Limketkai Sons Milling, Inc. vs. CA, G.R. No. L-23351, March 13, 1968, 22 SCRA 1000

LIMKETKAI SONS MILLING, INC.,petitioner,G.R. No. 118509vs.March 29, 1996 COURTOF APPEALS, ET. AL.,respondents.FACTS:Phil.Remnants Co. constituted BPI to manage, administer and sell its real property located inPasig, Metro Manila.BPI gave authority to real estate broker Pedro Revilla Jr. to sell the lot for P1000 per square meter.Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land and thereafter was allowed to view the land.Lim and Alfonso LImketkai went to BPI to confirm the sale and both finally agreed that the land would be sold for P1000 per square meter. Notwithstanding the agreement, Alfonso asked BPI if it was possible to pay in terms provided that in case the term is disapproved, the price shall be paid in cash.Two or three days later, petitioner learned that its offer to pay on terms had been frozen. Alfonso Lim went to BPI onJuly 18, 1988and tendered the full payment of P33,056,000.00 toAlbano. The payment was refused because Albano stated that the authority to sell that particular piece of property inPasighad been withdrawn from his unitAn action for specific performance with damages was thereupon filed onAugust 25, 1988by petitioner against BPI. In the course of the trial, BPI informed the trial court that it had sold the property under litigation to NBS

ISSUE:WON there was a perfected contract of sale between Limketkai Co. and BPI.

HELD:There was already a perfected contract of sale because both parties already agreed to the sale of P1000/sq.m. Even if Lim tried to negotiate for a payment in terms, it is clear that if it be disapproved, the payment will be made in cash.The perfection of the contract took place when Aromin andAlbano, acting for BPI, agreed to sell and Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai, agreed to buy the disputed lot at P1,000.00 per square meter. Aside from this there was the earlier agreement between petitioner and the authorized broker. There was a concurrence of offer and acceptance, on the object, and on the cause thereof.

The phases that a contract goes through may be summarized as follows:a. preparation, conception or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties;b. perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; andc. consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract

BABAO VS. PEREZ, G.R. NO. L-8334, DECEMBER 28, 1957, 102 PHIL. 756 Bienvenido Babao vs. Florencio Perez (Article 1324; statute of fraud)

FACTS: Santiago Babao married the niece of Celestina Perez. 1924, Santi and Celestina allegedly had a verbal agreement where Santi was bound to improve the land of Celestina by leveling, clearing, planting fruits and other crops; that he will act as the administrator of the land; that all expenses for labor and materials will be at his cost, in consideration of which Celestina in turn bound herself to convey to Santi or his wife of the land,, with all the improvements after the death of Celestina. But, shortly before Celestinas death, she sold the land to another part. Thus, Santi filed this complaint alleging the sale of the land as fraudulent and fictitious and prays to recover the land or the expenses he incurred in improving the land.

ISSUE: whether or not the verbal agreement falls within the Stature of FraudsHELD: Contracts which by their terms are not to be performed within one year, may be taken out of the statute through performance by one party thereto. All that is required in such case is complete performance within the year by one party, however many tears may have to elapse before the agreement is performed by the other party. But nothing less than full performance by one party will suffice, and it has been held that, if anything remains to be done after the expiration of the year besides the mere payment of money, the statute will apply. It is not therefore correct to state that Santiago Babao has fully complied with his part within the year from the alleged contract in question.

Having reached the conclusion that all the parol evidence of appellee was submitted in violation of the Statute of Frauds, or of the rule which prohibits testimony against deceased persons, we find unnecessary to discuss the other issues raised in appellants' brief.

The case is dismissed, with costs against appellee.

PATERNO VS. JAO YAN, G.R. NO. L-12218, FEBRUARY 28, 1961, 1 SCRA 631

FACTS:

(1) By a notarized contract under date 3 of June 1948, the appellees, represented by their attorney-in-fact, Martina Paterno, leased to the appellant Jao Yan a parcel of land situated at a corner of Escolta Street and Plaza Moraga, of the City of Manila, covered by Transfer Certificate of Title No. 7768. The lease was to be for a period of seven (7) years, commencing on the 15th of July, 1948. The leasee bound himself to construct a building "to be made of strong wooden materials" on the leased premises, which would become property of the lessors at the termination of the lease; to pay P5,500,00 monthly rental, and all taxes, charges, and assessments on the building.(2) By complaint dated 20 May 1955, subsequently amended on 20 September 1955, the lessors filed action to recover from the lessee rentals in the sum P23,250.00 due for the months of March to June, 1955 and the first days of July, 1955; P7,680 for real estate taxes and penalties due on the building for the years 1953 to 1955; P2,500.00 attorney's fees; and for the recovery of the building constructed on the leased land..(3) Defendant lessee averred, in his answer, that the original written contract had been orally extended from seven (7) to ten (10) years, in consideration of his constructing a semi-concrete building (instead of the wooden one originally contemplated), as he actually had done, at a cost of P13,000.00, higher than the original wooden structure would have cost; that the rentals due had been retained by him because of plaintiff's refusal to recognize the modified contract; that [plaintiff's refusal to recognize the modified contract; that plaintiffs maliciously garnished the rents due from his sub-lessees; and prayed for judgment compelling plaintiffs to recognize the modified contract and to pay him damages, material and moral..

Applicable law:Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within a year from the making thereof;

(b) A special promise to answer for the debt, default, or miscarriage of another;

(c) An agreement made in consideration of marriage, other than a mutual promise to marry;

(d) An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money; but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum;

(e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein;

(f) A representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a contract.

ISSUE: WON the Statute of Frauds is applicable to the lease agreement (oral extension)

RTC: Yes, the contract is unenforceable. At the trial, defendant offered testimonial evidence to support his claim that the original written contract had been subsequently modified by oral agreement between the parties in the manner alleged in the answer; he also submitted documents filed with the City Engineer's office, regarding the semi-concrete building, conformably to the modificatory oral agreement.

The RTC dismissed such testimony.

HELD: No because there has already been partial performance.

RATIO:(1) Partial performance takes an oral contract out of the scope of the Statute Frauds. "The taking of possession by the lessee and the making of valuable improvement, and the like, on the faith of the oral agreement, may operate to the case out of the prohibition of the statute, for it would be gross fraud to permit the lessor in such a case to avoid the lease ." (49 Am. Jur. p. 809, sec. 106, case cited) The expenditure of money by a tenant in making improvement on the premises on the faith of an oral agreement for a lease for a further term, may be viewed not only as constituting in itself an act of part performance but as furnishing strong if not conclusive evidence that possession is continued under the oral contract and not as a tenant holding over under the original lease. (49 Am. Jur. 810; 33 A.L.R.. 1489, 1501).

Paul Reiss, et al. vs. Jose M. Memije, G.R. No. 5447, March 1, 1910, 15 Phil. 167FACTS:ISSUE:HELD:RATIO:Defendant appellant entered into a contract with one Buenaventura Kabalsa for the repair of a house in the city of Manila. The contractor undertook to furnish the necessary materials, including a considerable amount of lumber, to be used in the repairs. The contractor being a man of no commercial standing in the community was unable to secure credit therefor, and was compelled to pay cash for all purchases. Having no money and no credit he was unable to continue the purchase of the necessary lumber, plaintiffs, with whom he was dealing, absolutely refusing to allow any lumber to leave their yard without payment in advance. The work on the house being delayed for the lack of the necessary materials, defendant accompanied the contractor to plaintiffs' lumber yard, and after satisfying plaintiffs as to his own financial responsibility, and that as a property owner and an attorney in active practice in the city of Manila, he was good for the amount of lumber needed in the repair of his house, he entered into an agreement with them whereby they were to deliver the necessary lumber to the contractor for use in the repair of his house.In pursuance of and in accordance with the directions of the defendant, plaintiffs delivered to Kabalsa a considerable amount of lumber which was used in the repairs upon defendant's house, and judgment in this action was rendered in favor of the plaintiffs for the proven amount of the unpaid balance of the purchase price of this lumber.Appellant makes various assignments of error, and contends: First, that the trial court erred in declining to allow an amendment to defendant's answer for the purpose of formally denying plaintiff's allegations as to defendant's guaranty of payment of the purchase price of the lumber; second, that the trial court erred in failing to set out in its decision the finding of facts upon which the judgment rests; third, that the evidence of record does not sustain a finding that the defendant did in fact assume responsibility for the payment of the purchase price of the lumber delivered to his contractor; and forth, that even if it be held that he did so, then since the alleged promise, as set up by plaintiffs in their evidence, merely guaranteed payment for the lumber and was not in writing, proof thereof was not admissible in evidence, and defendant was not bound thereby, under the provisions of section 335 of the Code of Civil Procedure.The alleged errors of procedures may be dismissed without much discussion. We think a reading of the judgment itself clearly discloses that the trial judge did in fact make the necessary findings of fact, and that he expressly held that, admitting all the evidence offered by both parties, the evidence of record establishes the existence of defendant's promise to pay for the lumber, and discloses the existence of a balance due on account of the lumber delivered to defendant's contractor. Without considering whether, under the pleadings, the defendant's evidence should have been stricken out of the record and his motion to amend his answer denied, as appears to have been the opinion of the trial court, we agree with the trial court that even if the evidence be admitted and the complaint amended, the weight of all the evidence, including the evidence, thus admitted, supports the plaintiffs' allegation touching defendants' promise to pay for the lumber in question, and establishes his contention that this lumber was in fact delivered to the defendant's contractor, and by him used in the construction of the house under the direction of the defendant, and that the amount for which the judgment was given in the court below was the amount of the unpaid purchase price of the lumber thus delivered. If, therefore, it was error of the trial court to rule that defendant's evidence should be stricken from the record and that defendant's answer should not be amended in accordance with a motion for that purpose made three weeks after judgment was rendered, it was at most error without prejudice.The only question that remains is defendant's contention that his alleged guaranty of payment of the purchase price of the lumber furnished at his request to his contractor Kabalsa not being in writing, it is unenforceable in this action.Section 335 of Act No. 190 is as follows:In the following cases an agreement hereafter made shall be unenforceable by action unless the same, or some note or memorandum thereof, by in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement can not be received without the writing, or secondary evidence of its contents:x x x x x x x x x2 A special promise to answer for the debt, default, or miscarriage of another;x x x x x x x x xAn immense amount of litigation has arisen in England and the United States over the construction of similar provisions which are found in most, if not all, of the so-called statutes of fraud which have been enacted in those jurisdictions, and many courts and text writer have acknowledged their inability to find anything like uniform rules of construction in the conflicting decisions which have been rendered, applying the statute to the infinite variety of facts which have presented themselves; so that it has been said by some that the law upon the subject is in a state of hopeless confusion.The true test as to whether a promise is within the statute had been said to lie in the answer to the question whether the promise is an original or a collateral one. If the promise is an original or an independent one; that is, if the promisor becomes thereby primarily liable for the payment of the debt, the promise is not within the statute. But, on the other hand, if the promise is collateral to the agreement of another and the promisor becomes thereby merely a surety, the promise must be in writing. (Gullvs.Lindsay, 4 Exch. 45; and other cases cited under note 2, p. 906, Encyclopedia of Law, vol. 29.)Just what is the character of a promise as original or collateral is a question of law and fact which must in each case be determined from the evidence as to the language used in making the promise, and the circumstances under which the promise was made; and, since as a general rule the parties making a promise of this nature rarely understand the legal and technical difference between an original and a collateral promise, the precise form of words used, even when established by undisputed testimony is not always conclusive. So that it is said that "While, as a matter of law, a promise, absolute in form, to pay or to be 'responsible' or to be the 'paymaster,' is an original promise, and while, on the other hand, if the promisor says, 'I will see you paid,' or 'I will pay if he does not,' or uses equivalent words, the promise standing alone is collateral, yet under all the circumstances of the case, an absolute promise to pay, or a promise to be 'responsible,' may be found to be collateral, or promises deemedprima faciecollateral may be adjudged original." (Encyclopedia of Law, 2d ed., vol. 29, p. 907, and many cases there cited.)If goods are sold upon the sole credit and responsibility of the party who make the promise, then, even though they be delivered to a third person, there is no liability of the third person to which that of the party promising can be collateral, and consequently such a promise to pay does not require a memorandum in writing; and on the same principle it has been held that when one advances money at the request of another (on his promise to repay it) to pay the debt of a third party, as the payment creates no debt against such third party, not being made at all upon his credit, the liability of the party on whose request and promise it was made is original and not collateral, and not with the Statute of Frauds. (Pearsevs.Blagrave, 3 Com. Law, 338; Prop'rs. of Upper Locksvs.Abbott, 14 N. H., 157.) But it has been said that if the person for whose benefit the promise is made was himself liable at all, the promise of the defendant must be in writing. (Matsonvs.Wharam, 2 T. R., 80.) And the text writers point out that if this rule be understood as confined to cases where a third party and the defendant are liable in the same way, and to do the same thing, one as principal and the other as surety, it may be accepted as the uniform doctrine of all the cases both in England and in the United States. (Browse on the Statute of Frauds, par. 197, and cases there cited.) In such cases, the defendant is said to come in aid to procure the credit to be given to the principal debtor, and the question, therefore, ultimate is "upon whose credit the goods were sold or the money advanced, or whatever other thing done which the defendant by his promise procured to be done;" and where the defendant stands in the relation to the third party of surety to principal "if any credit at all be given to the third party, the defendant's promise is required to be in writing as collateral." (Browne on the Statute of Frauds, p. 227, and notes 2 and 4.) But it must be clearly recognized that these principles are applicable only where the parties are liable in the same way to do the same thing, one as principal and the other as surety, for if the credit is given to both jointly, since neither can be said to be surety for the other to the creditor, their engagement need not be in writing.As has been said before, it is frequently a matter of difficulty to determine to whom the credit has actually been given, whether to the defendant alone, in which case the debt is his own and his promise is good without writing; or in part to the third party, in which case the defendant's promise being collateral to and in aid of the third party's liability, requires a writing to support it, or to both jointly, in which case as has been said their engagement need not be in writing. This must be determined from the language and expressions used by the parties promising, and from an examination of the circumstance showing the understanding of the parties. The unexplained fact that charges were made against a third party on the plaintiffs' books, or that the bill was presented to the original debtor in the first instance,unqualified by special circumstances, tends to prove that the credit was given in whole or in part to him, and that the defendant's promise is a collateral one. (Larsonvs.Wyman, 14 Wend. (N.Y.), 246; Pennellvs.Pentz, 4 E. D. Smith (N. Y.), 639.) But it is evidently quite impossible to specify any one fact or set of facts on which the question as to whom the plaintiff gave credit is to be determined. In the language of Buchanan, C.J., in Eldervs.Warfield (7 Harris & (Md.), 397), "the extent of the understaking, the express in used, the situation of the parties, and all the circumstances of the case should be taken into consideration."Application of these principles has been made in many cases where owners of buildings going up under contract enter into agreements upon the faith of which subcontractors or other have continued to supply labor or material after the principle contractor has become either actually or probably unable to pay. In these cases, the question is whether the services for which the action is brought against the owner of the building were performed solely upon the credit of his promise, to be himself responsible and to pay for the materials and labor furnished, or whether the subcontractors and laborers continued to furnish labor and materials to the principal contractor relying upon his obligation guaranteed by the promise of the owner. (Gillvs.Herrick, 11 Mass., 501; Walkervs.Hill, 119 Mass., 249; Cliffordvs.Luhring, 69 Ill., 401; Rawsonvs.Springsteen, 2 Thomp. & C. (N. Y.), 416; Belknapvs.Bender, 6 Thomp. & C. (N.Y.), 611; Jefferson Countyvs.Slagle, 66 Pa. St., 202. See Eshlemanvs.Harnish, 76 Pa. St., 97; Harveyvs.Mercur, 78 Pa. St., 257; Weylandvs.Critchfield, 3 Grant (Pa.), 113; Lakemanvs.Mountstephen, L.R. 7 H. L., 17.)Taking into consideration all the circumstances of the case at bar, we are satisfied that the credit for the lumber delivered by the plaintiffs to defendant's contractor was extended solely and exclusively to the defendant under the verbal agreement had with him, and therefore, that the provisions of the statue did not require that it should be made in writing. Defendant admitted on the stand that his contractor had no commercial credit or standing in the community, and it appears that plaintiffs, after investigation, absolutely refused to extent him any credit whatever upon any conditions and that the defendant was well aware of that fact. From the testimony of the contractor himself, it seems clear that when the agreement for the delivery of lumber was made, the credit was extended not to the contractor but to the defendant. It appears that both plaintiffs and defendant exercised especial precautions to see that all the lumber was delivered on defendant's lot, and that before each bill of lumber was delivered, defendant carefully examined the invoice, which the agreement was submitted to him, and that no lumber was delivered without his approval. The precise language in which the verbal agreement was made does not appear from the evidence, and while it is true that one of the plaintiffs in his disposition, made in the United States, refers to the agreement as one whereby defendant "guaranteed" payment for the lumber, we are satisfied from all the evidence that the word was not used by this witness in its technical sense, and that he did not mean thereby to say that defendant guaranteed paymentby the contractor, but rather that after satisfying plaintiffs as to his own financial responsibility, he obligated himself to pay for the lumber delivered to his contractor for use in his house. The only evidence in the whole record which tends to put our conclusion in this regard in doubt, is the testimony of plaintiffs' acting manager during plaintiffs' absence in the United States who stated that he sent a statement of account and a bill for the lumber to the contractor; but this fact, which under ordinary circumstances would be strong evidence that the credit was originally extended to the contractor and merely guaranteed by the defendant, was satisfactorily and sufficiently explained by proof that plaintiffs were compelled to leave for the United States quite unexpectedly, with no opportunity to go over the accounts with their acting manager, who was left in charge, so that the latter having no knowledge whatever as to plaintiffs' agreement with defendant, and learning that the lumber had been delivered to the contractor, supposed that it had been sold to him, and only discovered his mistake on later investigation and correspondence with his principals, after the contractor had notified him as to the true nature of the transaction.The judgment appealed from should be affirmed with the costs of this instance against the appellant. So ordered.Arellano, C.J., Torres, Mapa, Johnson and Moreland, JJ.,concur.

GONZALO VS. TARNATE, JR., G.R. NO. 160600, JANUARY 15, 2014FACTS:ISSUE:HELD:RATIO:What is "In Pare Delicto"?"In pare delicto" is a doctrine which stipulates that the guilty parties to an illegal contract are not entitled to any relief. It literally means that both parties are in equal fault and it follows that both of them can't recover from each of them any damages or any other relief from law.

Photo credits to www.ramirezlaw.blogspot.com

In a recent decided case from the Supreme Court of the Philippines, particularly the case of Gonzalo vs. Tarnate, Jr. (G.R. No. 160600), the doctrine of "in pare delicto" was put to a test. This case sprung out from a prohibited subcontracting of a contract with a DPWH pursuant to Sec. 6 of PD 1594. However, Gonzalo as a contractor of DPWH subcontracted Tarnate, Jr. As a consequence, Gonzalo and Tarnate, Jr. entered into a deed of assignment contract in favor of the latter. However, later on, Tarnate learned that Gonzalo unilaterally rescinded the deed of assignment. Hence, Tarnate, Jr. filed a case in the Regional Trial Court.

The initial finding of RTC was in favor of Tarnate, Jr. Gonzalo was ordered to comply with his obligations under the deed of assignment but without the award of exemplary damages in favor of Tarnate, Jr. for failure to show that the defendant Gonzalo acted in wanton, fraudulent, reckless, oppressive or malevolent manner.

Gonzalo appealed the case to the Court of Appeals (CA). The CA did not apply the doctrine of "in pare delicto" to the case explaining that the said doctrine is only applicable if the fault of one party was more or less equivalent to the fault of the other party. The CA ruled in favor of Tarnate, Jr. again this time. It found that Gonzalo is more guilty than Tarnate, Jr to the extent of violating the deed of assignment. It declared Gonzalo to pay Tarnate, Jr. the agreed 10% retention fee (based from the deed of assignment) for the said amount had unjustly enriched Gonzalo. It was noted that Gonzalo made use of the equipment of Tarnate, Jr. for the DPWH project.

Gonzalo filed a petition for review of the decision of the CA before the Supreme Court. The SC denied Gonzalo's petition. Below are the very significant provisions (most are based from the Civil Code of the Philippines) and findings of the Supreme Court on this case:

1. Illegal subcontract - The SC ruled that the subcontract was illegal because it did not comply with the requirements of PD 1594. It is clear from the provisions of PD 1594 that every contractor is prohibited from subcontracting with or assigning to another person any contract or project that he has with DPWH unless the DPWH Secretary has approved the subcontracting assignment.2. Illegal deed of assignment - The deed of assignment is also illegal because it sprung from an illegal subcontract. Since there was no legal subcontract that existed, there will be no legal deed of assignment to speak of. 3. Article 1409 of the Civil Code - This provides that "a contract whose cause, object or purpose is contrary to law is void or not existing." A void contract can not produce a valid one.4. Article 1422 of the Civil Code - This also provides that "a contract which is the direct result of a previous illegal contract is also void and inexistent."5. Article 1412 of the Civil Code - This provides that the guilty parties to an illegal contract cannot recover from one another and are not entitled to an affirmative relief because they are "in pare delicto" or in equal fault.6. Article 22 of the Civil Code - This provision states that "every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him."The final decision of SC is in favor of Tarnate, Jr. The previous decision of the RTC and CA to properly adjudged Gonzalo to be liable for Tarnate, Jr. in the amount of 10% retention fee are confirmed as correct. Gonzalo's defense of his payment of the 10% retention fee was conditioned that Tarnate has to pay his personal debt to Congressman Dominguez was set aside. Burdening Tarnate to pay his personal debt would constitute an another unjust enrichment case. However, there was no damages in favor of Tarnate, Jr. since the contract was void. A void and nonexistent contract produces no juridical tie between the parties involved.

The doctrine of "in pare delicto" as in this case, can not prevent a recovery if doing so violates the public policy against unjust enrichment. Gonzalo's unjust enrichment overcome the doctrine of "in pare delicto". In addition, the illegality of their contract should not be allowed to deprive Tarnate, Jr. from being fully compensated what is recoverable including the imposition of a legal interest of 6% per annum. But, this is without the award for moral damages, attorney's fees and litigation expenses. Gonzalo as the petitioner has been ordered to pay for costs of the suit.Full Case:Republic of the PhilippinesSUPREME COURTManilaFIRST DIVISIONG.R. No. 160600 January 15, 2014DOMINGO GONZALO,Petitioner,vs.JOHN TARNATE, JR.,Respondent.D E C I S I O NBERSAMIN,J.:The doctrine of in pari delicto which stipulates that the guilty parties to an illegal contract are not entitled to any relief, cannot prevent a recovery if doing so violates the public policy against unjust enrichment.AntecedentsAfter the Department of Public Works and Highways (DPWH) had awarded on July 22, 1997 the contract for the improvement of the Sadsadan-Maba-ay Section of the Mountain Province-Benguet Road in the total amount of 7 014 963 33 to his company, Gonzalo Construction,1petitioner Domingo Gonzalo (Gonzalo) subcontracted to respondent John Tarnate, Jr. (Tarnate) on October 15, 1997, the supply of materials and labor for the project under the latter s business known as JNT Aggregates. Their agreement stipulated, among others, that Tarnate would pay to Gonzalo eight percent and four percent of the contract price, respectively, upon Tarnate s first and second billing in the project.2In furtherance of their agreement, Gonzalo executed on April 6, 1999 a deed of assignment whereby he, as the contractor, was assigning to Tarnate an amount equivalent to 10% of the total collection from the DPWH for the project. This 10% retention fee (equivalent toP233,526.13) was the rent for Tarnates equipment that had been utilized in the project. In the deed of assignment, Gonzalo further authorized Tarnate to use the official receipt of Gonzalo Construction in the processing of the documents relative to the collection of the 10% retention fee and in encashing the check to be issued by the DPWH for that purpose.3The deed of assignment was submitted to the DPWH on April 15, 1999. During the processing of the documents for the retention fee, however, Tarnate learned that Gonzalo had unilaterally rescinded the deed of assignment by means of an affidavit of cancellation of deed of assignment dated April 19, 1999 filed in the DPWH on April 22, 1999;4and that the disbursement voucher for the 10% retention fee had then been issued in the name of Gonzalo, and the retention fee released to him.5Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail. Thus, he brought this suit against Gonzalo on September 13, 1999 in the Regional Trial Court (RTC) in Mountain Province to recover the retention fee ofP233,526.13, moral and exemplary damages for breach of contract, and attorneys fees.6In his answer, Gonzalo admitted the deed of assignment and the authority given therein to Tarnate, but averred that the project had not been fully implemented because of its cancellation by the DPWH, and that he had then revoked the deed of assignment. He insisted that the assignment could not stand independently due to its being a mere product of the subcontract that had been based on his contract with the DPWH; and that Tarnate, having been fully aware of the illegality and ineffectuality of the deed of assignment from the time of its execution, could not go to court with unclean hands to invoke any right based on the invalid deed of assignment or on the product of such deed of assignment.7Ruling of the RTCOn January 26, 2001, the RTC, opining that the deed of assignment was a valid and binding contract, and that Gonzalo must comply with his obligations under the deed of assignment, rendered judgment in favor of Tarnate as follows:WHEREFORE, premises considered and as prayed for by the plaintiff, John Tarnate, Jr. in his Complaint for Sum of Money, Breach of Contract With Damages is hereby RENDERED in his favor and against the above-named defendant Domingo Gonzalo, the Court now hereby orders as follows:1. Defendant Domingo Gonzalo to pay the Plaintiff, John Tarnate, Jr., the amount of TWO HUNDRED THIRTY THREE THOUSAND FIVE HUNDRED TWENTY SIX and 13/100 PESOS (P233,526.13) representing the rental of equipment;2. Defendant to pay Plaintiff the sum of THIRTY THOUSAND (P30,000.00) PESOS by way of reasonable Attorneys Fees for having forced/compelled the plaintiff to litigate and engage the services of a lawyer in order to protect his interest and to enforce his right. The claim of the plaintiff for attorneys fees in the amount of FIFTY THOUSAND PESOS (P50,000.00) plus THREE THOUSAND PESOS (P3,000.00) clearly appears to be unconscionable and therefore reduced to Thirty Thousand Pesos (P30,000.00) as aforestated making the same to be reasonable;3. Defendant to pay Plaintiff the sum of FIFTEEN THOUSAND PESOS (P15,000.00) by way of litigation expenses;4. Defendant to pay Plaintiff the sum of TWENTY THOUSAND PESOS (P20,000.00) for moral damages and for the breach of contract; and5. To pay the cost of this suit.Award of exemplary damages in the instant case is not warranted for there is no showing that the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner analogous to the case of Xentrex Automotive, Inc. vs. Court of Appeals, 291 SCRA 66.8Gonzalo appealed to the Court of Appeals (CA).Decision of the CAOn February 18, 2003, the CA affirmed the RTC.9Although holding that the subcontract was an illegal agreement due to its object being specifically prohibited by Section 6 of Presidential Decree No. 1594; that Gonzalo and Tarnate were guilty of entering into the illegal contract in violation of Section 6 of Presidential Decree No. 1594; and that the deed of assignment, being a product of and dependent on the subcontract, was also illegal and unenforceable, the CA did not apply the doctrine of in pari delicto, explaining that the doctrine applied only if the fault of one party was more or less equivalent to the fault of the other party. It found Gonzalo to be more guilty than Tarnate, whose guilt had been limited to the execution of the two illegal contracts while Gonzalo had gone to the extent of violating the deed of assignment. It declared that the crediting of the 10% retention fee equivalent toP233,256.13 to his account had unjustly enriched Gonzalo; and ruled, accordingly, that Gonzalo should reimburse Tarnate in that amount because the latters equipment had been utilized in the project.Upon denial of his motion for reconsideration,10Gonzalo has now come to the Court to seek the review and reversal of the decision of the CA.IssuesGonzalo contends that the CA erred in affirming the RTC because: (1) both parties were in pari delicto; (2) the deed of assignment was void; and (3) there was no compliance with the arbitration clause in the subcontract.Gonzalo submits in support of his contentions that the subcontract and the deed of assignment, being specifically prohibited by law, had no force and effect; that upon finding both him and Tarnate guilty of violating the law for executing the subcontract, the RTC and the CA should have applied the rule of in pari delicto, to the effect that the law should not aid either party to enforce the illegal contract but should leave them where it found them; and that it was erroneous to accord to the parties relief from their predicament.11RulingWe deny the petition for review, but we delete the grant of moral damages, attorneys fees and litigation expenses.There is no question that every contractor is prohibited from subcontracting with or assigning to another person any contract or project that he has with the DPWH unless the DPWH Secretary has approved the subcontracting or assignment. This is pursuant to Section 6 of Presidential Decree No. 1594, which provides:Section 6. Assignment and Subcontract. The contractor shall not assign, transfer, pledge, subcontract or make any other disposition of the contract or any part or interest therein except with the approval of the Minister of Public Works, Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be. Approval of the subcontract shall not relieve the main contractor from any liability or obligation under his contract with the Government nor shall it create any contractual relation between the subcontractor and the Government.Gonzalo, who was the sole contractor of the project in question, subcontracted the implementation of the project to Tarnate in violation of the statutory prohibition. Their subcontract was illegal, therefore, because it did not bear the approval of the DPWH Secretary. Necessarily, the deed of assignment was also illegal, because it sprung from the subcontract. As aptly observed by the CA:x x x. The intention of the parties in executing the Deed of Assignment was merely to cover up the illegality of the sub-contract agreement. They knew for a fact that the DPWH will not allow plaintiff-appellee to claim in his own name under the Sub-Contract Agreement.Obviously, without the Sub-Contract Agreement there will be no Deed of Assignment to speak of. The illegality of the Sub-Contract Agreement necessarily affects the Deed of Assignment because the rule is that an illegal agreement cannot give birth to a valid contract. To rule otherwise is to sanction the act of entering into transaction the object of which is expressly prohibited by law and thereafter execute an apparently valid contract to subterfuge the illegality. The legal proscription in such an instance will be easily rendered nugatory and meaningless to the prejudice of the general public.12Under Article 1409 (1) of the Civil Code, a contract whose cause, object or purpose is contrary to law is a void or inexistent contract. As such, a void contract cannot produce a valid one.13To the same effect is Article 1422 of the Civil Code, which declares that "a contract, which is the direct result of a previous illegal contract, is also void and inexistent."We do not concur with the CAs finding that the guilt of Tarnate for violation of Section 6 of Presidential Decree No. 1594 was lesser than that of Gonzalo, for, as the CA itself observed, Tarnate had voluntarily entered into the agreements with Gonzalo.14Tarnate also admitted that he did not participate in the bidding for the project because he knew that he was not authorized to contract with the DPWH.15Given that Tarnate was a businessman who had represented himself in the subcontract as "being financially and organizationally sound and established, with the necessary personnel and equipment for the performance of the project,"16he justifiably presumed to be aware of the illegality of his agreements with Gonzalo. For these reasons, Tarnate was not less guilty than Gonzalo.According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract cannot recover from one another and are not entitled to an affirmative relief because they are in pari delicto or in equal fault. The doctrine of in pari delicto is a universal doctrine that holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other.17Nonetheless, the application of the doctrine of in pari delicto is not always rigid.1wphi1An accepted exception arises when its application contravenes well-established public policy.18In this jurisdiction, public policy has been defined as "that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good."19Unjust enrichment exists, according to Hulst v. PR Builders, Inc.,20"when a person unjustly retains a benefit at the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience." The prevention of unjust enrichment is a recognized public policy of the State, for Article 22 of the Civil Code explicitly provides that "[e]very person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him." It is well to note that Article 22 "is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as basic principles to be observed for the rightful relationship between human beings and for the stability of the social order; designed to indicate certain norms that spring from the fountain of good conscience; guides for human conduct that should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice."21There is no question that Tarnate provided the equipment, labor and materials for the project in compliance with his obligations under the subcontract and the deed of assignment; and that it was Gonzalo as the contractor who received the payment for his contract with the DPWH as well as the 10% retention fee that should have been paid to Tarnate pursuant to the deed of assignment.22Considering that Gonzalo refused despite demands to deliver to Tarnate the stipulated 10% retention fee that would have compensated the latter for the use of his equipment in the project, Gonzalo would be unjustly enriched at the expense of Tarnate if the latter was to be barred from recovering because of the rigid application of the doctrine of in pari delicto. The prevention of unjust enrichment called for the exception to apply in Tarnates favor. Consequently, the RTC and the CA properly adjudged Gonzalo liable to pay Tarnate the equivalent amount of the 10% retention fee (i.e.,P233,526.13).Gonzalo sought to justify his refusal to turn over theP233,526.13 to Tarnate by insisting that he (Gonzalo) had a debt ofP200,000.00 to Congressman Victor Dominguez; that his payment of the 10% retention fee to Tarnate was conditioned on Tarnate paying that debt to Congressman Dominguez; and that he refused to give the 10% retention fee to Tarnate because Tarnate did not pay to Congressman Dominguez.23His justification was unpersuasive, however, because, firstly, Gonzalo presented no proof of the debt to Congressman Dominguez; secondly, he did not competently establish the agreement on the condition that supposedly bound Tarnate to pay to Congressman Dominguez;24and, thirdly, burdening Tarnate with Gonzalos personal debt to Congressman Dominguez to be paid first by Tarnate would constitute another case of unjust enrichment.The Court regards the grant of moral damages, attorneys fees and litigation expenses to Tarnate to be inappropriate. We have ruled that no damages may be recovered under a void contract, which, being nonexistent, produces no juridical tie between the parties involved.25It is notable, too, that the RTC and the CA did not spell out the sufficient factual and legal justifications for such damages to be granted.Lastly, the letter and spirit of Article 22 of the Civil Code command Gonzalo to make a full reparation or compensation to Tarnate. The illegality of their contract should not be allowed to deprive Tarnate from being fully compensated through the imposition of legal interest. Towards that end, interest of 6% per annum reckoned from September 13, 1999, the time of the judicial demand by Tarnate, is imposed on the amount ofP233,526.13. Not to afford this relief will make a travesty of the justice to which Tarnate was entitled for having suffered too long from Gonzalos unjust enrichment.WHEREFORE, we AFFIRM the decision promulgated on February 18, 2003, but DELETE the awards of moral damages, attorneys fees and litigation expenses; IMPOSE legal interest of 6% per annum on the principal oLP233,526.13 reckoned from September 13, 1999; and DIRECT the petitioner to pay the costs of suit.SO ORDERED.

RANA VS. WONG, ET AL., G.R. NO. 192861, JUNE 30, 2014 FACTS:ISSUE:HELD:RATIO:

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISIONG.R. No. 192861 June 30, 2014LINDA RANA,Petitioner,vs.TERESITA LEE WONG, SPS. SHIRLEY LEE ONG and RUBEN ANG ONG, represented by their Attorney-in-fact WILSON UY, and SPS. ROSARIO and.WILSON UY,Respondents.x - - - - - - - - - - - - - - - - - - - - - - - xG.R. No. 192862SPS. ROSARIO and WILSON UY, WILSON UY as attorney-in-fact of TERESITA LEE WONG, and SPS. SHIRLEY LEE ONG and RUBEN ANG ONG,Petitioners,vs.SPS. REYNALDO. and LINDA RANA,Respondents.D E C I S I O NPERLAS-BERNABE,J.:Assailed in these consolidated petitions for review on certiorari1are the Decision2dated July 13, 2005 and the Resolution3dated June 18, 2010 of the Court of Appeals (CA) in CA-G.R. CV No. 78463 which affirmed the Decision4dated December 20, 2002 of the Regional Trial Court of Cebu City, 7th Judicial Region, Branch 22 (RTC) in Civil Case Nos. CEB-20893 and CEB-21296.The FactsTeresita Lee Wong (Wong) and Spouses Shirley and Ruben Ang Ong (Sps. Ong) are co-owners pro-indivisoof a residential land situated in Peace Valley Subdivision, Lahug, Cebu City, covered by Transfer Certificate of Title (TCT) No. 1391605(Wong-Ong property), abutting6a 10-meter7wide subdivision road (subject road).On the opposite side of the subject road, across the Wong-Ong property, are the adjacent lots of Spouses Wilson and Rosario Uy (Sps. Uy) and Spouses Reynaldo and Linda Rana (Sps. Rana), respectively covered by TCT Nos. 1240958(Uy property) and T-1155699(Rana property). The said lots follow a rolling terrain10with the Rana property standing about two (2) meters11higher than and overlooking the Uy property, while the Wong-Ong property is at the same level with the subject road.12Sometime in 1997, Sps. Rana elevated and cemented a portion of the subject road that runs between the Rana and Wong-Ong properties (subject portion) in order to level the said portion with their gate.13Sps. Rana likewise backfilled a portion (subject backfilling) of the perimeter fence separating the Rana and Uyproperties without erecting a retaining wall that would hold the weight of the added filling materials. The matter was referred to the Office of the Barangay Captain of Lahug14as well as the Office of the Building Official of Cebu City (OBO),15but to no avail.16The RTC ProceedingsOn September 19, 1997, Wong, Sps. Ong, and Sps. Uy (Wong, et al.) filed a Complaint17for Abatement of Nuisance with Damages against Sps. Rana before the RTC, docketed as Civil Case No. CEB-20893, seeking to: (a) declare the subject portion as a nuisance which affected the ingress and egress of Wong and Sps. Ong to their lot "in the usual and [normal] manner, such that they now have to practically jump from the elevated road to gain access to their lot and scale the same elevation in order to get out";18(b) declare the subject backfilling as a nuisance considering that it poses a clear and present danger to the life and limb of the Uy family arising from the premature weakening of Sps. Uys perimeter fence due to the seeping of rain water from the Rana property that could cause its sudden collapse;19(c) compel Sps. Rana to restore the subject portion to its original condition; (d) compel Sps. Rana to remove the backfilling materials along Sps. Uys perimeter fence and repair the damage to the fence; and (e) pay moral and exemplary damages, attorneys fees, litigation expenses, and costs of suit.20In their Answer dated October 23, 1997,21Sps. Rana countered that prior to the construction of their residence, there was no existing road and they merely developed the subject portion which abuts their gate in view of the rolling terrain. They claimed thatWong and Sps. Ong do not have any need for the subject portion because their property is facing an existing road, i.e., Justice Street. They likewise denied having undertaken any backfilling along the boundary of the Uy property considering the natural elevation of their own property, which renders backfilling unnecessary.22After the filing of Sps. Ranas Answer, Wong, et al., in turn, filed a Motion for Leave to be Allowed to Bring in Heavy Equipment23for the intermediate development of the Wong-Ong property with a view to the use of the subject road as access to their lot. Notwithstanding Sps. Ranas opposition, the RTC granted Wong,et al.s motion in an Order24dated November 27, 1997 (November 27, 1997 Order), the dispositive portion of which reads as follows: WHEREFORE, as prayed for, the motion is hereby GRANTED. Consequently, the plaintiffs are hereby allowed to use heavy equipments/machineries in order to develop the area and make use of the right of way which is located between the [Wong-Ong and Rana properties]. (Emphasis supplied)Despite the limited tenor of the November 27, 1997 Order, Wong, et al., on May 23 and 24, 1998, proceeded to level the subject portion, which, in the process, hampered Sps. Ranas ingress and egress to their residence, resulting too to the entrapment of their vehicle inside their garage.25Feeling aggrieved, Sps. Rana, on June 19, 1998, filed a Supplemental Answer,26praying for: (a) the restoration of the soil, boulders, grade, contour, and level of the subject portion; and (b) payment of moral damages, actual and consequential damages, and exemplary damages.Meanwhile, on December 8, 1997, Sps. Rana filed with another branch of the same trial court a Complaint27for Recovery of Property and Damages against Sps. Uy, docketed as Civil Case No. CEB-21296. They alleged that in October 1997, theycaused a resurvey of their property which purportedly showed that Sps. Uyencroached upon an11-square meter (sq. m.) portion along the common boundary of their properties. Their demands for rectification as well as barangay conciliation efforts were, however, ignored. Thus, they prayed that Sps. Uy be ordered to remove their fence along the common boundary and return the encroached portion, as well as to pay moral damages, attorneys fees, and litigation expenses. After the filing of Sps. Ranas complaint, Civil Case No. CEB-21296 was consolidated with Civil Case No. CEB-20893.28In response thereto, Sps. Uy filed an Answer with Counterclaim,29averring that prior to putting up their fence, they caused a relocation survey of their property and were, thus, confident that their fence did not encroach upon the Rana property. In view of Sps.Ranas complaint, they then caused another relocation survey which allegedly showed, however, that while they encroached around 3 sq. m. of the Rana property, Sps. Rana intruded into 7 sq. m. of their property. Hence, theyposited that they had "a bigger cause than that of [Sps. Rana] in [so] far as encroachment is concerned."30Accordingly, they prayed for the dismissal of Sps. Ranas complaint with counterclaim for damages, attorneys fees, and litigation expenses.In light of the foregoing, the RTC appointed three (3) commissioners to conduct a resurvey of the Uy and Rana properties for the purpose of determining if any encroachment occurred whatsoever.31The RTC RulingOn December 20, 2002, the RTC rendered a Decision32in the consolidated cases.In Civil Case No. CEB-20893, the RTC found that: (a) Sps. Rana, without prior consultation with the subdivision owner or their neighbors, developed to their sole advantage the subject portion consisting of one-half of the width of the 10-meter subject road by introducing filling materials, and rip rapping the side of the road; (b) the said act denied Wong and Sps. Ong the use of the subject portion and affected the market value of their property; (c) Sps. Uy have no intention of using the subject portion for ingress or egress considering that theybuilt a wall fronting the same; and (d) Wong, et al.s manner of enforcing the November 27, 1997 Order caused damage and injury to Sps. Rana and amounted to bad faith. In view of these findings, the RTC declared that the parties all acted in bad faith, and, therefore, no relief can be granted to them against each other.33Separately, however, the RTC found that the backfilling done by Sps. Rana on their property exerted pressure on the perimeter fence of the Uy property, thereby constituting a nuisance. As such, the former were directed to construct a retaining wall at their own expense.34Meanwhile, in Civil Case No. CEB-21296, the RTC, despite having adopted the findings of Atty. Reuel T. Pintor (Atty. Pintor) a court-appointed commissioner who determined that Sps. Uy encroached the Rana property by 2 sq. m35 dismissed both the complaint and counterclaim for damages because of the failure ofboth parties to substantiate their respective claims of bad faith against each other.36Dissatisfied with the RTCs verdict, the parties filed separate appeals with the CA.The CA RulingOn July 13, 2005, the CA rendered a Decision37affirming the RTC.With respect to Civil Case No. CEB-20893, the CA found that (a) Sps. Ranas act of elevating and cementing the subject portion curtailed the use and enjoyment by Wong and Sps. Ong of their properties; (b) the undue demolition of the subject portion by Wong, et al.hampered Sps. Ranas ingress and egress to their residence and deprived them of the use of their vehicle which was entrapped in their garage; and (c) both parties were equally at fault in causingdamage and injury to each other and, thus, are not entitled to the reliefs sought for.38On the other hand, the CA found that the backfilling done by Sps. Rana on their property requires necessary works to prevent it from jeopardizing someones life or limb.39As for Civil Case No. CEB-21296, the CA sustained the dismissal of the complaint as well as the parties respective claims for damages for lack of legal and factual bases.40The parties filed separate motions for reconsideration41which were, however, denied in the Resolution42dated June 18, 2010, hence, the instant petitions.The Issues Before the CourtIn G.R. No. 192861, petitioner Linda Rana (Linda Rana)43faults the RTC in (a) not finding Wong and Sps. Uyguilty of malice and bad faith both in instituting Civil Case No. CEB-20893 and in erroneously implementing the November 27, 1997 Order, and (b) failing or refusing to grant the reliefs initially prayed for,among others, the reconveyance of the encroached property.44On the other hand, in G.R. No. 192862, petitioners Wong, et al. fault the RTC in (a) applying the in pari delictodoctrine against them and failing to abate the nuisance45which still continues and actually exists as Sps. Rana caused the same to be reconstructed and restored to their prejudice,46and (b) not finding Sps. Rana guilty of bad faith in instituting Civil Case No. CEB-21296 and ordering them to pay damages to petitioners Wong, et al.47The Courts RulingThe petitions are partly meritorious.As both petitions traverse the issues intersectingly, the Court deems it apt to proceed with its disquisition according to the subject matters of the cases as originally filed before the RTC.A. Civil Case No. CEB-20893For Abatement of Nuisance and Damages.Under Article 694 of the Civil Code, a nuisance is defined as "any act, omission, establishment, business, condition of property, or anything else which: (1) Injures or endangers the healthor safety of others; or (2) Annoys or offends the senses; or(3) Shocks, defies or disregards decency or morality; or (4) Obstructs or interferes with the free passage of any public highway or street, or any body of water;or (5) Hinders or impairs the use of property." Based on case law, however, the term "nuisance" is deemed to be "so comprehensive that it has been applied to almost all ways which have interfered with the rights of the citizens, either in person, property, the enjoyment of his property, or his comfort."48Article 695 of the Civil Code classifies nuisances with respect to the object or objects that they affect. In this regard, a nuisance may either be: (a) a public nuisance (or one which "affects a community or neighborhood or any considerable number of persons, although the extent of the annoyance, danger or damage upon individuals may be unequal"); or (b) a private nuisance (or one "that is not included in the foregoing definition" [or, as case law puts it, one which "violates only private rights and produces damages to but one or a few persons"]).49Jurisprudence further classifies nuisances in relation to their legal susceptibility to summary abatement (that is, corrective action without prior judicial permission). In this regard, a nuisance may either be: (a) a nuisance per se(or one which "affects the immediate safety of persons and property and may be summarily abated under the undefined law of necessity");50or (b) a nuisance per accidens(or that which "depends upon certain conditions and circumstances, and its existence being a question of fact, it cannot be abated without due hearing thereon ina tribunal authorized to decide whether such a thing does in law constitute a nuisance.")51It is a standing jurisprudentialrule that unless a nuisance is a nuisance per se, it may not be summarily abated. In Lucena Grand Central Terminal, Inc. v. Jac Liner, Inc.,52the Court, citing other cases on the matter, emphasized the need for judicial intervention when the nuisance is not a nuisance per se, to wit:In Estate of Gregoria Francisco v. Court of Appeals, this Court held:Respondents can not seek cover under the general welfare clause authorizing the abatement of nuisances without judicial proceedings. That tenet applies to a nuisance per se, or one which affects the immediate safety of persons and property and may be summarily abated under the undefined law of necessity. The storage of copra in the quonset building is a legitimate business. By its nature, it can not be said to be injurious to rights of property, of health or of comfort of the community. If it be a nuisance per accidensit may be so proven in a hearing conducted for thatpurpose. It is not per sea nuisance warranting its summary abatement without judicial intervention.In Pampanga Bus Co., Inc. v. Municipality of Tarlacwhere the appellant-municipality similarly argued that the terminal involved therein is a nuisance that may be abated by the Municipal Council viaan ordinance, this Court held: "Suffice it to say that in the abatement of nuisances the provisions of the Civil Code (Articles 694-707) must be observed and followed. This appellant failed to do."53(Emphases supplied; citations omitted)Aside from the remedy of summary abatement which should be taken under the parameters stated in Articles 70454(for public nuisances) and 70655(for private nuisances) of the Civil Code, a private person whose property right was invaded or unreasonably interfered with by the act, omission, establishment, business or condition of the property of another may file a civil action to recover personal damages.56Abatement may be judicially sought through a civil action therefor57if the pertinent requirements under the Civil Code for summary abatement, or the requisite that the nuisance is a nuisance per se, do not concur. To note, the remedies of abatement and damages are cumulative; hence, both may be demanded.58In the present cases, Wong, et al. availed of the remedy of judicial abatement and damages against Sps.Rana, claiming that both the elevated and cemented subject portionand the subject backfillingare "nuisances" caused/created by the latter which curtailed their use and enjoyment of their properties.With respect to the elevated and cemented subject portion, the Court finds that the same is not a nuisance per se. By its nature, it is not injurious to the health or comfort of the community. It was built primarily to facilitate the ingress and egress of Sps. Rana from their house which was admittedly located on a higher elevation than the subject road and the adjoining Uy and Wong-Ong properties.Since the subject portion is not a nuisance per se(but actually a nuisance per accidensas will be later discussed) it cannot be summarily abated. As such, Wong, et al.s demolition of Sps. Ranas subject portion, which was not sanctioned under the RTCs November 27, 1997 Order,remains unwarranted. Resultantly, damages ought to be awarded in favor of Sps. Rana particularly that of (a) nominal damages59 for the vindication and recognition of Sps. Ranas right to be heard before the court prior to Wong, et al.sabatement of the subject portion (erroneously perceived as a nuisance per se) and (b) temperate damages60 for the pecuniary loss owing to the demolition of the subject portion, which had been established albeit uncertain as to the actual amount of loss.Sps. Ranas entitlement to the above-mentioned damages, however, only stands in theory.1wphi1This is because the actual award thereof is precluded by the damage they themselves have caused Wong, et al. in view of their construction of the subject portion. As the records establish, Sps. Rana, without prior consultation with Wong, et al. and to their sole advantage, elevated and cemented almost half61of the 10-meter wide subject road. As homeowners of Peace Valley Subdivision, Wong, et al. maintain the rights to the unobstructed use of and free passage over the subject road. By constructing the subject portion, Sps. Rana introduced a nuisance per accidensthat particularly transgressed the aforesaid rights. Thus, for the vindication and recognition of Wong, et al.srights, Sps. Rana should be similarly held liable for nominal damages. Under Article 2216 of the Civil Code,62courts have the discretion to determine awards of nominal and temperate damages without actual proof of pecuniary loss, as in this case. Assessing the respective infractions of the parties herein, the Court finds it prudent to sustain the CAs verdict offsetting the damage caused by said parties against each other. The Court can, however, only concur with the CA in result since the latter inaccurately applied,63as basis for its ruling, the in pari delictoprinciple enunciated in the case of Yu Bun Guan v. Ong64(Yu Guan).In said case, the Court discussed the in pari delicto principle with respect to the subject matter ofinexistent and void contracts, viz.:Inapplicability of the in Pari Delicto PrincipleThe principle of in pari delictoprovides that when two parties are equally at fault, the law leaves them as they are and denies recovery by either one of them. However, this principle does not apply with respect to inexistent and void contracts. Said this Court in Modina v. Court of Appeals:"The principle of in pari delicto non oritur actio denies all recovery to the guilty parties inter se. It applies to cases where the nullity arises from the illegality of the consideration orthe purpose of the contract. When two persons are equally at fault, the law does not relieve them. The exception to this general rule is when the principle is invoked with respect to inexistent contracts."65(emphasis supplied; citations omitted)Clearly, no void or inexistent contract is hereinat issue, hence, the Courts disagreement with the CAs invocation of Yu Guanin this respect.As for the subject backfillingtouching the perimeter fence of the Uy property, records show that the said fence was not designed to act as a retaining wall66but merely to withhold windload and its own load.67Both the RTC and the CA found the subject backfilling to have added pressure on the fence,68consequently endangering the safety of the occupants of the Uy property, especially considering the higher elevation of the Rana property. With these findings, the Court thus agrees with the courts a quothat there is a need for Linda Rana to construct a retaining wall69which would bear the weight and pressure of the filling materials introduced on their property. The Court, however, observed that neither the RTC nor the CA specified in their respective decisions the backfilled areas which would require the retaining wall. Due to the technicality of the matter, and considering that the due authenticity and genuineness of the findings/recommendation70of the OBO and the accompanying sketch71thereto were not specifically denied by Sps. Rana,72the required retaining wall shall beconstructed in accordance with the said sketch which showed the area backfilled.B. Civil Case No. CEB-21296For Recovery of Property.Now, with respect to Civil Case No. CEB-21296, the Court finds that the CA erred in affirming the RTCs dismissal thereof considering that it was determined that Sps. Uy had actually encroached upon the Rana property to the extent of 2 sq. m.Settled is the rule that in order that an action for the recovery of property may prosper, the party prosecuting the same need only prove the identity of the thing and his ownership thereof.73In the present cases, the Report74of the court-appointed commissioner, Atty. Pintor, who conducted a relocation survey75of the Rana and Uy properties identified and delineated the boundaries of the two properties and showed that Sps. Uys perimeter fence intruded on 2 sq. m.of the Rana property.76Both the RTC and the CA relied upon the said report; thus, absent any competent showing that the said finding was erroneous, the Court sees no reason to deviate from the conclusions reached by the courts a quo. Having sufficiently proven their claim, Sps. Rana are, therefore entitled to the return of the 2 sq.m. encroached portion. Corollary thereto, compliance by Linda Rana with the directive in Civil Case No. CEB-20893to build a retaining wall on their property shall be held in abeyance pending return of the encroached portion.C. Claims Common to Both Civil Case No. CEB-20893 and Civil Case No. CEB-21296: Malicious Prosecution of Both Cases, Moral and Exemplary Damages, Attorneys Fees, and LitigationExpenses.As a final matter, the Court resolvesthe claims common to both Civil Case No. CEB-20893 and Civil Case No. CEB-21296, particularly those on malicious prosecution, as well asmoral and exemplary damages, attorneys fees, and litigation expenses.As the Court sees it, the filing bythe parties of their respective complaints against each other was notclearly and convincingly shown to have been precipitated by any maliceor bad faith, sufficient enough to warrant the payment of damages in favor of either party. As correctly pointed out by the CA, malicious prosecution, both in criminal and civil cases, requires the presence oftwo (2) elements, namely: (a) malice; and (b) absence of probable cause. Moreover, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person; and that it was initiated deliberately knowing that the charge was false and baseless.77Hence, the mere filing of a suitwhich subsequently turns out to be unsuccessful does not render a person liable for malicious prosecution, for the law could not have meant toimpose a penalty on the right to litigate.78As the aforementioned elements were not duly proven, the claims for malicious prosecution are hereby denied.With respect to the claims for moral damages, although the Court found the parties to have sustained nominal damages as a result of the other parties acts, an award of moral damages would nonetheless be improper in this case. Article 2217 of the Civil Code states that "[m]oral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act for omission." Corollary thereto, Article 2219 of the same code (Article 2219) states that "[m]oral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; (3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage; (5) Illegal or arbitrary detention or arrest; (6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in Article 309; [and] (10) Actsand actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35."Here, it was not proven thatthe damage caused by (a) Sps. Rana against Wong, et al., arising from the elevation and cementing of the subject portion and the subject backfilling, and (b) Sps. Uy against Sps. Rana, by virtue of their 2 sq. m. encroachment, could be characterized as a form of or had resulted in physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or any other similar injury. Neitherwas it convincingly shown that the present controversies fall within the class of cases enumerated under Article 2219. Therefore, no moral damages should be awarded.Similarly, the Court deems that an award of exemplary damages would be inappropriate since these damages are imposed only "by way of example or correction for the publicgood, in addition to the moral, temperate, liquidated or compensatory damages."79Bluntly placed, the Court does not view the present matters of such caliber. Hence, there is no reason to grant the parties claims for the same.Lastly, considering that neither of the parties was able to successfully prove (a) their claims for malicious prosecution,80(b) their entitlement to moral and exemplary damages,81and (c) the attendance of any of the circumstances under Article 220882of the Civil Code, their respective claims for attorneys fees and litigation expensesagainst each other are also denied. WHEREFORE, the Decision dated July 13, 2005 and the Resolution dated June 18, 2010 in CA-G.R. CV No. 78463 are SET ASIDE and a new one is entered as follows:In Civil Case No. CEB-20893:(a) The awards of damages in favor of each party are OFFSETagainst each other as herein discussed;(b) Linda Rana is hereby ORDEREDto build, at her own expense, a retaining wall on the property covered by TCT No. 124095 in accordance with the sketch of the Office of the Building Official of Cebu City attached to the records of the case, subject to the condition as shall be hereunder set; and(c) All other claims and counterclaims are DISMISSED for lack of legal and factual bases.In Civil Case No. CEB-21296:(a) Spouses Rosario and Wilson Uy are DIRECTED to return to Linda Rana the 2-square meter encroached portion as reflected in the relocation survey conducted by court-appointed commissioner Atty. Reuel T. Pintor, after which Linda Rana shall be OBLIGED to build the retaining wall as directed by the Court; and(b) All other claims and counterclaims are DISMISSED for lack of merit.SO ORDERED.ESTELA M. PERLAS-BERNABEAssociate JusticeWE CONCUR:ARTURO D. BRION*Associate JusticeActing ChairpersonDIOSDADO M. PERALTA**Associate JusticeMARIANO C. DEL CASTILLOAssociate Justice

JOSE CATRAL MENDOZA***Associate JusticeA T T E S T A T I O NI attest that the conclusions in the above Decision had been reached in consultation before the cases were assigned to the writer of the opinion of the Court's Division.ARTURO D. BRIONAssociate JusticeActing Chairperson, Second DivisionC E R T I F I C A T I O NPursuant to Section 13, Article VIII of the Constitution, and the Division Acting Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the cases were assigned to the writer of the opinion of the Court's Division.MARIA LOURDES P. A. SERENOChief Justice

Footnotes*Designated Acting Chairperson per Special Order No. 1699 dated June 13, 2014.**Designated Acting Member per Special Order No. 1712 dated June 23, 2014 .***Designated Acting Member per Special Order No. 1696 dated June 13, 2014.1Rollo (G.R. No. 192861), pp. 5-26; rollo (G.R. No. 192862), pp. 3-32.2Rollo (G.R. No. 192861), pp. 72-90; rollo (G.R. No. 192862), pp. 38-55. Penned by Executive Justice Mercedes Gozo-Dadole, with Associate JusticesSesinando E. Villon and Ramon M. Bato, Jr., concurring.3Rollo (G.R. No. 192861), pp. 102-105; rollo (G.R. No. 192862), pp. 57-60. Penned by Associate Justice Agnes Reyes Carpio, with Associate Justices Edgardo L. delos Santos and Eduardo B. Peralta, Jr., concurring.4Rollo (G.R. No. 192861), pp. 63-70; rollo (G.R. No. 192862), pp. 130-137. Penned by Judge (now Court of Appeals Justice) Pampio A. Abarintos.5Rollo (G.R. No. 192861), p. 35 (including the dorsal portion); rollo (G.R. No. 192862), pp. 119-120.6Rollo (G.R. No. 192861), p. 63.7See RTC Order in Civil Case No. CEB-20893; rollo (G.R. No. 192861), p. 50.8Rollo (G.R. No. 192861), p. 37 (including the dorsal portion); rollo (G.R. No. 192862), pp. 123.9Rollo (G.R. No. 192861), p. 36; rollo (G.R. No. 192862), pp. 121-122.10Rollo (G.R. No. 192861), p. 64; rollo (G.R. No. 192862), p. 40.11Rollo (G.R. No. 192861), p. 50.12Rollo (G.R. No. 192861), p. 74; rollo(G.R. No. 192862), p. 40.13Rollo (G.R. No. 192861), pp. 64 and 74; rollo(G.R. No. 192862), p. 131.14Rollo (G.R. No. 192861), p. 38.15See Certification to file action [in court] issued by OBO; rollo (G.R. No. 192862), p. 124.16Rollo (G.R. No. 192861), pp. 74-75; rollo (G.R. No. 192862), pp. 40-41.17Rollo (G.R. No. 192861), pp. 28-34; rollo (G.R. No. 192862), pp. 112-118.18Rollo (G.R. No. 192861), p. 30; rollo (G.R. No. 192862), p. 114.19Rollo (G.R. No. 192861), p. 31; rollo (G.R. No. 192862), p. 115.20Rollo (G.R. No. 192861), pp. 32-33; rollo (G.R. No. 192862), pp. 116-117.21Rollo (G.R. No. 192861), pp. 39-43; rollo (G.R. No. 192862), pp. 125-129.22Rollo (G.R. No. 192861), pp. 38-40; rollo (G.R. No. 192862), pp. 125-126.23Rollo (G.R. No. 192861), pp. 46-47.24Id. at 51.25Rollo (G.R. No. 192861), p. 84; rollo (G.R. No. 192862), p. 49.26Rollo (G.R. No. 192861), pp. 52-55.27Id. at 57-60.28See RTC Order dated April 6, 1998 signed by Judge Ireneo Lee Gako, Jr.; id. at 61-62.29Records, pp. 154-156.30Id. at 155.31See RTC Order dated February 21, 2000 signed by Judge Pampio A. Abarintos; id. at 246.32Rollo (G.R. No. 192861), pp. 63-70; rollo (G.R. No. 192862), pp. 130-137.33Rollo (G.R. No. 192861), pp. 68-69; rollo (G.R. No. 192862), pp. 135-136.34Id.35Rollo (G.R. No. 192861), p. 67; rollo (G.R. No. 192862), p. 134.36Rollo (G.R. No. 192861), pp. 69-70; rollo (G.R. No. 192862), pp. 136-137.37Rollo (G.R. No. 192861), pp. 72-90; rollo (G.R. No. 192862), pp. 38-55.38Rollo (G.R. No. 192861), p. 84; rollo (G.R. No. 192862), p. 49.39Rollo (G.R. No. 192861), p. 85; rollo (G.R. No. 192862), p. 50.40Rollo (G.R. No. 192861), pp. 88-89; rollo (G.R. No. 192862), pp. 53-54.41See Separate Motions filed by Sps. Rana and Wong, Sps. Ong and Sps. Uy; rollo(G.R. No. 192861), pp. 92-100 and rollo(G.R. No. 192862), pp. 61-79, respectively.42Rollo (G.R. No. 192861), pp. 102-105; rollo (G.R. No. 192862), pp. 57-60.43During the pendency of the proceedings before the RTC, Linda Ranas husband, Reynaldo Rana, passed away, thus, the petition in G.R. No. 192861 was instituted by her solely. (See Notice of Death; records, pp. 247-249.)44Rollo (G.R. No. 192861), pp. 14-15.45Rollo (G.R. No. 192862), p. 17.46Id. at 22.47Id. at 27-28.48AC Enterprises, Inc. v. Frabelle Properties Corp., 537 Phil. 114, 143 (2006).49Id.50Perez v. Madrona, G.R. No. 184478, March 21, 2012, 668 SCRA 696, 706-707.51Salao v. Santos, 67 Phil. 547, 550-551 (1939).52492 Phil 314 (2005).53Id. at 327.54ART. 704. Any private person may abate a public nuisance which is specially injurious to himby removing or, if necessary, by destroying the thing which constitutes the same, without committing a breach of the peace, or doing unnecessary injury. But it is necessary:(1) That demand be first made upon the owner or possessor of the property to abate the nuisance;(2) That such demand has been rejected;(3) That the abatement be approved by the district health officer and executed with the assistance of the local police; and(4) That the value of the destruction does not exceed three thousand pesos. (Emphasis supplied)55ART. 706. Any person injured by a private nuisance may abateit by removing or, if necessary, by destroying the thing which constitutes the nuisance, without committing a breach of the peace, or doing unnecessary injury. However, it is indispensable that the procedure for extrajudicial abatement of a public nuisance by private person be followed. (Emphases supplied)56See AC Enterprises, Inc. v. Frabelle Properties Corp.,supra note 48, at 144-145.57Articles 699 and 705 of the Civil Code provide as follows:ART. 699. The remedies against a public nuisance are:(1) A prosecution under the Penal Code or any local ordinance: or(2) A civil action; or(3) Abatement, without judicial proceedings.ART. 705. The remedies against a private nuisance are:(1) A civil action; or(2) Abatement, without judicial proceedings. (Emphases supplied)58See Article 697 of the Civil Code. See also Paras,Edgardo L., Civil Code of the Philippines Annotated (16th Ed., 2008), Vol. 2, p. 747.59Civil Code, ART. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.60Civil Code ART. 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be provided with certainty.61Rollo(G.R. No. 192861), p. 50.62ART. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case.63See pages 13 and 14, as well as footnote 5 of CA Decision, rollo(G.R. No. 192861), pp. 84-85.64419 Phil. 845 (2001).65Id. at 856.66See Annex "A" of Presidential Decree No. (PD) 1096 (1977), entitled "ADOPTING A NATIONAL BUILDING CODE OF THE PHILIPPINES (NBCP) THEREBY REVISING REPUBLIC ACT NUMBERED SIXTY-FIVE HUNDRED FORTY-ONE (R.A. NO. 6541),"on "Words, Terms and Phrases" which defines "retaining wall" as "[a]ny wall used to resist the lateral displacement of any material; a subsurface wall built to resist the lateral pressure of internal loads.67Transcript of Stenographic Notes, June 1, 1999, pp. 7, 11.68Rollo, (G.R. No. 192861), pp. 69 and 80; rollo(G.R. No. 192862), p. 135.69Under Section 1202(c)(2) of PD 1096, amending R.A. No. 6541, otherwise known as the "National Building Code of the Philippines."SEC. 1202. Excavation, Foundation and Retaining Walls.x x x x(c) Footings, Foundations and Retaining Wallsx x x x (2) Whenever or wherever there exists in the site of the construction an abrupt change in the ground levels or level of the foundation such that instability of the soil could result, retaining walls shall be provided and such shall be of adequate design and type of construction as prescribed by the Secretary [of the then Public Works, Transportation and Communications].70Records, p. 205. Issued by Engineering Assistant Cresercia F. Alcuizar dated June 2, 1997.71Id. at 206.72See paragraph 9 of the Complaint in Civil Case No. CEB-20893; id. at 4. See also paragraphs 7 and 8 of the answer; id. at 19-20.73See Articles 428 and 434 of the Civil Code which respectively read:ART. 428. The owner has the right to enjoy and dispose of a thing, without other limitations than those established by law.The owner has also a right of action against the holder and possessor of the thing in order to recover it.ART. 434. In an action to recover, the property must be identified, and the plaintiff must rely on the strength of his title and not on the weakness of the defendant's claim.74See Commissioners Report dated November 22, 2000; records, pp. 304-306.75Id. at 311.76Id. at 304-306.77Rollo(G.R. No. 192861), p. 88; rollo(G.R. No. 192862), p. 53.78Premiere Devt. Bank v. Central Surety & Insurance Co.,Inc., 598 Phil. 827, 861 (2009); citation omitted.79CIVIL CODE, Art. 2229.80See Premiere Devt. Bank v. Central Surety & Insurance Co., Inc., supra note 78.81See Equitable PCI Bank v. Ng Sheung Ngor, 565 Phil. 520, 543 (2007).82ART. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered, except:(1) When exemplary damages are awarded;(2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;(3) In criminal cases of malicious prosecution against the plaintiff;(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim;(6) In actions for legal support;(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;(8) In actions for indemnity under workmens compensation and employers liability laws;(9) In a separate civil action to recover civil liability arising from a crime;(10) When at least double judicial costs are awarded; or(11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered.In all cases, the attorneys fees and expenses oflitigation must be reasonable. (Emphases supplied)

PEDRO T. BERCERO VS. CAPITOL DEVELOPMENT CORPORATION, G.R. NO. 154765, MARCH 29, 2007

FACTS:ISSUE:HELD:RATIO:

Republic of the PhilippinesSupreme CourtManilaTHIRD DIVISIONPEDRO T. BERCERO,G.R. No. 154765

Petitioner,

Present:

YNARES-SANTIAGO,J.,

Chairperson,

- versus -AUSTRIA-MARTINEZ,

CALLEJO, SR.,

CHICO-NAZARIO,and

NACHURA,JJ.

CAPITOL DEVELOPMENT

CORPORATION,[1]Promulgated:

Respondent.March 29, 2007

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xD E C I S I O NAUSTRIA-MARTINEZ,J.:Before the Court is a Petition for Review onCertiorariunder Rule 45 of the Revised Rules of Court assailing the Decision[2]dated February 11, 2002 of the Court of Appeals (CA) in CA-G.R. CV No. 56484 which set aside the Decision[3]dated May 27, 1996 of the Regional Trial Court, Branch 88, Quezon City (RTC-Branch 88) in Civil Case No. Q-92-11732, and the CA Resolution[4]dated August 29, 2002 which denied petitioners Motion for Reconsideration.The factual background of the case is as follows:On January 31, 1983, Capitol Development Corporation (respondent) leased its commercial building and lot located at 1194 EDSA, Quezon City to R.C. Nicolas Merchandising, Inc., (R.C. Nicolas) for a 10-year period or until January 31, 1993 with the option for the latter to make additional improvements in the property to suit its business and to sublease portions thereof to third parties.[5]R.C. Nicolas converted the space into a bowling and billiards center and subleased separate portions thereof to Midland Commercial Corporation, Jerry Yu, Romeo Tolentino, Julio Acuin, Nicanor Bas, and Pedro T. Bercero (petitioner).Petitioners sublease contract with R.C. Nicolas was for a three-year period or until August 16, 1988.[6]Meanwhile, for failure to pay rent, respondent filed an ejectment case against R.C. Nicolas before the Metropolitan Trial Court, Branch 41, Quezon City (MeTC-Branch 41), docketed as Civil Case No. 52933.Respondent also impleaded the sub-lessees of R.C. Nicolas as parties-defendants.During the pendency of Civil Case No. 52933, several sub-lessees including petitioner, entered into a compromise settlement with respondent.[7]In the compromise settlement, the sub-lessees recognized respondent as the lawful and absolute owner of the property and that the contract between respondent and R.C. Nicolas had been lawfully terminated because of the latters non-payment of rent; and that the sub-lessees voluntarily surrendered possession of the premises to respondent; that the sub-lessees directly executed lease contracts with respondent considering the termination of leasehold rights of R.C. Nicolas.Petitioner entered into a lease contract with respondent for a three-year period, from August 16, 1988 to August 31, 1991.[8]On October 21, 1988, respondent and petitioner, as well as several other sub-lessees of R.C. Nicolas, filed a Joint Manifestation and Motion in Civil Case No. 52933, manifesting to the MeTC-Branch 41 that they entered into a compromise settlement and moved that the names of the sub-lessees as parties-defendants be dropped and excluded.[9]On November 14, 1988, R.C. Nicolas filed a complaint for ejectment and collection of unpaid rentals against petitioner before the Metropolitan Trial Court, Branch 39, Quezon City (MeTC-Branch 39), docketed as Civil Case No. 0668.[10]On April 18, 1989, MeTC-Branch 39 rendered a Decision in favor of R.C. Nicolas and ordered the eviction of petitioner from the leased premises.[11]Dissatisfied, petitioner filed an appeal before the Regional Trial Court, Branch 78, Quezon City (RTC-Branch 78).R.C. Nicolas filed a Motion for Execution Pending Appeal which was opposed by petitioner.In an Order dated October 4, 1990, RTC-Branch 78 directed the issuance of a writ of execution pending appeal since petitioner failed to file asupersedeasbond and periodically deposit the rentals due during the pendency of the appeal.[12]Accordingly, on October 22, 1990 a writ of execution was issued.[13]Sometime in November 1990, petitioner was evicted from the leased premises.[14]Petitioner assailed the Order dated October 4, 1990 in a petition forcertiorariwith the CA, docketed as CA-G.R. SP No. 23275, but the petition was denied due course and dismissed by the CA in a Decision dated December 28, 1990.[15]On September 3, 1991, respondent filed a Manifestation in Civil Case No. 52933 urging MeTC-Branch 41 to order R.C. Nicolas to desist from harassing respondent and petitioner, and to confirm respondents right of possession to the premises in the light of the ejectment case filed by R.C. Nicolas against petitioner.[16]Two months later, or on November 13, 1991, MeTC-Branch 41 rendered a Decision in Civil Case No. 52933 in favor of respondent and ordered R.C. Nicolas to pay its unpaid rentals from September 1986 until October 1988.[17]Meanwhile, since his eviction in November 1990, petitioner made repeated demands on respondent for the restoration of his possession of the commercial space leased to him to no avail.[18]Thus, on March 24, 1992, petitioner filed a complaint for sum of money with attachment and mandatory injunction with damages against the respondent before the RTC-Branch 88, docketed as Civil Case No. Q-92-11732.[19]On May 27, 1996, RTC-Branch 88 rendered its Decision[20]in favor of petitioner, the dispositive portion of which reads:WHEREFORE, premises rendered, this Court finds for the plaintiff and orders the defendant:1)to restore plaintiffs possession of the rented building located at 1194 EDSA, Quezon City for the next three years effective from receipt of the copy of this decision;2)to pay the plaintiff the following:a.P480,000.00actual damagesb.P50,000.00moral damagesc.P50,000.00exemplary damagesd.P50,000.00attorneys fees3)to pay the costs.Accordingly, the counterclaim filed by the defendant Capitol Development Corporation is hereby DISMISSED.SO ORDERED.[21]The RTC held that respondent miserably failed to comply with its obligation under Article 1654 of the New Civil Code due to its apathy and failure to extend any assistance to the petitioner and was, therefore, liable for the restoration of petitioners possession and the payment of actual damages corresponding to lost profit, cash, generator, and other items petitioner lost due to the ev