" v. Municpalit" of $abanatuan and Mactan-$ebu -nternational Airport Aut'orit" v. $ourt of Appeals$ Dhich define the rights and obligations of landoDners Dhose #ro#erties Dere e3#ro#riated Dhen the #!blic #!r#ose for Dhich eminent domain Das e3ercised no longer s!bsists. 1n2er"$ Dhich Das cited in the recent case of %e"es v. $ourt of Appeals$>26? De declared that the government acF!ires only s!ch rights in e3#ro#riated #arcels of land as may be alloDed by the character of its title over the #ro#erties 1f 3 3 3 land is e3#ro#riated for a #artic!lar #!r#ose$ Dith the condition that Dhen that #!r#ose is ended or abandoned the #ro#erty shall ret!rn to its former oDner$ then$ of co!rse$ Dhen the #!r#ose is terminated or abandoned the former oDner reacF!ires the #ro#erty so e3#ro#riated. 1f 3 3 3 land is e3#ro#riated for a #!blic street and the e3#ro#riation is granted !#on condition that the city can only !se it for a #!blic street$ then$ of co!rse$ Dhen the city abandons its !se as a #!blic street$ it ret!rns to the former oDner$ !nless there is some stat!tory #rovision to the contrary 3 3 3 3 1f$ !#on the contrary$ hoDever$ the decree of e3#ro#riation gives to the entity a fee sim#le title$ then$ of co!rse$ the land becomes the absol!te #ro#erty of the e3#ro#riator$ Dhether it be the 2tate$ a #rovince$ or m!nici#ality$ and in that case the non-!ser does not have the effect of defeating the title acF!ired by the e3#ro#riation #roceedings 3 3 3 3 8hen land has been acF!ired for #!blic !se in fee sim#le$ !nconditionally$ either by the e3ercise of eminent domain or by #!rchase$ the former oDner retains no rights in the land$ and the #!blic !se may be abandoned$ or the land may be devoted to a different !se$ Ditho!t any im#airment of the estate or title acF!ired$ or any reversion to the former oDner 3 3 3 3>2)? 1n Mactan-$ebu -nternational Airport Aut'orit"$ res#ondent hiongbian so!ght to enforce an alleged right of re#!rchase over her #ro#erties that had been e3#ro#riated in ivil ase &o. %-1))1. Ahis o!rt did not alloD her to add!ce evidence of her claim$ for to do so Do!ld !nsettle as to her #ro#erties the 0!dgment of condemnation in the eminent domain #roceedings. 8e also held therein that hiongbianGs evidence Das both inadmissible and lacBing in #robative val!e Ahe terms of the 0!dgment are clear and !neF!ivocal and grant title to .ot &o. /41 in fee sim#le to the %e#!blic of the -hili##ines. Ahere Das no condition im#osed to the effect that the lot Do!ld ret!rn to I1O&G*1"& or that I1O&G*1"& had a right to re#!rchase the same if the #!r#ose for Dhich it Das e3#ro#riated is ended or abandoned or if the #ro#erty Das to be !sed other than as the .ah!g"ir#ort. I1O&G*1"& cannot rely on the r!ling in 4actan- eb! 1nternational "ir#ort vs. o!rt of "##eals Dherein the #resentation of #arol evidence Das alloDed to #rove the e3istence of a Dritten agreement containing the right to re#!rchase. 2aid case did not involve e3#ro#riation #roceedings b!t a contract of sale 3 3 3 3 Ao #ermit I1O&G*1"& to #rove the e3istence of a com#romise settlement Dhich she claims to have entered into Dith the %e#!blic of the -hili##ines #rior to the rendition of 0!dgment in the e3#ro#riation case Do!ld res!lt in a modification of the 0!dgment of a co!rt Dhich has long become final and e3ec!tory 3 3 3 3 "nd even ass!ming for the saBe of arg!ment that I1O&G*1"& co!ld #rove the e3istence of the alleged Dritten agreement acBnoDledging her right to

107

re#!rchase .ot &o. /41 thro!gh #arol evidence$ the o!rt of "##eals erred in holding that the evidence #resented by I1O&G*1"& Das admissible 3 3 3 3 "side from being inadmissible !nder the #rovisions of the 2tat!te of (ra!ds$ >the? testimonies are also inadmissible for being hearsay in nat!re 3 3 3 3>2/? 8e adhere to the #rinci#les en!nciated in 2er" and in Mactan-$ebu -nternational Airport Aut'orit"$ and do not overr!le them. &onetheless the Deight of their im#ort$ #artic!larly o!r r!ling as regards the #ro#erties of res#ondent hiongbian in Mactan$ebu -nternational Airport Aut'orit"$ m!st be commens!rate to the facts that Dere established therein as disting!ished from those e3tant in the case at bar. hiongbian #!t forth inadmissible and inconcl!sive evidence$ Dhile in the instant case De have #re#onderant #roof as fo!nd by the trial co!rt of the e3istence of the right of re#!rchase in favor of #etitioners. 4oreover$ res#ondent 4 1"" has bro!ght to o!r attention a significant and telling #ortion in the +ecision in ivil ase &o. %-1))1 validating o!r discernment that the e3#ro#riation by the #redecessors of res#ondent Das ordered !nder the r!nning im#ression that .ah!g "ir#ort Do!ld contin!e in o#eration "s for the #!blic #!r#ose of the e3#ro#riation #roceeding$ it cannot noD be do!bted. "ltho!gh 4actan "ir#ort is being constr!cted$ it does not taBe aDay the act!al !sef!lness and im#ortance of the .ah!g"ir#ortE it is handling the air traffic both civilian and military. (rom it aircrafts fly to 4indanao and Hisayas and #ass thr! it on their flights to the &orth and 4anila. Then, no eviden e ?as addu ed to sho? ho? soon is the 8a tan $irport to be pla ed in operation and ?hether the +ahug $irport ?ill be losed i::ediatel9 thereafter. 1t is !# to the other de#artments of the Government to determine said matters. Ahe o!rt cannot s!bstit!te its 0!dgment for those of the said de#artments or agencies. In the absen e of su h sho?ing, the Court ?ill presu:e that the +ahug $irport ?ill ontinue to be in operation .emp'asis supplied/.>3'? 8hile the trial co!rt in ivil ase &o. %-1))1 co!ld have sim#ly acBnoDledged the #resence of #!blic #!r#ose for the e3ercise of eminent domain regardless of the s!rvival of.ah!g "ir#ort$ the trial co!rt in its +ecision chose not to do so b!t instead #refi3ed its finding of #!blic #!r#ose !#on its !nderstanding that R (a'ug Airport ill continue to be in operation.N Herily$ these meaningf!l statements in the body of the +ecision Darrant the concl!sion that the e3#ro#riated #ro#erties Do!ld remain to be so !ntil it Das confirmed that.ah!g "ir#ort Das no longer Rin operation.N Ahis inference f!rther im#lies tDo (2) thingsE (a) after the .ah!g "ir#ort ceased its !ndertaBing as s!ch and the e3#ro#riated lots Dere not being !sed for any air#ort e3#ansion #ro0ect$ the rights vis-\-vis the e3#ro#riated .ots &os. /16 and /2' as betDeen the 2tate and their former oDners$ #etitioners herein$ m!st be eF!itably ad0!sted; and$ (b) the foregoing !nmistaBable declarations in the body of the +ecision sho!ld merge Dith and become an intrinsic #art of the fallo thereof Dhich !nder the #remises is clearly inadeF!ate since the dis#ositive #ortion is not in accord Dith the findings as contained in the body thereof.
>31?

2ignificantly$ in light of the disc!ssion above$ the admission of #etitioners d!ring the #re-trial of ivil ase &o. =*-2''15 for reconveyance and damages that res#ondent 4 1"" Das the absol!te oDner of .ots &os. /16 and /2' does not #re0!dice #etitionersG interests. Ahis is as it sho!ld be not only beca!se the admission concerns a legal concl!sion fiercely debated by the #arties>32? b!t more so since res#ondent Das tr!ly the

108

absol!te oDner of the realties !ntil it Das a##arent that .ah!g "ir#ort had sto##ed doing b!siness. Ao s!m !# Dhat De have said so far$ the attendance in the case at bar of standing admissible evidence validating the claim of #etitioners as Dell as the #ortions aboveF!oted of the +ecision in the e3#ro#riation case vol!nteered no less than by res#ondent itself$ taBes this case aDay from the ambit of Mactan-$ebu -nternational Airport Aut'orit" v. $ourt of Appeals>33? b!t Dithin the #rinci#les en!nciated in 2er" as mentioned earlier. 1n addition$ there sho!ld be no do!bt that o!r #resent reading of the fallo of the +ecision in ivil ase &o. %-1))1 so as to incl!de the statements in the body thereof afore-F!oted is sanctioned by the r!le that a final and e3ec!tory 0!dgment may nonetheless be RclarifiedN by reference to other #ortions of the decision of Dhich it forms a #art. 1n %epublic v. +e (os Angeles>34? De r!led Ahis o!rt has #rom!lgated many cases 3 3 3 Dherein it Das held that a 0!dgment m!st not be read se#arately b!t in connection Dith the other #ortions of the decision of Dhich it forms a #art. Ience 3 3 3 the decision of the co!rt beloD sho!ld be taBen as a Dhole and considered in its entirety to get the tr!e meaning and intent of any #artic!lar #ortion thereof 3 3 3 3 &either is this o!rt inclined to confine itself to a reading of the said fallo literally. On the contrary$ the 0!dgment #ortion of a decision sho!ld be inter#reted and constr!ed in harmony Dith the ratio decidendi thereof 3 3 3 3 "s stated in the case ofPolicarpio vs. P'ilippine ,eterans Board, et al.$ supra, to get the tr!e intent and meaning of a decision$ no s#ecific #ortion thereof sho!ld be resorted to b!t the same m!st be considered in its entirety. Ience$ a resol!tion or r!ling may and does a##ear in other #arts of the decision and not merely in the fallo thereof 3 3 3 3 Ahe foregoing #rono!ncements find s!##ort in the case of (ocsin, et al. vs. Paredes$ et al.$ 63 -hil.$ )6$ /1-/2$ Dherein this o!rt alloDed a 0!dgment that had become final and e3ec!tory to be RclarifiedN by s!##lying a Dord Dhich had been inadvertently omitted and Dhich$ Dhen s!##lied$ in effect changed the literal im#ort of the original #hraseology 3 3 3 3 Ahis is so beca!se$ in the first #lace$ if an already final 0!dgment can still be amended to s!##ly an omission committed thro!gh oversight$ this sim#ly means that in the constr!ction or inter#retation of an already final decision$ the fallo or dis#ositive #ortion thereof m!st be correlated Dith the body of s!ch final decision 3 3 3 3 >1?f an amendment may be alloDed after a decision has already become final 3 3 3 s!ch amendment may consist 3 3 3 either in the 3 3 3 inter#retation of an ambig!o!s #hrase therein in relation to the body of the decision Dhich gives it life.>35? 8e noD resolve to harmoni<e the res#ective rights of the 2tate and #etitioners to the e3#ro#riated .ots &os. /16 and /2'. 4actan- eb! 1nternational "ir#ort "!thority>36? is correct in stating that one Do!ld not find an e3#ress statement in the ,ecision in ivil ase &o. %-1))1 to the effect that R t'e >condemned@ lot ould return to >t'e lando ner@ or t'at >t'e lando ner@ 'ad a rig't to repurc'ase t'e same if t'e purpose for 'ic' it as e!propriated is ended or abandoned or if t'e propert" as to be used ot'er t'an as t'e (a'ug Airport.N Ahis omission notDithstanding$ and Dhile the incl!sion of this #rono!ncement in the 0!dgment of condemnation Do!ld have been ideal$ s!ch #recision is not absol!tely necessary nor is it fatal to the ca!se of #etitioners herein. &o do!bt$ the ret!rn or re#!rchase of the condemned #ro#erties of #etitioners co!ld be readily 0!stified as the manifest legal effect or conseF!ence of the trial co!rtGs !nderlying #res!m#tion that R (a'ug Airport ill

109

continue to be in operationN Dhen it granted the com#laint for eminent domain and the air#ort discontin!ed its activities. Ahe #redicament of #etitioners involves a constr!ctive tr!st$ one that is aBin>36? to the im#lied tr!st referred to in "rt. 1454 of the $ivil $ode$ R-f an absolute conve"ance of propert" is made in order to secure t'e performance of an obligation of t'e grantor to ard t'e grantee, a trust b" virtue of la is establis'ed. -f t'e fulfillment of t'e obligation is offered b" t'e grantor 'en it becomes due, 'e ma" demand t'e reconve"ance of t'e propert" to 'im.N 1n the case at bar$ #etitioners conveyed .ots &os. /16 and /2' to the government Dith the latter obliging itself to !se the realties for the e3#ansion of .ah!g "ir#ort; failing to Bee# its bargain$ the government can be com#elled by #etitioners to reconvey the #arcels of land to them$ otherDise$ #etitioners Do!ld be denied the !se of their #ro#erties !#on a state of affairs that Das not conceived nor contem#lated Dhen the e3#ro#riation Das a!thori<ed. "ltho!gh the symmetry betDeen the instant case and the sit!ation contem#lated by "rt. 1454 is not #erfect$ the #rovision is !ndo!btedly a##licable. (or$ as e3#lained by an e3#ert on the laD of tr!stsE RT'e onl" problem of great importance in t'e field of constructive trusts is to decide 'et'er in t'e numerous and var"ing fact situations presented to t'e courts t'ere is a rongful 'olding of propert" and 'ence a t'reatened unjust enric'ment of t'e defendant.N>3)? onstr!ctive tr!sts are fictions of eF!ity Dhich are bo!nd by no !nyielding form!la Dhen they are !sed by co!rts as devices to remedy any sit!ation in Dhich the holder of the legal title may not in good conscience retain the beneficial interest.>3/? 1n constr!ctive tr!sts$ the arrangement is tem#orary and #assive in Dhich the tr!steeGs sole d!ty is to transfer the title and #ossession over the #ro#erty to the #laintiffbeneficiary.>4'? Of co!rse$ the R ronged part" seeEing t'e aid of a court of e#uit" in establis'ing a constructive trust must 'imself do e#uit".N>41? "ccordingly$ the co!rt Dill e3ercise its discretion in deciding Dhat acts are reF!ired of the #laintiff-beneficiary as conditions #recedent to obtaining s!ch decree and has the obligation to reimb!rse the tr!stee the consideration received from the latter 0!st as the #laintiff-beneficiary Do!ld if he #roceeded on the theory of rescission. >42? 1n the good 0!dgment of the co!rt$ the tr!stee may also be #aid the necessary e3#enses he may have inc!rred in s!staining the #ro#erty$ his fi3ed costs for im#rovements thereon$ and the monetary val!e of his services in managing the #ro#erty to the e3tent that #laintiff-beneficiary Dill sec!re a benefit from his acts.>43? Ahe rights and obligations betDeen the constr!ctive tr!stee and the beneficiary$ in this case$ res#ondent 4 1"" and #etitioners over .ots &os. /16 and /2'$ are echoed in "rt. 11/' of the $ivil $ode$ R3'en t'e conditions 'ave for t'eir purpose t'e e!tinguis'ment of an obligation to give, t'e parties, upon t'e fulfillment of said conditions, s'all return to eac' ot'er 'at t'e" 'ave received ! ! ! ! -n case of t'e loss, deterioration or improvement of t'e t'ing, t'e provisions 'ic', it' respect to t'e debtor, are laid do n in t'e preceding article s'all be applied to t'e part" 'o is bound to return ! ! ! !N Ience$ res#ondent 4 1"" as re#resentative of the 2tate is obliged to reconvey .ots &os. /16 and /2' to #etitioners Dho shall hold the same s!b0ect to e3isting liens thereon$ i.e.$ leasehold right of ,-8I. 1n ret!rn$ #etitioners as if they Dere #laintiff-beneficiaries of a constr!ctive tr!st m!st restore to res#ondent 4 1"" Dhat they received as 0!st com#ensation for the e3#ro#riation of .ots &os. /16 and /2' in ivil ase &o. %-1))1$ i.e.$ -6$'65.'' for .ot &o. /16 and -/$2/1.'' for .ot &o. /2' Dith

110

conseF!ential damages by Day of legal interest from 16 &ovember 1/46. -etitioners m!st liBeDise #ay res#ondent 4 1"" the necessary e3#enses it may have inc!rred in s!staining the #ro#erties and the monetary val!e of its services in managing them to the e3tent that #etitioners Dill be benefited thereby. Ahe government hoDever may Bee# Dhatever income or fr!its it may have obtained from the #arcels of land$ in the same Day that #etitioners need not acco!nt for the interests that the amo!nts they received as 0!st com#ensation may have earned in the meantime. "s a matter of 0!stice and convenience$ the laD considers the fr!its and interests as the eF!ivalent of each other.>44? Cnder "rt. 11)/ of the $ivil $ode$ R-f t'e t'ing is improved b" its nature, or b" time, t'e improvement s'all inure to t'e benefit of t'e creditor ! ! !,N the creditor being the #erson Dho stands to receive something as a res!lt of the #rocess of restit!tion. onseF!ently$ #etitioners as creditors do not have to settle as #art of the #rocess of restit!tion the a##reciation in val!e of .ots &os. /16 and /2' Dhich is the nat!ral conseF!ence of nat!re and time. -etitioners need not also #ay for im#rovements introd!ced by third #arties$ i.e.$ ,-8I$ as the dis#osition of these #ro#erties is governed by e3isting contracts and relevant #rovisions of laD. "s for the im#rovements that res#ondent 4 1"" may have made on .ots &os. /16 and /2'$ if any$ #etitioners m!st #ay res#ondent their #revailing free marBet #rice in case #etitioners o#t to b!y them and res#ondent decides to sell. 1n other Dords$ if #etitioners do not Dant to a##ro#riate s!ch im#rovements or res#ondent does not choose to sell them$ the im#rovements Do!ld have to be removed Ditho!t any obligation on the #art of #etitioners to #ay any com#ensation to res#ondent 4 1"" for Dhatever it may have tangibly introd!ced therein.>45? Ahe medi!m of com#ensation for the restit!tion shall be ready money or cash #ayable Dithin a #eriod of three h!ndred si3ty five (365) days from the date that the amo!nt to be ret!rned by #etitioners is determined Dith finality$ !nless the #arties herein sti#!late and agree !#on a different scheme$ medi!m or sched!le of #ayment. 1f after the #eriod of three h!ndred si3ty five (365) days or the la#se of the com#romise scheme or sched!le of #ayment s!ch amo!nt oDed is not settled$ the right of re#!rchase of #etitioners and the obligation of res#ondent 4 1"" to reconvey .ots &os. /16 and /2' and7or the latterGs im#rovements as set forth herein shall be deemed forfeited and the oDnershi# of those #arcels of land shall vest absol!tely !#on res#ondent 4 1"". (inally$ De delete the aDard of -6'$'''.'' for attorneyGs fees and -15$'''.'' for litigation e3#enses in favor of #etitioners as decreed in the assailed +ecision of 12 "#ril 1///of the trial co!rt. 1t is not so!nd #!blic #olicy to set a #remi!m !#on the right to litigate Dhere s!ch right is e3ercised in good faith$ as in the #resent case$ albeit the decision to resist the claim is erroneo!s.>46? Ahe r!le on aDards of attorneyGs fees and litigation e3#enses is fo!nd in "rt. 22') of the $ivil $ode 1n the absence of sti#!lation$ attorneyMs fees and e3#enses of litigation$ other than 0!dicial costs$ cannot be recovered$ e3ce#tE (1) 8hen e3em#lary damages are aDarded;

(2) 8hen the defendantMs act or omission has com#elled the #laintiff to litigate Dith third #ersons or to inc!r e3#enses to #rotect his interests;

111

(3) (4)

1n criminal cases of malicio!s #rosec!tion against the #laintiff; 1n case of a clearly !nfo!nded civil action or #roceeding against the #laintiff;

(5) 8here the defendant acted in gross and evident bad faith in ref!sing to satisfy the #laintiffMs valid and demandable claim; (6) 1n actions for legal s!##ort;

(6) 1n actions for the recovery of Dages of ho!sehold hel#ers$ laborers and sBilled DorBers; ()) 1n actions for indemnity !nder DorBmenMs com#ensation and em#loyerMs liability laDs; (/) 1n a se#arate civil action to recover civil liability arising from a crime;

(1') 8hen at least do!ble 0!dicial costs are aDarded; (11) 1n any other case Dhere the co!rt deems it 0!st and eF!itable that attorneyMs fees and e3#enses of litigation sho!ld be recovered. 1n all cases$ the attorneyMs fees and e3#enses of litigation m!st be reasonable. "s noted in Mirasol v. +e la $ru&$>46? "rt. 22') intends to retain the aDard of attorneyGs fees as the e3ce#tion in o!r laD and the general r!le remains that attorneyGs fees are not recoverable in the absence of a sti#!lation thereto. 1n the case at bar$ considering the established absence of any sti#!lation regarding attorneyGs fees$ the trial co!rt cannot base its aDard on any of the e3ce#tions en!merated in "rt. 22'). Ahe records of the instant case do not disclose any #roof #resented by #etitioners to s!bstantiate that the act!ations of res#ondent 4 1"" Dere clearly !nfo!nded or #!rely for the #!r#ose of harassment; neither does the trial co!rt maBe any finding to that effect in its a##ealed +ecision. 8hile "rt. 22')$ #ar. (4)$ alloDs attorneyGs fees in cases of clearly !nfo!nded civil actions$ this e3ce#tion m!st be !nderstood to mean those Dhere the defenses are so !ntenable as to amo!nt to gross and evident bad faith. =vidence m!st be #resented to the co!rt as to the facts and circ!mstances constit!ting the alleged bad faith$ otherDise$ the aDard of attorneyGs fees is not 0!stified Dhere there is no #roof other than the bare statement of harassment that a #arty to be so ad0!dged had acted in bad faith. Ahe e3ercise of 0!dicial discretion in the aDard of attorneyGs fees !nder "rt. 22')$ #ar. (11)$ demands a fact!al$ legal or eF!itable 0!stification that Do!ld bring the case Dithin the e3ce#tion and 0!stify the grant of s!ch aDard. DA=/=7O/=$ the instant Petition for %evie is G%"&A=,. Ahe +ecision of the o!rt of "##eals in "-G.%. H &o. 64456 dated 2' ,ecember 2''1 and its %esolution of 2) &ovember 2''2 denying reconsideration of the +ecision are %=H=%2=, and 2=A "21,=.

112

Ahe +ecision of %A -*r. 1/ of eb! =*-2''15 is 4O,1(1=, 1& -"%A by -

ity dated 12 "#ril 1/// in

ivil

ase &o.

(a) O%,=%1&G res#ondent 4actan- eb! 1nternational "ir#ort "!thority (4 1"") AO %= O&H=@ to #etitioner Ieirs of Aimoteo 4oreno and 4aria %otea$ namelyE =s#eran<a %.=d0ec$ *ernarda %. 2!ela$ %!by . %otea$ *ernarda %. %otea$ =lia %. Hda ,e .imbaga$ Hirginia %. "rbon$ %osalinda %. "rF!isola$ ora<on %otea$ (e %. =bora$ aridad %otea$ "ngeles Hda. ,e %enacia$ +orge %otea$ 4aria .!isa %otea-Hillegas$ "lfredo %. %otea, re#resented by his heirs$ namelyE .i<beth %otea and =le#eth %otea; .!is %otea$ re#resented by his heir +ennifer %otea; and %olando %. %otea$ re#resented by his heir %olando %. %otea +r.$ .ot &o. /16 Dith an area of 2$355 sF!are meters and .ot &o. /2' consisting of 3$'/6 sF!are meters in .ah!g$ eb! ity$ Dith all the im#rovements thereon evolving thro!gh nat!re or time$ b!t e3cl!ding those that Dere introd!ced by third #arties$ i.e.$ ,-8I$ Dhich shall be governed by e3isting contracts and relevant #rovisions of laD; (b) O%,=%1&G #etitioner Ieirs of Aimoteo 4oreno and 4aria %otea AO -"@ res#ondent 4 1"" Dhat the former received as 0!st com#ensation for the e3#ro#riation of .ots &os. /16 and /2' in ivil ase &o. %-1))1$ i.e.$ -6$'65.'' for .ot &o. /16 and -/$2/1.'' for .ot &o. /2' Dith conseF!ential damages by Day of legal interest from 16 &ovember 1/46. -etitioners m!st liBeDise -"@ res#ondent 4 1"" the necessary e3#enses that the latter may have inc!rred in s!staining the #ro#erties and the monetary val!e of its services in managing the #ro#erties to the e3tent that #etitioners Dill sec!re a benefit from s!ch acts. %es#ondent 4 1"" hoDever may Bee# Dhatever income or fr!its it may have obtained from the #arcels of land$ in the same Day that #etitioners need not acco!nt for the interests that the amo!nts they received as 0!st com#ensation may have earned in the meantime; (c) O%,=%1&G res#ondent 4 1"" AO O&H=@ to #etitioners the im#rovements it may have b!ilt on .ots &os. /16 and /2'$ if any$ in Dhich case #etitioners 2I".. -"@for these im#rovements at the #revailing free marBet #rice$ otherDise$ if #etitioners do not Dant to a##ro#riate s!ch im#rovements$ or if res#ondent does not choose to sell them$ res#ondent 4 1"" 2I".. %=4OH= these im#rovements 81AIOCA "&@ O*.1G"A1O& on the #art of #etitioners to #ay any com#ensation to res#ondent 4 1"" for them; (d) O%,=%1&G #etitioners AO -"@ the amo!nt so determined !nder letter (b) of this dis#ositive #ortion as consideration for the reconveyance of .ots &os. /16 and /2'$ as Dell as the #revailing free marBet #rice of the im#rovements b!ilt thereon by res#ondent 4 1""$ if any and desired to be bo!ght and sold by the #arties$ in ready money or cash -"@"*.=Dithin a #eriod of three h!ndred si3ty five (365) days from the date that the amo!nt !nder letter (b) above is determined Dith finality$ !nless the #arties herein sti#!late a different scheme or sched!le of #ayment$ otherDise$ after the #eriod of three h!ndred si3ty five (365) days or the la#se of the com#romise scheme or sched!le of #ayment and the amo!nt so #ayable is not settled$ the right of re#!rchase of #etitioners and the obligation of res#ondent 4 1"" to so reconvey .ots &os. /16 and /2' and7or the im#rovements shall be,==4=, (O%(=1A=, and the oDnershi# of those #arcels of land shall H=2A "*2O.CA=.@ !#on res#ondent 4 1""; (e) %=4"&,1&G the instant case to %A -*r. 1/ of eb! ity for #!r#oses of determining the amo!nt of com#ensation for .ots &os. /16 and /2' to be #aid by #etitioners as mandated in letter (b) hereof$ and the val!e of the #revailing free marBet #rice of the im#rovements b!ilt thereon by res#ondent 4 1""$ if any and desired to be

113

bo!ght and sold by the #arties$ and in general$ sec!ring the immediate e3ec!tion of this +ecision !nder the #remises; (f) O%,=%1&G #etitioners to res#ect the right of the ,e#artment of -!blic 8orBs and IighDays to its lease contract !ntil the e3#iration of the lease #eriod; and (g) ,=.=A1&G the aDard of -6'$'''.'' for attorneyGs fees and -15$'''.'' for litigation e3#enses against res#ondent 4 1"" and in favor of #etitioners. Ahis +ecision is Ditho!t #re0!dice to the claim of intervenor one %ichard =. =nch!an on his allegation that he acF!ired thro!gh deeds of assignment the rights of some of herein #etitioners over .ots &os. /16 and /2'. &o costs. -O O/!=/=!. <uisumbing, Austria-Martine&, $allejo, and Tinga, 00., conc!r.

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila (1%2A ,1H121O& ,./. No. +011&33 7ebruar9 28, %'81 4O-= V. A=//=/$, #etitioner vs. +.6. +=VI-T= . CO., INC., 4O-= T. 8$/C=+O, ,OV=/N8=NT -=/VIC= IN0 IN-;/$NC= -@-T=8, 6/OVINCI$+ -A=/I77 O7 /II$+, /=,I-T=/ O7 !==!- O7 /II$+ and TA= AON. CO;/T O7 $66=$+-, res#ondents. Amador Santiago, 0r. for respondent (.P. (eviste G $o., -nc. Benjamin A#uino for respondent 0.T. Marcelo, 0r. %=2O.CA1O&

114

8=+=NCIO0A=//=/$, J.: *efore the o!rt is #etitionerMs 4otion$ dated +!ly 3$ 1/)1$ for the reconsideration of the %esol!tion of this o!rt$ dated "#ril 1$ 1/)1$ denying d!e co!rse to this -etition for %evieD on certiorari for lacB of merit. Ahe 4otion for %econsideration Das set for oral arg!ment on +!ne 13$ 1/)4$ after Dhich$ the o!rt reF!ired the #arties to s!bmit sim!ltaneo!sly concise memoranda in am#lification of their oral arg!ments. "ll #arties have com#lied Dith the o!rtMs directive. *riefly$ the antecedent facts may be s!mmari<ed as folloDsE On +!ne 1'$ 1/6/$ ..-. .eviste ; o. (.eviste$ for short) had obtained a loan from the Government 2ervice 1ns!rance 2ystem (G212) in the amo!nt of -1$)54$311.5'. "s sec!rity therefore$ .eviste mortgaged tDo (2) lots$ one located at -araQaF!e (the -araQaF!e -ro#erty)$ and the other located at *!endia "ven!e$ 4aBati$ Dith an area of a##ro3imately 2$665 sF!are meters$ together Dith the 3-story b!ilding thereon (the *!endia -ro#erty). On &ovember 3$ 1/61$ .eviste sold to -etitioner$ +ose H. Ierrera$ the *!endia -ro#erty for the amo!nt of -3$65'$'''.''. Ahe conditions Dere that #etitioner Do!ldE (1) #ay .eviste -11$)/5$6)).5'; (2) ass!me .evisteMs indebtedness of -1)54$311.5' to the G212; and (3) s!bstit!te the -aranaF!e #ro#erty Dith his oDn Dithin a #eriod of si3 (6) months. (or his #art$ .eviste !ndertooB to arrange for the conformity of the G212 to #etitionerMs ass!m#tion of the obligation. 1t Das f!rther sti#!lated in the ontract to 2ell that Lfail!re to com#ly Dith any of the conditions contained therein$ #artic!larly the #ayment of the sched!led amorti<ations on the dates herein s#ecified shall render this contract a!tomatically cancelled and any and all #ayments made shall be forfeited in favor of the vendor and deemed as rental and7or liF!idated damages.L -etitioner tooB #ossession of the *!endia #ro#erty$ received rentals of -21$'''.'' monthly$ and collected a##ro3imately -)''$'''.'' from ,ecember$ 1/61$ !# to 4arch$ 1/65. IoDever$ #etitioner remitted a total of only -3''$'''.'' to the G212. On "#ril 15$ 1/63$ #etitioner reF!ested the G212 for the restr!ct!ring of the mortgage obligation beca!se of his oDn arrearages in the #ayment of the amorti<ations. G212 re#lied that as a matter of #olicy$ it co!ld not act on his reF!est !nless he first made #ro#er s!bstit!tion of #ro#erty$ !#dated the acco!nt$ and #aid 2'O thereof to the G212. Ahere Das no reF!irement by the G212 for the e3ec!tion of a final deed of sale by .eviste in favor of #etitioner.

115

On +!ne 2$ 1/64$ G212 sent notice to .eviste of its intention to foreclose the mortgaged #ro#erties by reason of defa!lt in the #ayment of amorti<ations. "n a##lication for foreclos!re Das thereafter filed by the G212 Dith the -rovincial 2heriff of %i<al$ and on (ebr!ary 15$ 1/65$ the foreclosed #ro#erties Dere sold at #!blic a!ction and a ertificate of 2ale in favor of the G212$ as the highest bidder$ Das iss!ed. On 4arch 3$ 1/65$ .eviste assigned its right to redeem both foreclosed #ro#erties to res#ondent +ose 4arcelo$ +r. (4arcelo for brevity). .ater$ on &ovember 2'$ 1/65$ 4arcelo redeemed the #ro#erties from the G212 by #aying it the s!m of -3$232$666./4 for Dhich he Das iss!ed a certificate of redem#tion. Ahe -aranaF!e #ro#erty Das t!rned over by 4arcelo to .eviste !#on #ayment by the latter of a##ro3imately -25'$'''.'' as disclosed at the hearing. .eviste needed the -araQF!e -ro#erty as it had sold the same and s!it had been filed against it for its recovery. On 4ay 6$ 1/65$ #etitioner Drote the G212 (=3hibit LHL) informing the latter of his right to redeem the foreclosed #ro#erties and asBing that he be alloDed to do so in installments. "##arently$ the G212 had not favorably acted thereon. On 4ay 13$ 1/65$ #etitioner instit!ted s!it against .eviste before the o!rt of (irst 1nstance of %i<al for L1n0!nction$ ,amages$ and ancellation of "nnotation.L On ,ecember 2'$ 1/66$ the Arial o!rt rendered its ,ecision discussing #etitionerMs om#laint for lacB of basis in fact and in laD$ and ordering an #ayments made by #etitioner to .eviste forfeited in favor of the latter #!rs!ant to their contract #roviding for a!tomatic forfeit!re Lin the event of fail!re to com#ly Dith any of the conditions contained therein$ #artic!larly the #ayment of the sched!led amorti<ations.L On a##eal$ the "##ellate o!rt affirmed the 0!dgment in toto$ stating in #artE

1t is to be noted that a##ellee .. -. .eviste and o.$ 1nc. Das not in a financial #osition to redeem the foreclosed #ro#erty and there Das no ass!rance that a##ellant Do!ld redeem the #ro#erty Dithin the #eriod. 1n this sit!ation$ a##ellee has no other alternative$ b!t to assign the right of redem#tion to a #erson Dilling and ca#able to ass!me the same$ if only to #rotect his interest in the said #ro#erty. .iBeDise$ Dhen the eF!ity to redeem Das assigned$ a##ellant co!ld have #reserved and #rotected Dhatever right he may have to the #ro#erty by tendering the redem#tion #rice to 4arcelo. Ie had !# to (ebr!ary 24$ 1/66$ to do so$ b!t he did not. Ahe record established f!rther that a##ellant did not redeem the #ro#erty. ... % %econsideration so!ght by #etitioner Das met Dith denial by res#ondent "##ellate o!rt. Ience$ the instant -etition seeBing revieD by certiorari before this instance. "s hereinbefore stated$ De denied the -etition for lacB of merit. -etitioner seeBs reconsideration essentially on the contention that affirmance of the "##ellate o!rtMs ,ecision Do!ld res!lt in #atent in0!stice as he Do!ld not only forfeit the *!endia -ro#erty to 4arcelo$ b!t Do!ld also lose the amo!nt of -1$)/5$6)).5' and -3''$'''.''$ Dhich he #aid to .eviste and the G212$ res#ectively; that it Do!ld res!lt in

116

the !n0!st enrichment of .eviste; and that .eviste as Dell the G212 and 4arcelo Do!ld be benefiting at #etitionerMs e3#ense. onsidering the gro!nds of #etitionerMs 4otion for %econsideration$ the arg!ments add!ced d!ring the oral arg!ment and in the #artiesM res#ective 4emoranda$ De resolve to deny reconsideration !#on the folloDing considerationsE 1. (a) Ahe G212 has not benefited in any Day at the e3#ense of #etitioner. 8hat it received$ by Day of redem#tion from res#ondent 4arcelo$ Das the mortgage loan it had e3tended #l!s interest and s!ndry charges. (b) &either has 4arcelo benefited at the e3#ense of #etitioner. 2aid res#ondent had #aid to G212 the amo!nt - 3$232$666./4$ Dhich is not far beloD the s!m of - 3$65'$'''.''$ Dhich Das the consideration #etitioner Do!ld have #aid to .eviste had his contract been cons!mmated. (c) .eviste had neither #rofited at the e3#ense of #etitioner$ (or .osing his *!endia -ro#erty$ all he had received Das - 1$)54$311.5' from G212 less amo!nts he had #aid$ #l!s - 1$)/5$6)).'' #aid to him by #etitioner$ the total of Dhich is s!bstantially a reasonable val!e of the *!endia -ro#erty. 2. 1t is F!ite tr!e that #etitioner had lost the - 1$)/5$6)).'' he had #aid to .eviste$ #l!s - 3''$'''.'' he had #aid to G212$ less the rentals he had received Dhen in #ossession of the *!endia -ro#erty. Ahat loss is attrib!table to his fa!lt inE (a) &ot having been able to s!bmit collateral to G212 in s!bstit!tion of the -aranaF!e -ro#erty; (b) &ot #aying off the mortgage debt Dhen G212 decided to foreclose; and (c) &ot maBing an earnest effort to redeem the #ro#erty as a #ossible redem#tioner. 3. 1t cannot be validly said that #etitioner had f!lly com#lied Dith all the conditions of his contract Dith .eviste. (or one thing$ he Das not able to s!bstit!te the -araQaF!e -ro#erty Dith another collateral for the G212 loan. 4oreover$ as stated by the o!rt of "##eals$ LnoDhere in the letter (of the G212) Das mentioned that a final deed of sale m!st first be e3ec!ted and #resented before the ass!m#tion may be considered. (or if it Das really the intention of G212$ the reF!irement of ,eed of 2ale sho!ld have been stated in its letter.L " O%,1&G.@$ #etitionerMs 4otion for %econsideration is hereby denied.

2O O%,=%=,. Plana, %elova, +e la 2uente and $uevas, 00., concur. Gutierre&, 0r.K and Alampa", 00.,tooE no part.

117

-eparate Opinions

T==A$N"==, J., dissentingE 1 vote to grant #etitionerMs motion for reconsideration of the o!rtMs earlier %esol!tion denying the #etition and instead to grant the relief so!ght therein by #etitioner$ for the gro!nds and considerations hereinafter stated. 1t can be inferred from the antecedent facts that res#ondent .eviste ; o.$ 1nc. (.eviste) Das g!ilty of bad faith and of violating the terms and conditions of its ontract to 2ell Dith #etitioner +ose H. Ierrera. On +!ne 1'$ 1/6/$ .eviste had sec!red a loan from the Government 2ervice 1ns!rance 2ystem in the amo!nt of -1$)54$311.5'$ mortgaging tDo #arcels of land$ one located at -aranaF!e and the other located at *!endia "ven!e$ 4aBati$ Dith an area of 2$665 sF!are meters and the b!ilding and other im#rovements thereon (covered by A A &o. /)11 of the %egistry of ,eeds of the -rovince of %i<al). .ater$ or on &ovember 3$ 1/61$ .eviste sold to Ierrera the *!endia #ro#erty for the s!m of -3$65'$'''.''. Ierrera agreed that (1) he Do!ld ass!me .evisteMs indebtedness of -1$)54$311.5' to the G212; (2) that he Do!ld #ay .eviste the balance of -1$)/5$6)).5' Dithin tDo (2) years from the date of the contract$ Dith interest thereon at 12O #er ann!m; and (3) that he Do!ld s!bstit!te the -araQaF!e #ro#erty Dith his oDn Dithin a #eriod of si3 months. On the other hand$ .eviste !ndertooB that it Do!ld arrange for the conformity of the G212 to IerreraMs ass!m#tion of its mortgage obligation. Ahe #arties f!rther sti#!lated that Lfail!re to com#ly Dith any of the conditions contained therein$ #artic!larly the #ayment of the sched!led amorti<ation on the dates herein s#ecified shall render this contract a!tomatically cancelled and any and all #ayments made shall be forfeited in favor of the vendor and deemed as rental and7or !nliF!idated damages. "bo!t the first DeeB of ,ecember$ 1/61$ Ierrera tooB #ossession of the *!endia #ro#erty and received the monthly rentals of aro!nd -21$'''.''. On ,ecember 2'$ 1/61$ Ierrera notified G212 of the ontract to 2ell e3ec!ted by .eviste #roviding for his ass!m#tion of .evisteMs mortgage obligation. 8hen no action Das taBen thereon by the G212 and .eviste failed to taBe any action to facilitate the ass!m#tion of the mortgage by Ierrera$ the latter sent his administrator$ 4r. 1sidro avestany$ to folloD it !# Dith the G212. 1n the co!rse thereof$ avestany fo!nd that .eviste Das in arrears in its amorti<ation #ayments for 14 months$ Dhich Ierrera did not BnoD at the time of the sale.

118

Ahe G212 reF!ired Ierrera to s!bmit #a#ers to s!##ort his ass!m#tion of the mortgage !ntil finally he Das informed that the ass!m#tion co!ld not be a##roved !ntil Ierrera co!ld s!bmit a final deed of sale (the original contract being merely a contract to sell or a conditional sale) and that he has no #ersonality to re#resent .eviste in connection Dith the restr!ct!ring of the mortgage. *!t nevertheless$ the G212 received #ayments from Ierrera for the acco!nt of .eviste$ s!ggesting that this Das necessary for Lf!rther actionsL to be taBen on the ass!m#tion of mortgage. Ahe 4anager of the ollection ,e#artment even s!ggested to avestany to contin!e the #ayments as a gest!re of good faith. Ierrera remitted a total of -3''$'''.'' to the G212$ credited against .evisteMs acco!nt. 4eanDhile$ .eviste contin!ed to receive #ayments from Ierrera !nder the ontract to 2ell. C#on f!ll #ayment$ avestany then reF!ested .eviste to e3ec!te the final deed of sale for s!bmission to the G212 b!t .eviste ref!sed$ alleging as an e3c!se IerreraMs fail!re to ass!me the mortgage (Dhich .eviste itself had blocBed). CnBnoDn to Ierrera$ .eviste alone Das notified on +!ne 21$ 1/64 by the G212 of its intention to foreclose the mortgage. Ierrera came to BnoD abo!t it only on +an!ary 16$ 1/65. Ie immediately Drote an !rgent a##eal to the G212 reminding the G212 that he had already #aid in f!ll the #rinci#al of -1$)/5$6)).5' to .eviste and -3''.'''.'' to the G212 and asBed that the foreclos!re be held in abeyance #ending efforts to settle .evisteMs acco!nt Dhich .eviste had !ndertaBen to have Ierrera ass!me. &onetheless$ the G212 #roceeded Dith the a!ction sale and itself bidded for the #ro#erty. On 4arch 3$ 1/65$ .eviste (notDithstanding its having received f!ll #ayment of -1$)/5$6)).5' from Ierrera) yet sold for !ndisclosed amo!nt and considerations the eF!ity of redem#tion (Dhich in 0!stice and eF!ity #ertained to Ierrera) to its cores#ondent +ose A. 4arcelo and event!ally$ Ierrera Das o!sted from the #ro#erty in dis#!te. On 4ay 13$ 1/65$ Ierrera filed a com#laint against .eviste before the o!rt of (irst 1nstance of %i<al for in0!nction$ damages and cancellation of annotation. Ahe trial co!rt dismissed the com#laint for alleged lacB of basis in fact and in laD$ and ordered all #ayments made by Ierrera forfeited in favor of .eviste. Ierrera a##ealed to the o!rt of "##eals Dhich affirmed the loDer co!rtMs decision and denied reconsideration. On +an!ary 23$1/)1$ Ierrera filed the #etition for revieD on certiorari Dhich Das denied by this o!rt in a min!te resol!tion dated "#ril 1$ 1/)1. Ience$ IerreraMs motion for reconsideration$ Dhich Das heard and arg!ed before the o!rt on +!ne 13$ 1/)4. Ierrera reiterated the main iss!es$ th!sE V an res#ondent .eviste laDf!lly ref!se to iss!e a final deed of sale to the #etitioner even after it had already received f!ll #ayment of Dhat Das d!e it !nder the ontract to 2ell9 V an res#ondent .eviste laDf!lly ref!se to com#ly Dith its obligation !nder the ontract to 2ell to sec!re the conformity of res#ondent G212 to the ass!m#tion of the mortgage obligation by #etitioner9

119

V an res#ondent .eviste a!tomatically cancel the ontract to 2ell and forfeit all the s!ms #aid by #etitioner there!nder Dhen res#ondent .eviste Das the one that vol!ntarily #revented the #etitioner from f!lfilling his obligations !nder the ontract to 2ell and by otherDise maBing it legally or #hysically im#ossible for the #etitioner to f!lfill s!ch obligations9 V an res#ondent .eviste laDf!lly assign its eF!ity of redem#tion over the *!endia #ro#erty to res#ondent 4arcelo$ and can the latterMs redem#tion of said #ro#erty from res#ondent G212 be considered laDf!l9 V an res#ondent .eviste be laDf!lly aDarded damages and attorneyMs fees in the instant case9 .eviste #atently had no 0!stification to ref!se to e3ec!te the final deed of sale to Ierrera$ after receiving f!ll #ayment of the sti#!lated amo!nt$ and thereby #revent f!lfillment of the remaining condition for IerreraMs ass!m#tion of its mortgage obligation Dith G212$ Dhich it had e3#ressly !ndertaBen to sec!re from G212. Ahere Das constr!ctive f!lfillment on IerreraMs #art of his obligations !nder the ontract and !nder "rticle 11)6 of the ivil ode$ L(A)he condition shall be deemed f!lfilled Dhen the obligor vol!ntarily #revents its f!lfillment.L Ahe motion for reconsideration sho!ld be granted and the #etition granted to obviate a carriage of 0!stice. 8hile it is tr!e that !nder #aragra#h &o. 11 of the ontract to 2ell$ fail!re to com#ly Dith any of the conditions therein en!merated Do!ld render the contract a!tomatically cancelled and all the s!ms #aid by #etitioner forfeited$ Ierrera Das #revented from f!lfilling the condition of ass!ming the G212 mortgage beca!se of .evisteMs oDn non-com#liance Dith its obligation of sec!ring the consent of G212 thereto. Ahe contract e3#ressly obligated .eviste to DorB o!t Dith the G212 IerreraMs ass!m#tion of the mortgage. *!t obvio!sly beca!se of selfish and self-serving motives and designs$ as borne o!t by the events$ .eviste made no effort to assist and arrange for IerreraMs ass!m#tion of its mortgage obligation. 1n s#ite of the fact that Ierrera had already #aid .eviste the f!ll amo!nt of -1$)/5.6)).5'$ .eviste ref!sed to e3ec!te the final deed of sale in favor of Ierrera as reF!ired by G212. Ahe s!bstit!tion of .evisteMs -aranaF!e #ro#erty Dith IerreraMs oDn #ro#erty as additional sec!rity for .evisteMs indebtedness co!ld not be DorBed o!t and agreed !#on by Ierrera Dith G212$ Dhich ref!sed to deal Dith him Ditho!t s!ch final deed of sale from .eviste. 1ndeed$ Ierrera Das verily sF!ee<ed in this #incer movement Ierrera co!ld not ass!me .evisteMs mortgage obligation and restr!ct!re the same Dith G212 Dhich ref!sed to recogni<e and deal Dith him Ditho!t a final deed of sale from .eviste. *!t .eviste ref!sed to e3ec!te s!ch final deed of sale notDithstanding that he had been #aid by Ierrera the f!ll amo!nt of -1$)/5$6)).5' d!e to him and Dhat Das left Das .evisteMs o!tstanding mortgage indebtedness to G212. Ahe G212$ in t!rn$ notDithstanding IerreraMs #ayment on acco!nt thereof directly to it of some -3''$'''.'' and the more than s!fficient sec!rity in its favor of the *!endia #ro#erty alone$ ref!sed (abetted by .evisteMs absol!te non-coo#eration$ contrary to his contract!al obligation) to have Ierrera ass!me the mortgage obligation. 1nstead$ G212 Ditho!t notice to Ierrera foreclose the mortgage and com#letely sh!t off Ierrera-even from his right of redem#tion as .evisteMs vendee.

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1f a #arty charges himself Dith an obligation #ossible to be #erformed$ he m!st abide by it !nless #erformance is rendered im#ossible by the act of God$ the laD$ or the other #arty. (.abayen vs. Aalisay 2ilay 4illing o.$ 52 -hil. 44'). *y .evisteMs !n0!stifiable act$ it virt!ally #revented Ierrera from com#lying Dith his obligation to ass!me the G212 mortgage and .eviste cannot noD in eF!ity and 0!stice insist on rescission of the contract beca!se of IerreraMs fail!re Dhich .eviste itself had bro!ght abo!t. Ahe sit!ation is analogo!s to that contem#lated in "rticle 1266 of the ivil ode Dhich #rovides that L(A)he debtor in obligations to do shall also be released Dhen the #restation becomes legally or #hysically im#ossible Ditho!t the fa!lt of the obligor .L .evisteMs non-com#liance Dith its oDn !ndertaBing Dhich #revented Ierrera from ass!ming the G212 mortgage bars it from invoBing the rescission cla!se. Cnder #ar. 4 of the ontract to 2ell$ it Das e3#ressly !ndertaBen by .eviste that Lthe ass!m#tion of mortgage shall be arranged and conformity thereto by G212 obtained by the Hendor Dith the f!ll coo#eration of the Hendee.L *!t notDithstanding its having received the f!ll amo!nt d!e it$ .eviste did not f!lfill the essential condition reF!ired by G212 for IerreraMs ass!m#tion of the mortgage the e3ec!tion by .eviste of the final deed of sale. "rticle 116/ of the ivil ode e3#ressly #rovides$ in this regard$ that L(1)n reci#rocal obligations$ neither #arty inc!rs in delay if the other does not com#ly or is not ready to com#ly in a #ro#er manner Dith Dhat is inc!mbent !#on him. (rom the moment one of the #arties f!lfills his obligation$ delay by the other begins.L "s doc!mented by Ierrera in his memorand!m in am#lification of oral arg!ment (%ecord$ ##. 314-315)$ L.eviste has clearly not com#lied Dith (its) obligation. Ah!s$ Dhen asBed re#eatedly by this Ionorable o!rt Dhat definitive ste#s it tooB to arrange and sec!re s!ch conformity of res#ondent G212$ res#ondent .eviste co!ld not readily ansDer$ as it co!ld not #oint to any definitive ste# that it had act!ally !ndertaBen. 1ndeed$ if res#ondent .eviste Das acting in good faith and Das sincere in com#lying Dith its obligation$ it co!ld have at least done the folloDingE 1. Officially inform res#ondent G212 abo!t its e3ec!tion of the ontract to 2ell and officially reF!est G212 to a##rove #etitionerMs ass!m#tion of its mortgage obligation$ s!b0ect to the condition stated in the contract. 2. Officially inform res#ondent G212 that #etitioner had already #aid to it the f!ll amo!nt d!e !nder the ontract to 2ell$ and for this reason$ it Das Dilling to transfer the title of the *!endia #ro#erty to the #etitioner$ and for this #!r#ose$ iss!e a final ,eed of 2ale$ even if s!b0ect to certain conditions. 3. 1f #etitioner had indeed failed to com#ly Dith his obligations !nder the ontract to 2ell$ d!ring the #eriod covering the years 1/62 and 1/63$ then Dhy did res#ondent .eviste contin!e receiving #ayments from #etitioner9 1t m!st be noted that res#ondent .eviste Das #aid the f!ll amo!nt of the consideration (-1$)/5$6)).5') d!e to it on installment basis$ the last of Dhich Das on +!ly 2$ 1/64 (=3hs. L=L$ L(L$ LGL$ LIL$ L1L$ L+L$ L:L$ and L.L).

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4. %es#ondent .eviste co!ld also have formally com#lained to #etitioner or even res#ondent G212 abo!t #etitionerMs alleged nonf!lfillment of his obligations !nder the ontract to 2ell$ or advise res#ondent G212 not to receive any more #ayments from #etitioner made in its name. 8hy did res#ondent .eviste Bee# F!iet and alloD res#ondent G212 to contin!e receiving said #ayments9 1t m!st be noted that -etitioner made the folloDing #ayments to res#ondent G212$ for the acco!nt of res#ondent .evisteE 1''$'''.'' V 1/63 5'$'''.'' V 4ay 1'$ 1/64 5'$'''.'' V 4ay 24$ 1/64 5'$ '''.'' V &ov. 5$ 1/64 5'$'''.'' V +an. 22$ 1/65 >=3h.LM@L? (rom the above$ it Dill be seen that res#ondent .eviste not only Das the one that clearly failed to com#ly Dith its obligations !nder the ontract to 2ell$ b!t also it Das the one that #revented the #etitioner from f!lfilling his obligation !nder said contract. =ven as to the restr!ct!ring of .evisteMs mortgage obligation Dhich Ierrera had reF!ested (since .evisteMs doc!mented arrearages before the e3ec!tion of the contract amo!nted to aro!nd -)''$'''.'')$ G212 had declined to entertain the same for lacB of the final deed of sale$ stating in a letter to Ierrera that 8e Dish to inform yo! that De cannot go on #rocessing yo!r #a#ers in vieD of the fact that as of this date .. -. .eviste and o. is still the registered oDner of the mortgaged #ro#erty$ hence$ De cannot entertain yo!r reF!est. (=3hibit '; !nderscoring s!##lied) 1t also a##ears that res#ondent G212 ine3#licably did not sym#athi<e Dith the #light of Ierrera (bro!ght abo!t by .eviste itself) as may be seen by the folloDing circ!mstancesE (1) 1t reF!ired Ierrera to s!bmit s!##orting #a#ers Dhich led him to believe that the ass!m#tion of the mortgage Do!ld be #ro#erly acted !#on; (2) 1t acce#ted #ayments from Ierrera for the acco!nt of .eviste; (3) 1t did not inform Ierrera of its intention to foreclose the #ro#erty BnoDing that Ierrera had #!rchased the same and hence had the right to redeem the #ro#erty as .evisteMs vendee$ notDithstanding its BnoDledge and that Ierrera Das directly maBing #ayments to it on acco!nt of .evisteMs mortgage indebtedness; (4) 1t #roceeded Dith the a!ction sale$ notDithstanding the letter-a##eal of Ierrera$ that he had already #aid in f!ll the #rinci#al amo!nt to .eviste

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and -3''$'''.'' to the G212 and asBing that he be given a chance to settle .evisteMs acco!nt; (5) 1t alloDed and recogni<ed the sale of eF!ity of redem#tion to a total stranger$ 4arcelo$ notDithstanding the offer of Ierrera as .evisteMs vendee and s!ccessor to redeem the #ro#erty Dithin the #eriod of redem#tion$ as Das IerreraMs right in laD and eF!ity; (6) Ahe total stranger 4arcelo Das alloDed to redeem the #ro#erty$ and ret!rned the -aranaF!e #ro#erty to .eviste; and (6) 1t de#arted from the established #olicy of government financial instit!tions of alloDing the restr!ct!ring of debtorMs mortgage acco!nts$ !nless they Dere in e!tremis and violated its oDn settled #olicy of giving d!e #reference to the oDner and vendee Ierrera of redeeming and7or reacF!iring the foreclosed #ro#erty. "s the late hief +!stice astro stated in his se#arate o#inion in +BP vs. Mirang,66 2 %" 141$ in taBing notice of s!ch #olicy and !rging the ,*- to e3tend s!ch assistance to the ha#less res#ondent debtor therein. L(1)t is Dell remember that !ncom#romising or mechanical a##lication of the letter of the laD has res!lted not infreF!ently$ in the denial of moral 0!stice$ L after laying the #remise that +!stice 4aBasiar maBes the #ertinent s!ggestion that the ,*- restr!ct!re the acco!nt of 4irang. .iBe +!stice 4aBasiar$ 1 #ersonally BnoD that the ,*- and similar Government financial instit!tions (the -hili##ine &ational *anB$ the Government 2ervice 1ns!rance 2ystem$ and the 2ocial 2ec!rity 2ystem) have restr!ct!red acco!nts of debtor onsidering the inordinate a##reciation of land val!es everyDhere$ there a##ears to be no ins!#erable obstacle to the ,*- restr!ct!ring the acco!nt of 4irang$ not only to enable him to #ay his indebtedness in easy terms over a #eriod of years b!t as Dell to maBe available additional f!nds to be !tili<ed by him in the develo#ment of his 1)-]-hectare land. 1t is not too late in the day V in this$ o!r com#assionate society V for the ,*- to do so. %es#ondent 4arcelo Das eF!ally not in good faith Dhen he #!rchased the eF!ity of redem#tion. 4arcelo BneD of the ontract to 2ell Dith Ierrera at the time the eF!ity Das assigned to him by .eviste. 4oreover$ Ierrera Das still in material #ossession of the #ro#erty then. 1n iniF!ito!s a!tomatic rescission of the contract be s!stained$ .eviste Do!ld be !n0!stly enriched by (1) -1$)/5$6)).5'$ the #rinci#al amo!nt directly #aid to it by Ierrera; (2) -3''$'''.''$ the amo!nt #aid by Ierrera to G212 for .evisteMs arrearages the -araQaF!e #ro#erty$ Dhich Das ret!rned to him by 4arcelo; (4) the !ndisclosed #roceeds of the sale of eF!ity of redem#tion to 4arcelo (in effect a do!ble #ayment to .eviste for the same #ro#erty); and (5) moreover$ G212 foreclosed the mortgage for .evisteMs total o!tstanding indebtedness to G212 in the s!m of -3$232$666./4 (##. 2$ 4$ main %esol!tion); this Das a total gain to .eviste$ for it Das thereby discharged and relieved entirely of its said mortgage debt of -3$232$666./4 at the loss of only the *!endia #ro#erty$ Dhich it had already sold to and had been f!lly #aid by$ Ierrera in the

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agreed amo!nt of -1$)/5$6)).5'. Ahis constit!tes !n0!st enrichment at the e3#ense of Ierrera Dhose #ayments to .eviste and the G212$ totalling almost -2.2 million Dere declared forfeited. *asic #rinci#les of 0!stice and eF!ity cry o!t against s!ch !n0!st enrichment and ineF!ity. "s De held in Air Manila, -nc. vs. $-%, )3 2 %" 56/$ L(=)F!ity as the com#lement of legal 0!risdiction seeBs to reach and do com#lete 0!stice Dhere co!rts of laD$ thro!gh the infle3ibility of their r!les and Dant of #oDer to ada#t their 0!dgments to the s#ecial circ!mstances of cases$ are incom#etent to do so. M=F!ity regards the s#irit and not the letter$ the intent and not the form$ the s!bstance rather than the circ!mstance$ as it is vario!sly e3#ressed by different co!rts.M L Ierrera is entitled to the relief so!ght by him !nder these basic #rinci#les of laD$ 0!stice and eF!ity$ as Das e3tended by this o!rt !nder analogo!s circ!mstances to the debtor in its recent decision in %epublic of t'e P'il.(&=,") vs. o!rt of "##eals (G.%. &o. 52664$ &ov. 2/$1/)4) notDithstanding that the debtor in Levident good faithL had inc!rred in delay in discharging its obligations to another government agency$ the &=,"$ Dhich had shoDn Lclear #rocrastination and indecisionL in seeBing afterDards to re0ect the #ayments made and cancel the #revio!s a!thori<ation it had given for the sale of the debtorMs attached real #ro#erty. Ahe !nBindest bloD is that the o!rt has !#held even the aDard of -5$'''. V nominal damages and -65$'''. V attorneyMs fees against Ierrera for seeBing the 0!st vindication in co!rt of his rights.

-eparate Opinions T==A$N"==, J., dissentingE 1 vote to grant #etitionerMs motion for reconsideration of the o!rtMs earlier %esol!tion denying the #etition and instead to grant the relief so!ght therein by #etitioner$ for the gro!nds and considerations hereinafter stated. 1t can be inferred from the antecedent facts that res#ondent .eviste ; o.$ 1nc. (.eviste) Das g!ilty of bad faith and of violating the terms and conditions of its ontract to 2ell Dith #etitioner +ose H. Ierrera. On +!ne 1'$ 1/6/$ .eviste had sec!red a loan from the Government 2ervice 1ns!rance 2ystem in the amo!nt of -1$)54$311.5'$ mortgaging tDo #arcels of land$ one located at -aranaF!e and the other located at *!endia "ven!e$ 4aBati$ Dith an area of 2$665 sF!are meters and the b!ilding and other im#rovements thereon (covered by A A &o. /)11 of the %egistry of ,eeds of the -rovince of %i<al). .ater$ or on &ovember 3$ 1/61$ .eviste sold to Ierrera the *!endia #ro#erty for the s!m of -3$65'$'''.''. Ierrera agreed that (1) he Do!ld ass!me .evisteMs indebtedness of -1$)54$311.5' to the G212; (2) that he Do!ld #ay .eviste the balance of -1$)/5$6)).5' Dithin tDo (2) years from the date of the contract$ Dith interest thereon at 12O #er

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ann!m; and (3) that he Do!ld s!bstit!te the -araQaF!e #ro#erty Dith his oDn Dithin a #eriod of si3 months. On the other hand$ .eviste !ndertooB that it Do!ld arrange for the conformity of the G212 to IerreraMs ass!m#tion of its mortgage obligation. Ahe #arties f!rther sti#!lated that Lfail!re to com#ly Dith any of the conditions contained therein$ #artic!larly the #ayment of the sched!led amorti<ation on the dates herein s#ecified shall render this contract a!tomatically cancelled and any and all #ayments made shall be forfeited in favor of the vendor and deemed as rental and7or !nliF!idated damages. "bo!t the first DeeB of ,ecember$ 1/61$ Ierrera tooB #ossession of the *!endia #ro#erty and received the monthly rentals of aro!nd -21$'''.''. On ,ecember 2'$ 1/61$ Ierrera notified G212 of the ontract to 2ell e3ec!ted by .eviste #roviding for his ass!m#tion of .evisteMs mortgage obligation. 8hen no action Das taBen thereon by the G212 and .eviste failed to taBe any action to facilitate the ass!m#tion of the mortgage by Ierrera$ the latter sent his administrator$ 4r. 1sidro avestany$ to folloD it !# Dith the G212. 1n the co!rse thereof$ avestany fo!nd that .eviste Das in arrears in its amorti<ation #ayments for 14 months$ Dhich Ierrera did not BnoD at the time of the sale. Ahe G212 reF!ired Ierrera to s!bmit #a#ers to s!##ort his ass!m#tion of the mortgage !ntil finally he Das informed that the ass!m#tion co!ld not be a##roved !ntil Ierrera co!ld s!bmit a final deed of sale (the original contract being merely a contract to sell or a conditional sale) and that he has no #ersonality to re#resent .eviste in connection Dith the restr!ct!ring of the mortgage. *!t nevertheless$ the G212 received #ayments from Ierrera for the acco!nt of .eviste$ s!ggesting that this Das necessary for Lf!rther actionsL to be taBen on the ass!m#tion of mortgage. Ahe 4anager of the ollection ,e#artment even s!ggested to avestany to contin!e the #ayments as a gest!re of good faith. Ierrera remitted a total of -3''$'''.'' to the G212$ credited against .evisteMs acco!nt. 4eanDhile$ .eviste contin!ed to receive #ayments from Ierrera !nder the ontract to 2ell. C#on f!ll #ayment$ avestany then reF!ested .eviste to e3ec!te the final deed of sale for s!bmission to the G212 b!t .eviste ref!sed$ alleging as an e3c!se IerreraMs fail!re to ass!me the mortgage (Dhich .eviste itself had blocBed). CnBnoDn to Ierrera$ .eviste alone Das notified on +!ne 21$ 1/64 by the G212 of its intention to foreclose the mortgage. Ierrera came to BnoD abo!t it only on +an!ary 16$ 1/65. Ie immediately Drote an !rgent a##eal to the G212 reminding the G212 that he had already #aid in f!ll the #rinci#al of -1$)/5$6)).5' to .eviste and -3''.'''.'' to the G212 and asBed that the foreclos!re be held in abeyance #ending efforts to settle .evisteMs acco!nt Dhich .eviste had !ndertaBen to have Ierrera ass!me. &onetheless$ the G212 #roceeded Dith the a!ction sale and itself bidded for the #ro#erty. On 4arch 3$ 1/65$ .eviste (notDithstanding its having received f!ll #ayment of -1$)/5$6)).5' from Ierrera) yet sold for !ndisclosed amo!nt and considerations the eF!ity of redem#tion (Dhich in 0!stice and eF!ity #ertained to Ierrera) to its co-

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res#ondent +ose A. 4arcelo and event!ally$ Ierrera Das o!sted from the #ro#erty in dis#!te. On 4ay 13$ 1/65$ Ierrera filed a com#laint against .eviste before the o!rt of (irst 1nstance of %i<al for in0!nction$ damages and cancellation of annotation. Ahe trial co!rt dismissed the com#laint for alleged lacB of basis in fact and in laD$ and ordered all #ayments made by Ierrera forfeited in favor of .eviste. Ierrera a##ealed to the o!rt of "##eals Dhich affirmed the loDer co!rtMs decision and denied reconsideration. On +an!ary 23$1/)1$ Ierrera filed the #etition for revieD on certiorari Dhich Das denied by this o!rt in a min!te resol!tion dated "#ril 1$ 1/)1. Ience$ IerreraMs motion for reconsideration$ Dhich Das heard and arg!ed before the o!rt on +!ne 13$ 1/)4. Ierrera reiterated the main iss!es$ th!sE V an res#ondent .eviste laDf!lly ref!se to iss!e a final deed of sale to the #etitioner even after it had already received f!ll #ayment of Dhat Das d!e it !nder the ontract to 2ell9 V an res#ondent .eviste laDf!lly ref!se to com#ly Dith its obligation !nder the ontract to 2ell to sec!re the conformity of res#ondent G212 to the ass!m#tion of the mortgage obligation by #etitioner9 V an res#ondent .eviste a!tomatically cancel the ontract to 2ell and forfeit all the s!ms #aid by #etitioner there!nder Dhen res#ondent .eviste Das the one that vol!ntarily #revented the #etitioner from f!lfilling his obligations !nder the ontract to 2ell and by otherDise maBing it legally or #hysically im#ossible for the #etitioner to f!lfill s!ch obligations9 V an res#ondent .eviste laDf!lly assign its eF!ity of redem#tion over the *!endia #ro#erty to res#ondent 4arcelo$ and can the latterMs redem#tion of said #ro#erty from res#ondent G212 be considered laDf!l9 V an res#ondent .eviste be laDf!lly aDarded damages and attorneyMs fees in the instant case9 .eviste #atently had no 0!stification to ref!se to e3ec!te the final deed of sale to Ierrera$ after receiving f!ll #ayment of the sti#!lated amo!nt$ and thereby #revent f!lfillment of the remaining condition for IerreraMs ass!m#tion of its mortgage obligation Dith G212$ Dhich it had e3#ressly !ndertaBen to sec!re from G212. Ahere Das constr!ctive f!lfillment on IerreraMs #art of his obligations !nder the ontract and !nder "rticle 11)6 of the ivil ode$ L(A)he condition shall be deemed f!lfilled Dhen the obligor vol!ntarily #revents its f!lfillment.L Ahe motion for reconsideration sho!ld be granted and the #etition granted to obviate a carriage of 0!stice. 8hile it is tr!e that !nder #aragra#h &o. 11 of the ontract to 2ell$ fail!re to com#ly Dith any of the conditions therein en!merated Do!ld render the contract a!tomatically cancelled and all the s!ms #aid by #etitioner forfeited$ Ierrera Das #revented from f!lfilling the condition of ass!ming the G212 mortgage beca!se of .evisteMs oDn non-com#liance Dith its obligation of sec!ring the consent of G212 thereto. Ahe contract e3#ressly obligated .eviste to DorB o!t Dith the G212 IerreraMs ass!m#tion

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of the mortgage. *!t obvio!sly beca!se of selfish and self-serving motives and designs$ as borne o!t by the events$ .eviste made no effort to assist and arrange for IerreraMs ass!m#tion of its mortgage obligation. 1n s#ite of the fact that Ierrera had already #aid .eviste the f!ll amo!nt of -1$)/5.6)).5'$ .eviste ref!sed to e3ec!te the final deed of sale in favor of Ierrera as reF!ired by G212. Ahe s!bstit!tion of .evisteMs -aranaF!e #ro#erty Dith IerreraMs oDn #ro#erty as additional sec!rity for .evisteMs indebtedness co!ld not be DorBed o!t and agreed !#on by Ierrera Dith G212$ Dhich ref!sed to deal Dith him Ditho!t s!ch final deed of sale from .eviste. 1ndeed$ Ierrera Das verily sF!ee<ed in this #incer movement Ierrera co!ld not ass!me .evisteMs mortgage obligation and restr!ct!re the same Dith G212 Dhich ref!sed to recogni<e and deal Dith him Ditho!t a final deed of sale from .eviste. *!t .eviste ref!sed to e3ec!te s!ch final deed of sale notDithstanding that he had been #aid by Ierrera the f!ll amo!nt of -1$)/5$6)).5' d!e to him and Dhat Das left Das .evisteMs o!tstanding mortgage indebtedness to G212. Ahe G212$ in t!rn$ notDithstanding IerreraMs #ayment on acco!nt thereof directly to it of some -3''$'''.'' and the more than s!fficient sec!rity in its favor of the *!endia #ro#erty alone$ ref!sed (abetted by .evisteMs absol!te non-coo#eration$ contrary to his contract!al obligation) to have Ierrera ass!me the mortgage obligation. 1nstead$ G212 Ditho!t notice to Ierrera foreclose the mortgage and com#letely sh!t off Ierrera-even from his right of redem#tion as .evisteMs vendee. 1f a #arty charges himself Dith an obligation #ossible to be #erformed$ he m!st abide by it !nless #erformance is rendered im#ossible by the act of God$ the laD$ or the other #arty. (.abayen vs. Aalisay 2ilay 4illing o.$ 52 -hil. 44'). *y .evisteMs !n0!stifiable act$ it virt!ally #revented Ierrera from com#lying Dith his obligation to ass!me the G212 mortgage and .eviste cannot noD in eF!ity and 0!stice insist on rescission of the contract beca!se of IerreraMs fail!re Dhich .eviste itself had bro!ght abo!t. Ahe sit!ation is analogo!s to that contem#lated in "rticle 1266 of the ivil ode Dhich #rovides that L(A)he debtor in obligations to do shall also be released Dhen the #restation becomes legally or #hysically im#ossible Ditho!t the fa!lt of the obligor .L .evisteMs non-com#liance Dith its oDn !ndertaBing Dhich #revented Ierrera from ass!ming the G212 mortgage bars it from invoBing the rescission cla!se. Cnder #ar. 4 of the ontract to 2ell$ it Das e3#ressly !ndertaBen by .eviste that Lthe ass!m#tion of mortgage shall be arranged and conformity thereto by G212 obtained by the Hendor Dith the f!ll coo#eration of the Hendee.L *!t notDithstanding its having received the f!ll amo!nt d!e it$ .eviste did not f!lfill the essential condition reF!ired by G212 for IerreraMs ass!m#tion of the mortgage the e3ec!tion by .eviste of the final deed of sale. "rticle 116/ of the ivil ode e3#ressly #rovides$ in this regard$ that L(1)n reci#rocal obligations$ neither #arty inc!rs in delay if the other does not com#ly or is not ready to com#ly in a #ro#er manner Dith Dhat is inc!mbent !#on him. (rom the moment one of the #arties f!lfills his obligation$ delay by the other begins.L "s doc!mented by Ierrera in his memorand!m in am#lification of oral arg!ment (%ecord$ ##. 314-315)$ L.eviste has clearly not com#lied Dith (its) obligation. Ah!s$ Dhen asBed re#eatedly by this Ionorable o!rt Dhat definitive ste#s it tooB to arrange and sec!re s!ch conformity of res#ondent G212$ res#ondent .eviste co!ld not readily ansDer$ as it co!ld not #oint to any definitive ste# that it had act!ally !ndertaBen.

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1ndeed$ if res#ondent .eviste Das acting in good faith and Das sincere in com#lying Dith its obligation$ it co!ld have at least done the folloDingE 1. Officially inform res#ondent G212 abo!t its e3ec!tion of the ontract to 2ell and officially reF!est G212 to a##rove #etitionerMs ass!m#tion of its mortgage obligation$ s!b0ect to the condition stated in the contract. 2. Officially inform res#ondent G212 that #etitioner had already #aid to it the f!ll amo!nt d!e !nder the ontract to 2ell$ and for this reason$ it Das Dilling to transfer the title of the *!endia #ro#erty to the #etitioner$ and for this #!r#ose$ iss!e a final ,eed of 2ale$ even if s!b0ect to certain conditions. 3. 1f #etitioner had indeed failed to com#ly Dith his obligations !nder the ontract to 2ell$ d!ring the #eriod covering the years 1/62 and 1/63$ then Dhy did res#ondent .eviste contin!e receiving #ayments from #etitioner9 1t m!st be noted that res#ondent .eviste Das #aid the f!ll amo!nt of the consideration (-1$)/5$6)).5') d!e to it on installment basis$ the last of Dhich Das on +!ly 2$ 1/64 (=3hs. L=L$ L(L$ LGL$ LIL$ L1L$ L+L$ L:L$ and L.L). 4. %es#ondent .eviste co!ld also have formally com#lained to #etitioner or even res#ondent G212 abo!t #etitionerMs alleged nonf!lfillment of his obligations !nder the ontract to 2ell$ or advise res#ondent G212 not to receive any more #ayments from #etitioner made in its name. 8hy did res#ondent .eviste Bee# F!iet and alloD res#ondent G212 to contin!e receiving said #ayments9 1t m!st be noted that -etitioner made the folloDing #ayments to res#ondent G212$ for the acco!nt of res#ondent .evisteE 1''$'''.'' V 1/63 5'$'''.'' V 4ay 1'$ 1/64 5'$'''.'' V 4ay 24$ 1/64 5'$ '''.'' V &ov. 5$ 1/64 5'$'''.'' V +an. 22$ 1/65 >=3h.LM@L? (rom the above$ it Dill be seen that res#ondent .eviste not only Das the one that clearly failed to com#ly Dith its obligations !nder the ontract to 2ell$ b!t also it Das the one that #revented the #etitioner from f!lfilling his obligation !nder said contract. =ven as to the restr!ct!ring of .evisteMs mortgage obligation Dhich Ierrera had reF!ested (since .evisteMs doc!mented arrearages before the e3ec!tion of the contract amo!nted to aro!nd -)''$'''.'')$ G212 had declined to entertain the same for lacB of the final deed of sale$ stating in a letter to Ierrera that 8e Dish to inform yo! that De cannot go on #rocessing yo!r #a#ers in vieD of the fact that as of this date .. -. .eviste and o. is still the

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registered oDner of the mortgaged #ro#erty$ hence$ De cannot entertain yo!r reF!est. (=3hibit '; !nderscoring s!##lied) 1t also a##ears that res#ondent G212 ine3#licably did not sym#athi<e Dith the #light of Ierrera (bro!ght abo!t by .eviste itself) as may be seen by the folloDing circ!mstancesE (1) 1t reF!ired Ierrera to s!bmit s!##orting #a#ers Dhich led him to believe that the ass!m#tion of the mortgage Do!ld be #ro#erly acted !#on; (2) 1t acce#ted #ayments from Ierrera for the acco!nt of .eviste; (3) 1t did not inform Ierrera of its intention to foreclose the #ro#erty BnoDing that Ierrera had #!rchased the same and hence had the right to redeem the #ro#erty as .evisteMs vendee$ notDithstanding its BnoDledge and that Ierrera Das directly maBing #ayments to it on acco!nt of .evisteMs mortgage indebtedness; (4) 1t #roceeded Dith the a!ction sale$ notDithstanding the letter-a##eal of Ierrera$ that he had already #aid in f!ll the #rinci#al amo!nt to .eviste and -3''$'''.'' to the G212 and asBing that he be given a chance to settle .evisteMs acco!nt; (5) 1t alloDed and recogni<ed the sale of eF!ity of redem#tion to a total stranger$ 4arcelo$ notDithstanding the offer of Ierrera as .evisteMs vendee and s!ccessor to redeem the #ro#erty Dithin the #eriod of redem#tion$ as Das IerreraMs right in laD and eF!ity; (6) Ahe total stranger 4arcelo Das alloDed to redeem the #ro#erty$ and ret!rned the -aranaF!e #ro#erty to .eviste; and (6) 1t de#arted from the established #olicy of government financial instit!tions of alloDing the restr!ct!ring of debtorMs mortgage acco!nts$ !nless they Dere in e!tremis and violated its oDn settled #olicy of giving d!e #reference to the oDner and vendee Ierrera of redeeming and7or reacF!iring the foreclosed #ro#erty. "s the late hief +!stice astro stated in his se#arate o#inion in +BP vs. Mirang,66 2 %" 141$ in taBing notice of s!ch #olicy and !rging the ,*- to e3tend s!ch assistance to the ha#less res#ondent debtor therein. L(1)t is Dell remember that !ncom#romising or mechanical a##lication of the letter of the laD has res!lted not infreF!ently$ in the denial of moral 0!stice$ L after laying the #remise that +!stice 4aBasiar maBes the #ertinent s!ggestion that the ,*- restr!ct!re the acco!nt of 4irang. .iBe +!stice 4aBasiar$ 1 #ersonally BnoD that the ,*- and similar Government financial instit!tions (the -hili##ine &ational *anB$ the Government 2ervice 1ns!rance 2ystem$ and the 2ocial 2ec!rity 2ystem) have restr!ct!red acco!nts of debtor onsidering the inordinate a##reciation of land val!es everyDhere$ there a##ears to be no ins!#erable obstacle to the ,*- restr!ct!ring the acco!nt of 4irang$ not

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only to enable him to #ay his indebtedness in easy terms over a #eriod of years b!t as Dell to maBe available additional f!nds to be !tili<ed by him in the develo#ment of his 1)-]-hectare land. 1t is not too late in the day V in this$ o!r com#assionate society V for the ,*- to do so. %es#ondent 4arcelo Das eF!ally not in good faith Dhen he #!rchased the eF!ity of redem#tion. 4arcelo BneD of the ontract to 2ell Dith Ierrera at the time the eF!ity Das assigned to him by .eviste. 4oreover$ Ierrera Das still in material #ossession of the #ro#erty then. 1n iniF!ito!s a!tomatic rescission of the contract be s!stained$ .eviste Do!ld be !n0!stly enriched by (1) -1$)/5$6)).5'$ the #rinci#al amo!nt directly #aid to it by Ierrera; (2) -3''$'''.''$ the amo!nt #aid by Ierrera to G212 for .evisteMs arrearages the -araQaF!e #ro#erty$ Dhich Das ret!rned to him by 4arcelo; (4) the !ndisclosed #roceeds of the sale of eF!ity of redem#tion to 4arcelo (in effect a do!ble #ayment to .eviste for the same #ro#erty); and (5) moreover$ G212 foreclosed the mortgage for .evisteMs total o!tstanding indebtedness to G212 in the s!m of -3$232$666./4 (##. 2$ 4$ main %esol!tion); this Das a total gain to .eviste$ for it Das thereby discharged and relieved entirely of its said mortgage debt of -3$232$666./4 at the loss of only the *!endia #ro#erty$ Dhich it had already sold to and had been f!lly #aid by$ Ierrera in the agreed amo!nt of -1$)/5$6)).5'. Ahis constit!tes !n0!st enrichment at the e3#ense of Ierrera Dhose #ayments to .eviste and the G212$ totalling almost -2.2 million Dere declared forfeited. *asic #rinci#les of 0!stice and eF!ity cry o!t against s!ch !n0!st enrichment and ineF!ity. "s De held in Air Manila, -nc. vs. $-%, )3 2 %" 56/$ L(=)F!ity as the com#lement of legal 0!risdiction seeBs to reach and do com#lete 0!stice Dhere co!rts of laD$ thro!gh the infle3ibility of their r!les and Dant of #oDer to ada#t their 0!dgments to the s#ecial circ!mstances of cases$ are incom#etent to do so. M=F!ity regards the s#irit and not the letter$ the intent and not the form$ the s!bstance rather than the circ!mstance$ as it is vario!sly e3#ressed by different co!rts.M L Ierrera is entitled to the relief so!ght by him !nder these basic #rinci#les of laD$ 0!stice and eF!ity$ as Das e3tended by this o!rt !nder analogo!s circ!mstances to the debtor in its recent decision in %epublic of t'e P'il.(&=,") vs. o!rt of "##eals (G.%. &o. 52664$ &ov. 2/$1/)4) notDithstanding that the debtor in Levident good faithL had inc!rred in delay in discharging its obligations to another government agency$ the &=,"$ Dhich had shoDn Lclear #rocrastination and indecisionL in seeBing afterDards to re0ect the #ayments made and cancel the #revio!s a!thori<ation it had given for the sale of the debtorMs attached real #ro#erty. Ahe !nBindest bloD is that the o!rt has !#held even the aDard of -5$'''. V nominal damages and -65$'''. V attorneyMs fees against Ierrera for seeBing the 0!st vindication in co!rt of his rights.

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%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila =& *"& ,./. No. +0%)2'% 4anuar9 (%, %'18

=/+IN!$ -T=/NB=/, and +;II -T=/NB=/,, the latter represented b9 her ,uardian $d0+ite: $NTONIO -T=/NB=/,, #laintiffs-a##ellees$ vs. ,ONI$+O -O+O8ON, defendant-a##ellant. Gon&alo Solomon in 'is o n be'alf. Arturo (. %odrigue& for appellees. CONC=6CION, J.E Ahis is an action for the foreclos!re of a real estate mortgage constit!tedon "!g!st 6$ 1/44$ by defendant Gon<alo 2olomon$ in favor of #laintiffs =rlinda 2ternberg and .!< 2ternberg$ to g!arrantee the #ayment to each of them of -3$'''$ -hili##ine c!rrency$ or the total s!m of -6$'''$ -hili##inec!rrency$ one (1) year from said date$ e3tendible for another year$ Dith interest thereon at the rate of 6 #er cent #er ann!m. -laintiffs alleged intheir com#laintVfiled Dith the o!rt of (irst 1nstance of 4anila$ in Dhich the mortgage

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#ro#erty is sit!atedVthat defendant has failed to #ay said debt$ des#ite to re#eated demands by the former and re#eated #romises of thelatter$ for Dhich reason it is #rayed that 0!dgment be rendered against saiddefendant for the #rinci#al of said obligation and the interest thereon$ and$ in the event of fail!re to #ay the same$ that the mortgage be foreclosed. 1n his ansDer$ defendant admitted the indebtedness above referred to$ as Dellas the real estate mortgage constit!ted to sec!re its satisfaction$ and alleged that non-#ayment thereof is d!e to #laintiffMs demand that settlementbe made in -hili##ine c!rrency on a #eso-to-#eso basis$ notDithstanding thefact that the #rinci#al of the indebtedness Das received by him in +a#anesemilitary notes and that he is bo!nd to #ay only its eF!ivalent in -hili##inec!rrency #!rs!ant to the *allantyne 2ched!le of Hal!es. ,efendant #rayed$ therefore$ that 0!dgment be rendered only for the eF!ivalent$ in -hili##inec!rrency of said s!m of -6$'''$ in +a#anese military notes$ as may be determined by the co!rt. 4aintaining that this ansDer raises merely a F!estion of laD$ #laintiffs$ there!#on$ moved for a 0!dgment on the #leadings$ Dhich Das not ob0ected toby the defendant. .ater on$ both #arties filed their res#ective memoranda$after Dhich the o!rt of (irst 1nstance of 4anila rendered a decision sentencing the defendant to #ay to the #laintiffs the s!m of -6$'''$ -hili##ine c!rrency$ Ditho!t interest$ and Ditho!t any #rono!ncement as tocosts. ,efendant has a##ealed from this decision and he noDs maintains thatE 1. Ahe co!rt erred in ref!sing to a##ly the *allantyne 2cale of Hal!es to defendant-a##ellantMs Dartime obligation. 2. Ahe loDer co!rt erred in finding 0!dgment for the #laintif-a##ellants and against the defendant-a##ellant for the s!m of -6$'''$ -hili##ine c!rrency$ considering that the obligation Das -6$''' in +a#anese Dar notes. "##ellantMs #retense is !ntenable. 8e have re#eatedly held that obligations contracted d!ring the +a#anese occ!#ation and #ayable only after liberationbecome d!e and #ayable in -hili##ine c!rrency on the #eso-to-#eso basis(8ilson vs. *erBenBotter$1 4/ Off. Ga<. 14'1). 1n the case at bar$ the deedof mortgage in F!estion dated "!g!st 6$ 1/44$ #rovides$ not only that theobligation g!arranteed thereby shall be #aid Lone year from the date thereofL$ or on "!g!st 6$ 1/45$ and$ hence$ after the liberation of 4anila$Dhich tooB #lace in (ebr!ary of that year$ b!t$ alsoE Ahat strict com#liance is the essesnce and nat!re of this agreement and as s!ch this mortgage shall be #aid one year from date hereof as #rovided above and e3#ressly agreed not soonerC or upon t'e e!piration of t'e time e!tensionif so e!tended. (=m#hasis o!rs.). 1n other Dords$ it Das e3#ressly agreed !#on that #laintiffMs debt co!ld not be #aid before "!g!st 6$ 1/45. 2ince 4anila Das liberated several months before that date$ it folloDs that$ in line Dith the vieD consistently adhered to by this o!rt (%ono vs. Gome<2 46 Off. Ga<.$ 2!##l. &o. 11$ 33/; Gome< vs. Aabia$3 46 Off. Ga<.$ 2!##l. &o. 2$ 641; "revalo vs. *arretto$ )/ -hil.$ 633; Garcia vs. ,e los 2antos$4 4/ Off. Ga<.$ 4)3'; *erg vs. Ae!s$ /6 -hil.$ 1'2; :are vs. 1m#erial$5 54 Off. Ga<.$ 2165; #laintiffs Dere$ and are$ entitled to demand #ayment of their credit on a #eso-to-#eso basis.

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8herefore$ the decision a##ealed from is hereby affirmed$ Dith costs against the defendant-a##ellant. 1t is so ordered. Beng&on, Montema"or, %e"es, A., Bautista Angelo, (abrador, %e"es, 0.B.(., )ndencia, and 2eli!, 00., conc!r.

6$!I++$, 4., dissentingE 1 dissent for the same reasons stated in my o#inion in the case of ,el %osario vs. 2andico$6 46 Off. Ga<. 2))6; .a Orden de --. *enedictinos vs. -hili##ine Ar!st o.6 46 Off. Ga<. 2)/4; 2alvante vs. r!<$ )) -hil.$ 236; Ienson vs. +.:. -icBering ; o.$ .td.$ )) -hil.$ 312; -hili##ine %efining om#any$ 1nc. vs. .edesma$ )) -hil.$ 56/; "raneta vs. IongBong ; 2hanghai *anBing or#oration$ )) -hil.$ 566; -eo#les *anB ; Ar!st o. vs. -hili##ine &ational *anB$ )) -hil.$ 625; IongBong ; 2hanghai *anBing or#oration vs. "raneta$ G.%. &o. .-3613$ 2' +!ne 1/51; -once de .eon vs. 2y0!co$ /' -hil.$ 311; -acific ommercial o. vs. Go Aian Gee ; o.$ /' -hil.$ 43/; ,!ngao vs. %oF!e$ /' -hil.$ 656; 8inshi# vs. -hili##ine Ar!st o.$ /' -hil.$ 644; 8ilson vs. *erBenBotter$) 4/ Off. Ga<.$ 14'1; Halen<!ela vs. *aBani$/ 4/ Off. Ga<. 4)36; 2hotDell vs. .a<atin$1' 52 Off. Ga<. 2''3; &icolas vs. 4atias$ /6 -hil.$ 6/5; Sarago<a vs. "lagar$11 51 Off. Ga<. 2/'6; and :are vs. 1m#erial$ supra$ #. 163. Paras, $. 0., concurs.

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila =& *"& ,./. No. +022118 8a9 (%, %'2&

,/=,O/IO $/$N=T$, INC., #etitioner$ vs. TA= 6AI+I66IN= -;,$/ =-T$T=- !=V=+O68=NT CO., +T!., res#ondent. Araneta and Araneta for petitioner. %osauro Alvare& and )rnani $ru& PaFo for respondent. /=@=-, 4.B.+., J.:

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-etition for certiorari to revieD a 0!dgment of the o!rt of "##eals$ in its "-G.%. &o. 2)24/-%$ affirming Dith modification$ an amendatory decision of the o!rt of (irst 1nstance of 4anila$ in its ivil ase &o. 363'3$ entitled L-hili##ine 2!gar =states ,evelo#ment o.$ .td.$ #laintiff$ vers!s +. 4. A!ason ; o.$ 1nc. and Gregorio "raneta$ 1nc.$ defendants.L "s fo!nd by the o!rt of "##eals$ the facts of this case areE +. 4. A!ason ; o.$ 1nc. is the oDner of a big tract land sit!ated in K!e<on ity$ otherDise BnoDn as the 2ta. 4esa Ieights 2!bdivision$ and covered by a Aorrens title in its name. On +!ly 2)$ 1/5'$ thro!gh Gregorio "raneta$ 1nc.$ it (A!ason ; o.) sold a #ortion thereof Dith an area of 43$'34.4 sF!are meters$ more or less$ for the s!m of -43'$514.''$ to -hili##ine 2!gar =states ,evelo#ment o.$ .td. Ahe #arties sti#!lated$ among in the contract of #!rchase and sale Dith mortgage$ that the b!yer Dill V *!ild on the said #arcel land the 2to. ,omingo h!rch and Dhile the seller for its #art Dill V onstr!ct streets on the &= and &8 and 28 sides of the land herein sold so that the latter Dill be a blocB s!rro!nded by streets on all fo!r sides; and the street on the &= side shall be named L2to. ,omingo "ven!e;L Ahe b!yer$ -hili##ine 2!gar =states ,evelo#ment o.$ .td.$ finished the constr!ction of 2to. ,omingo h!rch and onvent$ b!t the seller$ Gregorio "raneta$ 1nc.$ Dhich began constr!cting the streets$ is !nable to finish the constr!ction of the street in the &ortheast side named (2to. ,omingo "ven!e) beca!se a certain third-#arty$ by the name of 4an!el "b!ndo$ Dho has been #hysically occ!#ying a middle #art thereof$ ref!sed to vacate the same; hence$ on 4ay 6$ 1/5)$ -hili##ine 2!gar =states ,evelo#ment o.$ .t. filed its com#laint against +. 4. A!ason ; o.$ 1nc.$ and instance$ seeBing to com#el the latter to com#ly Dith their obligation$ as sti#!lated in the above-mentioned deed of sale$ and7or to #ay damages in the event they failed or ref!sed to #erform said obligation. *oth defendants +. 4. A!ason and o. and Gregorio "raneta$ 1nc. ansDered the com#laint$ the latter #artic!larly setting !# the #rinci#al defense that the action Das #remat!re since its obligation to constr!ct the streets in F!estion Das Ditho!t a definite #eriod Dhich needs to he fi3ed first by the co!rt in a #ro#er s!it for that #!r#ose before a com#laint for s#ecific #erformance Dill #ros#er. Ahe iss!es having been 0oined$ the loDer co!rt #roceeded Dith the trial$ and !#on its termination$ it dismissed #laintiffMs com#laint (in a decision dated 4ay 31$ 1/6')$ !#holding the defenses inter#osed by defendant Gregorio "raneta$ 1nc.5L p'M5.FNt -laintiff moved to reconsider and modify the above decision$ #raying that the co!rt fi3 a #eriod Dithin Dhich defendants Dill com#ly Dith their obligation to constr!ct the streets in F!estion. ,efendant Gregorio "raneta$ 1nc. o##osed said motion$ maintaining that #laintiffMs com#laint did not e3#ressly or im#liedly allege and #ray for the fi3ing of a #eriod to onvent

134

com#ly Dith its obligation and that the evidence #resented at the trial Das ins!fficient to Darrant the fi3ing of s!ch a #eriod. On +!ly 16$ 1/6'$ the loDer co!rt$ after finding that Lthe #roven facts #recisely Darrants the fi3ing of s!ch a #eriod$L iss!ed an order granting #laintiffMs motion for reconsideration and amending the dis#ositive #ortion of the decision of 4ay 31$ 1/6'$ to read as folloDsE 8I=%=(O%=$ 0!dgment is hereby rendered giving defendant Gregorio "raneta$ 1nc.$ a #eriod of tDo (2) years from notice hereof$ Dithin Dhich to com#ly Dith its obligation !nder the contract$ "nne3 L"L. ,efendant Gregorio "raneta$ 1nc. #resented a motion to reconsider the above F!oted order$ Dhich motion$ #laintiff o##osed. On "!g!st 16$ 1/6'$ the loDer co!rt denied defendant Gregorio "raneta$ 1ncMs. motion; and the latter #erfected its a##eal o!rt of "##eals. 1n said a##ellate co!rt$ defendant-a##ellant Gregorio "raneta$ 1nc. contended mainly that the relief granted$ i.e.$ fi3ing of a #eriod$ !nder the amendatory decision of +!ly 16$ 1/6'$ Das not 0!stified by the #leadings and not s!##orted by the facts s!bmitted at the trial of the case in the co!rt beloD and that the relief granted in effect alloDed a change of theory after the s!bmission of the case for decision. %!ling on the above contention$ the a##ellate co!rt declared that the fi3ing of a #eriod Das Dithin the #leadings and that there Das no tr!e change of theory after the s!bmission of the case for decision since defendant-a##ellant Gregorio "raneta$ 1nc. itself sF!arely #laced said iss!e by alleging in #aragra#h 6 of the affirmative defenses contained in its ansDer Dhich reads V 6. Cnder the ,eed of 2ale Dith 4ortgage of +!ly 2)$ 1/5'$ herein defendant has a reasonable time Dithin Dhich to com#ly Dith its obligations to constr!ct and com#lete the streets on the &=$ &8 and 28 sides of the lot in F!estion; that !nder the circ!mstances$ said reasonable time has not ela#sed; ,is#osing of the other iss!es raised by a##ellant Dhich Dere r!led as not meritorio!s and Dhich are not decisive in the resol!tion of the legal iss!es #osed in the instant a##eal before !s$ said a##ellate co!rt rendered its decision dated ,ecember 26$ 1/63$ the dis#ositive #art of Dhich reads V 1& H1=8 8I=%=O($ 0!dgment affirmed and modified; as a conseF!ence$ defendant is given tDo (2) years from the date of finality of this decision to com#ly Dith the obligation to constr!ct streets on the &=$ &8 and 28 sides of the land sold to #laintiff so that the same Do!ld be a blocB s!rro!nded by streets on all fo!r sides. Cns!ccessf!l in having the above decision reconsidered$ defendant-a##ellant Gregorio "raneta$ 1nc. resorted to a #etition for revieD by certiorari to this o!rt. 8e gave it d!e co!rse.

135

8e agree Dith the #etitioner that the decision of the o!rt of "##eals$ affirming that of the o!rt of (irst 1nstance is legally !ntenable. Ahe fi3ing of a #eriod by the co!rts !nder "rticle 11/6 of the ivil ode of the -hili##ines is so!ght to be 0!stified on the basis that #etitioner (defendant beloD) #laced the absence of a #eriod in iss!e by #leading in its ansDer that the contract Dith res#ondent -hili##ine 2!gar =states ,evelo#ment o.$ .td. gave #etitioner Gregorio "raneta$ 1nc. Lreasonable time Dithin Dhich to com#ly Dith its obligation to constr!ct and com#lete the streets.L &either of the co!rts beloD seems to have noticed that$ on the hy#othesis stated$ Dhat the ansDer #!t in iss!e Das not Dhether the co!rt sho!ld fi3 the time of #erformance$ b!t Dhether or not the #arties agreed that the #etitioner sho!ld have reasonable time to #erform its #art of the bargain. 1f the contract so #rovided$ then there Das a #eriod fi3ed$ a Lreasonable time;L and all that the co!rt sho!ld have done Das to determine if that reasonable time had already ela#sed Dhen s!it Das filed if it had #assed$ then the co!rt sho!ld declare that #etitioner had breached the contract$ as averred in the com#laint$ and fi3 the res!lting damages. On the other hand$ if the reasonable time had not yet ela#sed$ the co!rt #erforce Das bo!nd to dismiss the action for being #remat!re. *!t in no case can it be logically held that !nder the #lea above F!oted$ the intervention of the co!rt to fi3 the #eriod for #erformance Das Darranted$ for "rticle 11/6 is #recisely #redicated on the absence of any #eriod fi3ed by the #arties. =ven on the ass!m#tion that the co!rt sho!ld have fo!nd that no reasonable time or no #eriod at all had been fi3ed (and the trial co!rtMs amended decision noDhere declared any s!ch fact) still$ the com#laint not having so!ght that the o!rt sho!ld set a #eriod$ the co!rt co!ld not #roceed to do so !nless the com#laint in as first amended; for the original decision is clear that the com#laint #roceeded on the theory that the #eriod for #erformance had already ela#sed$ that the contract had been breached and defendant Das already ansDerable in damages. Granting$ hoDever$ that it lay Dithin the o!rtMs #oDer to fi3 the #eriod of #erformance$ still the amended decision is defective in that no basis is stated to s!##ort the concl!sion that the #eriod sho!ld be set at tDo years after finality of the 0!dgment. Ahe list #aragra#h of "rticle 11/6 is clear that the #eriod can not be set arbitrarily. Ahe laD e3#ressly #rescribes that V the o!rt shall determine s!ch #eriod as may !nder the circ!mstances been #robably contem#lated by the #arties. "ll that the trial co!rtMs amended decision (%ec. on "##eal$ #. 124) says in this res#ect is that Lthe #roven facts #recisely Darrant the fi3ing of s!ch a #eriod$L a statement manifestly ins!fficient to e3#lain hoD the tDo #eriod given to #etitioner herein Das arrived at. 1t m!st be recalled that "rticle 11/6 of the ivil ode involves a tDo-ste# #rocess. Ahe o!rt m!st first determine that Lthe obligation does not fi3 a #eriodL (or that the #eriod is made to de#end !#on the Dill of the debtor)$L b!t from the nat!re and the circ!mstances it can be inferred that a #eriod Das intendedL ("rt. 11/6$ #ars. 1 and 2). Ahis #reliminary #oint settled$ the o!rt m!st then #roceed to the second ste#$ and decide Dhat #eriod Das L#robably contem#lated b" t'e partiesL (,o.$ #ar. 3). 2o that$ !ltimately$ the o!rt can not fi3 a #eriod merely beca!se in its o#inion it is or sho!ld be reasonable$ b!t m!st set the time that the #arties are shoDn to have intended. "s the record stands$ the trial

136

o!rt a##ears to have #!lled the tDo-year #eriod set in its decision o!t of thin air$ since no circ!mstances are mentioned to s!##ort it. -lainly$ this is not Darranted by the ivil ode. 1n this connection$ it is to be borne in mind that the contract shoDs that the #arties Dere f!lly aDare that the land described therein Das occ!#ied by sF!atters$ beca!se the fact is e3#ressly mentioned therein (%ec. on "##eal$ -etitionerMs "##endi3 *$ ##. 12-13). "s the #arties m!st have BnoDn that they co!ld not taBe the laD into their oDn hands$ b!t m!st resort to legal #rocesses in evicting the sF!atters$ they m!st have reali<ed that the d!ration of the s!its to be bro!ght Do!ld not be !nder their control nor co!ld the same be determined in advance. Ahe concl!sion is th!s forced that the #arties m!st have intended to defer the #erformance of the obligations !nder the contract !ntil the sF!atters Dere d!ly evicted$ as contended by the #etitioner Gregorio "raneta$ 1nc. Ahe o!rt of "##eals ob0ected to this concl!sion that it Do!ld render the date of #erformance indefinite. @et$ the circ!mstances admit no other reasonable vieD; and this very indefiniteness is Dhat e3#lains Dhy the agreement did not s#ecify any e3act #eriods or dates of #erformance. 1t folloDs that there is no 0!stification in laD for the setting the date of #erformance at any other time than that of the eviction of the sF!atters occ!#ying the land in F!estion; and in not so holding$ both the trial o!rt and the o!rt of "##eals committed reversible error. 1t is not denied that the case against one of the sF!atters$ "b!ndo$ Das still #ending in the o!rt of "##eals Dhen its decision in this case Das rendered. 1n vieD of the foregoing$ the decision a##ealed from is reversed$ and the time for the #erformance of the obligations of #etitioner Gregorio "raneta$ 1nc. is hereby fi3ed at the date that all the sF!atters on affected areas are finally evicted therefrom. osts against res#ondent -hili##ine 2!gar =states ,evelo#ment$ o.$ .td. 2o ordered.

$oncepcion, $.0., +i&on, %egala, MaEalintal, Beng&on, 0.P., Sanc'e& and $astro, 00., concur.

%e#!blic of the -hili##ines -;6/=8= CO;/T 4anila =& *"& ,./. No. +0&&2% 8ar h 21, %'%3

137

INCA$;-TI . CO., #laintiff-a##ellant$ vs. ,/=,O/IO @;+O, defendant-a##ellee. Aausserman, $o'n and 2is'er for appellant. %o'de and 3rig't for appellee. Bruce, (a rence, %oss and BlocE, Amici $uriae, for Manuel, 2rancisco and $armen 4ulo. $/=++$NO, C.J.E Ahis s!it is bro!ght for the recovery of a certain s!m of money$ the balance of a c!rrent acco!nt o#ened by the firm of 1ncha!sti ; om#any Dith Aeodoro @!lo and after his death contin!ed Dith his DidoD and children$ Dhose #rinci#al re#resentative is Gregorio @!lo. Aeodoro @!lo$ a #ro#erty oDner of 1loilo$ for the e3#loitation and c!ltivation of his n!mero!s 'aciendas in the #rovince of Occidental &egros$ had been borroDing money from the firm of 1ncha!sti ; om#any !nder s#ecific conditions. On "#ril /$ 1/'3; Aeodoro @!lo died testate and for the e3ec!tion of the #rovisions of his Dill he had a##ointed as administrators his DidoD and five of his sons$ Gregorio @!lo being one of the latter. Ie th!s left a DidoD$ Gregoria %egalado$ Dho died on October 22d of the folloDing year$ 1/'4$ there remaining of the marriage the folloDing legitimate childrenE -edro$ (rancisco$ Aeodoro$ 4an!el$ Gregorio$ 4ariano$ armen$ once#cion$ and +ose @!lo y %egalado. Of these children once#cion and +ose Dere minors$ Dhile Aeodoro Das mentally incom#etent. "t the death of their #redecessor in interest$ Aeodoro @!lo$ his DidoD and children held the con0!gal #ro#erty in common and at the death of this said DidoD$ Gregoria %egalado$ these children #reserved the same relations !nder the name of Ii0os de A. @!lo contin!ing their c!rrent acco!nt Dith 1ncha!sti ; om#any in the best and most harmonio!s reci#rocity !ntil said balance amo!nted to tDo h!ndred tho!sand #esos. 1n for the #ayment of the disb!rsements of money Dhich !ntil that time it had been maBing in favor of its debtors$ the @!los. (irst. Gregorio @!lo$ for himself and in re#resentation of his brothers -edro (rancisco$ 4an!el$ 4ariano$ and armen$ e3ec!ted on +!ne 26$ 1/')$ a notarial doc!ment (=3hibit 2) Dhereby all admitted their indebtedness to 1ncha!sti ; om#any in the s!m of -2'3$221.26 and$ in order to sec!re the same Dith interest thereon at 1' #er cent #er ann!m$ they es#ecially mortgaged an !ndivided si3-ninth of their thirty-eight r!ral #ro#erties$ their remaining !rban #ro#erties$ lorc'as$ and family credits Dhich Dere listed$ obligating themselves to maBe a forma inventory and to describe in d!e form all the said #ro#erties$ as Dell as to c!re all the defects Dhich might #revent the inscri#tion of the said instr!ment in the registry of #ro#erty and finally to e3tend by the necessary formalities the aforesaid mortgage over the remaining three-ninths #art of all the #ro#erty and rights belonging to their other brothers$ the incom#etent Aeodoro$ and the minors once#cion and +ose. 2econd. On +an!ary 11$ 1/'/$ Gregorio @!lo in re#resentation of Ii0os de A. @!lo ansDered a letter of the firm of 1ncha!sti ; om#any in these termsE L8ith yo!r favor of the 2d inst. De have received an abstract of o!r c!rrent acco!nt Dith yo!r im#ortant firm$ closed on the 31st of last ,ecember$ Dith Dhich De desire to e3#ress o!r entire conformity as also Dith the balance in yo!r favor of -261$)63.12.L On +!ly 16$ 1/'/$ 1ncha!sti ; om#any informed Ii0os de A. @!lo of the red!ction of the said balance to

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-253$445.42$ Dith Dhich balance Ii0os de A. @!lo e3#ressed its conformity by means of a letter of the 1/th of the same month and year. %egarding this conformity a neD doc!ment evidencing the mortgage credit Das formali<ed. Ahird. On "!g!st 12$ 1/'/$ Gregorio @!lo$ for himself and in re#resentation of his brother 4an!el @!lo$ and in their oDn behalf -edro @!lo$ (rancisco @!lo$ armen @!lo$ and once#cion @!lo$ the latter being of age at the time$ e3ec!ted the notarial instr!ment (=3hibit P). Ahro!gh this$ the said #ersons$ incl!ding once#cion @!lo ratified all the contents of the #rior doc!ment of +!ne 26$ 1/')$ severally and 0ointly acBnoDledged and admitted their indebtedness to 1ncha!sti ; om#any for the net amo!nt of tDo h!ndred fifty-three tho!sand fo!r h!ndred forty-five #esos and forty-tDo centavos (-253$445.42) Dhich they obligated themselves to #ay$ Dith interest at ten #er cent #er ann!m$ in five installments at the rate of fifty tho!sand #esos (-5'$''')$ e3ce#t the last$ this being fifty-three tho!sand fo!r h!ndred forty-five #esos and forty-tDo centavos (-53$445.42)$ beginning +!ne 3'$ 1/1'$ contin!ing s!ccessively on the 3'th of each +!ne !ntil the last #ayment on +!ne 3'$ 1/14. "mong other cla!ses$ they e3#ressly sti#!lated the folloDingE (ifth. Ahe defa!lt in #ayment of any of the installments established in cla!se 3$ or the noncom#liance of any of the other obligations Dhich by the #resent doc!ment and that of +!ne 26$ 1/')$ De$ the @!los$ brothers and sisters$ have ass!med$ Dill res!lt in the mat!rity of all the said installments$ and as a conseF!ence thereof$ if they so deem e3#edient 4essrs. 1ncha!sti ; om#any may e3ercise at once all the rights and actions Dhich to them a##ertain in order to obtain the immediate and total #ayment of o!r debt$ in the same manner that they Do!ld have so done at the mat!rity of the said installments. (ifteenth. "ll the obligations Dhich by this$ as Dell as by the doc!ment of +!ne 26$ 1/')$ concern !s$ Dill be !nderstood as having been contradicted in solidum by all of !s$ the @!los$ brothers and sisters. 2i3teenth. 1t is also agreed that this instr!ment shall be confirmed and ratified in all its #arts$ Dithin the #resent DeeB$ by o!r brother ,on 4ariano @!lo y %egalado Dho resides in *acolod$ otherDise it Dill not be binding on 4essrs. 1ncha!sti ; om#any Dho can maBe !se of their rights to demand and obtain immediate #ayment of their credit Ditho!t any f!rther e3tension or delay$ in accordance Dith Dhat De have agreed. (o!rth. Ahis instr!ment Das neither ratified nor confirmed by 4ariano @!lo. (ifth. Ahe @!los$ brothers and sisters$ Dho e3ec!ted the #receding instr!ment$ did not #ay the first installment of the obligation. 2i3th. Aherefore$ on 4arch 26$ 1/11$ 1ncha!sti ; om#any bro!ght an ordinary action in the o!rt of (irst 1nstance of 1loilo$ against Gregorio @!lo for the #ayment of the said balance d!e of tDo h!ndred fifty-three tho!sand$ fo!r h!ndred forty-five #esos and fortytDo centavos -253$445.42) Dith interest at ten #er cent #er ann!m$ on that date aggregating forty-tDo tho!sand$ nine h!ndred forty-fo!r #esos and seventy-si3 centavos (-42$/44.66)

139

2eventh. *!t$ on 4ay 12$ 1/11$ (rancisco$ 4an!el$ and armen @!lo y %egalado e3ec!ted in favor 1ncha!sti ; om#any another notarial instr!ment in recognition of the debt and obligation of #ayment in the folloDing termsE L(irst$ the debt is red!ce for them to tDo h!ndred tDenty-five tho!sand #esos (-225$'''); second$ the interest is liBeDise red!ced for them to 6 #ercent #er ann!m$ from 4arch 15$ 1/11; third$ the installments are increase to eight$ the first of -2'$'''$ beginning on +!ne 3'$ 1/11$ and the rest of -3'$''' each on the same date of each s!ccessive year !ntil the total obligation shall be finally and satisfactorily #aid on +!ne 3'$ 1/1/$L it being e3#ressly agreed Lthat if any of the #artial #ayments s#ecified in the foregoing cla!se be not #aid at its mat!rity$ the amo!nt of the said #artial #ayment together Dith its interest shall bear interest at the rate of 15 #er cent #er ann!m from the date of said mat!rity$ Ditho!t the necessity of demand !ntil its com#lete #ayment;L that Lif d!ring tDo consec!tive years the #artial #ayments agreed !#on be not made$ they shall lose the right to maBe !se of the #eriod granted to them for the #ayment of the debt or the #art thereof Dhich remains !n#aid$ and that 4essrs. 1ncha!sti ; om#any may consider the total obligation d!e and demandable$ and #roceed to collect the same together Dith the interest for the delay above sti#!lated thro!gh all legal means.L (4th cla!se.) Ah!s Das it sti#!lated betDeen 1ncha!sti ; om#any and the said three @!los$ brothers and sisters V by Day of com#romise so that 1ncha!sti ; om#any might$ as it did$ DithdraD the claims #ending in the s#ecial #roceedings for the #robate of the Dill of ,on Aeodoro @!lo and of the intestacy of ,oQa Gregoria %egalado V sti#!lating e3#ressly hoDever in the si3th cla!se that L1ncha!sti ; om#any sho!ld incl!de in their s!it bro!ght in the o!rt of (irst 1nstance of 1loilo against ,on Gregorio @!lo$ his brother and 0oint co-obligee$ ,on -edro @!lo$ and they Dill #roc!re by all legal means and in the least time #ossible a 0!dgment in their favor against the said ,on Gregorio and ,on -edro$ sentencing the later to #ay the total amo!nt of the obligation acBnoDledged b" t'em in the aforementioned instr!ment of "!g!st 12$ 1/'/; Dith the !nderstanding that if they sho!ld deem it convenient for their interests$ ,on (rancisco$ ,on 4an!el$ and ,oQa armen @!lo may a##oint an attorney to coo#erate Dith the laDyers of 1ncha!sti ; om#any in the #roceedings of the said case.L =ighth. 4atters being th!s on +!ly 1'$ 1/11$ Gregorio @!lo ansDered the com#laint and alleged as defenses; first$ that an acc!m!lation of interest had taBen #lace and that com#o!nd interest Das asBed for the -hili##ine c!rrency at #ar Dith 4e3ican; second$ that in the instr!ment of "!g!st 21$ 1/'/$ tDo conditions Dere agreed one of Dhich o!ght to be a##roved by the o!rt of (irst 1nstance$ and the other ratified and confirmed by the other brother 4ariano @!lo$ neither of Dhich Das com#lied Dith; third $ that Dith regard to the same debt claims Dere #resented before the commissioners in the s#ecial #roceedings over the inheritances of Aeodoro @!lo and Gregoria %egalado$ tho!gh later they Dere dismissed$ #ending the #resent s!it; fo!rth and finally$ that the instr!ment of "!g!st 12$ 1/'/$ Das novated by that of 4ay 12$ 1/11$ e3ec!ted by 4an!el$ (rancisco and armen @!lo. &inth. Ahe o!rt of (irst 1nstance of 1loilo decided the case Lin favor of the defendant Ditho!t #re0!dice to the #laintiffMs bringing Dithin the #ro#er time another s!it for his #ro#ortional #art of the 0oint debt$ and that the #laintiff #ay the costs.L (*. of =.$ 21.) Ahe #laintiff a##ealed from this 0!dgment by bill of e3ce#tions and before this co!rt made the folloDing assignment of errorsE

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1. Ahat the co!rt erred in considering the contract of 4ay 12$ 1/11$ as constit!ting a novation of that of "!g!st 12$ 1/'/. 11. Ahat the co!rt erred in rendering 0!dgment in favor of the defendant. 111. "nd that the co!rt erred n denying the motion for a neD trial. L&o one denies in this case$L says the trial 0!dge$ Lthat the estate of Aeodoro @!lo or his heirs oDe 1ncha!sti ; om#any an amo!nt of money$ the ob0ect of this action$ namely$ -253$445.42L (*. of =. 1)). LAhe fact is admitted$L says the defendant$ Lthat the #laintiff has not collected the debt$ and that the same is oDingL (*rief$ 33). L1n the arg!ments of the attorneys$L the 0!dge goes on$ Lit Das really admitted that the #laintiff had a right to bring an action against Gregorio @!lo$ as one of the con0oint and solidary obligors in the contract of "!g!st 12$ 1/'/; b!t the defendant says that the #laintiff has no right to s!e him alone$ since after the #resent s!it Das bro!ght$ the #laintiff entered into a com#romise Dith the other con0oint and solidary debtors$ the res!lt being the neD contract of 4ay 12$ 1/11$ by virt!e of Dhich the #ayments Dere e3tended$ the same constit!ting a novation of the contract Dhich gave him the same #rivileges that Dere given his con0oint and solidary codebtors. Ahis (the 0!dge concl!des) is the only F!estion bro!ght !# by the #arties.L (*. of =.$ 1/.) "nd this is the only one Dhich the 2!#reme o!rt has to solve by virt!e of the assignments of errors alleged. onseF!ently$ there is no need of saying anything regarding the first three defenses of the ansDer$ nor regarding the lacB of the signat!re of 4ariano @!lo ratifying and confirming the instr!ment of "!g!st 12$ 1/'/$ !#on Dhich the a##ellee still insists in his brief for this a##eal; altho!gh it Dill not be s!#erfl!o!s to state the doctrine that a condition$ s!ch as is contained in the si3teenth cla!se of the said contract (third #oint in the statement of facts)$ is by no means of s!s#ensive b!t a resol!tory condition; the effect of the fail!re of com#liance Dith the said cla!se$ that is to say$ the lacB of the ratification and confirmance by 4ariano @!lo being not to s!s#end b!t to resolve the contract$ leaving 1ncha!sti ; om#any at liberty$ as sti#!lated$ Lto maBe !se of its rights to demand and obtain the immediate #ayment of its credit.L Ahe only F!estion indicated in the decision of the inferior co!rt involves$ hoDever$ these othersE (irst$ Dhether the #laintiff can s!e Gregorio @!lo alone$ there being other obligors; second$ if so$ Dhether it lost this right by the fact of its having agreed Dith the other obligors in the red!ction of the debt$ the #rorog!ing of the obligation and the e3tension of the time for #ayment$ in accordance Dith the instr!ment of 4ay 12$ 1/11; third$ Dhether this contract Dith the said three obligors constit!tes a novation of that of "!g!st 12$ 1/'/$ entered into Dith the si3 debtors Dho ass!med the #ayment of tDo h!ndred fifty-three tho!sand and some odd #esos$ the s!b0ect matter of the s!it; and fo!rth$ if not so$ Dhether it does have any effect at all in the action bro!ght$ and in this #resent s!it. 8ith res#ect to the first it cannot be do!bted that$ the debtors having obligated themselves in solidum$ the creditor can bring its action in toto against any one of them$ inasm!ch as this Das s!rely its #!r#ose in demanding that the obligation contracted in its favor sho!ld be solidary having in mind the #rinci#le of laD that$ LDhen the obligation is constit!ted as a con0oint and solidary obligation each one of the debtors is bo!nd to

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#erform in f!ll the !ndertaBing Dhich is the s!b0ect matter of s!ch obligation.L ( ivil ode$ articles 1136 and 1144.) "nd even tho!gh the creditor may have sti#!lated Dith some of the solidary debtors diverse installments and conditions$ as in this case$ 1ncha!sti ; om#any did Dith its debtors 4an!el$ (rancisco$ and armen @!lo thro!gh the instr!ment of 4ay 12$ 1/11$ this does not lead to the concl!sion that the solidarity sti#!lated in the instr!ment of "!g!st 12$ 1/'/ is broBen$ as De already BnoD the laD #rovides that Lsolidarity may e3ist even tho!gh the debtors are not bo!nd in the same manner and for the same #eriods and !nder the same conditions.L (-bid$ article 114'.) 8hereby the second #oint is resolved. 8ith res#ect to the third$ there can also be no do!bt that the contract of 4ay 12$ 1/11$ does not constit!te a novation of the former one of "!g!st 12$ 1/'/$ Dith res#ect to the other debtors Dho e3ec!ted this contract$ or more concretely$ Dith res#ect to the defendant Gregorio @!loE (irst$ beca!se Lin order that an obligation may be e3ting!ished by another Dhich s!bstit!tes it$ it is necessary that it sho!ld be so e3#ressly declared or that the old and the neD be incom#atible in all #ointsL ( ivil ode$ article 12'4); and the instr!ment of 4ay 12$ 1/11$ far from e3#ressly declaring that the obligation of the three Dho e3ec!ted it s!bstit!tes the former signed by Gregorio @!lo and the other debtors$ e3#ressly and clearly stated that the said obligation of Gregorio @!lo to #ay the tDo h!ndred and fifty-three tho!sand and odd #esos s!ed for e3ists$ sti#!lating that the s!it m!st contin!e its co!rse and$ if necessary$ these three #arties Dho e3ec!ted the contract of 4ay 12$ 1/11$ Do!ld coo#erate in order that the action against Gregorio @!lo might #ros#er (6th #oint in the statement of facts)$ Dith other !ndertaBings concerning the e3ec!tion of the 0!dgment Dhich might be rendered against Gregorio @!lo in this same s!it. L1t is alDays necessary to state that it is the intention of the contracting #arties to e3ting!ish the former obligation by the neD oneL (+!dgment in cassation$ +!ly )$ 1/'/). Ahere e3ist no incom#atibility betDeen the old and the neD obligation as Dill be demonstrated in the resol!tion of the last #oint$ and for the #resent De Dill merely reiterate the legal doctrine that an obligation to #ay a s!m of money is not novated in a neD instr!ment Dherein the old is ratified$ by changing only the term of #ayment and adding other obligations not incom#atible Dith the old one. (+!dgments in cassation of +!ne 2)$ 1/'4 and of +!ly )$ 1/'/.) 8ith res#ect to the last #oint$ the folloDing m!st be borne in mindE 2acts. V (irst. Of the nine children of A. @!lo$ si3 e3ec!ted the mortgage of "!g!st 12$ 1/'/$ namely$ Gregorio$ -edro$ (rancisco$ 4an!el$ armen$ and once#cion$ admitting a debt of -253$445.42 at 1' #er cent #er ann!m and mortgaging si3-ninths of their hereditary #ro#erties. 2econd. Of those si3 children$ (rancisco$ 4an!el and armen e3ec!ted the instr!ment of 4ay 12$ 1/11$ Dherein Das obtained a red!ction of the ca#ital to 225$''' #esos and of the interest to 6 #er cent from the 15th of 4arch of the same year of 1/11. Ahird. Ahe other children of A. @!lo named 4ariano$ Aeodoro$ and +ose have not taBen #art in these instr!ments and have not mortgaged their hereditary #ortions. (o!rth. *y the first instr!ment the mat!rity of the first installment Das +!ne 3'$ 1/1'$ Dhereas by the second instr!ment$ (rancisco$ 4an!el$ and armen had in their favor as the mat!rity of the first installment of their debt$ +!ne 3'$ 1/12$ and (ifth$ on 4arch 26$ 1/11$ the action against Gregorio @!lo Das already filed and 0!dgment Das #rono!nced on ,ecember 22$ 1/11$ Dhen the Dhole debt Das not yet d!e nor even the

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first installment of the same res#ective the three aforesaid debtors$ (rancisco$ 4an!el$ and armen. -n jure it Do!ld folloD that by sentencing Gregorio @!lo to #ay 253$445 #esos and 42 centavos of "!g!st 12$ 1/'/$ this debtor$ if he sho!ld #ay all this s!m$ co!ld not recover from his 0oint debtors (rancisco$ 4an!el$ and armen their #ro#ortional #arts of the -253$445.42 Dhich he had #aid$ inasm!ch as the three Dere not obligated by virt!e of the instr!ment of 4ay 12$ 1/11$ to #ay only 225$''' #esos$ th!s constit!ting a violation of Gregorio @!loMs right !nder s!ch hy#othesis$ of being reimb!rsed for the s!m #aid by him$ Dith the interest of the amo!nts advanced at the rate of one-si3th #art from each of his five codebtors. ( iv. ode$ article 1145$ #ar. 2). Ahis res!lt Do!ld have been a #ondero!s obstacle against the #ros#ering of the s!it as it had been bro!ght. 1t Do!ld have been very 0!st then to have absolved the solidary debtor Dho having to #ay the debt in its entirety Do!ld not be able to demand contrib!tion from his codebtors in order that they might reimb!rse him pro rata for the amo!nt advanced for them by him. *!t s!ch hy#othesis m!st be #!t o!t of consideration by reason of the fact that occ!rred d!ring the #endency of the action$ Dhich fact the 0!dge states in his decision. L1n this contract of 4ay last$L he says$ Lthe amo!nt of the debt Das red!ced to -225$''' and the attorney of the #laintiff admits in his #lea that Gregorio @!lo has a right to the benefit of this red!ction.L (*. of =.$ 1/.) Ahis is a fact Dhich this 2!#reme o!rt m!st hold as firmly established$ considering that the #laintiff in its brief$ on #age 26$ corroborates the same in these DordsE L8hat effect$L it says$ Lco!ld this contract have over the rights and obligations of the defendant Gregorio @!lo Dith res#ect to the #laintiff com#any9 1n the first #lace$ De are the first to reali<e that it benefits him Dith res#ect to the red!ction of the amo!nt of the debt. Ahe obligation being solidary$ the remission of any #art of the debt made by a creditor in favor of one or more of the solidary debtors necessarily benefits the others$ and therefore there can be no do!bt that$ in accordance Dith the #rovision of article 1143 of the ivil ode$ the defendant has the right to en0oy the benefits of the #artial remission of the debt granted by the creditor.L 8herefore De hold that altho!gh the contract of 4ay 12$ 1/11$ has not novated that of "!g!st 12$ 1/'/$ it has affected that contract and the o!tcome of the s!it bro!ght against Gregorio @!lo alone for the s!m of -253$445.42; and in conseF!ence thereof$ the amo!nt stated in the contract of "!g!st 12$ 1/'/$ cannot be recovered b!t only that stated in the contract of 4ay 12$ 1/11$ by virt!e of the remission granted to the three of the solidary debtors in this instr!ment$ in conformity Dith Dhat is #rovided in article 1143 of the ivil ode$ cited by the creditor itself. 1f the efficacy of the later instr!ment over the former to!ching the amo!nt of the debt had been recogni<ed$ sho!ld s!ch efficacy not liBeDise be recogni<ed concerning the mat!rity of the same9 1f (rancisco$ 4an!el$ and armen had been incl!ded in the s!it$ they co!ld have alleged the defense of the nonmat!rity of the installments since the first installment did not mat!re !ntil +!ne 3'$ 1/12$ and Ditho!t the least do!bt the defense Do!ld have #ros#ered$ and the three Do!ld have been absolved from the s!it. annot this defense of the #remat!rity of the action$ Dhich is im#lied in the last s#ecial defense set !# in the ansDer of the defendant Gregorio @!lo be made available to him in this #roceeding9 Ahe folloDing commentary on article 114' of the ivil ode s!fficiently ansDers this F!estionE L. . . . *efore the #erformance of the condition$ or before the e3ec!tion of

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a term Dhich affects one debtor alone #roceedings may be had against him or against any of the others for the remainder Dhich may be already demandable b!t the conditional obligation or that Dhich has not yet mat!red cannot be demanded from any one of them. "rticle 114) confirms the r!le Dhich De noD en!nciate inasm!ch as in case the total claim is made by one creditor$ Dhich De believe im#ro#er if directed against the debtor affected by the condition or the term$ the latter can maBe !se of s!ch e3ce#tions as are #ec!liarly #ersonal to his oDn obligation; and if against the other debtors$ they mig't maBe !se of those e3ce#tions$ even tho!gh they are #ersonal to the other$ inasm!ch as they alleged they are #ersonal to the other$ inasm!ch as they alleged them in connection it' t'at part of t'e responsibilit" attaching in a s#ecial manner to the other.L () 4anresa$ 2#. ivil ode$ 1/6.) Article 557? of t'e $ivil $ode. V LAhe solidary debtor may !tili<e against the claims of the creditor of the defenses arising from the nat!re of the obligation and those Dhich are #ersonal to him. Ahose #ersonally #ertaining to the others may be em#loyed by him only Dith regard to the share of the debt for Dhich the latter may be liable.L Gregorio @!lo cannot allege as a defense to the action that it is #remat!re. 8hen the s!it Das bro!ght on 4arch 26$ 1/11$ the first installment of the obligation had already mat!red of +!ne 3'$ 1/1'$ and Dith the mat!rity of this installment$ the first not having been #aid$ the Dhole debt had become mat!re$ according to the e3#ress agreement of the #arties$ inde#endently of the resol!tory condition Dhich gave the creditor the right to demand the immediate #ayment of the Dhole debt !#on the e3#iration of the sti#!lated term of one DeeB alloDed to sec!re from 4ariano @!lo the ratification and confirmation of the contract of "!g!st 12$ 1/'/. &either co!ld he invoBe a liBe e3ce#tion for the shares of his solidary codebtors -edro and once#cion @!lo$ they being in identical condition as he. *!t as regards (rancisco$ 4an!el$ and armen @!lo$ none of the installments #ayable !nder their obligation$ contracted later$ had as yet mat!red. Ahe first #ayment$ as already stated$ Das to mat!re on +!ne 3'$ 1/12. Ahis e3ce#tion or #ersonal defense of (rancisco$ 4an!el$ and armen @!lo Las to the #art of the debt for Dhich they Dere res#onsibleL can be sent !# by Gregorio @!lo as a #artial defense to the action. Ahe #art of the debt for Dhich these three are res#onsible is three-si3ths of -225$''' or -112$5''$ so that Gregorio @!lo may claim that$ even acBnoDledging that the debt for Dhich he is liable is -225$'''$ nevertheless not all of it can noD be demanded of him$ for that #art of it Dhich #ertained to his codebtors is not yet d!e$ a state of affairs Dhich not only #revents any action against the #ersons Dho Dere granted the term Dhich has not yet mat!red$ b!t also against the other solidary debtors Dho being ordered to #ay co!ld not noD s!e for a contrib!tion$ and for this reason the action Dill be only as to the -112$5''. "gainst the #ro#riety and legality of a 0!dgment against Gregorio @!lo for this s!m$ to Dit$ the three-si3ths #art of the debt Dhich forms the s!b0ect matter of the s!it$ De do not thinB that there Das any reason or arg!ment offered Dhich s!stains an o#inion that for the #resent it is not #ro#er to order him to #ay all or #art of the debt$ the ob0ect of the action.

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1t has been said in the brief of the a##ellee that the #remat!rity of the action is one of the defenses derived from the nat!re of the obligation$ according to the o#inion of the commentator of the ivil ode$ 4!ci!s 2caevola$ and conseF!ently the defendant Gregorio @!lo may maBe !se of it in accordance Dith article 114) of the said ode. 1t may be so and yet$ taBen in that light$ the effect Do!ld not be different from that already stated in this decision; Gregorio @!lo co!ld not be freed from maBing any #ayment Dhatever b!t only from the #ayment of that #art of the debt Dhich corres#onds to his codebtors (rancisco$ 4an!el$ and armen. Ahe same a!thor$ considering the case of the o##osing contention of tDo solidary debtors as to one of Dhom the obligation is #!re and !nconditional and as to the other it is conditional and is not yet demandable$ and com#aring the disadvantages Dhich m!st floD from holding that the obligation is demandable Dith these Dhich m!st folloD if the contrary vieD is ado#ted$ favors this sol!tion of the #roblemE Ahere is a middle gro!nd$ (he says)$ from Dhich De can safely set o!t$ to Dit$ that the creditor may ofcourse$ demand the #ayment of his credit against the debtor not favored by any condition or e3tension of time.L "nd f!rther on$ he decides the F!estion as to Dhether the Dhole debt may be recovered or only that #art !nconditionally oDing or Dhich has already mat!red$ saying$ L8itho!t failing to #roceed Dith 0!ridical rigor$ b!t Ditho!t falling into e3travagances or monstrosities$ De believe that the sol!tion of the diffic!lty is #erfectly #ossible. IoD9 *y limiting the right of the creditor to the recovery of the amo!nt oDed by the debtors bo!nd !nconditionally or as to Dhom the obligation has mat!red$ and leaving in s!s#ense the right to demand the #ayment of the remainder !ntil the e3#iration of the term of the f!lfillment of the condition. *!t Dhat then is the effect of solidarity9 IoD can this restriction of right be reconciled Dith the d!ty im#osed !#on each one of the debtors to ansDer for the Dhole obligation9 2im#ly this$ by recogni<ing in the creditor the #oDer$ !#on the #erformance of the condition or the e3#iration of the term of claiming from any one or all of the debtors that #art of the obligation affected by those conditions. (2caevola$ ivil ode$ 1/$ )'' and )'1.) 1t has been said also by the trial 0!dge in his decision that if a 0!dgment be entered against Gregorio @!lo for the Dhole debt of -253$445.42$ he cannot recover from (rancisco$ 4an!el$ and armen @!lo that #art of the amo!nt Dhich is oDed by them beca!se they are obliged to #ay only 225$''' #esos and this is eight installments none of Dhich Das d!e. (or this reason he Das of the o#inion that he (Gregorio @!lo) cannot be obliged to #ay his #art of the debt before the contract of 4ay 12$ 1/11$ may be enforced$ and LconseF!ently he decided the case in favor of the defendant$ Ditho!t #re0!dice to the #laintiff #roceeding in d!e time against him for his #ro#ortional #art of the 0oint debt.L (*. of =.$ 21 and 22.) *!t in the first #lace$ taBing into consideration the conformity of the #laintiff and the #rovision of article 1143 of the ivil ode$ it is no longer #ossible to sentence the defendant to #ay the -253$445.42 of the instr!ment of "!g!st 12$ 1/'/$ b!t$ if anything$ the 225$''' of the instr!ment of 4ay 12$ 1/11. 1n the second #lace$ neither is it #ossible to c!rtail the defendantMs right of recovery from the signers of the instr!ment of 4ay 12$ 1/11$ for he Das 0!stly e3onerated from the

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#ayment of that #art of the debt corres#onding to them by reason of there having been !#held in his favor the e3ce#tion of an !nmat!red installment Dhich #ertains to them. 1n the third #lace$ it does not seem 0!st$ 4!ci!s 2caevola considers it Labs!rd$L that$ there being a debtor Dho is !nconditionally obligated as to Dhen the debt has mat!red$ the creditor sho!ld be forced to aDait the reali<ation of the condition (or the e3#iration of the term.) &ot only is there no reason for this$ as stated by the a!thor$ b!t the co!rt Do!ld even fail to consider the s#ecial laD of the contract$ neither re#ealed nor novated$ Dhich cannot be omitted Ditho!t violating article 1'/1 of the ivil ode according to Dhich Lthe obligations arising from contracts have the force of laD betDeen the contracting #arties and must be com#lied Dith in accordance Dith the tenor of the same.L ertain it is that the trial co!rt$ in holding that this action Das #remat!re b!t might be bro!ght in the time$ regarded the contract of "!g!st 12$ 1/'/$ as having been e3#ressly novated; b!t it is absol!tely im#ossible in laD to s!stain s!ch s!##osed novation$ in accordance Dith the legal #rinci#les already stated$ and nevertheless the obligation of the contract of 4ay 12$ 1/11$ m!st liBeDise be com#lied Dith in accordance Dith its tenor$ Dhich is contrary in all res#ects to the s!##osed novation$ by obliging the #arties Dho signed the contract to carry on the s!it bro!ght against Gregorio @!lo. Ahe contract of 4ay 12$ 1/11$ has affected the action and the s!it$ to the e3tent that Gregorio @!lo has been able to maBe in his favor the defense of remission of #art of the debt$ thanBs to the #rovision of article 114)$ beca!se it is a defense derived from the nat!re of the obligation$ so that altho!gh the said defendant Das not #arty to the contract in F!estion$ yet beca!se of the #rinci#le of solidarity he Das benefited by it. Ahe defendant Gregorio @!lo cannot be ordered to #ay the -253$445.42 claimed from him in the s!it here$ beca!se he has been benefited by the remission made by the #laintiff to three of his codebtors$ many times named above. onseF!ently$ the debt is red!ced to 225$''' #esos. *!t$ as it cannot be enforced against the defendant e3ce#t as to the three-si3ths #art Dhich is Dhat he can recover from his 0oint codebtors (rancisco$ 4an!el$ and armen$ at #resent$ 0!dgment can be rendered only as to the -112$5''. 8e therefore sentence the defendant Gregorio @!lo to #ay the #laintiff 1ncha!sti ; om#any -112$5''$ Dith the interest sti#!lated in the instr!ment of 4ay 12$ 1/11$ from 4arch 15$ 1/11$ and the legal interest on this interest d!e$ from the time that it Das claimed 0!dicially in accordance Dith article 11'/ of the ivil ode$ Ditho!t any s#ecial finding as to costs. Ahe 0!dgment a##ealed from is reversed. 2o ordered. $arson, Trent, and Araullo, 00., conc!r.

-eparate Opinions 8O/=+$N!, J., dissentingE

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1n my 0!dgment the action m!st be dismissed$ as it Das bro!ght #remat!rely. Ahe defendant Das entitled to all of the benefits of the contract of 4ay 12$ 1/11$ betDeen the #laintiff and (rancisco$ 4an!el$ and armen. One of these #rovisions Das that the first #ayment need not be made !ntil +!ne 3'$ 1/12. Ahe action Das commenced on the 26t of 4arch$ 1/11$ and altho!gh this date Das #rior to the date of the second contract$ that is$ the contract Dith (rancisco$ 4an!el$ and armen$ said contract Das e3ec!ted before the trial of the action$ and some of the beneficial #rovisions therein contained Dere to #rod!ce their effects from 4arch 15$ 1/11$ a date #rior to the commencement of the action. "t the time of the trial the defendant co!ld$ in my 0!dgment$ have inter#osed$ !nder the allegations of the amended ansDer$ any of the defenses Dhich co!ld have been made !se of by (rancisco$ 4an!el$ or armen if they had been the defendant. Ahat being the case$ nothing Das d!e the #laintiff at the time it s!ed and accordingly its action m!st be dismissed Dith costs. (or these reasons 1 vote to affirm.

I1%, ,1H121O&

F,./. No. %11%&(. Nove:ber 2(, 2))3G

+$7$/,= C=8=NT 6AI+I66IN=-, INC., #for:erl9 +afarge 6hilippines, In .*, +;ION CONTIN=NT$+ +$N! CO/6O/$TION, CONTIN=NT$+ O6=/$TIN, CO/6O/$TION and 6AI+I6 /O-=B=/,, petitioners, vs. CONTIN=NT$+ C=8=NT CO/6O/$TION, ,/=,O/@ T. +I8 and $NTAON@ $. 8$/I$NO, respondents. !=CI-ION 6$N,$NIB$N, J.:

147

4ay defendants in civil cases im#lead in their co!nterclaims #ersons Dho Dere not #arties to the original com#laints9 Ahis is the main F!estion to be ansDered in this controversy.

The Case *efore !s is a -etition for %evieD>1? !nder %!le 45 of the %!les of o!rt$ seeBing to n!llify the 4ay 22$ 2''2>2? and the 2e#tember 3$ 2''2 Orders>3? of the %egional Arial o!rt (%A ) of K!e<on ity (*ranch )') in ivil ase &o. K-''-411'3. Ahe decretal #ortion of the first assailed Order readsE R8I=%=(O%=$ in the light of the foregoing as earlier stated$ the #laintiffGs motion to dismiss claims is granted. "ccordingly$ the defendantsG claims against 4r. .im and 4r. 4ariano ca#tioned as their co!nterclaims are dismissed.N>4? Ahe second challenged Order denied #etitionersG 4otion for %econsideration.

The 7a ts *riefly$ the origins of the #resent controversy can be traced to the .etter of 1ntent (.O1) e3ec!ted by both #arties on "!g!st 11$ 1//)$ Dhereby -etitioner .afarge ement -hili##ines$ 1nc. (.afarge) -- on behalf of its affiliates and other F!alified entities$ incl!ding -etitioner .!<on ontinental .and or#oration (. . ) -- agreed to #!rchase the cement b!siness of %es#ondent ontinental ement or#oration ( ). On October 21$ 1//)$ both #arties entered into a 2ale and -!rchase "greement (2-"). "t the time of the foregoing transactions$ #etitioners Dere Dell aDare that had a case #ending Dith the 2!#reme o!rt. Ahe case Das docBeted as G% &o. 11/612$ entitled Asset Privati&ation Trust .APT/ v. $ourt of Appeals and $ontinental $ement $orporation. 1n antici#ation of the liability that the Iigh Arib!nal might ad0!dge against $ the #arties$ !nder la!se 2 (c) of the 2-"$ allegedly agreed to retain from the #!rchase #rice a #ortion of the contract #rice in the amo!nt of -116$'2'$)46.)4 -- the eF!ivalent of C2^2$6//$14'. Ahis amo!nt Das to be de#osited in an interest-bearing acco!nt in the (irst &ational ity *anB of &eD @orB ( itibanB) for #ayment to "-A$ the #etitioner in G% &o. 11/612. IoDever$ #etitioners allegedly ref!sed to a##ly the s!m to the #ayment to "-A$ des#ite the s!bseF!ent finality of the ,ecision in G% &o. 11/612 in favor of the latter and the re#eated instr!ctions of %es#ondent . (earf!l that non#ayment to "-A Do!ld res!lt in the foreclos!re$ not 0!st of its #ro#erties covered by the 2-" Dith .afarge b!t of several other #ro#erties as Dell$ filed before the %egional Arial o!rt of K!e<on ity on +!ne 2'$ 2'''$ a R om#laint Dith "##lication for -reliminary "ttachmentN against #etitioners. ,ocBeted as ivil ase &o. K-''-411'3$ the om#laint #rayed$ among others$ that #etitioners be directed to #ay the R"-A %etained "mo!ntN referred to in la!se 2 (c) of the 2-".

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-etitioners moved to dismiss the om#laint on the gro!nd that it violated the #rohibition on for!m-sho##ing. %es#ondent had allegedly made the same claim it Das raising in ivil ase &o. K-''-411'3 in another action$ Dhich involved the same #arties and Dhich Das filed earlier before the 1nternational hamber of ommerce. "fter the trial co!rt denied the 4otion to ,ismiss in its &ovember 14$ 2''' Order$ #etitioners elevated the matter before the o!rt of "##eals in "-G% 2- &o. 6)6)). 1n the meantime$ to avoid being in defa!lt and Ditho!t #re0!dice to the o!tcome of their a##eal$ #etitioners filed their "nsDer and om#!lsory o!nterclaims ad $autelam before the trial co!rt in ivil ase &o. K-''-411'3. 1n their "nsDer$ they denied the allegations in the om#laint. Ahey #rayed -- by Day of com#!lsory co!nterclaims against %es#ondent $ its ma0ority stocBholder and #resident Gregory A. .im$ and its cor#orate secretary "nthony ". 4ariano -- for the s!ms of (a) -2$6''$''' each as act!al damages$ (b)-1''$'''$''' each as e3em#lary damages$ (c) -1''$'''$''' each as moral damages$ and (d) -5$'''$''' each as attorneyGs fees #l!s costs of s!it. -etitioners alleged that $ thro!gh .im and 4ariano$ had filed the RbaselessN om#laint in ivil ase &o. K-''-411'3 and #roc!red the 8rit of "ttachment in bad faith. %elying on this o!rtGs #rono!ncement in Sapuga" v. $A,>5? #etitioners #rayed that both .im and 4ariano be held R0ointly and solidarilyN liable Dith %es#ondent . On behalf of .im and 4ariano Dho had yet to file any res#onsive #leading$ moved to dismiss #etitionersG com#!lsory co!nterclaims on gro!nds that essentially constit!ted the very iss!es for resol!tion in the instant -etition.

/uling of the Trial Court On 4ay 22$ 2''2$ the %egional Arial o!rt of K!e<on ity (*ranch )') dismissed #etitionersG co!nterclaims for several reasons$ among Dhich Dere the folloDingE a) the co!nterclaims against %es#ondents .im and 4ariano Dere not com#!lsory; b) the r!ling in Sapuga" Das not a##licable; and c) #etitionersG "nsDer Dith o!nterclaims violated #roced!ral r!les on the #ro#er 0oinder of ca!ses of action.>6? "cting on the 4otion for %econsideration filed by #etitioners$ the trial co!rt -- in an "mended Order dated 2e#tember 3$ 2''2>6? -- admitted some errors in its 4ay 22$ 2''2 Order$ #artic!larly in its #rono!ncement that their co!nterclaim had been #leaded against .im and 4ariano only. IoDever$ the %A clarified that it Das dismissing the co!nterclaim insofar as it im#leaded %es#ondents .im and 4ariano$ even if it incl!ded . Ience this -etition.>)?

Issues 1n their 4emorand!m$ #etitioners raise the folloDing iss!es for o!r considerationE

149

R>a?

8hether or not the %A gravely erred in ref!sing to r!le that %es#ondent has no #ersonality to move to dismiss #etitionersG com#!lsory co!nterclaims on %es#ondents .im and 4arianoGs behalf. 8hether or not the %A gravely erred in r!ling that (i) #etitionersG co!nterclaims against %es#ondents .im and 4ariano are not com#!lsory; (ii) Sapuga" v. $ourt of Appeals is ina##licable here; and (iii) #etitioners violated the r!le on 0oinder of ca!ses of action.N>/?

R>b?

(or clarity and coherence$ the o!rt Dill resolve the foregoing in reverse order.

The CourtJs /uling Ahe -etition is meritorio!s.

7irst IssueE Counterclaims and Joinder of Causes of Action.

Petitioners’ Counterclaims Compulsor o!nterclaims are defined in 2ection 6 of %!le 6 of the %!les of ivil -roced!re as Rany claim Dhich a defending #arty may have against an o##osing #arty.N Ahey are generally alloDed in order to avoid a m!lti#licity of s!its and to facilitate the dis#osition of the Dhole controversy in a single action$ s!ch that the defendantGs demand may be ad0!dged by a co!nterclaim rather than by an inde#endent s!it. Ahe only limitations to this #rinci#le are (1) that the co!rt sho!ld have 0!risdiction over the s!b0ect matter of the co!nterclaim$ and (2) that it co!ld acF!ire 0!risdiction over third #arties Dhose #resence is essential for its ad0!dication.>1'? " co!nterclaim may either be #ermissive or com#!lsory. 1t is #ermissive Rif it does not arise o!t of or is not necessarily connected Dith the s!b0ect matter of the o##osing #artyGs claim.N>11? " #ermissive co!nterclaim is essentially an inde#endent claim that may be filed se#arately in another case. " co!nterclaim is com#!lsory Dhen its ob0ect Rarises o!t of or is necessarily connected Dith the transaction or occ!rrence constit!ting the s!b0ect matter of the o##osing #artyGs claim and does not reF!ire for its ad0!dication the #resence of third #arties of Dhom the co!rt cannot acF!ire 0!risdiction.N>12? CnliBe #ermissive co!nterclaims$ com#!lsory co!nterclaims sho!ld be set !# in the same action; otherDise$ they Do!ld be barred forever. *AMA%$1 v. 2ederation of United *amarco +istributors>13? laid doDn the folloDing criteria to determine Dhether a co!nterclaim is com#!lsory or #ermissiveE 1) "re iss!es of fact and laD raised by the claim and by the co!nterclaim largely the same9 2) 8o!ld res judicata bar a s!bseF!ent s!it on defendantGs claim$ absent the com#!lsory co!nterclaim r!le9 3) 8ill s!bstantially the same evidence s!##ort or ref!te #laintiffGs claim as Dell as defendantGs

150

co!nterclaim9 4) 1s there any logical relation betDeen the claim and the co!nterclaim9 " #ositive ansDer to all fo!r F!estions Do!ld indicate that the co!nterclaim is com#!lsory. "do#ted in <uintanilla v. $A>14? and reiterated in Alda" v. 2GU -nsurance $orporation,>15? the Rcom#elling test of com#!lsorinessN characteri<es a co!nterclaim as com#!lsory if there sho!ld e3ist a Rlogical relationshi#N betDeen the main claim and the co!nterclaim. Ahere e3ists s!ch a relationshi# Dhen cond!cting se#arate trials of the res#ective claims of the #arties Do!ld entail s!bstantial d!#lication of time and effort by the #arties and the co!rt; Dhen the m!lti#le claims involve the same fact!al and legal iss!es; or Dhen the claims are offshoots of the same basic controversy betDeen the #arties. 8e shall noD e3amine the nat!re of #etitionersG co!nterclaims against res#ondents Dith the !se of the foregoing #arameters. -etitioners base their co!nterclaim on the folloDing allegationsE RGregory A. .im and "nthony ". 4ariano Dere the #ersons res#onsible for maBing the bad faith decisions for$ and ca!sing #laintiff to file this baseless s!it and to #roc!re an !nDarranted Drit of attachment$ notDithstanding their BnoDledge that #laintiff has no right to bring it or to sec!re the Drit. 1n taBing s!ch bad faith actions$ Gregory A. .im Das motivated by his #ersonal interests as one of the oDners of #laintiff Dhile "nthony ". 4ariano Das motivated by his sense of #ersonal loyalty to Gregory A. .im$ for Dhich reason he disregarded the fact that #laintiff is Ditho!t any valid ca!se. R onseF!ently$ both Gregory A. .im and "nthony ". 4ariano are the #laintiffGs co-0oint tortfeasors in the commission of the acts com#lained of in this ansDer and in the com#!lsory co!nterclaims #leaded beloD. "s s!ch they sho!ld be held 0ointly and solidarily liable as #laintiffGs co-defendants to those com#!lsory co!nterclaims #!rs!ant to the 2!#reme o!rtGs decision in 2a#!gay v. 4obil. 333 333 333

RAhe #laintiffGs$ Gregory A. .im and "nthony ". 4arianoGs bad faith filing of this baseless case has com#elled the defendants to engage the services of co!nsel for a fee and to inc!r costs of litigation$ in amo!nts to be #roved at trial$ b!t in no case less than -5 million for each of them and for Dhich #laintiff Gregory A. .im and "nthony ". 4ariano sho!ld be held 0ointly and solidarily liable. RAhe #laintiffGs$ Gregory A. .imGs and "nthony ". 4arianoGs actions have damaged the re#!tations of the defendants and they sho!ld be held 0ointly and solidarily liable to them for moral damages of -1'' million each. R1n order to serve as an e3am#le for the #!blic good and to deter similar baseless$ bad faith litigation$ the #laintiff$ Gregory A. .im and "nthony ". 4ariano sho!ld be held 0ointly and solidarily liable to the defendants for e3em#lary damages of -1'' million each.N >16? Ahe above allegations shoD that #etitionersG co!nterclaims for damages Dere the res!lt of res#ondentsG (.im and 4ariano) act of filing the om#laint and sec!ring the 8rit of "ttachment in bad faith. Tiu Po v. Bautista>16? involved the iss!e of Dhether the co!nterclaim that so!ght moral$ act!al and e3em#lary damages and attorneyGs fees

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against res#ondents on acco!nt of their Rmalicio!s and !nfo!ndedN com#laint Das com#!lsory. 1n that case$ De held as folloDsE R-etitionersG co!nterclaim for damages f!lfills the necessary reF!isites of a com#!lsory co!nterclaim. Ahey are damages claimed to have been s!ffered by #etitioners as a conseF!ence of the action filed against them. Ahey have to be #leaded in the same action; otherDise$ #etitioners Do!ld be #recl!ded by the 0!dgment from invoBing the same in an inde#endent action. Ahe #rono!ncement in Papa vs. Banaag .5= S$%A 58?5/ .5:;;/ is in #ointE R om#ensatory$ moral and e3em#lary damages$ allegedly s!ffered by the creditor in conseF!ence of the debtorGs action$ are also com#!lsory co!nterclaim barred by the dismissal of the debtorGs action. Ahey cannot be claimed in a s!bseF!ent action by the creditor against the debtor.N R"side from the fact that #etitionersG co!nterclaim for damages cannot be the s!b0ect of an inde#endent action$ it is the same evidence that s!stains #etitionersG co!nterclaim that Dill ref!te #rivate res#ondentGs oDn claim for damages. Ahis is an additional factor that characteri<es #etitionersG co!nterclaim as com#!lsory.N>1)? 4oreover$ !sing the Rcom#elling test of com#!lsoriness$N De find that$ clearly$ the recovery of #etitionersG co!nterclaims is contingent !#on the case filed by res#ondents; th!s$ cond!cting se#arate trials thereon Dill res!lt in a s!bstantial d!#lication of the time and effort of the co!rt and the #arties. 2ince the co!nterclaim for damages is com#!lsory$ it m!st be set !# in the same action; otherDise$ it Do!ld be barred forever. 1f it is filed conc!rrently Dith the main action b!t in a different #roceeding$ it Do!ld be abated on the gro!nd of litis pendentiaC if filed s!bseF!ently$ it Do!ld meet the same fate on the gro!nd of res judicata.>1/?

-apuga9 v. Court of $ppeals Applica!le to the Case at "ar Sapuga" v. $ourt of Appeals finds a##lication in the #resent case. 1n Sapuga", %es#ondent 4obil -hili##ines filed before the trial co!rt of -asig an action for re#levin against 2#o!ses 4arino and .ina +oel 2a#!gay. Ahe om#laint arose from the s!##osed fail!re of the co!#le to Bee# their end of their ,ealershi# "greement. 1n their "nsDer Dith o!nterclaim$ #etitioners alleged that after inc!rring e3#enses in antici#ation of the ,ealershi# "greement$ they reF!ested the #laintiff to alloD them to get gas$ b!t that it had ref!sed. 1t claimed that they still had to #ost a s!rety bond Dhich$ initially fi3ed at -2''$'''$ Das later raised to -6''$'''. Ahe s#o!ses e3erted all efforts to sec!re a bond$ b!t the bonding com#anies reF!ired a co#y of the ,ealershi# "greement$ Dhich res#ondent contin!ed to Dithhold from them. .ater$ #etitioners discovered that res#ondent and its manager$ %icardo -. ardenas$ had intended all along to aDard the dealershi# to 1sland "ir -rod!ct or#oration. 1n their "nsDer$ #etitioners im#leaded in the co!nterclaim 4obil -hili##ines and its manager -- %icardo -. ardenas -- as defendants. Ahey #rayed that 0!dgment be

152

rendered$ holding both 0ointly and severally liable for #re-o#eration e3#enses$ rental$ storage$ g!arding fees$ and !nreali<ed #rofit incl!ding damages. "fter both 4obil and ardenas failed to res#ond to their "nsDer to the o!nterclaim$ #etitioners filed a R4otion to ,eclare -laintiff and its 4anager %icardo -. ardenas in ,efa!lt on ,efendantGs o!nterclaim.N "mong the iss!es raised in Sapuga" Das Dhether ardenas$ Dho Das not a #arty to the original action$ might nevertheless be im#leaded in the co!nterclaim. 8e dis#osed of this iss!e as folloDsE R" co!nterclaim is defined as any claim for money or other relief Dhich a defending #arty may have against an o##osing #arty. IoDever$ the general r!le that a defendant cannot by a co!nterclaim bring into the action any claim against #ersons other than the #laintiff admits of an e3ce#tion !nder 2ection 14$ %!le 6 Dhich #rovides that TDhen the #resence of #arties other than those to the original action is reF!ired for the granting of com#lete relief in the determination of a co!nterclaim or cross-claim$ the co!rt shall order them to be bro!ght in as defendants$ if 0!risdiction over them can be obtained.G Ahe incl!sion$ therefore$ of ardenas in #etitionersG co!nterclaim is sanctioned by the r!les.N>2'? Ahe #rerogative of bringing in neD #arties to the action at any stage before 0!dgment is intended to accord com#lete relief to all of them in a single action and to avert a d!#licity and even a m!lti#licity of s!its thereby. 1n insisting on the ina##licability of Sapuga"$ res#ondents arg!e that neD #arties cannot be incl!ded in a co!nterclaim$ e3ce#t Dhen no com#lete relief can be had. Ahey add that R>i?n the #resent case$ 4essrs. .im and 4ariano are not necessary for #etitioners to obtain com#lete relief from %es#ondent as #laintiff in the loDer co!rt. Ahis is beca!se %es#ondent as a cor#oration Dith a se#arate >legal #ersonality? has the 0!ridical ca#acity to indemnify #etitioners even Ditho!t 4essrs. .im and 4ariano.N>21? 8e disagree. Ahe incl!sion of a cor#orate officer or stocBholder -- ardenas in Sapuga" or .im and 4ariano in the instant case -- is not #remised on the ass!m#tion that the #laintiff cor#oration does not have the financial ability to ansDer for damages$ s!ch that it has to share its liability Dith individ!al defendants. %ather$ s!ch incl!sion is based on the allegations of fra!d and bad faith on the #art of the cor#orate officer or stocBholder. Ahese allegations may Darrant the #iercing of the veil of cor#orate fiction$ so that the said individ!al may not seeB ref!ge therein$ b!t may be held individ!ally and #ersonally liable for his or her actions. 1n Tramat Mercantile v. $ourt of Appeals, >22? the o!rt held that generally$ it sho!ld only be the cor#oration that co!ld #ro#erly be held liable. IoDever$ circ!mstances may Darrant the incl!sion of the #ersonal liability of a cor#orate director$ tr!stee$ or officer$ if the said individ!al is fo!nd g!ilty of bad faith or gross negligence in directing cor#orate affairs. %emo 0r. v. -A$>23? has stressed that Dhile a cor#oration is an entity se#arate and distinct from its stocBholders$ the cor#orate fiction may be disregarded if R!sed to defeat #!blic convenience$ 0!stify a Drong$ #rotect fra!d$ or defend crime.N 1n these instances$ Rthe laD Dill regard the cor#oration as an association of #ersons$ or in case of tDo cor#orations$ Dill merge them into one.N Ah!s$ there is no debate on Dhether$ in alleging bad faith on the #art of .im and 4ariano the co!nterclaims had in effect made them

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Rindis#ensable #artiesN thereto; based on the alleged facts$ both are clearly #arties in interest to the co!nterclaim.>24? %es#ondents f!rther assert that R4essrs. .im and 4ariano cannot be held #ersonally liable >beca!se their assailed acts? are Dithin the #oDers granted to them by the #ro#er board resol!tions; therefore$ it is not a #ersonal decision b!t rather that of the cor#oration as re#resented by its board of directors.N>25? Ahe foregoing assertion$ hoDever$ is a matter of defense that sho!ld be threshed o!t d!ring the trial; Dhether or not Rfra!dN is e3tant !nder the circ!mstances is an iss!e that m!st be established by convincing evidence.>26? 2!ability and liability are tDo distinct matters. 8hile the o!rt does r!le that the co!nterclaims against %es#ondent Gs #resident and manager may be #ro#erly filed$ the determination of Dhether both can in fact be held 0ointly and severally liable Dith res#ondent cor#oration is entirely another iss!e that sho!ld be r!led !#on by the trial co!rt. IoDever$ Dhile a com#!lsory co!nterclaim may im#lead #ersons not #arties to the original com#laint$ the general r!le -- a defendant in a com#!lsory co!nterclaim need not file any res#onsive #leading$ as it is deemed to have ado#ted the allegations in the com#laint as its ansDer -- does not a##ly. Ahe filing of a res#onsive #leading is deemed a vol!ntary s!bmission to the 0!risdiction of the co!rt; a neD #arty im#leaded by the #laintiff in a com#!lsory co!nterclaim cannot be considered to have a!tomatically and !nBnoDingly s!bmitted to the 0!risdiction of the co!rt. " contrary r!ling Do!ld res!lt in mischievo!s conseF!ences Dhereby a #arty may be indiscriminately im#leaded as a defendant in a com#!lsory co!nterclaim; and 0!dgment rendered against it Ditho!t its BnoDledge$ m!ch less #artici#ation in the #roceedings$ in blatant disregard of r!dimentary d!e #rocess reF!irements. Ahe correct #roced!re in instances s!ch as this is for the trial co!rt$ #er 2ection 12 of %!le 6 of the %!les of o!rt$ to Rorder >s!ch im#leaded #arties? to be bro!ght in as defendants$ if 0!risdiction over them can be obtained$N by directing that s!mmons be served on them. 1n this manner$ they can be #ro#erly a##raised of and ansDer the charges against them. Only !#on service of s!mmons can the trial co!rt obtain 0!risdiction over them. 1n Sapuga", ardenas Das f!rnished a co#y of the "nsDer Dith o!nterclaim$ b!t he did not file any res#onsive #leading to the co!nterclaim leveled against him. &evertheless$ the o!rt gave d!e consideration to certain fact!al circ!mstances$ #artic!larly the trial co!rtGs treatment of the om#laint as the "nsDer of ardenas to the com#!lsory co!nterclaim and of his seeming acF!iescence thereto$ as evidenced by his fail!re to maBe any ob0ection des#ite his active #artici#ation in the #roceedings. 1t Das held th!sE R1t is noteDorthy that ardenas did not file a motion to dismiss the co!nterclaim against him on the gro!nd of lacB of 0!risdiction. 8hile it is a settled r!le that the iss!e of 0!risdiction may be raised even for the first time on a##eal$ this does not obtain in the instant case. "ltho!gh it Das only 4obil Dhich filed an o##osition to the motion to declare in defa!lt$ the fact that the trial co!rt denied said motion$ both as to 4obil and ardenas on the gro!nd that 4obilGs com#laint sho!ld be considered as the ansDer to #etitionersG com#!lsory co!nterclaim$ leads !s to the inesca#able concl!sion that the trial co!rt treated the o##osition as having been filed in behalf of both 4obil and ardenas and that the latter had ado#ted as his ansDer the allegations raised in the

154

com#laint of 4obil. Obvio!sly$ it Das this ratiocination Dhich led the trial co!rt to deny the motion to declare 4obil and ardenas in defa!lt. (!rthermore$ ardenas Das not !naDare of said incidents and the #roceedings therein as he testified and Das #resent d!ring trial$ not to s#eaB of the fact that as manager of 4obil he Do!ld necessarily be interested in the case and co!ld readily have access to the records and the #leadings filed therein. R*y ado#ting as his ansDer the allegations in the com#laint Dhich seeBs affirmative relief$ ardenas is deemed to have recogni<ed the 0!risdiction of the trial co!rt over his #erson and s!bmitted thereto. Ie may not noD be heard to re#!diate or F!estion that 0!risdiction.N>26? 2!ch fact!al circ!mstances are !navailing in the instant case. Ahe records do not shoD that %es#ondents .im and 4ariano are either aDare of the co!nterclaims filed against them$ or that they have actively #artici#ated in the #roceedings involving them. (!rther$ in dismissing the co!nterclaims against the individ!al res#ondents$ the co!rt a #uo -- !nliBe inSapuga" -- cannot be said to have treated %es#ondent Gs 4otion to ,ismiss as having been filed on their behalf.

Rules on Permissive Joinder of Causes of Action or Parties Not Applica!le %es#ondent contends that #etitionersG co!nterclaims violated the r!le on 0oinder of ca!ses of action. 1t arg!es that Dhile the original om#laint Das a s!it for s#ecific #erformance based on a contract$ the co!nterclaim for damages Das based on the tort!o!s acts of res#ondents.>2)? 1n its 4otion to ,ismiss$ cites 2ection 5 of %!le 2 and 2ection 6 of %!le 3 of the %!les of ivil -roced!re$ Dhich De F!oteE O2ection 5. 0oinder of causes of action. P " #arty may in one #leading assert$ in the alternative or otherDise$ as many ca!ses of action as he may have against an o##osing #arty$ s!b0ect to the folloDing conditionsE (a) Ahe #arty 0oining the ca!ses of action shall com#ly Dith the r!les on 0oinder of #arties; 3 3 3N 2ection 6. Permissive joinder of parties. P "ll #ersons in Dhom or against Dhom any right to relief in res#ect to or arising o!t of the same transaction or series of transactions is alleged to e3ist Dhether 0ointly$ severally$ or in the alternative$ may$ e3ce#t as otherDise #rovided in these %!les$ 0oin as #laintiffs or be 0oined as defendants in one com#laint$ Dhere any F!estion of laD or fact common to all s!ch #laintiffs or to all s!ch defendants may arise in the action; b!t the co!rt may maBe s!ch orders as may be 0!st to #revent any #laintiff or defendant from being embarrassed or #!t to e3#ense in connection Dith any #roceedings in Dhich he may have no interest.N Ahe foregoing #roced!ral r!les are fo!nded on #racticality and convenience. Ahey are meant to disco!rage d!#licity and m!lti#licity of s!its. Ahis ob0ective is negated by insisting -- as the co!rt a #uo has done -- that the com#!lsory co!nterclaim for damages be dismissed$ only to have it #ossibly re-filed in a se#arate #roceeding. 4ore im#ortant$

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as De have stated earlier$ %es#ondents .im and 4ariano are real #arties in interest to the com#!lsory co!nterclaim; it is im#erative that they be 0oined therein. 2ection 6 of %!le 3 #rovidesE R$ompulsor" joinder of indispensable parties. U -arties in interest Ditho!t Dhom no final determination can be had of an action shall be 0oined either as #laintiffs or defendants.N 4oreover$ in 0oining .im and 4ariano in the com#!lsory co!nterclaim$ #etitioners are being consistent Dith the solidary nat!re of the liability alleged therein.

-e ond IssueE CCC’s Personalit to #ove to $ismiss the Compulsor Counterclaims haracteri<ing their co!nterclaim for damages against %es#ondents 4ariano as R0oint and solidary$N #etitioners #rayedE R8I=%=(O%=$ it is res#ectf!lly #rayed that after trial 0!dgment be renderedE R1. R2. ,ismissing the com#laint in its entirety; Ordering the #laintiff$ Gregory A. .im and "nthony ". 4ariano 0ointly and solidarily to #ay defendant act!al damages in the s!m of at least -2$6''$'''.''; Ordering the #laintiff$ Gregory A. .im and "nthony "$ 4ariano 0ointly and solidarily to #ay the defendants .-1$ . . $ O and %osebergE Ra. =3em#lary damages of -1'' million each; Rb. 4oral damages of -1'' million each; and Rc. "ttorneyGs fees and costs of s!it of at least -5 million each. $ .im and

R3.

Other reliefs 0!st and eF!itable are liBeDise #rayed for.N>2/? Obligations may be classified as either 0oint or solidary. R+ointN or R0ointlyN or Rcon0ointN means mancum or mancomunada or pro rata obligation; on the other hand$ Rsolidary obligationsN may be !sed interchangeably Dith R0oint and severalN or Rseveral.N Ah!s$ #etitionersG !sage of the term R0oint and solidaryN is conf!sing and ambig!o!s. Ahe ambig!ity in #etitionersG co!nterclaims notDithstanding$ res#ondentsG liability$ if #roven$ is solidary. Ahis characteri<ation finds basis in "rticle 12'6 of the ivil ode$ Dhich #rovides that obligations are generally considered 0oint$ e3ce#t Dhen otherDise e3#ressly stated or Dhen the laD or the nat!re of the obligation reF!ires solidarity. IoDever$ obligations arising from tort are$ by their nat!re$ alDays solidary. 8e have assid!o!sly maintained this legal #rinci#le as early as 1/12 in 3orcester v. 1campo,>3'? in Dhich De heldE

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R3 3 3 Ahe diffic!lty in the contention of the a##ellants is that they fail to recogni<e that the basis of the #resent action is tort. Ahey fail to recogni<e the !niversal doctrine that each 0oint tort feasor is not only individ!ally liable for the tort in Dhich he #artici#ates$ b!t is also 0ointly liable Dith his tort feasors. 3 3 3 R1t may be stated as a general r!le that 0oint tort feasors are all the #ersons Dho command$ instigate$ #romote$ enco!rage$ advise$ co!ntenance$ coo#erate in$ aid or abet the commission of a tort$ or Dho a##rove of it after it is done$ if done for their benefit. Ahey are each liable as #rinci#als$ to the same e3tent and in the same manner as if they had #erformed the Drongf!l act themselves. 3 3 3 R+oint tort feasors are 0ointly and severally liable for the tort Dhich they commit. Ahe #ersons in0!red may s!e all of them or any n!mber less than all. =ach is liable for the Dhole damages ca!sed by all$ and all together are 0ointly liable for the Dhole damage. 1t is no defense for one s!ed alone$ that the others Dho #artici#ated in the Drongf!l act are not 0oined Dith him as defendants; nor is it any e3c!se for him that his #artici#ation in the tort Das insignificant as com#ared to that of the others. 3 3 3 R+oint tort feasors are not liable pro rata. Ahe damages can not be a##ortioned among them$ e3ce#t among themselves. Ahey cannot insist !#on an a##ortionment$ for the #!r#ose of each #aying an aliF!ot #art. Ahey are 0ointly and severally liable for the Dhole amo!nt. 3 3 3 R" #ayment in f!ll for the damage done$ by one of the 0oint tort feasors$ of co!rse satisfies any claim Dhich might e3ist against the others. Ahere can be b!t satisfaction. Ahe release of one of the 0oint tort feasors by agreement generally o#erates to discharge all. 3 3 3 ROf co!rse the co!rt d!ring trial may find that some of the alleged tort feasors are liable and that others are not liable. Ahe co!rts may release some for lacB of evidence Dhile condemning others of the alleged tort feasors. "nd this is tr!e even tho!gh they are charged 0ointly and severally.N 1n a R0ointN obligation$ each obligor ansDers only for a #art of the Dhole liability; in a RsolidaryN or R0oint and severalN obligation$ the relationshi# betDeen the active and the #assive s!b0ects is so close that each of them m!st com#ly Dith or demand the f!lfillment of the Dhole obligation. >31? Ahe fact that the liability so!ght against the is for s#ecific #erformance and tort$ Dhile that so!ght against the individ!al res#ondents is based solely on tort does not negate the solidary nat!re of their liability for tort!o!s acts alleged in the co!nterclaims. "rticle 1211 of the ivil ode is e3#licit on this #ointE R2olidarity may e3ist altho!gh the creditors and the debtors may not be bo!nd in the same manner and by the same #eriods and conditions.N Ahe solidary character of res#ondentsG alleged liability is #recisely Dhy credence cannot be given to #etitionersG assertion. "ccording to s!ch assertion$ %es#ondent cannot move to dismiss the co!nterclaims on gro!nds that #ertain solely to its individ!al co-debtors.>32? 1n cases filed by the creditor$ a solidary debtor may invoBe defenses arising from the nat!re of the obligation$ from circ!mstances #ersonal to it$ or even from those #ersonal to its co-debtors. "rticle 1222 of the ivil ode #rovidesE

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R" solidary debtor may$ in actions filed by the creditor$ avail itself of all defenses Dhich are derived from the nat!re of the obligation and of those Dhich are #ersonal to him$ or #ertain to his oDn share. Dith respe t to those ?hi h personall9 belong to the others, he :a9 avail hi:self thereof onl9 as regards that part of the debt for ?hi h the latter are responsible.L (=m#hasis s!##lied). Ahe act of %es#ondent as a solidary debtor -- that of filing a motion to dismiss the co!nterclaim on gro!nds that #ertain only to its individ!al co-debtors -- is therefore alloDed. IoDever$ a #er!sal of its 4otion to ,ismiss the co!nterclaims shoDs that %es#ondent filed it on behalf of o-res#ondents .im and 4ariano; it did not #ray that the co!nterclaim against it be dismissed. *e that as it may$ %es#ondent cannot be declared in defa!lt. +!ris#r!dence teaches that if the iss!es raised in the com#!lsory co!nterclaim are so intertDined Dith the allegations in the com#laint$ s!ch iss!es are deemed a!tomatically 0oined. >33? o!nterclaims that are only for damages and attorneyGs fees and that arise from the filing of the com#laint shall be considered as s#ecial defenses and need not be ansDered.>34?

CCC’s #otion to $ismiss the Counterclaim on "ehalf of Respondents %im and #ariano Not Allo&ed 8hile %es#ondent can move to dismiss the co!nterclaims against it by raising gro!nds that #ertain to individ!al defendants .im and 4ariano$ it cannot file the same 4otion on their behalf for the sim#le reason that it lacBs the reF!isite a!thority to do so. " cor#oration has a legal #ersonality entirely se#arate and distinct from that of its officers and cannot act for and on their behalf$ Ditho!t being so a!thori<ed. Ah!s$ !nless e3#ressly ado#ted by .im and 4ariano$ the 4otion to ,ismiss the com#!lsory co!nterclaim filed by %es#ondent has no force and effect as to them. 1n s!mmary$ De maBe the folloDing #rono!ncementsE 1. Ahe co!nterclaims against %es#ondents 4ariano are com#!lsory. $ Gregory A. .im and "nthony ".

2. Ahe co!nterclaims may #ro#erly im#lead %es#ondents Gregory A. .im and "nthony ". 4ariano$ even if both Dere not #arties in the original om#laint. 3. %es#ondent or any of the three solidary debtors ( $ .im or 4ariano) may incl!de$ in a 4otion to ,ismiss$ defenses available to their co-defendants; nevertheless$ the same 4otion cannot be deemed to have been filed on behalf of the said co-defendants. 4. 2!mmons m!st be served on %es#ondents .im and 4ariano before the trial co!rt can obtain 0!risdiction over them.

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DA=/=7O/=$ the -etition %=H=%2=,. Ahe co!rt of origin is co!nterclaims #leaded in #etitionersG ca!se the service of s!mmons on 4ariano. &o costs. -O O/!=/=!.

is G%"&A=, and the assailed Orders hereby O%,=%=, to taBe cogni<ance of the "nsDer Dith om#!lsory o!nterclaims and to %es#ondents Gregory A. .im and "nthony ".

Sandoval-Gutierre&, $arpio-Morales, and Garcia, 00., conc!r.

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