G.R. No. 147561             June 22, 2006

STRONGHOLD INSURANCE COMPANY, INC., Petitioner, vs.REPUBLIC-ASAHI GLASS CORPORATION, Respondent.

D E C I S I O N

PANGANIBAN, CJ:

Asurety company’s liability under the performance bond it issues is solidary. The death of the principal obligor does not, as a rule, extinguish the obligation and the solidary nature of that liability.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to reverse the March 13, 2001 Decision2 of the Court of Appeals (CA) in CA-GR CV No. 41630. The assailed Decision disposed as follows:

"WHEREFORE, the Order dated January 28, 1993 issued by the lower court is REVERSED and SET ASIDE. Let the records of the instant case be REMANDED to the lower court for the reception of evidence of all parties."3

The Facts

The facts of the case are narrated by the CA in this wise:

"On May 24, 1989, [respondent] Republic-Asahi Glass Corporation (Republic-Asahi) entered into a contract with x x x Jose D. Santos, Jr., the proprietor of JDS Construction (JDS), for the construction of roadways and a drainage system in Republic-Asahi’s compound in Barrio Pinagbuhatan, Pasig City, where [respondent] was to pay x x x JDS five million three hundred thousand pesos (P5,300,000.00) inclusive of value added tax for said construction, which was supposed to be completed within a period of two hundred forty (240) days beginning May 8, 1989. In order ‘to guarantee the faithful and satisfactory performance of its undertakings’ x x x JDS, shall post a performance bond of seven hundred ninety five thousand pesos (P795,000.00). x x x JDS executed, jointly and severally with [petitioner] Stronghold Insurance Co., Inc. (SICI) Performance Bond No. SICI-25849/g(13)9769.

"On May 23, 1989, [respondent] paid to x x x JDS seven hundred ninety five thousand pesos (P795,000.00) by way of downpayment.

"Two progress billings dated August 14, 1989 and September 15, 1989, for the total amount of two hundred seventy four thousand six hundred twenty one pesos and one centavo (P274,621.01) were submitted by x x x JDS to [respondent], which the latter paid. According to [respondent], these two progress billings accounted for only 7.301% of the work supposed to be undertaken by x x x JDS under the terms of the contract.

"Several times prior to November of 1989, [respondent’s] engineers called the attention of x x x JDS to the alleged alarmingly slow pace of the construction, which resulted in the fear that the construction will not be finished within the stipulated 240-day period. However, said reminders went unheeded by x x x JDS.

"On November 24, 1989, dissatisfied with the progress of the work undertaken by x x x JDS, [respondent] Republic-Asahi extrajudicially rescinded the contract pursuant to Article XIII of said contract, and wrote a letter to x x x JDS informing the latter of such rescission. Such rescission, according to Article XV of the contract shall not be construed as a waiver of [respondent’s] right to recover damages from x x x JDS and the latter’s sureties.

"[Respondent] alleged that, as a result of x x x JDS’s failure to comply with the provisions of the contract, which resulted in the said contract’s rescission, it had to hire another contractor to finish the project, for which it incurred an additional expense of three million two hundred fifty six thousand, eight hundred seventy four pesos (P3,256,874.00).

"On January 6, 1990, [respondent] sent a letter to [petitioner] SICI filing its claim under the bond for not less thanP795,000.00. On March 22, 1991, [respondent] again sent another letter reiterating its demand for payment under the aforementioned bond. Both letters allegedly went unheeded.

"[Respondent] then filed [a] complaint against x x x JDS and SICI. It sought from x x x JDS payment ofP3,256,874.00 representing the additional expenses incurred by [respondent] for the completion of the project using another contractor, and from x x x JDS and SICI, jointly and severally, payment of P750,000.00 as damages in accordance with the performance bond; exemplary damages in the amount of P100,000.00 and attorney’s fees in the amount of at least P100,000.00.

"According to the Sheriff’s Return dated June 14, 1991, submitted to the lower court by Deputy Sheriff Rene R. Salvador, summons were duly served on defendant-appellee SICI. However, x x x Jose D. Santos, Jr. died the previous year (1990), and x x x JDS Construction was no longer at its address at 2nd Floor, Room 208-A, San Buena Bldg. Cor. Pioneer St., Pasig, Metro Manila, and its whereabouts were unknown.

"On July 10, 1991, [petitioner] SICI filed its answer, alleging that the [respondent’s] money claims against [petitioner and JDS] have been extinguished by the death of Jose D. Santos, Jr. Even if this were not the case, [petitioner] SICI had been released from its liability under the performance bond because there was no liquidation, with the active participation and/or involvement, pursuant to procedural due process, of herein surety and contractor Jose D. Santos, Jr., hence, there was no ascertainment of the corresponding liabilities of Santos and SICI under the performance bond. At this point in time, said liquidation was impossible because of the death of Santos, who as such can no longer participate in any liquidation. The unilateral liquidation on the party (sic) of [respondent] of the work accomplishments did not bind SICI for being violative of procedural due process. The claim of [respondent] for the forfeiture of the performance bond in the amount of P795,000.00 had no factual and legal basis, as payment of said bond was conditioned on the payment of damages which [respondent] may sustain in the event x x x JDS failed to complete the contracted works. [Respondent] can no longer prove its claim for damages in view of the death of Santos. SICI was not informed by [respondent] of the death of Santos. SICI was not informed by [respondent] of the unilateral rescission of its contract with JDS, thus SICI was deprived of its right to protect its interests as surety under the performance bond, and therefore it was released from all liability. SICI was likewise denied due process when it was not notified of plaintiff-appellant’s process of determining and fixing the amount to be spent in the completion of the unfinished project. The procedure contained in Article XV of the contract is against public policy in that it denies SICI the right to procedural due process. Finally, SICI alleged that [respondent] deviated from the terms and conditions of the contract without the written consent of SICI, thus the latter was released from all liability. SICI also prayed for the award of P59,750.00 as attorney’s fees, andP5,000.00 as litigation expenses.

"On August 16, 1991, the lower court issued an order dismissing the complaint of [respondent] against x x x JDS and SICI, on the ground that the claim against JDS did not survive the death of its sole proprietor, Jose D. Santos, Jr. The dispositive portion of the [O]rder reads as follows:

‘ACCORDINGLY, the complaint against the defendants Jose D. Santos, Jr., doing business under trade and style, ‘JDS Construction’ and Stronghold Insurance Company, Inc. is ordered DISMISSED.

‘SO ORDERED.’

"On September 4, 1991, [respondent] filed a Motion for Reconsideration seeking reconsideration of the lower court’s August 16, 1991 order dismissing its complaint. [Petitioner] SICI field its ‘Comment and/or Opposition to the Motion for Reconsideration.’ On October 15, 1991, the lower court issued an Order, the dispositive portion of which reads as follows:

‘WHEREFORE, premises considered, the Motion for Reconsideration is hereby given due course. The Order dated 16 August 1991 for the dismissal of the case against Stronghold Insurance Company, Inc., is reconsidered and hereby reinstated (sic). However, the case against defendant Jose D. Santos, Jr. (deceased) remains undisturbed.

‘Motion for Preliminary hearing and Manifestation with Motion filed by [Stronghold] Insurance Company Inc., are set for hearing on November 7, 1991 at 2:00 o’clock in the afternoon.

‘SO ORDERED.’

"On June 4, 1992, [petitioner] SICI filed its ‘Memorandum for Bondsman/Defendant SICI (Re: Effect of Death of defendant Jose D. Santos, Jr.)’ reiterating its prayer for the dismissal of [respondent’s] complaint.

"On January 28, 1993, the lower court issued the assailed Order reconsidering its Order dated October 15, 1991, and ordered the case, insofar as SICI is concerned, dismissed. [Respondent] filed its motion for reconsideration which was opposed by [petitioner] SICI. On April 16, 1993, the lower court denied [respondent’s] motion for reconsideration. x x x."4

Ruling of the Court of Appeals

The CA ruled that SICI’s obligation under the surety agreement was not extinguished by the death of Jose D. Santos, Jr. Consequently, Republic-Asahi could still go after SICI for the bond.

The appellate court also found that the lower court had erred in pronouncing that the performance of the Contract in question had become impossible by respondent’s act of rescission. The Contract was rescinded because of the dissatisfaction of respondent with the slow pace of work and pursuant to Article XIII of its Contract with JDS.

The CA ruled that "[p]erformance of the [C]ontract was impossible, not because of [respondent’s] fault, but because of the fault of JDS Construction and Jose D. Santos, Jr. for failure on their part to make satisfactory progress on the project, which amounted to non-performance of the same. x x x [P]ursuant to the [S]urety [C]ontract, SICI is liable for the non-performance of said [C]ontract on the part of JDS Construction."5

Hence, this Petition.6

Issue

Petitioner states the issue for the Court’s consideration in the following manner:

"Death is a defense of Santos’ heirs which Stronghold could also adopt as its defense against obligee’s claim."7

More precisely, the issue is whether petitioner’s liability under the performance bond was automatically extinguished by the death of Santos, the principal.

The Court’s Ruling

The Petition has no merit.

Sole Issue:

Effect of Death on the Surety’s Liability

Petitioner contends that the death of Santos, the bond principal, extinguished his liability under the surety bond. Consequently, it says, it is automatically released from any liability under the bond.

As a general rule, the death of either the creditor or the debtor does not extinguish the obligation.8 Obligations are transmissible to the heirs, except when the transmission is prevented by the law, the stipulations of the parties, or the nature of the obligation.9 Only obligations that are personal10 or are identified with the persons themselves are extinguished by death.11

Section 5 of Rule 8612 of the Rules of Court expressly allows the prosecution of money claims arising from a contract against the estate of a deceased debtor. Evidently, those claims are not actually extinguished.13 What is extinguished is only the obligee’s action or suit filed before the court, which is not then acting as a probate court.14

In the present case, whatever monetary liabilities or obligations Santos had under his contracts with respondent were not intransmissible by their nature, by stipulation, or by provision of law. Hence, his death did not result in the extinguishment of those obligations or liabilities, which merely passed on to his estate.15 Death is not a defense that he or his estate can set up to wipe out the obligations under the performance bond. Consequently, petitioner as surety cannot use his death to escape its monetary obligation under its performance bond.

The liability of petitioner is contractual in nature, because it executed a performance bond worded as follows:

"KNOW ALL MEN BY THESE PRESENTS:

"That we, JDS CONSTRUCTION of 208-A San Buena Building, contractor, of Shaw Blvd., Pasig, MM Philippines, as principal and the STRONGHOLD INSURANCE COMPANY, INC. a corporation duly organized and existing under and by virtue of the laws of the Philippines with head office at Makati, as Surety, are held and firmly bound unto the REPUBLIC ASAHI GLASS CORPORATION and to any individual, firm, partnership, corporation or association supplying the principal with labor or materials in the penal sum of SEVEN HUNDRED NINETY FIVE THOUSAND (P795,000.00), Philippine Currency, for the payment of which sum, well and truly to be made, we bind ourselves, our heirs, executors, administrators, successors and assigns, jointly and severally, firmly by these presents.

"The CONDITIONS OF THIS OBLIGATION are as follows;

"WHEREAS the above bounden principal on the ___ day of __________, 19__ entered into a contract with the REPUBLIC ASAHI GLASS CORPORATION represented by _________________, to fully and faithfully. Comply with the site preparation works road and drainage system of Philippine Float Plant at Pinagbuhatan, Pasig, Metro Manila.

"WHEREAS, the liability of the Surety Company under this bond shall in no case exceed the sum of PESOS SEVEN HUNDRED NINETY FIVE THOUSAND (P795,000.00) Philippine Currency, inclusive of interest, attorney’s fee, and other damages, and shall not be liable for any advances of the obligee to the principal.

"WHEREAS, said contract requires the said principal to give a good and sufficient bond in the above-stated sum to secure the full and faithfull performance on its part of said contract, and the satisfaction of obligations for materials used and labor employed upon the work;

"NOW THEREFORE, if the principal shall perform well and truly and fulfill all the undertakings, covenants, terms, conditions, and agreements of said contract during the original term of said contract and any extension thereof that may be granted by the obligee, with notice to the surety and during the life of any guaranty required under the contract, and shall also perform well and truly and fulfill all the undertakings, covenants, terms, conditions, and agreements of any and all duly authorized modifications of said contract that may hereinafter be made, without notice to the surety except when such modifications increase the contract price; and such principal contractor or his or its sub-contractors shall promptly make payment to any individual, firm, partnership, corporation or association supplying the principal of its sub-contractors with labor and materials in the prosecution of the work provided for in the said contract, then, this obligation shall be null and void; otherwise it shall remain in full force and effect. Any extension of the period of time which may be granted by the obligee to the contractor shall be considered as given, and any modifications of said contract shall be considered as authorized, with the express consent of the Surety.

"The right of any individual, firm, partnership, corporation or association supplying the contractor with labor or materials for the prosecution of the work hereinbefore stated, to institute action on the penal bond, pursuant to the provision of Act No. 3688, is hereby acknowledge and confirmed."16

As a surety, petitioner is solidarily liable with Santos in accordance with the Civil Code, which provides as follows:

"Art. 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so.

"If a person binds himself solidarily with the principal debtor, the provisions of Section 4,17 Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship."

x x x x x x x x x

"Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has not been fully collected."

Elucidating on these provisions, the Court in Garcia v. Court of Appeals18 stated thus:

"x x x. The surety’s obligation is not an original and direct one for the performance of his own act, but merely accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor or promisee of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. x x x."19

Under the law and jurisprudence, respondent may sue, separately or together, the principal debtor and the petitioner herein, in view of the solidary nature of their liability. The death of the principal debtor will not work to convert, decrease or nullify the substantive right of the solidary creditor. Evidently, despite the death of the principal debtor, respondent may still sue petitioner alone, in accordance with the solidary nature of the latter’s liability under the performance bond.

WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals AFFIRMED. Costs against petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-32599 June 29, 1979

EDGARDO E. MENDOZA, petitioner vs.HON. ABUNDIO Z. ARRIETA, Presiding Judge of Branch VIII, Court of First Instance of Manila, FELINO TIMBOL, and RODOLFO SALAZAR, respondents.

David G. Nitafan for petitioner.

Arsenio R. Reyes for respondent Timbol.

Armando M. Pulgado for respondent Salazar.

 MELENCIO-HERRERA, J:

Petitioner, Edgardo Mendoza, seeks a review on certiorari of the Orders of respondent Judge in Civil Case No. 80803 dismissing his Complaint for Damages based on quasi-delict against respondents Felino Timbol and Rodolfo Salazar.

The facts which spawned the present controversy may be summarized as follows:

On October 22, 1969, at about 4:00 o'clock in the afternoon, a three- way vehicular accident occurred along Mac-Arthur Highway, Marilao, Bulacan, involving a Mercedes Benz owned and driven by petitioner; a private jeep owned and driven by respondent Rodolfo Salazar; and a gravel and sand truck owned by respondent Felipino Timbol and driven by Freddie Montoya. As a consequence of said mishap, two separate Informations for Reckless Imprudence Causing Damage to Property were filed against Rodolfo Salazar and Freddie Montoya with the Court of First Instance of Bulacan. The race against truck-driver Montoya, docketed as Criminal Case No. SM-227, was for causing damage to the jeep owned by Salazar, in the amount of Pl,604.00, by hitting it at the right rear portion thereby causing said jeep to hit and bump an oncoming car, which happened to be petitioner's Mercedes Benz. The case against jeep-owner-driver Salazar, docketed as Criminal Case No. SM 228, was for causing damage to the Mercedes Benz of petitioner in the amount of P8,890.00

At the joint trial of the above cases, petitioner testified that jeep-owner- driver Salazar overtook the truck driven by Montoya, swerved to the left going towards the poblacion of Marilao, and hit his car which was bound for Manila. Petitioner further testified that before the impact, Salazar had jumped from the jeep and that he was not aware that Salazar's jeep was bumped from behind by the truck driven by Montoya. Petitioner's version of the accident was adopted by truck driver Montoya. Jeep-owner-driver Salazar, on the other hand, tried to show that, after overtaking the truck driven by Montoya, he flashed a signal indicating his intention to turn left towards the poblacion of Marilao but was stopped at the intersection by a policeman who was directing traffic; that while he was at a stop position, his jeep was bumped at the rear by the truck driven by Montova causing him to be thrown out of the jeep, which then swerved to the left and hit petitioner's car, which was coming from the opposite direction.

On July 31, 1970, the Court of First Instance of Bulacan, Branch V, Sta. Maria, rendered judgment, stating in its decretal portion:

IN VIEW OF THE FOREGOING, this Court finds the accused Freddie Montoya GUILTY beyond reasonable doubt of the crime of damage to property thru reckless imprudence in Crime. Case No. SM-227, and hereby sentences him to pay a fine of P972.50 and to indemnify Rodolfo Salazar in the same amount of P972.50 as actual damages, with subsidiary imprisonment in case of insolvency, both as to fine and indemnity, with costs.

Accused Rodolfo Salazar is hereby ACQUITTED from the offense charged in Crime. Case No. SM-228, with costs de oficio, and his bond is ordered canceled

SO ORDERED. 1

Thus, the trial Court absolved jeep-owner-driver Salazar of any liability, civil and criminal, in view of its findings that the collision between Salazar's jeep and petitioner's car was the result of the former having been bumped from behind by the truck driven by Montoya. Neither was petitioner awarded damages as he was not a complainant against truck-driver Montoya but only against jeep-owner-driver Salazar.

On August 22, 1970, or after the termination of the criminal cases, petitioner filed Civil Case No. 80803 with the Court of First Instance of Manila against respondents jeep-owner-driver Salazar and Felino Timbol, the latter being the owner of the gravel and sand truck driven by Montoya, for indentification for the damages sustained by his car as a result of the collision involving their vehicles. Jeep-owner-driver Salazar and truck-owner Timbol were joined as defendants, either in the alternative or in solidum allegedly for the reason that petitioner was uncertain as to whether he was entitled to relief against both on only one of them.

On September 9, 1970, truck-owner Timbol filed a Motion to Dismiss Civil Case No. 80803 on the grounds that the Complaint is barred by a prior judgment in the criminal cases and that it fails to state a cause of action. An Opposition thereto was filed by petitioner.

In an Order dated September 12, 1970, respondent Judge dismissed the Complaint against truck-owner Timbol for reasons stated in the afore- mentioned Motion to Dismiss On September 30, 1970, petitioner sought before this Court the review of that dismissal, to which petition we gave due course.

On January 30, 1971, upon motion of jeep-owner-driver Salazar, respondent Judge also dismissed the case as against the former. Respondent Judge reasoned out that "while it is true that an independent civil action for liability under Article 2177 of the Civil Code could be prosecuted independently of the criminal action for the offense from which it arose, the New Rules of Court, which took effect on January 1, 1964, requires an express reservation of the civil action to be made in the criminal action; otherwise, the same would be barred pursuant to Section 2, Rule 111 ... 2 Petitioner's Motion for Reconsideration thereof was denied in the order dated February 23, 1971, with respondent Judge suggesting that the issue be raised to a higher Court "for a more decisive interpretation of the rule. 3

On March 25, 1971, petitioner then filed a Supplemental Petition before us, also to review the last two mentioned Orders, to which we required jeep-owner-driver Salazar to file an Answer.

The Complaint against

truck-owner Timbol

We shall first discuss the validity of the Order, dated September 12, 1970, dismissing petitioner's Complaint against truck-owner Timbol.

In dismissing the Complaint against the truck-owner, respondent Judge sustained Timbol's allegations that the civil suit is barred by the prior joint judgment in Criminal Cases Nos. SM-227 and SM-228, wherein no reservation to file a separate civil case was made by petitioner and where the latter actively participated in the trial and tried to prove damages against jeep-driver-Salazar only; and that the Complaint does not state a cause of action against truck-owner Timbol inasmuch as petitioner prosecuted jeep-owner-driver Salazar as the one solely responsible for the damage suffered by his car.

Well-settled is the rule that for a prior judgment to constitute a bar to a subsequent case, the following requisites must concur: (1) it must be a final judgment; (2) it must have been rendered by a Court having jurisdiction over the subject matter and over the parties; (3) it must be a judgment on the merits; and (4) there must be, between the first and second actions, Identity of parties, Identity of subject matter and Identity of cause of action.

It is conceded that the first three requisites of res judicata are present. However, we agree with petitioner that there is no Identity of cause of action between Criminal Case No. SM-227 and Civil Case No. 80803. Obvious is the fact that in said criminal case truck-driver Montoya was not prosecuted for damage to petitioner's car but for damage to the jeep. Neither was truck-owner Timbol a party in said case. In fact as the trial Court had put it "the owner of the Mercedes Benz cannot recover any damages from the accused Freddie Montoya, he (Mendoza) being a complainant only against Rodolfo Salazar in Criminal Case No. SM-228. 4 And more importantly, in the criminal cases, the cause of action was the enforcement of the civil liability arising from criminal negligence under Article l of the Revised Penal Code, whereas Civil Case No. 80803 is based on quasi-delict under Article 2180, in relation to Article 2176 of the Civil Code As held in Barredo vs. Garcia, et al. 5

The foregoing authorities clearly demonstrate the separate in. individuality of cuasi-delitos or culpa aquiliana under the Civil Code. Specifically they show that there is a distinction between civil liability arising from criminal negligence (governed by the Penal Code) and responsibility for fault or negligence under articles 1902 to 1910 of the Civil Code, and that the same negligent act may produce either a civil liability arising from a crime under the Penal Code, or a separate responsibility for fault or negligence under articles 1902 to 1910 of the Civil Code. Still more concretely, the authorities above cited render it inescapable to conclude that the employer in this case the defendant- petitioner is primarily and directly liable under article 1903 of the Civil Code.

That petitioner's cause of action against Timbol in the civil case is based on quasi-delict is evident from the recitals in the complaint to wit: that while petitioner was driving his car along MacArthur Highway at Marilao, Bulacan, a jeep owned and driven by Salazar suddenly swerved to his (petitioner's) lane and collided with his car That the sudden swerving of Salazar's jeep was caused either by the negligence and lack of skill of Freddie Montoya, Timbol's employee, who was then driving a gravel and sand truck iii the same direction as Salazar's jeep; and that as a consequence of the collision, petitioner's car suffered extensive damage amounting to P12,248.20 and that he likewise incurred actual and moral damages, litigation expenses and attorney's fees. Clearly, therefore, the two factors that a cause of action must consist of, namely: (1) plaintiff's primary right, i.e., that he is the owner of a Mercedes Benz, and (2) defendant's delict or wrongful act or omission which violated plaintiff's primary right, i.e., the negligence or lack of skill either of jeep-owner Salazar or of Timbol's employee, Montoya, in driving the truck, causing Salazar's jeep to swerve and collide with petitioner's car, were alleged in the Complaint. 6

Consequently, petitioner's cause of action being based on quasi-delict, respondent Judge committed reversible error when he dismissed the civil suit against the truck-owner, as said case may proceed independently of the criminal proceedings and regardless of the result of the latter.

Art. 31. When the civil action is based on an obligation not arising from the act or omission complained of as a felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter.

But it is truck-owner Timbol's submission (as well as that of jeep-owner-driver Salazar) that petitioner's failure to make a reservation in the criminal action of his right to file an independent civil action bars the institution of such separate civil action, invoking section 2, Rule 111, Rules of Court, which says:

Section 2. — Independent civil action. — In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code of the Philippines, an independent civil action entirely separate and distinct from the criminal action may be brought by the injured party during the pendency of the criminal case, provided the right is reserved as required in the preceding section. Such civil action shau proceed independently of the criminal prosecution, and shall require only a preponderance of evidence.

Interpreting the above provision, this Court, in Garcia vs. Florida 7 said:

As we have stated at the outset, the same negligent act causing damages may produce a civil liability arising from crime or create an action for quasi-delict or culpa extra-contractual. The former is a violation of the criminal law, while the latter is a distinct and independent negligence, having always had its own foundation and individuality. Some legal writers are of the view that in accordance with Article 31, the civil action based upon quasi-delict may proceed independently of the criminal proceeding for criminal negligence and regardless of the result of the latter. Hence, 'the proviso in Section 2 of Rule 111 with

reference to ... Articles 32, 33 and 34 of the Civil Code is contrary to the letter and spirit of the said articles, for these articles were drafted ... and are intended to constitute as exceptions to the general rule stated in what is now Section 1 of Rule 111. The proviso, which is procedural, may also be regarded as an unauthorized amendment of substantive law, Articles 32, 33 and 34 of the Civil Code, which do not provide for the reservation required in the proviso ... .

In his concurring opinion in the above case, Mr. Justice Antonio Barredo further observed that inasmuch as Articles 2176 and 2177 of the Civil Code create a civil liability distinct and different from the civil action arising from the offense of negligence under the Revised Penal Code, no reservation, therefore, need be made in the criminal case; that Section 2 of Rule 111 is inoperative, "it being substantive in character and is not within the power of the Supreme Court to promulgate; and even if it were not substantive but adjective, it cannot stand because of its inconsistency with Article 2177, an enactment of the legislature superseding the Rules of 1940."

We declare, therefore, that in so far as truck-owner Timbol is concerned, Civil Case No. 80803 is not barred by the fact that petitioner failed to reserve, in the criminal action, his right to file an independent civil action based on quasi-delict.

The suit against

jeep-owner-driver Salazar

The case as against jeep-owner-driver Salazar, who was acquitted in Criminal Case No. SM-228, presents a different picture altogether.

At the outset it should be clarified that inasmuch as civil liability co-exists with criminal responsibility in negligence cases, the offended party has the option between an action for enforcement of civil liability based on culpa criminal under Article 100 of the Revised Penal Code, and an action for recovery of damages based on culpa aquiliana under Article 2177 of the Civil Code. The action for enforcement of civil liability based on culpa criminal under section 1 of Rule 111 of the Rules of Court is deemed simultaneously instituted with the criminal action, unless expressly waived or reserved for separate application by the offended party. 8

The circumstances attendant to the criminal case yields the conclusion that petitioner had opted to base his cause of action against jeep-owner-driver Salazar on culpa criminal and not on culpa aquiliana as evidenced by his active participation and intervention in the prosecution of the criminal suit against said Salazar. The latter's civil liability continued to be involved in the criminal action until its termination. Such being the case, there was no need for petitioner to have reserved his right to file a separate civil action as his action for civil liability was deemed impliedly instituted in Criminal Case No. SM-228.

Neither would an independent civil action he. Noteworthy is the basis of the acquittal of jeep-owner-driver Salazar in the criminal case, expounded by the trial Court in this wise:

In view of what has been proven and established during the trial, accused Freddie Montoya would be held able for having bumped and hit the rear portion of the jeep driven by the accused Rodolfo Salazar,

Considering that the collision between the jeep driven by Rodolfo Salazar and the car owned and driven by Edgardo Mendoza was the result of the hitting on the rear of the jeep by the truck driven by Freddie Montoya, this Court behaves that accused Rodolfo Salazar cannot be held able for the damages sustained by Edgardo Mendoza's car. 9

Crystal clear is the trial Court's pronouncement that under the facts of the case, jeep-owner-driver Salazar cannot be held liable for the damages sustained by petitioner's car. In other words, "the fact from which the civil might arise did not exist. " Accordingly, inasmuch as petitioner's cause of action as against jeep-owner-driver Salazar is ex- delictu, founded on Article 100 of the Revised Penal Code, the civil action must be held to have been extinguished in consonance with Section 3(c), Rule 111 of the Rules of Court 10 which provides:

Sec. 3. Other civil actions arising from offenses. — In all cases not included in the preceding section the following rules shall be observed:

xxx xxx xxx

c) Extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil night arise did not exist. ...

And even if petitioner's cause of action as against jeep-owner-driver Salazar were not ex-delictu, the end result would be the same, it being clear from the judgment in the criminal case that Salazar's acquittal was not based upon reasonable doubt, consequently, a civil action for damages can no longer be instituted. This is explicitly provided for in Article 29 of the Civil Code quoted here under:

Art. 29. When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted. Such action requires only a preponderance of evidence ...

If in a criminal case the judgment of acquittal is based upon reasonable doubt, the court shall so declare. In the absence of any declaration to that effect, it may be inferred from the text of the decision whether or not the acquittal is due to that ground.

In so far as the suit against jeep-owner-driver Salazar is concerned, therefore, we sustain respondent Judge's Order dated January 30, 1971 dismissing the complaint, albeit on different grounds.

WHEREFORE, 1) the Order dated September 12, 1970 dismissing Civil Case No. 80803 against private respondent Felino Timbol is set aside, and respondent Judge, or his successor, hereby ordered to proceed with the hearing on the merits; 2) but the Orders dated January 30, 1971 and February 23, 1971 dismissing the Complaint in Civil Case No. 80803 against respondent Rodolfo Salazar are hereby upheld.

No costs.

SO ORDERED.

G.R. No. L-47745 April 15, 1988

JOSE S. AMADORA, LORETA A. AMADORA, JOSE A. AMADORA JR., NORMA A. YLAYA PANTALEON A. AMADORA, JOSE A. AMADORA III, LUCY A. AMADORA, ROSALINDA A. AMADORA, PERFECTO A. AMADORA, SERREC A. AMADORA, VICENTE A. AMADORA and MARIA TISCALINA A. AMADORA,petitioners vs.HONORABLE COURT OF APPEALS, COLEGIO DE SAN JOSE-RECOLETOS, VICTOR LLUCH SERGIO P. DLMASO JR., CELESTINO DICON, ANIANO ABELLANA, PABLITO DAFFON thru his parents and natural guardians, MR. and MRS. NICANOR GUMBAN, and ROLANDO VALENCIA, thru his guardian, A. FRANCISCO ALONSO, respondents.

Jose S. Amadora & Associates for petitioners.

Padilla Law Office for respondents.

 CRUZ, J.:

Like any prospective graduate, Alfredo Amadora was looking forward to the commencement exercises where he would ascend the stage and in the presence of his relatives and friends receive his high school diploma. These ceremonies were scheduled on April 16, 1972. As it turned out, though, fate would intervene and deny him that awaited experience. On April 13, 1972, while they were in the auditorium of their school, the Colegio de San Jose-Recoletos, a classmate, Pablito Damon, fired a gun that mortally hit Alfredo, ending all his expectations and his life as well. The victim was only seventeen years old. 1

Daffon was convicted of homicide thru reckless imprudence . 2 Additionally, the herein petitioners, as the victim's parents, filed a civil action for damages under Article 2180 of the Civil Code against the Colegio de San Jose-Recoletos, its rector the high school principal, the dean of boys, and the physics teacher, together with Daffon and two other students, through their respective parents. The complaint against the students was later dropped. After trial, the Court of First Instance of Cebu held the remaining defendants liable to the plaintiffs in the sum of

P294,984.00, representing death compensation, loss of earning capacity, costs of litigation, funeral expenses, moral damages, exemplary damages, and attorney's fees . 3 On appeal to the respondent court, however, the decision was reversed and all the defendants were completely absolved . 4

In its decision, which is now the subject of this petition for certiorari under Rule 45 of the Rules of Court, the respondent court found that Article 2180 was not applicable as the Colegio de San Jose-Recoletos was not a school of arts and trades but an academic institution of learning. It also held that the students were not in the custody of the school at the time of the incident as the semester had already ended, that there was no clear identification of the fatal gun and that in any event the defendant, had exercised the necessary diligence in preventing the injury. 5

The basic undisputed facts are that Alfredo Amadora went to the San Jose-Recoletos on April 13, 1972, and while in its auditorium was shot to death by Pablito Daffon, a classmate. On the implications and consequences of these facts, the parties sharply disagree.

The petitioners contend that their son was in the school to show his physics experiment as a prerequisite to his graduation; hence, he was then under the custody of the private respondents. The private respondents submit that Alfredo Amadora had gone to the school only for the purpose of submitting his physics report and that he was no longer in their custody because the semester had already ended.

There is also the question of the identity of the gun used which the petitioners consider important because of an earlier incident which they claim underscores the negligence of the school and at least one of the private respondents. It is not denied by the respondents that on April 7, 1972, Sergio Damaso, Jr., the dean of boys, confiscated from Jose Gumban an unlicensed pistol but later returned it to him without making a report to the principal or taking any further action . 6 As Gumban was one of the companions of Daffon when the latter fired the gun that killed Alfredo, the petitioners contend that this was the same pistol that had been confiscated from Gumban and that their son would not have been killed if it had not been returned by Damaso. The respondents say, however, that there is no proof that the gun was the same firearm that killed Alfredo.

Resolution of all these disagreements will depend on the interpretation of Article 2180 which, as it happens, is invoked by both parties in support of their conflicting positions. The pertinent part of this article reads as follows:

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices so long as they remain in their custody.

Three cases have so far been decided by the Court in connection with the above-quoted provision, to wit: Exconde v. Capuno 7 Mercado v. Court of Appeals, 8 and Palisoc v. Brillantes. 9 These will be briefly reviewed in this opinion for a better resolution of the case at bar.

In the Exconde Case, Dante Capuno, a student of the Balintawak Elementary School and a Boy Scout, attended a Rizal Day parade on instructions of the city school supervisor. After the parade, the boy boarded a jeep, took over its wheel and drove it so recklessly that it turned turtle, resulting in the death of two of its passengers. Dante was found guilty of double homicide with reckless imprudence. In the separate civil action flied against them, his father was held solidarily liable with him in damages under Article 1903 (now Article 2180) of the Civil Code for the tort committed by the 15-year old boy.

This decision, which was penned by Justice Bautista Angelo on June 29,1957, exculpated the school in an obiter dictum (as it was not a party to the case) on the ground that it was riot a school of arts and trades. Justice J.B.L. Reyes, with whom Justices Sabino Padilla and Alex Reyes concurred, dissented, arguing that it was the school authorities who should be held liable Liability under this rule, he said, was imposed on (1) teachers in general; and (2) heads of schools of arts and trades in particular. The modifying clause "of establishments of arts and trades" should apply only to "heads" and not "teachers."

Exconde was reiterated in the Mercado Case, and with an elaboration. A student cut a classmate with a razor blade during recess time at the Lourdes Catholic School in Quezon City, and the parents of the victim sued the culprits parents for damages. Through Justice Labrador, the Court declared in another obiter (as the school itself had also not been sued that the school was not liable because it was not an establishment of arts and trades. Moreover, the custody requirement had not been proved as this "contemplates a situation where the student lives and boards with the teacher, such that the control, direction and influences on the pupil supersede those of the parents." Justice J.B.L. Reyes did not take part but the other members of the court concurred in this decision promulgated on May 30, 1960.

In Palisoc vs. Brillantes, decided on October 4, 1971, a 16-year old student was killed by a classmate with fist blows in the laboratory of the Manila Technical Institute. Although the wrongdoer — who was already of age — was not boarding in the school, the head thereof and the teacher in charge were held solidarily liable with him. The Court declared through Justice Teehankee:

The phrase used in the cited article — "so long as (the students) remain in their custody" — means the protective and supervisory custody that the school and its heads and teachers exercise over the pupils and students for as long as they are at attendance in the school, including recess time. There is nothing in the law that requires that for such liability to attach, the pupil or student who commits the tortious act must live and board in the school, as erroneously held by the lower court, and the dicta in Mercado (as well as in Exconde) on which it relied, must now be deemed to have been set aside by the present decision.

This decision was concurred in by five other members, 10 including Justice J.B.L. Reyes, who stressed, in answer to the dissenting opinion, that even students already of age were covered by the provision since they were equally in the custody of the school and subject to its discipline. Dissenting with three others, 11 Justice Makalintal was for retaining the custody interpretation in Mercado and submitted that the rule should apply only to torts committed by students not yet of age as the school would be acting only in loco parentis.

In a footnote, Justice Teehankee said he agreed with Justice Reyes' dissent in the Exconde Case but added that "since the school involved at bar is a non-academic school, the question as to the applicability of the cited codal provision to academic institutions will have to await another case wherein it may properly be raised."

This is the case.

Unlike in Exconde and Mercado, the Colegio de San Jose-Recoletos has been directly impleaded and is sought to be held liable under Article 2180; and unlike in Palisoc, it is not a school of arts and trades but an academic institution of learning. The parties herein have also directly raised the question of whether or not Article 2180 covers even establishments which are technically not schools of arts and trades, and, if so, when the offending student is supposed to be "in its custody."

After an exhaustive examination of the problem, the Court has come to the conclusion that the provision in question should apply to all schools, academic as well as non-academic. Where the school is academic rather than technical or vocational in nature, responsibility for the tort committed by the student will attach to the teacher in charge of such student, following the first part of the provision. This is the general rule. In the case of establishments of arts and trades, it is the head thereof, and only he, who shall be held liable as an exception to the general rule. In other words, teachers in general shall be liable for the acts of their students except where the school is technical in nature, in which case it is the head thereof who shall be answerable. Following the canon ofreddendo singula singulis "teachers" should apply to the words "pupils and students" and "heads of establishments of arts and trades" to the word "apprentices."

The Court thus conforms to the dissenting opinion expressed by Justice J.B.L. Reyes in Exconde where he said in part:

I can see no sound reason for limiting Art. 1903 of the Old Civil Code to teachers of arts and trades and not to academic ones. What substantial difference is there between them insofar as concerns the proper supervision and vice over their pupils? It cannot be seriously contended that an academic teacher is exempt from the duty of watching that his pupils do not commit a tort to the detriment of third Persons, so long as they are in a position to exercise authority and Supervision over the pupil. In my opinion, in the phrase "teachers or heads of establishments of arts and trades" used in Art. 1903 of the old Civil Code, the words "arts and trades" does not qualify "teachers" but only "heads of establishments." The phrase is only an updated version of the equivalent terms "preceptores y artesanos" used in the Italian and French Civil Codes.

If, as conceded by all commentators, the basis of the presumption of negligence of Art. 1903 in someculpa in vigilando that the parents, teachers, etc. are supposed to have incurred in the exercise of their authority, it would seem clear that where the parent places the child under the effective authority of the teacher, the latter, and not the parent, should be the one answerable for the torts committed while under his custody, for the very reason/that the parent is not supposed to interfere with the discipline of the school nor with the authority and supervision of the teacher while the child is under instruction. And if there is no authority, there can be no responsibility.

There is really no substantial distinction between the academic and the non-academic schools insofar as torts committed by their students are concerned. The same vigilance is expected from the teacher over the students under his control and supervision, whatever the nature of the school where he is teaching. The suggestion in the Exconde and Mercado Cases is that the provision would make the teacher or even the head of the school of arts and trades liable for an injury caused by any student in its custody but if that same tort were committed in an academic school, no liability would attach to the teacher or the school head. All other circumstances being the same, the teacher or the head of the academic school would be absolved whereas the teacher and the head of the non-academic school would be held liable, and simply because the latter is a school of arts and trades.

The Court cannot see why different degrees of vigilance should be exercised by the school authorities on the basis only of the nature of their respective schools. There does not seem to be any plausible reason for relaxing that vigilance simply because the school is academic in nature and for increasing such vigilance where the school is non-academic. Notably, the injury subject of liability is caused by the student and not by the school itself nor is it a result of the operations of the school or its equipment. The injury contemplated may be caused by any student regardless of the school where he is registered. The teacher certainly should not be able to excuse himself by simply showing that he is teaching in an academic school where, on the other hand, the head would be held liable if the school were non-academic.

These questions, though, may be asked: If the teacher of the academic school is to be held answerable for the torts committed by his students, why is it the head of the school only who is held liable where the injury is caused in a school of arts and trades? And in the case of the academic or non- technical school, why not apply the rule also to the head thereof instead of imposing the liability only on the teacher?

The reason for the disparity can be traced to the fact that historically the head of the school of arts and trades exercised a closer tutelage over his pupils than the head of the academic school. The old schools of arts and trades were engaged in the training of artisans apprenticed to their master who personally and directly instructed them on the technique and secrets of their craft. The head of the school of arts and trades was such a master and so was personally involved in the task of teaching his students, who usually even boarded with him and so came under his constant control, supervision and influence. By contrast, the head of the academic school was not as involved with his students and exercised only administrative duties over the teachers who were the persons directly dealing with the students. The head of the academic school had then (as now) only a vicarious relationship with the students. Consequently, while he could not be directly faulted for the acts of the students, the head of the school of arts and trades, because of his closer ties with them, could be so blamed.

It is conceded that the distinction no longer obtains at present in view of the expansion of the schools of arts and trades, the consequent increase in their enrollment, and the corresponding diminution of the direct and personal contract of their heads with the students. Article 2180, however, remains unchanged. In its present state, the provision must be interpreted by the Court according to its clear and original mandate until the legislature, taking into account the charges in the situation subject to be regulated, sees fit to enact the necessary amendment.

The other matter to be resolved is the duration of the responsibility of the teacher or the head of the school of arts and trades over the students. Is such responsibility co-extensive with the period when the student is actually undergoing studies during the school term, as contended by the respondents and impliedly admitted by the petitioners themselves?

From a reading of the provision under examination, it is clear that while the custody requirement, to repeatPalisoc v. Brillantes, does not mean that the student must be boarding with the school authorities, it does signify that the student should be within the control and under the influence of the school authorities at the time of the occurrence of the injury. This does not necessarily mean that such, custody be co-terminous with the semester, beginning with the start of classes and ending upon the close thereof, and excluding the time before or after such period, such as the period of registration, and in the case of graduating students, the period before the commencement exercises. In the view of the Court, the student is in the custody of the school authorities as long as he is under the control and influence of the school and within its premises, whether the semester has not yet begun or has already ended.

It is too tenuous to argue that the student comes under the discipline of the school only upon the start of classes notwithstanding that before that day he has already registered and thus placed himself under its rules. Neither should such discipline be deemed ended upon the last day of classes notwithstanding that there may still be certain requisites to be satisfied for completion of the course, such as submission of reports, term papers, clearances and the like. During such periods, the student is still subject to the disciplinary authority of the school and cannot consider himself released altogether from observance of its rules.

As long as it can be shown that the student is in the school premises in pursuance of a legitimate student objective, in the exercise of a legitimate student right, and even in the enjoyment of a legitimate student right, and even in the enjoyment of a legitimate student privilege, the responsibility of the school authorities over the student continues. Indeed, even if the student should be doing nothing more than relaxing in the campus in the company of his classmates and friends and enjoying the ambience and atmosphere of the school, he is still within the custody and subject to the discipline of the school authorities under the provisions of Article 2180.

During all these occasions, it is obviously the teacher-in-charge who must answer for his students' torts, in practically the same way that the parents are responsible for the child when he is in their custody. The teacher-in-charge is the one designated by the dean, principal, or other administrative superior to exercise supervision over the pupils in the specific classes or sections to which they are assigned. It is not necessary that at the time of the injury, the teacher be physically present and in a position to prevent it. Custody does not connote immediate and actual physical control but refers more to the influence exerted on the child and the discipline instilled in him as a result of such influence. Thus, for the injuries caused by the student, the teacher and not the parent shag be held responsible if the tort was committed within the premises of the school at any time when its authority could be validly exercised over him.

In any event, it should be noted that the liability imposed by this article is supposed to fall directly on the teacher or the head of the school of arts and trades and not on the school itself. If at all, the school, whatever its nature, may be held to answer for the acts of its teachers or even of the head thereof under the general principle ofrespondeat superior, but then it may exculpate itself from liability by proof that it had exercised the diligence of abonus paterfamilias.

Such defense is, of course, also available to the teacher or the head of the school of arts and trades directly held to answer for the tort committed by the student. As long as the defendant can show that he had taken the necessary precautions to prevent the injury complained of, he can exonerate himself from the liability imposed by Article 2180, which also states that:

The responsibility treated of in this article shall cease when the Persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damages.

In this connection, it should be observed that the teacher will be held liable not only when he is acting in loco parentis for the law does not require that the offending student be of minority age. Unlike the parent, who wig be liable only if his child is still a minor, the teacher is held answerable by the law for the act of the student under him regardless of the student's age. Thus, in the Palisoc Case, liability attached to the teacher and the head of the technical school although the wrongdoer was already of age. In this sense, Article 2180 treats the parent more favorably than the teacher.

The Court is not unmindful of the apprehensions expressed by Justice Makalintal in his dissenting opinion in Palisoc that the school may be unduly exposed to liability under this article in view of the increasing activism among the students that is likely to cause violence and resulting injuries in the school premises. That is a valid fear, to be sure. Nevertheless, it should be repeated that, under the present ruling, it is not the school that will be held directly liable. Moreover, the defense of due diligence is available to it in case it is sought to be held answerable as principal for the acts or omission of its head or the teacher in its employ.

The school can show that it exercised proper measures in selecting the head or its teachers and the appropriate supervision over them in the custody and instruction of the pupils pursuant to its rules and regulations for the maintenance of discipline among them. In almost all cases now, in fact, these measures are effected through the assistance of an adequate security force to help the teacher physically enforce those rules upon the students. Ms should bolster the claim of the school that it has taken adequate steps to prevent any injury that may be committed by its students.

A fortiori, the teacher himself may invoke this defense as it would otherwise be unfair to hold him directly answerable for the damage caused by his students as long as they are in the school premises and presumably under his influence. In this respect, the Court is disposed not to expect from the teacher the same measure of responsibility imposed on the parent for their influence over the child is not equal in degree. Obviously, the parent can expect more obedience from the child because the latter's dependence on him is greater than on the teacher. It need not be stressed that such dependence includes the child's support and sustenance whereas submission to the teacher's influence, besides being coterminous with the period of custody is usually enforced only because of the students' desire to pass the course. The parent can instill more las discipline on the child than the teacher and so should be held to a greater accountability than the teacher for the tort committed by the child.

And if it is also considered that under the article in question, the teacher or the head of the school of arts and trades is responsible for the damage caused by the student or apprentice even if he is already of age — and therefore less tractable than the minor — then there should all the more be justification to require from the school authorities less accountability as long as they can prove reasonable diligence in preventing the injury. After all, if

the parent himself is no longer liable for the student's acts because he has reached majority age and so is no longer under the former's control, there is then all the more reason for leniency in assessing the teacher's responsibility for the acts of the student.

Applying the foregoing considerations, the Court has arrived at the following conclusions:1. At the time Alfredo Amadora was fatally shot, he was still in the custody of the authorities of Colegio de San Jose-Recoletos notwithstanding that the fourth year classes had formally ended. It was immaterial if he was in the school auditorium to finish his physics experiment or merely to submit his physics report for what is important is that he was there for a legitimate purpose. As previously observed, even the mere savoring of the company of his friends in the premises of the school is a legitimate purpose that would have also brought him in the custody of the school authorities.

2. The rector, the high school principal and the dean of boys cannot be held liable because none of them was the teacher-in-charge as previously defined. Each of them was exercising only a general authority over the student body and not the direct control and influence exerted by the teacher placed in charge of particular classes or sections and thus immediately involved in its discipline. The evidence of the parties does not disclose who the teacher-in-charge of the offending student was. The mere fact that Alfredo Amadora had gone to school that day in connection with his physics report did not necessarily make the physics teacher, respondent Celestino Dicon, the teacher-in-charge of Alfredo's killer.

3. At any rate, assuming that he was the teacher-in-charge, there is no showing that Dicon was negligent in enforcing discipline upon Daffon or that he had waived observance of the rules and regulations of the school or condoned their non-observance. His absence when the tragedy happened cannot be considered against him because he was not supposed or required to report to school on that day. And while it is true that the offending student was still in the custody of the teacher-in-charge even if the latter was physically absent when the tort was committed, it has not been established that it was caused by his laxness in enforcing discipline upon the student. On the contrary, the private respondents have proved that they had exercised due diligence, through the enforcement of the school regulations, in maintaining that discipline.

4. In the absence of a teacher-in-charge, it is probably the dean of boys who should be held liable especially in view of the unrefuted evidence that he had earlier confiscated an unlicensed gun from one of the students and returned the same later to him without taking disciplinary action or reporting the matter to higher authorities. While this was clearly negligence on his part, for which he deserves sanctions from the school, it does not necessarily link him to the shooting of Amador as it has not been shown that he confiscated and returned pistol was the gun that killed the petitioners' son.

5. Finally, as previously observed, the Colegio de San Jose-Recoletos cannot be held directly liable under the article because only the teacher or the head of the school of arts and trades is made responsible for the damage caused by the student or apprentice. Neither can it be held to answer for the tort committed by any of the other private respondents for none of them has been found to have been charged with the custody of the offending student or has been remiss in the discharge of his duties in connection with such custody.

In sum, the Court finds under the facts as disclosed by the record and in the light of the principles herein announced that none of the respondents is liable for the injury inflicted by Pablito Damon on Alfredo Amadora that resulted in the latter's death at the auditorium of the Colegio de San Jose-Recoletos on April 13, 1972. While we deeply sympathize with the petitioners over the loss of their son under the tragic circumstances here related, we nevertheless are unable to extend them the material relief they seek, as a balm to their grief, under the law they have invoked. WHEREFORE, the petition is DENIED, without any pronouncement as to costs. It is so ordered.

G.R. No. L-21438             September 28, 1966

AIR FRANCE, petitioner, vs.RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.

Lichauco, Picazo and Agcaoili for petitioner.Bengzon Villegas and Zarraga for respondent R. Carrascoso.

 SANCHEZ, J.:

The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso P25,000.00 by way of moral damages; P10,000.00 as exemplary damages; P393.20 representing the difference in fare between first class and tourist class for the portion of the trip Bangkok-Rome, these various amounts with interest at the legal rate, from the date of the filing of the complaint until paid; plus P3,000.00 for attorneys' fees; and the costs of suit.

On appeal,2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from P393.20 to P383.10, and voted to affirm the appealed decision "in all other respects", with costs against petitioner.

The case is now before us for review on certiorari.

The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:

Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on March 30, 1958.

On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines, Inc., issued to plaintiff a "first class" round trip airplane ticket from Manila to Rome. From Manila to Bangkok, plaintiff travelled in "first class", but at Bangkok, the Manager of the defendant airline forced plaintiff to vacate the "first class" seat that he was occupying because, in the words of the witness Ernesto G. Cuento, there was a "white man", who, the Manager alleged, had a "better right" to the seat. When asked to vacate his "first class" seat, the plaintiff, as was to be expected, refused, and told defendant's Manager that his seat would be taken over his dead body; a commotion ensued, and, according to said Ernesto G. Cuento, "many of the Filipino passengers got nervous in the tourist class; when they found out that Mr. Carrascoso was having a hot discussion with the white man [manager], they came all across to Mr. Carrascoso and pacified Mr. Carrascoso to give his seat to the white man" (Transcript, p. 12, Hearing of May 26, 1959); and plaintiff reluctantly gave his "first class" seat in the plane.3

1. The trust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent Court of Appeals. Petitioner charges that respondent court failed to make complete findings of fact on all the issues properly laid before it. We are asked to consider facts favorable to petitioner, and then, to overturn the appellate court's decision.

Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of record without expressing therein clearly and distinctly the facts and the law on which it is based". 5 This is echoed in the statutory demand that a judgment determining the merits of the case shall state "clearly and distinctly the facts and the law on which it is based"; 6 and that "Every decision of the Court of Appeals shall contain complete findings of fact on all issues properly raised before it". 7

A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The law, however, solely insists that a decision state the "essential ultimate facts" upon which the court's conclusion is drawn.  9 A court of justice is not hidebound to write in its decision every bit and piece of evidence 10 presented by one party and the other upon the issues raised. Neither is it to be burdened with the obligation "to specify in the sentence the facts"which a party "considered as proved". 11 This is but a part of the mental process from which the Court draws the essential ultimate facts. A decision is not to be so clogged with details such that prolixity, if not confusion, may result. So long as the decision of the Court of Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom "any specific finding of facts with respect to the evidence for the defense". Because as this Court well observed, "There is no law that so requires". 12 Indeed, "the mere failure to specify (in the decision) the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the same contrary to the requirements of the provisions of law and the Constitution". It is in this setting that in Manigque, it was held that the mere fact that the findings "were based entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant's side in the controversy as shown by his own testimony", would not vitiate the judgment. 13 If the court did not recite in the decision the testimony of each witness for, or each item of evidence presented by, the defeated party, it does not mean that the court has overlooked such testimony or such item of evidence. 14 At any rate, the legal presumptions are that official duty has been regularly performed, and that all the matters within an issue in a case were laid before the court and passed upon by it. 15

Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written statement of the ultimate facts as found by the court ... and essential to support the decision and judgment rendered thereon". 16They consist of the court's "conclusions" with respect to the determinative facts in issue". 17 A question of law, upon the other hand, has been declared as "one which does not call for an examination of the probative value of the evidence presented by the parties." 18

2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of the Court of Appeals. 19 That judgment is conclusive as to the facts. It is not appropriately the business of this Court to alter the facts or to review the questions of fact. 20

With these guideposts, we now face the problem of whether the findings of fact of the Court of Appeals support its judgment.

3. Was Carrascoso entitled to the first class seat he claims?

It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first class ticket. But petitioner asserts that said ticket did not represent the true and complete intent and agreement of the parties; that said respondent knew that he did not have confirmed reservations for first class on any specific flight, although he had tourist class protection; that, accordingly, the issuance of a first class ticket was no guarantee that he would have a first class ride, but that such would depend upon the availability of first class seats.

These are matters which petitioner has thoroughly presented and discussed in its brief before the Court of Appeals under its third assignment of error, which reads: "The trial court erred in finding that plaintiff had confirmed reservations for, and a right to, first class seats on the "definite" segments of his journey, particularly that from Saigon to Beirut". 21

And, the Court of Appeals disposed of this contention thus:

Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee that the passenger to whom the same had been issued, would be accommodated in the first-class compartment, for as in the case of plaintiff he had yet to make arrangements upon arrival at every station for the necessary first-class reservation. We are not impressed by such a reasoning. We cannot understand how a reputable firm like defendant airplane company could have the indiscretion to give out tickets it never meant to honor at all. It received the corresponding amount in payment of first-class tickets and yet it allowed the passenger to be at the mercy of its employees. It is more in keeping with the ordinary course of business that the company should know whether or riot the tickets it issues are to be honored or not.22

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention, thus:

On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question. Apart from his testimony, see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1", and defendant's own witness, Rafael Altonaga, confirmed plaintiff's testimony and testified as follows:

Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?

A. That the space is confirmed.

Q. Confirmed for first class?

A. Yes, "first class". (Transcript, p. 169)

x x x           x x x           x x x

Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that although plaintiff paid for, and was issued a "first class" airplane ticket, the ticket was subject to confirmation in Hongkong. The court cannot give credit to the testimony of said witnesses. Oral evidence cannot prevail over written evidence, and plaintiff's Exhibits "A", "A-l", "B", "B-l", "C" and "C-1" belie the testimony of said witnesses, and clearly show that the plaintiff was issued, and paid for, a first class ticket without any reservation whatever.

Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the reservation for a "first class" accommodation for the plaintiff was confirmed. The court cannot believe that after such confirmation defendant had a verbal understanding with plaintiff that the "first class" ticket issued to him by defendant would be subject to confirmation in Hongkong. 23

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount refunded on Carrascoso's ticket, the decision of the Court of First Instance was affirmed by the Court of Appeals in all other respects. We hold the view that such a judgment of affirmance has merged the judgment of the lower court. 24Implicit in that affirmance is a determination by the Court of Appeals that the proceeding in the Court of First Instance was free from prejudicial error and "all questions raised by the assignments of error and all questions that might have been raised are to be regarded as finally adjudicated against the appellant". So also, the judgment affirmed "must be regarded as free from all error". 25 We reached this policy construction because nothing in the decision of the Court of Appeals on this point would suggest that its findings of fact are in any way at war with those of the trial court. Nor was said affirmance by the Court of Appeals upon a ground or grounds different from those which were made the basis of the conclusions of the trial court. 26

If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat, notwithstanding the fact that seat availability in specific flights is therein confirmed, then an air passenger is placed in the hollow of the hands of an airline. What security then can a passenger have? It will always be an easy matter for an airline aided by its employees, to strike out the very stipulations in the ticket, and say that there was a verbal agreement to the contrary. What if the passenger had a schedule to fulfill? We have long learned that, as a rule, a written document speaks a uniform language; that spoken word could be notoriously unreliable. If only to achieve stability in the relations between passenger and air carrier, adherence to the ticket so issued is desirable. Such is the case here. The lower courts refused to believe the oral evidence intended to defeat the covenants in the ticket.

The foregoing are the considerations which point to the conclusion that there are facts upon which the Court of Appeals predicated the finding that respondent Carrascoso had a first class ticket and was entitled to a first class seat at Bangkok, which is a stopover in the Saigon to Beirut leg of the flight. 27 We perceive no "welter of distortions by the Court of Appeals of petitioner's statement of its position", as charged by petitioner. 28 Nor do we subscribe to petitioner's accusation that respondent Carrascoso "surreptitiously took a first class seat to provoke an issue". 29 And this because, as petitioner states, Carrascoso went to see the Manager at his office in Bangkok "to confirm my seat and because from Saigon I was told again to see the Manager". 30 Why, then, was he allowed to take a first class seat in the plane at Bangkok, if he had no seat? Or, if another had a better right to the seat?

4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is that Carrascoso's action is planted upon breach of contract; that to authorize an award for moral damages there must be an averment of fraud or bad faith;31 and that the decision of the Court of Appeals fails to make a finding of bad faith. The pivotal allegations in the complaint bearing on this issue are:

3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable consideration, the latter acting as general agents for and in behalf of the defendant, under which said contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff, First Class passage on defendant's plane during the entire duration of plaintiff's tour of Europe with Hongkong as starting point up to and until plaintiff's return trip to Manila, ... .

4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok, defendant furnished to the plaintiff First Class accommodation but only after protestations, arguments and/or insistence were made by the plaintiff with defendant's employees.

5. That finally, defendant failed to provide First Class passage, but instead furnished plaintiff only TouristClass accommodations from Bangkok to Teheran and/or Casablanca, ... the plaintiff has been compelledby defendant's employees to leave the First Class accommodation berths at Bangkok after he was already seated.

6. That consequently, the plaintiff, desiring no repetition of the inconvenience and embarrassments brought by defendant's breach of contract was forced to take a Pan American World Airways plane on his return trip from Madrid to Manila.32

x x x           x x x           x x x

2. That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid, plaintiff suffered inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental anguish, serious anxiety, wounded feelings, social humiliation, and the like injury, resulting in moral damages in the amount of P30,000.00. 33

x x x           x x x           x x x

The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiff a first class passage covering, amongst others, the Bangkok-Teheran leg; Second, That said contract was breached when

petitioner failed to furnish first class transportation at Bangkok; and Third, that there was bad faith when petitioner's employee compelled Carrascoso to leave his first class accommodation berth "after he was already, seated" and to take a seat in the tourist class, by reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing him mental anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral damages. It is true that there is no specific mention of the term bad faith in the complaint. But, the inference of bad faith is there, it may be drawn from the facts and circumstances set forth therein. 34 The contract was averred to establish the relation between the parties. But the stress of the action is put on wrongful expulsion.

Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed petitioner on guard on what Carrascoso intended to prove: That while sitting in the plane in Bangkok, Carrascoso was oustedby petitioner's manager who gave his seat to a white man; 35 and (b) evidence of bad faith in the fulfillment of the contract was presented without objection on the part of the petitioner. It is, therefore, unnecessary to inquire as to whether or not there is sufficient averment in the complaint to justify an award for moral damages. Deficiency in the complaint, if any, was cured by the evidence. An amendment thereof to conform to the evidence is not even required. 36 On the question of bad faith, the Court of Appeals declared:

That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the defendant Air France while at Bangkok, and was transferred to the tourist class not only without his consent but against his will, has been sufficiently established by plaintiff in his testimony before the court, corroborated by the corresponding entry made by the purser of the plane in his notebook which notation reads as follows:

"First-class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene",

and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The captain of the plane who was asked by the manager of defendant company at Bangkok to intervene even refused to do so. It is noteworthy that no one on behalf of defendant ever contradicted or denied this evidence for the plaintiff. It could have been easy for defendant to present its manager at Bangkok to testify at the trial of the case, or yet to secure his disposition; but defendant did neither. 37

The Court of appeals further stated —

Neither is there evidence as to whether or not a prior reservation was made by the white man. Hence, if the employees of the defendant at Bangkok sold a first-class ticket to him when all the seats had already been taken, surely the plaintiff should not have been picked out as the one to suffer the consequences and to be subjected to the humiliation and indignity of being ejected from his seat in the presence of others. Instead of explaining to the white man the improvidence committed by defendant's employees, the manager adopted the more drastic step of ousting the plaintiff who was then safely ensconsced in his rightful seat. We are strengthened in our belief that this probably was what happened there, by the testimony of defendant's witness Rafael Altonaga who, when asked to explain the meaning of the letters "O.K." appearing on the tickets of plaintiff, said "that the space is confirmed for first class. Likewise, Zenaida Faustino, another witness for defendant, who was the chief of the Reservation Office of defendant, testified as follows:

"Q How does the person in the ticket-issuing office know what reservation the passenger has arranged with you?

A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19, 1959)

In this connection, we quote with approval what the trial Judge has said on this point:

Why did the, using the words of witness Ernesto G. Cuento, "white man" have a "better right" to the seat occupied by Mr. Carrascoso? The record is silent. The defendant airline did not prove "any better", nay, any right on the part of the "white man" to the "First class" seat that the plaintiff was occupying and for which he paid and was issued a corresponding "first class" ticket.

If there was a justified reason for the action of the defendant's Manager in Bangkok, the defendant could have easily proven it by having taken the testimony of the said Manager by deposition, but defendant did not do so; the presumption is that evidence willfully suppressed would be adverse if produced [Sec. 69, par (e), Rules of Court]; and, under the circumstances, the Court is constrained to find, as it does find, that the Manager of the

defendant airline in Bangkok not merely asked but threatened the plaintiff to throw him out of the plane if he did not give up his "first class" seat because the said Manager wanted to accommodate, using the words of the witness Ernesto G. Cuento, the "white man".38

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the term "bad faith". But can it be doubted that the recital of facts therein points to bad faith? The manager not only prevented Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him suffer the humiliation of having to go to the tourist class compartment - just to give way to another passenger whose right thereto has not been established. Certainly, this is bad faith. Unless, of course, bad faith has assumed a meaning different from what is understood in law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive design or with some motive of self-interest or will or for ulterior purpose." 39

And if the foregoing were not yet sufficient, there is the express finding of bad faith in the judgment of the Court of First Instance, thus:

The evidence shows that the defendant violated its contract of transportation with plaintiff in bad faith, with the aggravating circumstances that defendant's Manager in Bangkok went to the extent of threatening the plaintiff in the presence of many passengers to have him thrown out of the airplane to give the "first class" seat that he was occupying to, again using the words of the witness Ernesto G. Cuento, a "white man" whom he (defendant's Manager) wished to accommodate, and the defendant has not proven that this "white man" had any "better right" to occupy the "first class" seat that the plaintiff was occupying, duly paid for, and for which the corresponding "first class" ticket was issued by the defendant to him.40

5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is well settled in law. 41 For the willful malevolent act of petitioner's manager, petitioner, his employer, must answer. Article 21 of the Civil Code says:

ART. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the provisions of Article 2219 (10), Civil Code, moral damages are recoverable. 42

6. A contract to transport passengers is quite different in kind and degree from any other contractual relation. 43And this, because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So it is, that any rule or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier. 44

Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of contract and a tort, giving a right of action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand payment under threat of ejection, though the language used was not insulting and she was not ejected." 46 And this, because, although the relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that breaks the contract may be also a tort". 47 And in another case, "Where a passenger on a railroad train, when the conductor came to collect his fare tendered him the cash fare to a point where the train was scheduled not to stop, and told him that as soon as the train reached such point he would pay the cash fare from that point to destination, there was nothing in the conduct of the passenger which justified the conductor in using insulting language to him, as by calling him a lunatic," 48 and the Supreme Court of South Carolina there held the carrier liable for the mental suffering of said passenger.1awphîl.nèt

Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action as we have said, is placed upon his wrongful expulsion. This is a violation of public duty by the petitioner air carrier — a case of quasi-delict. Damages are proper.

7. Petitioner draws our attention to respondent Carrascoso's testimony, thus —

Q You mentioned about an attendant. Who is that attendant and purser?

A When we left already — that was already in the trip — I could not help it. So one of the flight attendants approached me and requested from me my ticket and I said, What for? and she said, "We will note that you transferred to the tourist class". I said, "Nothing of that kind. That is tantamount to accepting my transfer." And I also said, "You are not going to note anything there because I am protesting to this transfer".

Q Was she able to note it?

A No, because I did not give my ticket.

Q About that purser?

A Well, the seats there are so close that you feel uncomfortable and you don't have enough leg room, I stood up and I went to the pantry that was next to me and the purser was there. He told me, "I have recorded the incident in my notebook." He read it and translated it to me — because it was recorded in French — "First class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene."

Mr. VALTE —

I move to strike out the last part of the testimony of the witness because the best evidence would be the notes. Your Honor.

COURT —

I will allow that as part of his testimony. 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebook reading "First class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene" is predicated upon evidence [Carrascoso's testimony above] which is incompetent. We do not think so. The subject of inquiry is not the entry, but the ouster incident. Testimony on the entry does not come within the proscription of the best evidence rule. Such testimony is admissible. 49a

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of the startling occurrence was still fresh and continued to be felt. The excitement had not as yet died down. Statements then, in this environment, are admissible as part of the res gestae. 50 For, they grow "out of the nervous excitement and mental and physical condition of the declarant". 51 The utterance of the purser regarding his entry in the notebook was spontaneous, and related to the circumstances of the ouster incident. Its trustworthiness has been guaranteed. 52 It thus escapes the operation of the hearsay rule. It forms part of the res gestae.

At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would have been an easy matter for petitioner to have contradicted Carrascoso's testimony. If it were really true that no such entry was made, the deposition of the purser could have cleared up the matter.

We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.

8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant exemplary damages — in contracts and quasi- contracts. The only condition is that defendant should have "acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." 53 The manner of ejectment of respondent Carrascoso from his first class seat fits into this legal precept. And this, in addition to moral damages.54

9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a similar judgment for attorneys' fees. The least that can be said is that the courts below felt that it is but just and equitable that attorneys' fees be given. 55 We do not intend to break faith with the tradition that discretion well exercised — as it was here — should not be disturbed.

10. Questioned as excessive are the amounts decreed by both the trial court and the Court of Appeals, thus: P25,000.00 as moral damages; P10,000.00, by way of exemplary damages, and P3,000.00 as attorneys' fees. The task of fixing these amounts is primarily with the trial court. 56 The Court of Appeals did not interfere with the same. The dictates of good sense suggest that we give our imprimatur thereto. Because, the facts and circumstances point to the reasonableness thereof.57

On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error. We accordingly vote to affirm the same. Costs against petitioner. So ordered.

August 31, 1954

G.R. No. L-7089DOMINGO DE LA CRUZ, plaintiff-appellant, vs.NORTHERN THEATRICAL ENTERPRISES INC., ET AL., defendants-appellees.

Conrado Rubio for appellant.Ruiz, Ruiz, Ruiz, Ruiz, and Benjamin Guerrero for appellees. MONTEMAYOR, J.:

The facts in this case based on an agreed statement of facts are simple. In the year 1941 the Northern Theatrical Enterprises Inc., a domestic corporation operated a movie house in Laoag, Ilocos Norte, and among the persons employed by it was the plaintiff DOMINGO DE LA CRUZ, hired as a special guard whose duties were to guard the main entrance of the cine, to maintain peace and order and to report the commission of disorders within the premises. As such guard he carried a revolver. In the afternoon of July 4, 1941, one Benjamin Martin wanted to crash the gate or entrance of the movie house. Infuriated by the refusal of plaintiff De la Cruz to let him in without first providing himself with a ticket, Martin attacked him with a bolo. De la Cruz defendant himself as best he could until he was cornered, at which moment to save himself he shot the gate crasher, resulting in the latter's death.

For the killing, De la Cruz was charged with homicide in Criminal Case No. 8449 of the Court of First Instance of Ilocos Norte. After a re-investigation conducted by the Provincial Fiscal the latter filed a motion to dismiss the complaint, which was granted by the court in January 1943. On July 8, 1947, De la Cruz was again accused of the same crime of homicide, in Criminal Case No. 431 of the same Court. After trial, he was finally acquitted of the charge on January 31, 1948. In both criminal cases De la Cruz employed a lawyer to defend him. He demanded from his former employer reimbursement of his expenses but was refused, after which he filed the present action against the movie corporation and the three members of its board of directors, to recover not only the amounts he had paid his lawyers but also moral damages said to have been suffered, due to his worry, his neglect of his interests and his family as well in the supervision of the cultivation of his land, a total of P15,000. On the basis of the complaint and the answer filed by defendants wherein they asked for the dismissal of the complaint, as well as the agreed statement of facts, the Court of First Instance of Ilocos Norte after rejecting the theory of the plaintiff that he was an agent of the defendants and that as such agent he was entitled to reimbursement of the expenses incurred by him in connection with the agency (Arts. 1709-1729 of the old Civil Code), found that plaintiff had no cause of action and dismissed the complaint without costs. De la Cruz appealed directly to this Tribunal for the reason that only questions of law are involved in the appeal.

We agree with the trial court that the relationship between the movie corporation and the plaintiff was not that of principal and agent because the principle of representation was in no way involved. Plaintiff was not employed to represent the defendant corporation in its dealings with third parties. He was a mere employee hired to perform a certain specific duty or task, that of acting as special guard and staying at the main entrance of the movie house to stop gate crashers and to maintain peace and order within the premises. The question posed by this appeal is whether an employee or servant who in line of duty and while in the performance of the task assigned to him, performs an act which eventually results in his incurring in expenses, caused not directly by his master or employer or his fellow servants or by reason of his performance of his duty, but rather by a third party or stranger not in the employ of his employer, may recover said damages against his employer.

The learned trial court in the last paragraph of its decision dismissing the complaint said that "after studying many laws or provisions of law to find out what law is applicable to the facts submitted and admitted by the parties, has found none and it has no other alternative than to dismiss the complaint." The trial court is right. We confess that we are not aware of any law or judicial authority that is directly applicable to the present case, and realizing the importance and far-reaching effect of a ruling on the subject-matter we have searched, though vainly, for judicial authorities and enlightenment. All the laws and principles of law we have found, as regards master and servants, or employer and employee, refer to cases of physical injuries, light or serious, resulting in loss of a member of the body or of any one of the senses, or permanent physical disability or even death, suffered in line of duty and in the course of the performance of the duties assigned to the servant or employee, and these cases are mainly governed by the Employer's Liability Act and the Workmen's Compensation Act. But a case involving damages caused to an employee by a stranger or outsider while said employee was in the performance of his duties, presents a novel question which under present legislation we are neither able nor prepared to decide in favor of the employee.

In a case like the present or a similar case of say a driver employed by a transportation company, who while in the course of employment runs over and inflicts physical injuries on or causes the death of a pedestrian; and such driver is later charged criminally in court, one can imagine that it would be to the interest of the employer to give

legal help to and defend its employee in order to show that the latter was not guilty of any crime either deliberately or through negligence, because should the employee be finally held criminally liable and he is found to be insolvent, the employer would be subsidiarily liable. That is why, we repeat, it is to the interest of the employer to render legal assistance to its employee. But we are not prepared to say and to hold that the giving of said legal assistance to its employees is a legal obligation. While it might yet and possibly be regarded as a normal obligation, it does not at present count with the sanction of man-made laws.

If the employer is not legally obliged to give, legal assistance to its employee and provide him with a lawyer, naturally said employee may not recover the amount he may have paid a lawyer hired by him.

Viewed from another angle it may be said that the damage suffered by the plaintiff by reason of the expenses incurred by him in remunerating his lawyer, is not caused by his act of shooting to death the gate crasher but rather by the filing of the charge of homicide which made it necessary for him to defend himself with the aid of counsel. Had no criminal charge been filed against him, there would have been no expenses incurred or damage suffered. So the damage suffered by plaintiff was caused rather by the improper filing of the criminal charge, possibly at the instance of the heirs of the deceased gate crasher and by the State through the Fiscal. We say improper filing, judging by the results of the court proceedings, namely, acquittal. In other words, the plaintiff was innocent and blameless. If despite his innocence and despite the absence of any criminal responsibility on his part he was accused of homicide, then the responsibility for the improper accusation may be laid at the door of the heirs of the deceased and the State, and so theoretically, they are the parties that may be held responsible civilly for damages and if this is so, we fail to see now this responsibility can be transferred to the employer who in no way intervened, much less initiated the criminal proceedings and whose only connection or relation to the whole affairs was that he employed plaintiff to perform a special duty or task, which task or duty was performed lawfully and without negligence.

Still another point of view is that the damages incurred here consisting of the payment of the lawyer's fee did not flow directly from the performance of his duties but only indirectly because there was an efficient, intervening cause, namely, the filing of the criminal charges. In other words, the shooting to death of the deceased by the plaintiff was not the proximate cause of the damages suffered but may be regarded as only a remote cause, because from the shooting to the damages suffered there was not that natural and continuous sequence required to fix civil responsibility.

In view of the foregoing, the judgment of the lower court is affirmed. No costs.

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

CANDIDA VIRATA, TOMAS VIRATA, MANOLITO VIRATA, EDERLINDA VIRATA, NAPOLEON VIRATA, ARACELY VIRATA, ZENAIDA VIRATA, LUZMINDA VIRATA, PACITA VIRATA, and EVANGELINA VIRATA,petitioners, vs.VICTORIO OCHOA, MAXIMO BORILLA and THE COURT OF FIRST INSTANCE OF CAVITE, 7th JUDICIAL DISTRICT, BRANCH V, stationed at BACOOR, CAVITE, respondents.

Remulla, Estrella & Associates for petitioners

Exequil C. Masangkay for respondents.

 FERNANDEZ, J.:

This is an appeal by certiorari, from the order of the Court of First Instance of Cavite, Branch V, in Civil Case No. B-134 granting the motion of the defendants to dismiss the complaint on the ground that there is another action pending between the same parties for the same cause. 1

The record shows that on September 24, 1975 one Arsenio Virata died as a result of having been bumped while walking along Taft Avenue, Pasay City by a passenger jeepney driven by Maximo Borilla and registered in the name Of Victoria Ochoa; that Borilla is the employer of Ochoa; that for the death of Arsenio Virata, a action for homicide through reckless imprudence was instituted on September 25, 1975 against Maximo Borilla in the Court of First Instance of Rizal at Pasay City, docketed as C Case No. 3162-P of said court; that at the hearing of the said criminal case on December 12, 1975, Atty. Julio Francisco, the private prosecutor, made a reservation to file a separate civil action for damages against the driver on his criminal liability; that on February 19, 1976 Atty. Julio Francisco filed a motion in said c case to withdraw the reservation to file a separate civil action; that thereafter, the private prosecutor actively participated in the trial and presented evidence on the damages; that on June 29, 1976 the heirs of Arsenio Virata again reserved their right to institute a separate civil action; that on July 19, 1977 the heirs of Arsenio Virata, petitioners herein, commenced Civil No. B-134 in the Court of First Instance of Cavite at Bacoor, Branch V, for damages based on quasi-delict against the driver Maximo Borilla and the registered owner of the jeepney, Victorio Ochoa; that on August 13, 1976 the defendants, private respondents filed a motion

to dismiss on the ground that there is another action, Criminal Case No. 3162-P, pending between the same parties for the same cause; that on September 8, 1976 the Court of First Instance of Rizal at Pasay City a decision in Criminal Case No. 3612-P acquitting the accused Maximo Borilla on the ground that he caused an injury by name accident; and that on January 31, 1977, the Court of First Instance of Cavite at Bacoor granted the motion to Civil Case No. B-134 for damages. 2

The principal issue is weather or not the of the Arsenio Virata, can prosecute an action for the damages based on quasi-delict against Maximo Borilla and Victoria Ochoa, driver and owner, respectively on the passenger jeepney that bumped Arsenio Virata.

It is settled that in negligence cases the aggrieved parties may choose between an action under the Revised Penal Code or of quasi-delict under Article 2176 of the Civil Code of the Philippines. What is prohibited by Article 2177 of the Civil Code of the Philippines is to recover twice for the same negligent act.

The Supreme Court has held that:

According to the Code Commission: 'The foregoing provision (Article 2177) though at first sight startling, is not so novel or extraordinary when we consider the exact nature of criminal and civil negligence. The former is a violation of the criminal law, while the latter is a 'culpa aquiliana' or quasi-delict, of ancient origin, having always had its own foundation and individuality, separate from criminal negligence. Such distinction between criminal negligence and 'culpa extra-contractual' or quasi-delito has been sustained by decision of the Supreme Court of Spain and maintained as clear, sound and perfectly tenable by Maura, an outstanding Spanish jurist. Therefore, under the proposed Article 2177, acquittal from an accusation of criminal negligence, whether on reasonable doubt or not, shall not be a bar to a subsequent civil action, not for civil liability arising from criminal negligence, but for damages due to a quasi-delict or 'culpa aquiliana'. But said article forestalls a double recovery. (Report of the Code Commission, p. 162.)

Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same argument of Justice Bocobo about construction that upholds 'the spirit that given life' rather than that which is literal that killeth the intent of the lawmaker should be observed in applying the same. And considering that the preliminary chapter on human relations of the new Civil Code definitely establishes the separability and independence of liability in a civil action for acts criminal in character (under Articles 29 to 32) from the civil responsibility arising from crime fixed by Article 100 of the Penal Code, and, in a sense, the Rules of Court, under Sections 2 and 3(c), Rule 111, contemplate also the same separability, it is 'more congruent' with the spirit of law, equity and justice, and more in harmony with modern progress', to borrow the felicitous language in Rakes vs. Atlantic Gulf and Pacific Co., 7 Phil. to 359, to hod as We do hold, that Article 2176, where it refers to 'fault covers not only acts 'not punishable by law' but also criminal in character, whether intentional and voluntary or consequently, a separate civil action lies against the in a criminal act, whether or not he is criminally prosecuted and found guilty and acquitted, provided that the offended party is not allowed, if he is actually charged also criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the, two assuming the awards made in the two cases vary. In other words the extinction of civil liability refereed to in Par. (c) of Section 13, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same act considered as a quasi-delict only and not as a crime is not extinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused. Brief stated, We hold, in reitration of Garcia, that culpa aquilina includes voluntary and negligent acts which may be punishable by law. 3

The petitioners are not seeking to recover twice for the same negligent act. Before Criminal Case No. 3162-P was decided, they manifested in said criminal case that they were filing a separate civil action for damages against the owner and driver of the passenger jeepney based on quasi-delict. The acquittal of the driver, Maximo Borilla, of the crime charged in Criminal Case No. 3162-P is not a bar to the prosecution of Civil Case No. B-134 for damages based on quasi-delict The source of the obligation sought to be enforced in Civil Case No. B-134 isquasi-delict, not an act or omission punishable by law. Under Article 1157 of the Civil Code of the Philippines, quasi-delict and an act or omission punishable by law are two different sources of obligation.

Moreover, for the petitioners to prevail in the action for damages, Civil Case No. B-134, they have only to establish their cause of action by preponderance of the evidence.

WHEREFORE, the order of dismissal appealed from is hereby set aside and Civil Case No. B-134 is reinstated and remanded to the lower court for further proceedings, with costs against the private respondents.

SO ORDERED.

L.G. FOODS CORPORATION and VICTORINO GABOR, Vice-President and General Manager,

Petitioners,

          - versus -

HON. PHILADELFA B. PAGAPONG-AGRAVIADOR, in her capacity as Presiding Judge of Regional Trial Court, Branch 43, Bacolod City, and SPS. FLORENTINO and THERESA VALLEJERA,

Respondents.

        G.R. No. 158995

        Present:

            PUNO, J., Chairperson,          SANDOVAL-GUTIERREZ,          CORONA,          AZCUNA, and          GARCIA, JJ.

       Promulgated:

          September 26, 2006

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D E C I S I O N 

GARCIA, J.:                            

   

          Assailed and sought to be set aside in this petition for review on certiorari is the Decision[1]dated April 25, 2003 of the Court of Appeals (CA), as reiterated in its Resolution of July 10, 2003, [2]in CA-G.R. SP No. 67600, affirming  an earlier Order of the Regional Trial Court (RTC) of Bacolod City, Branch 43, which denied the petitioners’ motion to dismiss in Civil Case No. 99-10845, an action for damages arising from a vehicular accident thereat instituted by the herein private respondents - the spouses Florentino Vallejera and Theresa Vallejera - against the petitioners.           The antecedent facts may be briefly stated as follows:          On February 26, 1996, Charles Vallereja, a 7-year old son of the spouses Florentino Vallejera and Theresa Vallejera, was hit by a Ford Fiera van owned by the petitioners and driven at the time by their employee, Vincent Norman Yeneza y Ferrer. Charles died as a result of the accident.           In time, an Information for Reckless Imprudence Resulting to Homicide was filed against the driver before the Municipal Trial Court in Cities (MTCC), Bacolod City, docketed as Criminal Case No. 67787, entitled People of the Philippines v. Vincent Norman Yeneza.           Unfortunately, before the trial could be concluded, the accused driver committed suicide, evidently bothered by conscience and remorse. On account thereof, the MTCC, in its order ofSeptember 30, 1998, dismissed the criminal case.           On June 23, 1999, in the RTC of Bacolod City, the spouses Vallejera filed a complaint [3] for damages against the petitioners as employers of the deceased driver, basically alleging that as such employers, they failed to exercise due diligence in the selection and supervision of their employees. Thereat docketed as Civil Case No. 99-10845, the complaint was raffled to Branch 43 of the court.

  

          In their Answer with Compulsory Counterclaim,[4] the petitioners as defendants denied liability for the death of the Vallejeras’ 7-year old son, claiming that they had exercised the required due diligence in the selection and supervision of their employees, including the deceased driver. They thus prayed in their Answer for the dismissal of the complaint for lack of cause of action on the part of the Vallejera couple.           During pre-trial, the defendant petitioners insisted that their dismissal prayer be resolved. Hence, the trial court required them to file within ten days a memorandum of authorities supportive of their position. 

          Instead, however, of the required memorandum of authorities, the defendant petitioners filed a Motion to Dismiss, principally arguing that the complaint is basically a “claim for subsidiary liability against an employer” under the provision of Article 103[5] of the Revised Penal Code. Prescinding therefrom, they contend that there must first be a judgment of conviction against their driver as a condition sine qua non to hold them liable. Ergo,  since the driver died during the pendency of the criminal action, the sine qua non  condition for their subsidiary liability was not fulfilled, hence the of lack of cause of action on the part of the plaintiffs. They further argue that since the plaintiffs did not make a reservation to institute a separate action for damages when the criminal case was filed, the damage suit in question is thereby deemed instituted with the criminal action. which was already dismissed.           In an Order dated September 4, 2001,[6] the trial court denied the motion to dismiss for lack of merit and set the case for pre-trial. With their motion for reconsideration having been denied by the same court in its subsequent order[7] of September 26, 2001, the petitioners then went on certiorari to the CA in CA-G.R. SP No. 67600, imputing grave abuse of discretion on the part  of the trial judge in refusing to dismiss the basic complaint for damages in Civil Case No. 99-10845.           In the herein assailed decision[8] dated April 25, 2003, the CA denied  the petition and upheld the trial court. Partly says the CA in its challenged issuance:

         xxx       xxx       xxx

It is clear that the complaint neither represents nor implies that the responsibility charged was the petitioner’s subsidiary liability under Art. 103, Revised Penal Code. As pointed out [by the trial court] in the Order of September 4, 2001, the complaint does not even allege the basic elements for such a liability, like the conviction of the accused employee  and his insolvency. Truly enough, a civil action to enforce subsidiary liability separate and distinct from the criminal action is even unnecessary.

 xxx       xxx       xxx

 Specifically, Civil Case No. 99-10845 exacts responsibility for fault or

negligence under Art. 2176, Civil Code, which is entirely separate and distinct from the civil liability arising from negligence under the Revised Penal Code. Verily, therefore, the liability under Art. 2180, Civil Code, is direct and immediate, and not conditioned upon prior recourse against the negligent employee or prior showing of the latter’s insolvency. (Underscoring in the original.)

   

In time, the petitioners moved for a reconsideration but  their motion was denied by the CA in its resolution[9] of July 10, 2003. Hence, the petitioners’ present recourse on their submission that the appellate court committed reversible error in upholding the trial court’s denial of their motion to dismiss.

 We DENY. As the Court sees it, the sole issue for resolution is whether the spouses Vallejeras’ cause of action in

Civil Case No. 99-10845 is founded on Article 103 of the Revised Penal Code, as maintained by the petitioners, or derived from Article 2180[10] of the Civil Code, as ruled by the two courts below.

  It thus behooves us to examine the allegations of the complaint for damages in Civil Case No. 99-

10845.  That complaint alleged, inter alia, as follows: 

xxx                   xxx                   xxx             3.         That defendant [LG Food Corporation] is the registered owner of a Ford Fiera Van with Plate No. NMS 881 and employer sometime February of 1996 of one Vincent Norman Yeneza y Ferrer, a salesman of said corporation;             4.         That sometime February 26, 1996 at around 2:00 P.M. at Rosario St., Bacolod City, the minor son of said plaintiffs [now respondents], Charles Vallejera, 7 years old, was hit and bumped by above-described vehicle then driven by said employee, Vincent Norman Yeneza y Ferrer;             5.         That the mishap was due to the gross fault and negligence of defendant’s employee, who drove said vehicle, recklessly, negligently and at a high speed without regard to traffic condition and safety of other road users and likewise to the fault and negligence of the owner employer, herein defendants LG Food Corporation who failed to exercise due diligence in the selection and supervision of his employee, Vincent Norman Yeneza y Ferrer;             6.         That as a result of said incident, plaintiffs’ son suffered multiple body injuries which led to his untimely demise on that very day;            7.         That a criminal case was filed against the defendant’s employee, docketed as Criminal Case No. 67787, (earlier filed as Crim. Case No. 96-17570 before RTC) before MTC-Branch III, entitled “People v. Yeneza” for “Reckless Imprudence resulting to

Homicide,” but the same was dismissed because pending litigation, then remorse-stricken [accused] committed suicide;    

xxx       xxx       xxx            8.         That the injuries and complications as well as the resultant death suffered by the late minor Charles Vallejera were due to the negligence and imprudence of defendant’s employee;             9.         That defendant LG Foods Corporation is civilly liable for the negligence/imprudence of its employee since it failed to exercise the necessary diligence required of a good father of the family in the selection and supervision of his employee, Vincent Norman Yeneza y Ferrer which diligence if exercised, would have prevented said incident.  (Bracketed words and emphasis ours.) 

           Nothing in the foregoing allegations suggests, even remotely, that the herein petitioners are being made to account for their subsidiary liability under Article 103 of the  Revised Penal Code.  As correctly pointed out  by the trial court in its order of September 4, 2001  denying the petitioners’Motion to Dismiss, the complaint did not even aver the basic elements for the subsidiary liability of an employer under Article 103 of the Revised Penal Code, such as the prior conviction of the driver in the criminal case filed against him nor his insolvency.           Admittedly, the complaint did not explicitly state that plaintiff Vallejeras  were suing the defendant petitioners for damages based on quasi-delict. Clear it is, however, from the allegations of the complaint that quasi-delict was their choice of remedy against the petitioners. To stress, the plaintiff spouses alleged in their complaint gross fault and negligence on the part of the driver and the failure of the petitioners, as employers, to exercise due diligence in the selection and supervision of their employees. The spouses further alleged that the petitioners are civilly liable for the negligence/imprudence of their driver since they failed to exercise the necessary diligence required of a good father of the family in the selection and supervision of their employees, which diligence, if exercised, could have prevented the vehicular accident that resulted to the death of their 7-year old son.           Section 2, Rule 2, of the 1997 Rules of Civil Procedure defines cause of action as the “act or omission by which a party violates the right of another.”  Such act or omission gives rise to an obligation which may come from law, contracts, quasi contracts, delicts or quasi-delicts.[11]            Corollarily, an act or omission causing damage to another may give rise to two separate civil liabilities on the part of the offender, i.e., 1) civil liability ex delicto;[12] and 2) independent civil liabilities, such as those (a) not arising from an act or omission complained of as felony (e.g., culpa contractual or obligations arising from law;[13] the intentional torts;[14] and culpa aquiliana[15]); or (b) where the injured party is granted a right to file an action independent and distinct from the criminal action.[16]  Either of these two possible liabilities may be enforced against the offender.[17]

           Stated otherwise, victims of negligence or their heirs have a choice between an action to enforce the civil liability arising from culpa criminal under Article 100 of the Revised Penal Code, and an action for quasi-delict (culpa aquiliana) under Articles 2176 to 2194 of the Civil Code.  If, as here, the action chosen is for quasi-delict, the plaintiff may hold the employer liable for the negligent act of its employee, subject to the employer’s defense of exercise of the diligence of a good father of the family.   On the other hand, if the action chosen is for culpa criminal, the plaintiff can hold the employer subsidiarily liable only upon proof of   prior conviction of its employee.[18]

           Article 1161[19] of the Civil Code provides that civil obligation arising from criminal offenses shall be governed by penal laws subject to the provision of Article 2177 [20] and of the pertinent provision of Chapter 2, Preliminary Title on Human Relation, and of Title XVIII of this Book, regulating damages. Plainly, Article 2177 provides for the alternative remedies the plaintiff may choose from in case the obligation has the possibility of arising indirectly from the delict/crime or directly from quasi-delict/tort.  The choice is with the plaintiff who makes known his cause of action in his initiatory pleading or complaint, [21]  and not with the defendant who can not ask for the dismissal of the plaintiff’s cause of action or lack of it based on the defendant’s perception that the plaintiff should have opted to file a claim under Article 103 of the Revised Penal Code.           Under Article 2180 of the Civil Code, the liability of the employer is direct or immediate. It is not conditioned upon prior recourse against the negligent employee and a prior showing of insolvency of such employee.[22]            Here, the complaint sufficiently alleged that the death of the couple’s minor  son  was  caused by  the  negligent  act  of the petitioners’ driver; and that the petitioners themselves were civilly liable for the negligence of their driver for failing “to exercise the necessary diligence required of a good father of the family in the selection and supervision of  [their] employee, the driver, which diligence, if exercised, would have prevented said accident.”           Had the respondent spouses elected to sue the petitioners based on Article  103  of  the Revised  Penal Code,  they  would  have alleged that the  guilt  of  the  driver had been proven beyond reasonable doubt; that such accused driver is insolvent; that it is the subsidiary liability of the defendant petitioners as employers  to pay for the damage done by their employee (driver) based on the principle that every person criminally liable is also civilly liable.[23] Since there was no conviction in the criminal case against the driver, precisely because death intervened prior to the termination of the criminal proceedings, the spouses’ recourse was, therefore, to sue the petitioners for their direct and primary liability based on quasi-delict.

           Besides, it is worthy to note that the petitioners, in their Answer with Compulsory Counter-Claim,[24] repeatedly made mention of Article 2180 of the Civil Code and anchored their defense on their allegation that “they had exercised due diligence in the selection and supervision of [their] employees.” The Court views this defense as an admission that indeed the petitioners acknowledged the private respondents’ cause of action as one for quasi-delict under Article 2180 of the Civil Code.               All  told,  Civil  Case No. 99-10845 is a negligence suit brought under Article 2176 - Civil Code to recover damages primarily from the petitioners as employers responsible for their negligent driver pursuant to Article 2180 of the  Civil Code. The obligation imposed by Article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible. Thus, the employer is liable for damages caused by his employees and household helpers acting within the scope of their assigned tasks, even though the former is not engaged in any business or industry.                 Citing Maniago v. CA,[25] petitioner would argue that Civil Case No. 99-10845 should have been dismissed for failure of the respondent spouses to make a reservation to institute a separate civil action for damages when the criminal case against the driver was filed.          The argument is specious.                   To start with, the petitioners’ reliance on Maniago is obviously misplaced. There, the civil case was filed while the criminal case against the employee was still pending. Here, the criminal case against the employee driver was prematurely terminated due to his death. Precisely, Civil Case No. 99-10845 was filed by the respondent spouses because no remedy can be obtained by them against the petitioners with the dismissal of the criminal case against their driver during the pendency thereof.           The circumstance that no reservation to institute a separate civil action for damages was made when the criminal case was filed is of no moment for the simple reason that the criminal case was dismissed without any pronouncement having been made therein. In reality, therefor, it is as if there was no criminal case to speak of in the first place. And for the petitioners to insist for the conviction of their driver as a condition  sine qua non  to hold them liable for damages is to ask for the impossible.                   IN VIEW WHEREOF, the instant petition is DENIED for lack of merit.           Costs against the petitioners.

ABS-CBN BROADCASTING CORPORATION, EUGENIO LOPEZ, JR., AUGUSTO ALMEDA-LOPEZ, and OSCAR M. LOPEZ,

Petitioners,

          - versus -

OFFICE OF THE OMBUDSMAN, ROBERTO S. BENEDICTO,*EXEQUIEL B. GARCIA, MIGUEL V. GONZALES, and SALVADOR (BUDDY) TAN,*

Respondents.

G.R. No. 133347

Present:

YNARES-SANTIAGO, J.,   Chairperson,AUSTRIA-MARTINEZ,CHICO-NAZARIO,NACHURA, andREYES, JJ.

Promulgated:

   October 15, 2008

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DECISION 

NACHURA, J.:                            

At bar is a petition for certiorari under Rule 65 of the Rules of Court challenging the Joint Resolution[1] dated May 2, 1997 of then Ombudsman Aniano Desierto in OMB-0-94-1109, dismissing the complaint filed by petitioners against private respondents, and the Order[2] denying their motion for reconsideration. 

This case stems from an all too familiar chapter in Philippine history, i.e., the declaration of martial law by then President Ferdinand Marcos and the simultaneous sequestration of not a few private corporations, including one of the petitioners herein, ABS-CBN Broadcasting Corporation (ABS-CBN).           On April 18 and 26, 1994, petitioners Eugenio, Jr., Oscar and Augusto Almeda, all surnamed Lopez, as officers and on behalf of ABS-CBN, executed separate complaint-affidavits charging private respondents Roberto S. Benedicto, Exequiel B. Garcia, Miguel V. Gonzalez, and Salvador (Buddy) Tan with the following crimes penalized under the Revised Penal Code (RPC): (a) Article 298 - Execution of Deeds by Means of Violence or Intimidation; (b) Article 315 paragraphs 1[b], 2[a], 3[a] - Estafa; (c) Article 308 - Theft; (d) Article 302 - Robbery; (e) Article 312 - Occupation of Real Property or Usurpation of Real Rights in Property; and (f) Article 318 - Other Deceits.           Individual petitioners’ complaint-affidavits[3] uniformly narrated the following facts:           1.       The day after the declaration of martial law, or on September 22, 1972, just before midnight, military troops arrived at the ABS-CBN Broadcast Center in Bohol Avenue, Quezon City, and informed the officers and personnel thereat of the seizure and closure of the premises by virtue of Letter of Instruction (LOI) No. 1 issued by President Marcos ordering the closure of all radio and television stations in the country.           2.       LOI No. 1 authorized the Secretary of National Defense to “take over or control, or cause the taking over and control of all x x x newspapers, magazines, radio and television facilities and all other media of communications” throughout the country. Consequently, a total of seven (7) television stations owned and operated by ABS-CBN were closed down by the government.[4]

           3.       When it became apparent that petitioners would not be granted a permit to re-open, ABS-CBN on October 31, 1972, terminated the services of all its employees, giving each employee his/her retirement benefits. Corollary thereto, sometime in November 1972, Eugenio Lopez, Jr., then president of ABS-CBN, wrote then Secretary of National Defense, Juan Ponce Enrile,[5] of their desire to sell ABS-CBN to the government. In that same month, however, Eugenio Lopez, Jr. was arrested by the military, and detained at Fort Bonifacio for almost five (5) years until his escape therefrom on September 30, 1977.           4.       Subsequently, after the proposal to sell ABS-CBN to the Marcos government did not materialize, ABS-CBN started negotiations with then Governor of Leyte, Benjamin “Kokoy” Romualdez, who expressed his desire and intention to acquire the former. However, the negotiations with Kokoy Romualdez in 1973 likewise did not result in the sale and re-opening of ABS-CBN.           5.       On June 6, 1973, the television and radio stations of Kanlaon Broadcasting System (KBS) on  Roxas Boulevard, Pasay City were consumed by fire. KBS was the umbrella corporation of the Benedicto Group of broadcasting companies, including Radio Philippines Network (RPN), [6] which operated TV Channel 9, the only television station allowed to continue operating during the early years of the martial law regime. Respondent Benedicto, then Philippine Ambassador to Japan, managed, controlled, and was one of the principal stockholders of RPN.           6.       On even date, both Benedicto and Alfredo Montelibano, who at that time was Chairperson of the Board of Directors (BOD) of ABS-CBN, were in Bacolod. Benedicto constituted Montelibano as his emissary to the Lopezes, relaying his plan to temporarily use ABS-CBN’s broadcast studios in Quezon City, from which to operate TV Channel 9, for such period of time as may be necessary to rebuild KBS’ burned studios.  

          7.       On June 8, 1973, Montelibano met with other officers and executives of ABS-CBN, including herein petitioners Oscar and Augusto Lopez, informing them of Benedicto’s request. Oscar and Augusto, and the rest of the ABS-CBN management team, strongly opposed the request. Eventually, however, when Montelibano mentioned that Malacañang and Romualdez had cleared said request, the possibility of a government-ordered confiscation of ABS-CBN, and not least of all, the possible release of Eugenio Lopez, Jr., petitioners Oscar and Augusto, as with the rest of ABS-CBN’s executives, acquiesced to Benedicto’s request.           8.       Thus, at noontime on the same day, representatives of KBS headed by Jose Montalvo arrived at the Meralco Building to finalize the proposed arrangement with ABS-CBN. The transaction between ABS-CBN and KBS is evidenced by a letter-agreement dated June 8, 1973, which reads in relevant part: 

            This is to confirm the agreement arrived at between RPN and ABS-CBN to the following effect: 

            1.         Commencing on the date hereof, ABS-CBN hereby conveys to RPN by way of lease its TV and radio equipment (excluding TV channels and radio frequencies) and its premises at the ABS-CBN Broadcast Center, Bohol Avenue, Quezon City (collectively called the “leased facilities”) listed in the schedule attached hereto and marked as Annex “A”.             2.         RPN shall pay ABS-CBN monthly rental as is reasonable compensation for the use of the leased facilities. The amount of the rental shall be determined after a discussion with Ambassador Roberto Benedicto.             3.         The term of this lease shall commence on the date hereof and continue for such reasonable time as may be normally necessary for the rehabilitation of RPN’s facilities unless an earlier period may be fixed by RPN and ABS-CBN after discussion with Ambassador Benedicto.             4.         RPN hereby assumes full and complete responsibility for the leased facilities and shall be answerable for any and all losses and damages to such facilities.             x x x x             6.         Upon termination of this lease, RPN shall return the possession of the leased facilities to ABS-CBN and vacate the same without the need of notice or demand.             7.         ABS-CBN, through its Chairman, Mr. Alfredo Montelibano, shall have the right to select and designate the personnel (not to exceed 20 at any one time) to maintain and operate all specialized TV and radio equipment.             x x x x             10.       ABS-CBN shall have the right to enter the Broadcast Center at any reasonable time during the term of this lease for the purpose of determining compliance by RPN of the terms hereof.             x x x x             12.       RPN shall not, without the prior written consent of ABS-CBN, sub-lease the leased facilities or any part thereof nor shall any part be removed from the premises except the equipment, which are intended for operation the Broadcast Center in due course of operations.  

          9.       Meanwhile, it appears that the parties were hard pressed to negotiate and fix the monthly rental rate. Several attempts by Oscar to set up a meeting with Benedicto for the fixing of the monthly rentals proved unsuccessful.           10.     After more than four months of trying, a meeting between Oscar and Benedicto finally materialized on October 31, 1973. At that meeting, the discussion not only covered fixing of reasonable rentals for the lease of the ABS-CBN studios, but likewise included the possibility of an outright sale.           11.     Thereafter, the discussions and negotiations stopped as none of the petitioners were able to meet anew with Benedicto who had supposedly referred the matter to “people above” and the “man on top.”           12.     Frustrated, then Senator Lorenzo Tañada, as counsel for ABS-CBN, in May 1976, wrote Benedicto demanding vacation of the ABS-CBN Broadcast Center and payment of back rentals for the use of the ABS-CBN studios and facilities.           13.     In response, Senator Estanislao Fernandez, on behalf of Benedicto, met with Senator Tañada in June 1976. Another meeting took place between the parties’ respective counsels which included respondent Gonzales, another counsel for Benedicto. Despite these meetings, no agreement was reached between Benedicto and ABS-CBN. On the whole, from June 8, 1973, the time KBS occupied the ABS-CBN studios in Quezon City, no rental was paid by the former to the latter.           14.     In the years following until the Marcos government was toppled in 1986, the ABS-CBN stations were transferred to the National Media Production Center (NMPC) headed by Gregorio Cendaña of the Ministry of Information.  Starting in January 1980, KBS, on a staggered basis, transferred possession, control and management of ABS-CBN’s provincial television stations to NMPC. Some of the radio stations of ABS-CBN were turned over to the government’s Bureau of Broadcast, while some were retained by KBS thru the Banahaw Broadcasting Corporation (BBC) and Radio Philippines Network (RPN).           15.     Parenthetically, during a military inventory in 1979-1980, and a visit by ABS-CBN executives at ABS-CBN’s radio transmitting stations in Meycauayan, Bulacan, headed by petitioner Augusto, on August 13, 1984, ABS-CBN properties and massive equipment were found to be missing. In addition, the musical records and radio dramas accumulated by ABS-CBN in a span of twenty-five (25) years and stored in its library were now gone.           16.     In June 1986, President Corazon Aquino, acting on the request of ABS-CBN through Senator Tañada, returned to ABS-CBN these radio and TV stations on a gradual and scheduled basis.

           As required by the Ombudsman, the respondents, except for Garcia, filed their respective counter-affidavits,[7] with Benedicto adopting that of Gonzales’, denying petitioners’ charges, and averring that:           1.       The execution of the June 8, 1973 letter-agreement was a free and voluntary act of ABS-CBN which agreed thereto fully expecting remuneration in the form of rentals, thus: 

            2.  RPN shall pay ABS-CBN monthly rental as is reasonable compensation for the use of the lease facilities. The amount of the rental shall be determined after a discussion with Ambassador Roberto Benedicto.  

          2.       In that regard, respondent Gonzales, counsel for KBS, RPN and Benedicto, participated in the negotiations and was present at three (3) meetings for the fixing of rentals. Also in attendance were former Senator Estanislao Fernandez, specially engaged to represent RPN and Benedicto, and Senator Tañada and petitioner Augusto for ABS-CBN.           3.       Initially, the discussions centered on the possible formulas for the fixing of rentals. Later on, however, before an agreement on the rental rate could be reached, the discussions shifted to the possibility of an outright sale. The discussions on the sale were expanded as various creditors of ABS-CBN had made and presented claims before respondent Garcia, then Comptroller of KBS-RPN.           4.       However, the discussions were discontinued when then Secretary of National Defense Juan Ponce Enrile reminded KBS of the sequestered status of ABS-CBN facilities such that arrangements undertaken for the use and lease thereof should be taken up with the government.[8]

           5.       Meanwhile, in July 1974, Secretary Ponce Enrile authorized KBS, acting on behalf of BBC, to make use of the ABS-CBN provincial stations which were not covered by the June 8, 1973letter-agreement. The authorization was granted in connection with the increased undertakings assigned by the Department of National Defense (DND) to KBS, specifically, for the government’s mass-media developmental peace and order nationwide campaign.           7.       Thereafter, in October 1977, RPN vacated the ABS-CBN studios and turned over the properties to George Viduya, the general manager of the government station GTV-4. Viduya continued operations of GTV-4 at the ABS-CBN properties, after which, the properties were all delivered in 1979 to the NMPC headed by Cendaña. The provincial stations were delivered and turned over on a staggered basis, with the DZRI station in Dagupan handed over in 1979. The successive transfer of all ABS-CBN studios and stations, in Quezon City and the provinces, were covered by receipts which were collated by the law firm of respondent Gonzales retained by KBS for that purpose.           8.       The use of the ABS-CBN studios involved only three (3) juridical entities, RPN, ABS-CBN and the government. The charges leveled by petitioners in their complaint-affidavits merely point to civil liability as specified in the letter-agreement itself: 

            4.  RPN hereby assumes full and complete responsibility for the leased facilities and shall be answerable for any and all losses and damages to such facilities.  

On the whole, the allegations of petitioners do not support the elements of the crimes charged.           9.       Lastly, respondents invoke the grant of absolute immunity to Benedicto as part of the Compromise Agreement in Sandiganbayan Civil Case No. 34 which states: 

            The Government hereby extends absolute immunity, as authorized under the pertinent provisions of Executive Orders Nos. 1, 2, 14 and 14-A, to Benedicto, the members of his family, officers and employees of the corporations above mentioned, who are included in past, present and future cases and investigations of the Philippine Government, such that there shall be no criminal investigation or prosecution against said persons for acts, omissions committed prior to February 25, 1986 that may be alleged to have violated any penal law, including but not limited to Republic Act No. 3019, in relation to the acquisition of any asset treated, mentioned or included in this Agreement.  

          Expectedly, the petitioners in their joint reply-affidavit refuted respondents’ counter-affidavits. Contrary to respondents’ allegations, petitioners reiterated Benedicto’s over-all ploy, in conspiracy with the other respondents who were officers of KBS and/or RPN, to use and occupy ABS-CBN properties without paying compensation therefor. Petitioners maintain that respondents’ grand scheme was to take-over ABS-CBN, albeit ostensibly covered by the letter-lease agreement, giving the take over a semblance of legality.           Thereafter, with the issues having been joined, the Ombudsman issued the herein assailed Joint Resolution dismissing petitioners’ complaints. To the Ombudsman, the following circumstances did not give rise to probable cause necessary to indict respondents for the various felonies charged: 

1.         The Letter-Agreement of June 8, 1973 belie any illegal take-over of the ABS-CBN complex.

             While the Lopezes are now complaining that the letter-agreement was virtually forced unto them thru intimidation, hence, the vitiated consent of Mr. Montelibano, there is nothing however which the complainants adduced to prove this allegation except their threadbare allegations of threats. On the contrary, it appears that the Lopezes blessed the letter-agreement hoping that their financial difficulties with respect to the affairs of the ABS-CBN and their problem concerning the continued detention of Eugenio Lopez, Jr. by the military, would at least be mitigated. x x x             It is thus clear that the ABS-CBN complex was freely leased by Montelibano upon consultation with the Lopezes who entertained some ulterior motives of their own which they expect would result from the agreement, either directly or indirectly. Of course, the Lopezes may not have realized some of these expectations (i.e., the rentals, the release of Eugenio, Jr. from detention) but this does not change the fact that the parties’ consent to the contract appears to have been freely given. Perforce, the complaint under Article 298 of the Revised Penal Code of the Philippines must fail. 2.         Other TV and radio stations were taken over pursuant to LOI 1-A, hence no violations of Art. 312, 302 and 308 of RPC.             To the alleged violation of Art. 312 of the Revised Penal Code, the respondents contended that their use of ABS-CBN’s facilities other than those included in the lease-agreement, was in fact with the authority of the then Department of National Defense (DND). There is no denying that all of the ABS-CBN properties including the provincial ones are under sequestration pursuant to Presidential Letter of Instruction No. 1-A, issued on September 28, 1972. It was under the strength of this Presidential Letter of Instruction that KBS-RPN was authorized to enter, occupy and operate the facilities of ABS-CBN. This was also confirmed by DND Secretary Juan Ponce Enrile in his letter to RPN dated June 26, 1976. Unmistakably, KBS-RPN’s possession of the ABS-CBN’s property other than those in the ABS-CBN complex is primarily anchored on the authority pursuant to LOI 1-A. With this apparent authority, this investigation can not see in any which way how the respondents could have illegally taken over the properties of the [petitioners], particularly those in the province; there is therefore no convincing proof to support a charge under Article 312 of the Revised Penal Code. It may come to mind that “occupation of real property or usurpation of real rights in property” under Article 312 requires as one of its elements the presence of violence against or intimidation of persons as a means in securing real property or rights belonging to another. Plainly, this element is not shown. The complainants may have felt intimidated by the sequestration order, but it is in the nature of such Order to be coercive. It was an act flowing from the martial law powers of then President Marcos. 3.         No unlawful taking as to justify charges for Robbery or Theft.             Robbery and Theft under Articles 302 and 308 of the Revised Penal Code were also attributed by the [petitioners] against the respondents. From the records, it is clear that KBS-RPN has juridical possession of the ABS-CBN properties subject of this complaint; a right which can be validly set-up even against ABS-CBN itself. It can be recalled that KBS-RPN was authorized to enter, occupy and operate ABS-CBN facilities by virtue of the authority granted by the President, pursuant to LOI No. 1-A. Aside, the Broadcast Center itself was covered by the lease-agreement. Under these situations, there is obviously no basis to charge the respondents for robbery and theft; for these penal offense require as an element the act of unlawful taking or asportation. Asportation is simply poles apart from the juridical possession which KBS-RPN enjoyed over the properties. 4.         No deceit was employed to gain possession of the Broadcast Center and the provincial TV and radio stations.             In the prosecution for estafa under [Articles 315, paragraphs 2(a), 3(a) and 318] of the Revised Penal Code, it is indispensable that the element of deceit, consisting in the false statement of fraudulent representation of the accused, be made prior to, or, at least simultaneously with, the delivery of the thing by the complainants, it being essential that such false statement or fraudulent representation constitutes the very cause or the only motive which induces the complainants to part with the thing. If there be no such prior or simultaneous false statement or fraudulent representation, any subsequent act of the respondent, however fraudulent or suspicious it may appear, can not serve as basis for the prosecution of these crimes.             [From petitioners’ complaint-affidavits], it is very clear that the late Alfredo Montelibano was the one who talked with Roberto Benedicto, preparatory to the signing of the lease-agreement. As the complainants did not identify exactly which constitute the deceitful act (or the intimidation) which could have induced the Lopezes into accepting the lease agreement, in most probability, the occurrences which vitiated their consent happened during this preliminary discussion. Noticeably however, it is not Alfredo

Montelibano, the one who supposedly talked with Benedicto, who is testifying on the alleged “veiled threat” or deceits, if there are. Precisely, because he is already dead.             x x x [I]t is submitted that the Lopezes can not now testify on something which are not derived from their own personal perception. The bottomline is that what they are now trying to adduce, pertaining to the alleged deceits [or intimidation] attending the negotiation of the lease agreement are purely hearsay. This is a matter which only Alfredo Montelibano could testify competently.[9]

  

          The Ombudsman saw no need to discuss the defenses of prescription and immunity from suit raised by the respondents given his dismissal of the complaint-affidavits on the merits. However, in a subsequent Order denying petitioners Motion for Reconsideration of the Joint Resolution, the Ombudsman lifted the Office of the Chief Legal Counsel’s ratiocination for dismissing the complaint-affidavits, thus: 

Incidentally, RPN has been identified as among the corporation in which respondent Benedicto has substantial interests. In fact, it was one of the subject matters of the Compromise Agreement reached by the government and respondent Benedicto in Sandiganbayan Civil Case no. 34.             In that Compromise Agreement, for and in consideration of respondent Benedicto’s cession of equities, and assignment of his rights and interest in corporations therein listed, among them RPN, the government extended “absolute immunity” to Benedicto, including officers of his corporations as therein mentioned, “such that there shall be no criminal investigation or prosecution against said persons for acts or omissions committed prior to February 25, 1986 that may be alleged to have violated any penal law, including but not limited to Republic Act No. 3019, in relation to the acquisition of any asset treated or included in this Agreement.”             In effect, the People of the Philippines as the offended party in criminal cases has waived its right to proceed criminally against Benedicto, et. al., for whatever crime they may have committed relative to, among others, the alleged plunder of ABS-CBN properties. Again, whatever liability that remains thereabout on respondents’ part is perforce only civil in nature.[10]

  

          Hence, this recourse by the petitioners alleging grave abuse of discretion in the Ombudsman’s Joint Resolution and Order.           Before anything else, we note that on April 5, 1999 and June 13, 2000, the respective counsel for respondents Tan and Benedicto, in compliance with Section 16,[11] Rule 3 of the Rules of Court, filed pleadings informing the Court of their clients’ demise. Benedicto’s counsel filed a Notice of Death (With Prayer for Dismissal)[12] moving that Benedicto be dropped as respondent in the instant case for the reason “that the pending criminal cases subject of this appeal are actions which do not survive the death of the party accused.”           Petitioners opposed the move to drop Benedicto as respondent, citing Torrijos v. Court of Appeals[13] which held that “civil liability of the accused survives his death; because death is not a valid cause for the extinguishment of civil obligations.”           Our ruling on this issue need not be arduous. The rules on whether the civil liability of an accused, upon death, is extinguished together with his criminal liability, has long been clarified and settled in the case of  People v. Bayotas:[14]

 1.         Death of an accused pending appeal of his conviction extinguishes his criminal liability as well as the civil liability based solely thereon. As opined by Justice Regalado, in this regard, “the death of the accused prior to final judgment terminates his criminal liability and only the civil liability directlyarising from and based solely on the offense committed, i.e., civil liability ex delicto in senso strictiore.” 2.         Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the same may also be predicated on a source of obligation other than delict. Article 1157 of the Civil Code enumerates these other sources of obligation from which the civil liability may arise as a result of the same act or omission:             a)         Law            b)         Contracts            c)         Quasi-contracts            d)         x x x            e)         Quasi-delicts 3.         Where the civil liability survives, as explained in Number 2 above, an action for recovery therefor may be pursued but only by way of filing a separate civil action and subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure [15] as amended. The separate civil action may be enforced either against the executor/administrator or the

estate of the accused, depending on the source of obligation upon which the same is based as explained above. 4.         Finally, the private offended party need not fear a forfeiture of his right to file this separate civil action by prescription, in cases where during the prosecution of the criminal action and prior to its extinction, the private-offended party instituted together therewith the civil action. In such case, the statute of limitations on the civil liability is deemed interrupted during the pendency of the criminal case, conformably with provisions of Article 1155 of the Civil Code, that should thereby avoid any apprehension on a possible [de]privation of right by prescription.  

          Applying the foregoing rules, ABS-CBN’s insistence that the case at bench survives because the civil liability of the respondents subsists is stripped of merit. 

To begin with, there is no criminal case as yet against the respondents. The Ombudsman did not find probable cause to prosecute respondents for various felonies in the RPC. As such, the rule that a civil action is deemed instituted along with the criminal action unless the offended party: (a) waives the civil action, (b) reserves the right to institute it separately, or (c) institutes the civil action prior to the criminal action,[16] is not applicable.

           In any event, consistent with People v. Bayotas,[17] the death of the accused necessarily calls for the dismissal of the criminal case against him, regardless of the institution of the civil case with it. The civil action which survives the death of the accused must hinge on other sources of obligation provided in Article 1157 of the Civil Code. In such a case, a surviving civil action against the accused founded on other sources of obligation must be prosecuted in a separate civil action. In other words, civil liability based solely on the criminal action is extinguished, and a different civil action cannot be continued and prosecuted in the same criminal action. 

Significantly, this Court in Benedicto v. Court of Appeals,[18] taking cognizance of respondent Benedicto’s death on May 15, 2000, has ordered that the latter be dropped as a party, and declared extinguished any criminal as well as civil liability ex delicto that might be attributable to him in Criminal Cases Nos. 91-101879 to 91-101883, 91-101884 to 101892, and 92-101959 to 92-101969 pending before the Regional Trial Court of Manila.

 Lastly, we note that petitioners appear to have already followed our ruling in People v. Bayotas[19] by

filing a separate civil action to enforce a claim against the estate of respondent Benedicto. [20] The claim against the estate of Benedicto is based on contract—the June 8, 1973letter- agreement—in consonance with Section 5,[21] Rule 86 of the Rules of Court. Plainly, the dropping of respondents Benedicto and Tan as parties herein is in order.

 We now come to the core issue of whether the Ombudsman committed grave abuse of discretion in

dismissing petitioners’ complaint against the respondents. We rule in the negative and, accordingly, dismiss the petition.

 We cannot overemphasize the fact that the Ombudsman is a constitutional officer duty bound to

“investigate on its own, or on complaint by any person, any act or omission of any public official, employee, office or agency, when such act or omission appears to be illegal, unjust, improper, or inefficient.”[22] The raison d ’etre for its creation and endowment of broad investigative authority is to insulate it from the long tentacles of officialdom that are able to penetrate judges’ and fiscals’ offices, and others involved in the prosecution of erring public officials, and through the execution of official pressure and influence, quash, delay, or dismiss investigations into malfeasances and misfeasances committed by public officers.[23]

 In Presidential Commission on Good Government (PCGG) v. Desierto,[24] we dwelt on the powers,

functions and duties of the Ombudsman, to wit:             The prosecution of offenses committed by public officers is vested primarily in the Office of the Ombudsman. It bears emphasis that the Office has been given a wide latitude of investigatory and prosecutory powers under the Constitution and Republic Act No. 6770 (The Ombudsman Act of 1989). This discretion is all but free from legislative, executive or judicial intervention to ensure that the Office is insulated from any outside pressure and improper influence.             Indeed, the Ombudsman is empowered to determine whether there exist reasonable grounds to believe that a crime has been committed and that the accused is probably guilty thereof and, thereafter, to file the corresponding information with the appropriate courts. The Ombudsman may thus conduct an investigation if the complaint filed is found to be in the proper form and substance. Conversely, the Ombudsman may also dismiss the complaint should it be found insufficient in form or substance.             Unless there are good and compelling reasons to do so, the Court will refrain from interfering with the exercise of the Ombudsman’s powers, and respect the initiative and independence inherent in the latter who, beholden to no one, acts as the champion of the people and the preserver of the integrity of public service.             The pragmatic basis for the general rule was explained in Ocampo v. Ombudsman: 

            The rule is based not only upon respect for the investigatory and prosecutory powers granted by the Constitution to the Office of the Ombudsman but upon practicality as well. Otherwise, the functions of the courts will be grievously hampered by innumerable petitions assailing the dismissal of investigatory proceedings conducted by the Office of the Ombudsman with regard to complaints filed before it, in much the same way that the courts would be extremely swamped if they would be compelled to review the exercise of discretion on the part of the fiscals or prosecuting attorneys each time they decide  to file an information in court or dismiss a complaint by private complainants.[25]

  

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

 As petitioners have ratified the letter-agreement, even after the lifting of martial law and the toppling

of the Marcos government, and advanced the validity of the letter-agreement in their claim against the estate of Benedicto, they cannot, in the same breath, aver that respondents’ actuations in the execution of the letter-agreement were criminal in nature, or that the letter-agreement was more ostensible than real and to insist on the prosecution of respondents for felonies supposedly committed in connection with this ubiquitous letter-agreement.[30]

 In fine, the Ombudsman did not abuse his discretion in determining that the allegations of petitioners

against respondents are civil in nature, bereft of criminal character. Perforce, he was correct in dismissing petitioners’ complaint-affidavits.

 WHEREFORE, premises considered, the petition is hereby DISMISSED. Roberto S. Benedicto and

Salvador Tan are dropped as private respondents without prejudice to the filing of separate civil actions against their respective estates. The assailed Joint Resolution and Order of the Ombudsman in OMB-0-94-1109 are AFFIRMED.

 SO ORDERED.

G.R. No. L-24033             February 22, 1968

PHOENIX ASSURANCE CO., LTD., plaintiff-appellant, vs.UNITED STATES LINES, defendant-appellee.

Quasha, Asperilla, Blanco & Associates for plaintiff-appellant. Enriquez D. Perez for defendant-appellee.

BENGZON, J.P., J.:

          The facts antecedent to this appeal from a decision dated October 31, 1964 of the Court of First Instance of Manila, are as follows:

          On June 29, 1962, General Motors shipped and consigned on a CIF basis to Davao Parts and Service, Inc. at Davao City from New York aboard the United States Lines' vessel SS "Pioneer Moor" a cargo of truck spare parts in 25 cases and 4 crates (2 pieces unboxed), for which United States Lines issues a short form bill of lading No. T-1 (Annex "A" and Exh. "1"), and which shipment was insured against loss and damage with Phoenix Assurance Co., Ltd. The short form bill of lading No. T-1 indicated Manila as the port of discharge and Davao City as the place where the goods were to be transshipped, and expressly incorporated by reference the provisions contained in the carrier's regular long form bill of lading (Annex "B" and Exh. "2").

          The SS "Pioneer Moor" on July 28, 1962 discharged at Manila to the custody of the Manila Port Service which was then the operator of the arrastre service at the Port of Manila, the above described cargo, complete but with the exception of two crates, namely, Crates Nos. 3139 and 3148 valued at P1,498.25.

          On July 30, 1962, the Luzon Brokerage Corporation, Customs broker hired by the United States Lines, filed in behalf of the latter a provisional claim against the Manila Port Service for short landed, short-delivered and/or landed in bad order cargo ex-United States Lines' vessel.

          On August 30, 1962, the afore-described cargo, with the exception of Crates Nos. 3139 and 3148 which were not discharged at the Manila Port, and Crates Nos. 3648 and 3649 which were discharged at the Manila Port but were lost in the custody of the Manila Port Service, was transshipped by United States Lines to Davao through a vessel of its Davao agent, Columbian Rope Company, and duly received in good order by the Davao Parts and Service, Inc.

          Davao Parts and Service, Inc. filed on December 26, 1962 a formal claim with the United States Lines through the latter's agent, Columbian Rope Company, for the value of Crates Nos. 3139, 3148, 3648 and 3649 in the total sum of P2,010.37.

          The United States Lines, after proper verification, paid Davao Parts and Service, Inc. the sum of P1,458.25, representing the value of Crates Nos. 3139 and 3148, when it was discovered that these two crates had been overlanded in Honolulu, but refused to pay for the value of Crates Nos. 3648 and 3649 for the reason that these crates had been lost while in the custody of the Manila Port Service.

          The two crates (Nos. 3139 and 3148) which were overlanded in Honolulu and for which United States Lines paid Davao Parts and Service, Inc. the sum of P1,458.25, were later recovered and returned to Davao Parts and Service, Inc. and the latter refunded United States Lines for the sum it paid.

          In view of United States Lines' refusal to pay for the two crates (Nos. 3648 and 3649) which were lost while in the custody of the Manila Port Service, Ker & Company, Ltd., agent of Phoenix Assurance Co., Ltd., in the Philippines, and insurer of Davao Parts and Service, Inc., paid to the latter the value of said crates in the sum of P552.12.

          On March 25, 1963, the United States Lines, through the Columbian Rope Company, by letter informed the Davao Parts and Service, Inc. that it was filing a claim for the undelivered crates with the Manila Port Service. And true to its word, it filed on March 30, 1963 a formal claim with the Manila Port Service for the value of Crates Nos. 3648 and 3649, but the latter declined to honor the same.

          On June 26, 1963, United States Lines, through Columbian Rope Company, its Davao agent, informed the Davao Parts and Service, Inc., inter alia, that the Manila Port Service had not yet settled its claim, and that the one-year period provided by law within which to bring action against the Manila Port Service for the two crates (Nos. 3648 and 3649) would expire on July 28, 1963.

          Phoenix Assurance Co., Ltd., through Ker & Company Ltd., its agent in the Philippines, wrote on July 24, 1963 the United States Lines expressing its appreciation to the latter for taking action against the Manila Port Service. In the same letter it requested for an extension of time to file suit against the United States Lines (the prescriptive period for doing so being set to expire on July 28, 1963), explaining that it could not file suit against any entity (including the Manila Port Service) except the United States Lines with whom its subrogee the Davao Parts and Service, Inc., was in contract.

          No reply having been received by it from the United States Lines, the Phoenix Assurance Co., Ltd. on July 29, 1963 filed a suit praying that judgment be rendered against the former for the sum of P552.12, with interest at the legal rate, plus attorney's fees and expenses of litigation. 1

          On August 16, 1963, the United States Lines filed its answer with counterclaim, 2 while Phoenix Assurance Co., Ltd. filed its answer to said counterclaim on August 26, 1963.

          On March 9, 1964, the parties submitted a Partial Stipulation of Facts. 3

          After trial, the lower court on October 31, 1964 rendered a decision dismissing plaintiff's complaint. 4

          Thus this appeal, raising the sole issue of whether or not the lower court erred in dismissing the complaint and in exonerating defendant-appellee from liability for the value of the two undelivered crates Nos. 3648 and 3649.

          It must be stated at the outset that a bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks and condition, quality, and value. As a contract, it names the contracting parties, which include the consignee, fixes the route, destination, and freight rate or charges, and stipulates the rights and obligations assumed by the parties. 5

          In this jurisdiction, it is a statutory and decisional rule of law that a contract is the law between the contracting parties, 6 and where there is nothing in it which is contrary to law, morals, good customs, public policy, or public order, the validity of the contract must be sustained. 7

          The Bill of Lading (short form) No. T-1 dated June 29, 1962 (Annex "A" and Exh. 1) provides under Section 1 thereof (Exh. that, "It is agreed that the receipt, custody carriage, delivery and transshipping of the goods are subject to the norms appearing on the face and back hereof and also to the terms contained in the carrier's regular long form, bill of lading, used in this service, including any clauses presently being stamped or endorsed thereon which shall be deemed to be incorporated in this bill of lading, which shall govern the relations whatsoever they may be between shipper, consignee, carrier and ship in every contingency, wheresoever and whensoever occurring and whether the carrier be acting as such or as bailee, . . . . (Emphasis supplied.)

          On the other hand, the regular long form Bill of Lading (Annex "B" and Exh. "2") provides, inter alia, that:1äwphï1.ñët

          The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are not in its actual custody. (Par. 2, last subpar. Emphasis supplied.)

          The carrier or master, in the exercise of its or his discretion and altho' transshipment or forwarding of the goods may have been contemplated or provided for herein, may at port of discharge or any other place whatsoever transship or forward the goods or any part thereof by any means at the risk and expense of the goods and at any time, whether before or after loading on the ship named and by any route, whether within or outside the scope of the voyage or beyond the port of discharge or destination of the goods and without notice to the shipper or consignee. The carrier or master may delay such transshipping or forwarding for any reason, including but not limited to awaiting a vessel or other means of transportation whether by the carrier or others.

          The carrier or master in making arrangements with any person for or in connection with all transshipping or forwarding of the goods or the use of any means of transportation not used or operated by the carrier shall be considered solely the agent of the shipper and consignee and without any other responsibility whatsoever or for the cost thereof . The receipt, custody, carriage and delivery of the goods by any such person or on carrier and all transshipping and forwarding shall be subject to all the provisions whatsoever of such person's or on carrier's form of bill of lading or agreement then in use, whether or not issued and even though such provisions may be less favorable

to the shipper or consignee in any respect than the provisions of this bill of lading. The shipper and consignee authorize the carrier or master to arrange with any such person or on-carrier that the lowest valuation or limitation of liability contained in the bill of lading or other agreement of such person or on-carrier shall apply.

          All responsibility of the carrier in any capacity shall altogether cease and the goods shall be deemed delivered by it and this contract of carriage shall be deemed fully performed on actual or constructive delivery of the goods to itself as such agent of the shipper and consignee or to any such person or on carrier at port of discharge from ship or elsewhere in case of an earlier transshipment.

          The shipper and consignee shall be liable to this carrier for and shall indemnify it against all expense of forwarding and transshipping, including any increase in or additional freight or other charges whatsoever.

          Pending or during forwarding or transshipping this carrier or the master may store the goods ashore or afloat solely as agent of the shipper and at the risk and expense of the goods and this carrier shall not be responsible for the acts, neglect, delay or failure to act of anyone to whom the goods are entrusted or delivered for storage, handling, or any service incidental thereto.

          In case the carrier issues a bill of lading covering transportation by a local or other carrier prior to the goods being delivered to and put into the physical custody of the carrier, it shall not be under any responsibility or liability whatsoever for any loss or damage to the goods occurring prior to or until the actual receipt or custody of the goods by it at the port or place of transportation to such port or place where the goods are put in its physical custody, it acts solely as the agent of the shipper. (Par. 16, emphasis supplied.)

          It is admitted by both parties that the crates subject matter of this action were lost while in the possession and custody of the Manila Port Service. Since the long form of Bill of Lading (Annex "B" and Exh. "2") provides that "The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are not in its actual custody," appellee cannot be held responsible for the loss of said crates. For as correctly observed by the lower court, it is hardly fair to make appellee accountable for a loss not due to its acts or omissions or over which it had no control. 8

          Contrary to appellant's stand, the appellee did not undertake to carry and deliver safely the cargo to the consignee in Davao City. The short form Bill of Lading (Annex "A" and Exh. "1") states in no uncertain terms that the port of discharge of the cargo is Manila, but that the same was to be transshipped beyond the port of discharge to Davao City. Pursuant to the terms of the long form Bill of Lading (Annex "B" and Exh. "2"), appellee's responsibility as a common carrier ceased the moment the goods were unloaded in Manila; and in the matter of transshipment, appellee acted merely as an agent of the shipper and consignee. Contrary likewise to appellant's contention, the cargo was not transshipped with the use of transportation used or operated by appellee. It is true that the vessel used for transshipment is owned and operated by appellee's Davao agent, the Columbian Rope Company, but there is no proof that said vessel is owned or operated by appellee. The vessels of appellee's agent are being erroneously presumed by appellant to be owned and operated by appellee.

          Appellant argues that the provisions of the Bill of Lading exculpating the appellee from liability for cargo losses, do not apply where full cargo freight is paid up to and beyond the point of stipulated discharge, and here defendant-appellee agreed to absorb all costs of forwarding and transshipment — freight having been prepaid up to Davao City. But the receipt of full cargo freight up to Davao City cannot render inoperative the provisions of the Bill of Lading relied upon by appellee inasmuch as such a situation is not provided therein as an exception. In fact, one searches the Bills of Lading (short and long forms) in vain for such an exception. Besides, it is for the convenience of both parties that full freight up to Davao City had been prepaid, otherwise there would have been need to make further arrangements regarding the transshipment of the cargo to Davao City. After all, the long form Bill of Lading provides that, "The shipper and consignee shall be liable to this carrier for and shall indemnify it against all expense of forwarding and transshipping, including any increase in or additional freight or other charge whatsoever." (Annex "B" and Exh. "2", par. 6, subpar. 4)

          The filing of a claim by defendant-appellee with the Manila Port Service for the value of the losses cannot be considered as an indication that it is answerable for cargo losses up to Davao City. On the contrary, it is a convincing proof that said party was not remiss in its duties as agent of the consignee. That appellee captioned its claim against the Manila Port Service as "SS 'Pioneer Moor' Voy. 25, Reb. 1067 New York/Davao via Manila B/L T-1 31 Packages Truck Spare Parts Cons: Davao Parts and Service," likewise, is no proof that appellee knowingly assumed liability for cargo losses up to Davao City. It merely showed that the goods would have to be, as indeed they were, first unloaded in Manila and thereafter transshipped to Davao City.

          Through the short form Bill of Lading (Annex "A" and Exh. "1"), incorporating by reference the terms of the regular long form bill of lading (Annex "B" and Exh. "2"), the United States Lines acknowledged the receipt of the

cargo of truck spare parts that it carried, and stated the conditions under which it was to carry the cargo, the place where it was to be transshipped, the entity to which delivery is to be made, and the rate of compensation for the carriage. This it delivered to the Davao Parts and Service, Inc. as evidence of a contract between them. By receiving the bill of lading, Davao Parts and Service, Inc. assented to the terms of the consignment contained therein, and became bound thereby, so far as the conditions named are reasonable in the eyes of the law. Since either appellant nor appellee alleges that any provision therein is contrary to law, morals, good customs, public policy, or public order, — and indeed We found none — the validity of the Bill of Lading must be sustained and the provisions therein properly applied to resolve the conflict between the parties.

          WHEREFORE, the decision appealed from is hereby affirmed, with costs against the appellant. So ordered

G.R. No. L-36902 January 30, 1982

LUIS PICHEL, petitioner, vs.PRUDENCIO ALONZO, respondent.

 

GUERRERO, J.:

This is a petition to review on certiorari the decision of the Court of First Instance of Basilan City dated January 5, 1973 in Civil Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis Pichel, defendant."

This case originated in the lower Court as an action for the annulment of a "Deed of Sale" dated August 14, 1968 and executed by Prudencio Alonzo, as vendor, in favor of Luis Pichel, as vendee, involving property awarded to the former by the Philippine Government under Republic Act No. 477. Pertinent portions of the document sued upon read as follows:

That the VENDOR for and in consideration of the sum of FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00), Philippine Currency, in hand paid by the VENDEE to the entire satisfaction of the VENDOR, the VENDOR hereby sells transfers, and conveys, by way of absolute sale, all the coconut fruits of his coconut land, designated as Lot No. 21 - Subdivision Plan No. Psd- 32465, situated at Balactasan Plantation, Lamitan, Basilan City, Philippines;

That for the herein sale of the coconut fruits are for all the fruits on the aforementioned parcel of land presently found therein as well as for future fruits to be produced on the said parcel of land during the years period; which shag commence to run as of SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic);

That the delivery of the subject matter of the Deed of Sale shall be from time to time and at the expense of the VENDEE who shall do the harvesting and gathering of the fruits;

That the Vendor's right, title, interest and participation herein conveyed is of his own exclusive and absolute property, free from any liens and encumbrances and he warrants to the Vendee good title thereto and to defend the same against any and all claims of all persons whomsoever. 1

After the pre-trial conference, the Court a quo issued an Order dated November 9, 1972 which in part read thus:

The following facts are admitted by the parties:

Plaintiff Prudencio Alonzo was awarded by the Government that parcel of land designated as Lot No. 21 of Subdivision Plan Psd 32465 of Balactasan, Lamitan, Basilan City in accordance with Republic Act No. 477. The award was cancelled by the Board of Liquidators on January 27, 1965 on the ground that, previous thereto, plaintiff was proved to have alienated the land to another, in violation of law. In 197 2, plaintiff's rights to the land were reinstated.

On August 14, 1968, plaintiff and his wife sold to defendant an the fruits of the coconut trees which may be harvested in the land in question for the period, September 15, 1968 to January 1, 1976, in consideration of P4,200.00. Even as of the date of sale, however, the land was still under lease to one, Ramon Sua, and it was the agreement that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by defendant directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said payment plaintiff refused to snow the defendant to make any harvest.

In July 1972, defendant for the first time since the execution of the deed of sale in his favor, caused the harvest of the fruit of the coconut trees in the land.

xxx xxx xxx

Considering the foregoing, two issues appear posed by the complaint and the answer which must needs be tested in the crucible of a trial on the merits, and they are:

First.— Whether or nor defendant actually paid to plaintiff the full sum of P4,200.00 upon execution of the deed of sale.

Second.— Is the deed of sale, Exhibit 'A', the prohibited encumbrance contemplated in Section 8 of Republic Act No. 477? 2

Anent the first issue, counsel for plaintiff Alonzo subsequently 'stipulated and agreed that his client ... admits fun payment thereof by defendant. 3 The remaining issue being one of law, the Court below considered the case submitted for summary judgment on the basis of the pleadings of the parties, and the admission of facts and documentary evidence presented at the pre-trial conference.

The lower court rendered its decision now under review, holding that although the agreement in question is denominated by the parties as a deed of sale of fruits of the coconut trees found in the vendor's land, it actually is, for all legal intents and purposes, a contract of lease of the land itself. According to the Court:

... the sale aforestated has given defendant complete control and enjoyment of the improvements of the land. That the contract is consensual; that its purpose is to allow the enjoyment or use of a thing; that it is onerous because rent or price certain is stipulated; and that the enjoyment or use of the thing certain is stipulated to be for a certain and definite period of time, are characteristics which admit of no other conclusion. ... The provisions of the contract itself and its characteristics govern its nature. 4

The Court, therefore, concluded that the deed of sale in question is an encumbrance prohibited by Republic Act No. 477 which provides thus:

Sec. 8. Except in favor of the Government or any of its branches, units, or institutions, land acquired under the provisions of this Act or any permanent improvements thereon shall not be thereon and for a term of ten years from and after the date of issuance of the certificate of title, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of such period.

Any occupant or applicant of lands under this Act who transfers whatever rights he has acquired on said lands and/or on the improvements thereon before the date of the award or signature of the contract of sale, shall not be entitled to apply for another piece of agricultural land or urban, homesite or residential lot, as the case may be, from the National Abaca and Other Fibers Corporation; and such transfer shall be considered null and void. 5

The dispositive portion of the lower Court's decision states:

WHEREFORE, it is the judgment of this Court that the deed of sale, Exhibit 'A', should be, as it is, hereby declared nun and void; that plaintiff be, as he is, ordered to pay back to defendant the consideration of the sale in the sum of P4,200.00 the same to bear legal interest from the date of the filing of the complaint until paid; that defendant shall pay to the plaintiff the sum of P500.00 as attorney's fees.

Costs against the defendant. 6

Before going into the issues raised by the instant Petition, the matter of whether, under the admitted facts of this case, the respondent had the right or authority to execute the "Deed of Sale" in 1968, his award over Lot No. 21 having been cancelled previously by the Board of Liquidators on January 27, 1965, must be clarified. The case in point is Ras vs. Sua 7 wherein it was categorically stated by this Court that a cancellation of an award granted pursuant to the provisions of Republic Act No. 477 does not automatically divest the awardee of his rights to the land. Such cancellation does not result in the immediate reversion of the property subject of the award, to the State. Speaking through Mr. Justice J.B.L. Reyes, this Court ruled that "until and unless an appropriate proceeding for reversion is instituted by the State, and its reacquisition of the ownership and possession of the land decreed by a competent court, the grantee cannot be said to have been divested of whatever right that he may have over the same property." 8

There is nothing in the record to show that at any time after the supposed cancellation of herein respondent's award on January 27, 1965, reversion proceedings against Lot No. 21 were instituted by the State. Instead, the admitted fact is that the award was reinstated in 1972. Applying the doctrine announced in the above-cited Ras case, therefore, herein respondent is not deemed to have lost any of his rights as grantee of Lot No. 21 under Republic Act No. 477 during the period material to the case at bar, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, respondent could exercise all the rights pertaining to a grantee with respect to Lot No. 21.

This brings Us to the issues raised by the instant Petition. In his Brief, petitioner contends that the lower Court erred:

1. In resorting to construction and interpretation of the deed of sale in question where the terms thereof are clear and unambiguous and leave no doubt as to the intention of the parties;

2. In declaring — granting without admitting that an interpretation is necessary — the deed of sale in question to be a contract of lease over the land itself where the respondent himself waived and abandoned his claim that said deed did not express the true agreement of the parties, and on the contrary, respondent admitted at the pre-trial that his agreement with petitioner was one of sale of the fruits of the coconut trees on the land;

3. In deciding a question which was not in issue when it declared the deed of sale in question to be a contract of lease over Lot 21;

4. In declaring furthermore the deed of sale in question to be a contract of lease over the land itself on the basis of facts which were not proved in evidence;

5. In not holding that the deed of sale, Exhibit "A" and "2", expresses a valid contract of sale;

6. In not deciding squarely and to the point the issue as to whether or not the deed of sale in question is an encumbrance on the land and its improvements prohibited by Section 8 of Republic Act 477; and

7. In awarding respondent attorney's fees even granting, without admitting, that the deed of sale in question is violative of Section 8 of Republic Act 477.

The first five assigned errors are interrelated, hence, We shall consider them together. To begin with, We agree with petitioner that construction or interpretation of the document in question is not called for. A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties. The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed. Such is the mandate of the Civil Code of the Philippines which provides that:

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control ... .

Pursuant to the afore-quoted legal provision, the first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible. 9

Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it purports to be. It is a document evidencing the agreement of herein parties for the sale of coconut fruits of Lot No. 21, and not for thelease of the land itself as found by the lower Court. In clear and express terms, the document defines the object of the contract thus: "the herein sale of the coconut fruits are for an the fruits on the aforementioned parcel of land during the years ...(from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover, as petitioner correctly asserts, the document in question expresses a valid contract of sale. It has the essential elements of a contract of sale as defined under Article 1485 of the New Civil Code which provides thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

The subject matter of the contract of sale in question are the fruits of the coconut trees on the land during the years from September 15, 1968 up to January 1, 1976, which subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things having a potential existence may be the object of the contract of sale. And inSibal vs. Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject matter of the sale. Here, the Supreme Court, citing Mechem on Sales and American cases said which have potential existence may be the subject matter of sale. Here, the Supreme Court, citing Mechem on Sales and American cases said:

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep. 63) Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possess. He may make a valid sale of the wine that a vineyard is expected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next case of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the goodwill of a trade and the like. The thing sold, however, must be specific and Identified. They must be also owned at the time by the vendor. (Hull vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523).

We do not agree with the trial court that the contract executed by and between the parties is "actually a contract of lease of the land and the coconut trees there." (CFI Decision, p. 62, Records). The Court's holding that the contract in question fits the definition of a lease of things wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain and for a period which may be definite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous. The essential difference between a contract of sale and a lease of things is that the delivery of the thing sold transfers ownership, while in lease no such transfer of ownership results as the rights of the lessee are limited to the use and enjoyment of the thing leased.

In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held:

Since according to article 1543 of the same Code the contract of lease is defined as the giving or the concession of the enjoyment or use of a thing for a specified time and fixed price, and since such contract is a form of enjoyment of the property, it is evident that it must be regarded as one of the means of enjoyment referred to in said article 398, inasmuch as the terms enjoyment, use, and benefit involve the same and analogous meaning relative to the general utility of which a given thing is capable. (104 Jurisprudencia Civil, 443)

In concluding that the possession and enjoyment of the coconut trees can therefore be said to be the possession and enjoyment of the land itself because the defendant-lessee in order to enjoy his right under the contract, he actually takes possession of the land, at least during harvest time, gather all of the fruits of the coconut trees in the land, and gain exclusive use thereof without the interference or intervention of the plaintiff-lessor such that said plaintiff-lessor is excluded in fact from the land during the period aforesaid, the trial court erred. The contract was clearly a "sale of the coconut fruits." The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut fruits of his land," thereby divesting himself of all ownership or dominion over the fruits during the seven-year period. The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distinct and separate from each other, the first pertaining to

the accessory or improvements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the other way around, the accessory follows the principal. Hence, the sale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land itself.

The real and pivotal issue of this case which is taken up in petitioner's sixth assignment of error and as already stated above, refers to the validity of the "Deed of Sale", as such contract of sale, vis-a-vis the provisions of Sec. 8, R.A. No. 477. The lower Court did not rule on this question, having reached the conclusion that the contract at bar was one of lease. It was from the context of a lease contract that the Court below determined the applicability of Sec. 8, R.A. No. 477, to the instant case.

Resolving now this principal issue, We find after a close and careful examination of the terms of the first paragraph of Section 8 hereinabove quoted, that the grantee of a parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the natural and/or industrial fruits of the land awarded to him. What the law expressly disallows is the encumbrance or alienation of the land itself or any of the permanent improvements thereon. Permanent improvements on a parcel of land are things incorporated or attached to the property in a fixed manner, naturally or artificially. They include whatever is built, planted or sown on the land which is characterized by fixity, immutability or immovability. Houses, buildings, machinery, animal houses, trees and plants would fall under the category of permanent improvements, the alienation or encumbrance of which is prohibited by R.A. No. 477. While coconut trees are permanent improvements of a land, their nuts are natural or industrial fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise disposed of by the owner of the land. Herein respondents, as the grantee of Lot No. 21 from the Government, had the right and prerogative to sell the coconut fruits of the trees growing on the property.

By virtue of R.A. No. 477, bona fide occupants, veterans, members of guerilla organizations and other qualified persons were given the opportunity to acquire government lands by purchase, taking into account their limited means. It was intended for these persons to make good and productive use of the lands awarded to them, not only to enable them to improve their standard of living, but likewise to help provide for the annual payments to the Government of the purchase price of the lots awarded to them. Section 8 was included, as stated by the Court a quo, to protect the grantees from themselves and the incursions of opportunists who prey on their misery and poverty." It is there to insure that the grantees themselves benefit from their respective lots, to the exclusion of other persons.

The purpose of the law is not violated when a grantee sells the produce or fruits of his land. On the contrary, the aim of the law is thereby achieved, for the grantee is encouraged and induced to be more industrious and productive, thus making it possible for him and his family to be economically self-sufficient and to lead a respectable life. At the same time, the Government is assured of payment on the annual installments on the land. We agree with herein petitioner that it could not have been the intention of the legislature to prohibit the grantee from selling the natural and industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein the grantee would not be able to receive and enjoy the fruits of the property in the real and complete sense.

Respondent through counsel, in his Answer to the Petition contends that even granting arguendo that he executed a deed of sale of the coconut fruits, he has the "privilege to change his mind and claim it as (an) implied lease," and he has the "legitimate right" to file an action for annulment "which no law can stop." He claims it is his "sole construction of the meaning of the transaction that should prevail and not petitioner. (sic). 10 Respondent's counsel either misapplies the law or is trying too hard and going too far to defend his client's hopeless cause. Suffice it to say that respondent-grantee, after having received the consideration for the sale of his coconut fruits, cannot be allowed to impugn the validity of the contracts he entered into, to the prejudice of petitioner who contracted in good faith and for a consideration.

The issue raised by the seventh assignment of error as to the propriety of the award of attorney's fees made by the lower Court need not be passed upon, such award having been apparently based on the erroneous finding and conclusion that the contract at bar is one of lease. We shall limit Ourselves to the question of whether or not in accordance with Our ruling in this case, respondent is entitled to an award of attorney's fees. The Civil Code provides that:

Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's 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 plaintiff's 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 workmen's compensation and employer's 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;

(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

We find that none of the legal grounds enumerated above exists to justify or warrant the grant of attorney's fees to herein respondent.

IN VIEW OF THE FOREGOING, the judgment of the lower Court is hereby set aside and another one is entered dismissing the Complaint. Without costs.

SO ORDERED.

G.R. No. L-17133      December 31, 1965

U.S.T. COOPERATIVE STORE, petitioner-appellee, vs.THE CITY OF MANILA and MARCELINO SARMIENTO, as Treasurer of the City of Manila, respondents-appellants.

Herras Law Office for petitioner-appellee.City Fiscal H. Concepcion, Jr. and Assistant City Fiscal Manuel T. Reyes for respondents-appellants.

MAKALINTAL, J.:

This is an appeal by respondents from the decision of the Court of First Instance of Manila ordering them to refund to appellee the sums it had paid to the City of Manila as municipal taxes and license fees for the period beginning July 1957 up to December 1958. The total amount involved is P12,345.10.

The material facts were stipulated by the parties. Appellee is a duly organized cooperative association registered with the Securities and Exchange Commission on March 18, 1947 in accordance with Commonwealth Act No. 5165 as amended. Its net assets never exceeded P500,000 during, the years 1957, 1958 and 1959. From the time of its registration it was under the jurisdiction of the Cooperative Administration Office.

On June 22, 1957 Republic Act No. 2023, otherwise known as the Philippine Non-Agricultural Cooperative Act, was approved by Congress, amending and consolidating existing laws on non-agricultural cooperatives in the Philippines. The two provisions of said Act which bear on the present case are sections 4 (1) and 66 (1), which read as follows:

SEC. 4 (1) Every cooperative under the jurisdiction of the Cooperatives Administration Office existing at the time of the approval of this Act which has been registered under existing cooperative laws

(Commonwealth Act five hundred sixty-five, Act Twenty five hundred eight and Act Thirty-four hundred twenty-five, all as amended) shall be deemed to be registered under this Act, and its by-laws shall so far as they are not inconsistent with the provisions of this Act, continue in force , and be deemed to be registered under this Act.

SEC. 66 (1) Cooperatives with net assets of not more than five hundred thousand pesos shall be exempt from all taxes and government fees of whatever name, and nature except those provided for under this Act: ... .

Unaware of the exemption provided for in section 66 (1) appellee paid to respondent City of Manila municipal taxes and license fees in the total amount and for the period already stated. In May 1959 appellee requested a refund of said amount from the City Treasurer, but the request was denied. Hence the present suit.

Appellants contend that the exemption under section 66 (1) does not apply to appellee because the latter was trying business not only with its members but also with the general public. It may be noted that this fact is not ground for non-exemption from taxes and license fees. What the law imposes — and that under another section (Sec. 58) — is a restriction to the effect that a cooperative shall not transact business with non-members to exceed that done with members. There is no proof that this restriction has been violated; and in any case, the law does not provide that the penalty for such violation is the non-exemption of the cooperative concerned. All that is required for purposes of exemption is that the cooperative be registered under Republic Act 2023 and that its net assets be not more than P500,000. On the question of registration, section 4 is clear that every cooperative under the jurisdiction of the Cooperatives Administration Office existing at the time of the approval of this Act which has been registered under existing cooperative laws (as is the case of appellee here) shall be deemed to be registered under this Act.

Appellant next argues that since the taxes and license fees in question were voluntarily paid they can no longer be recovered, as appellee was presumed to know the law concerning its exemption and hence must be considered as having waived the benefit thereof. That the payment was erroneously made there can be no doubt. The error consisted in appellee's not knowing of the enactment of Republic Act No. 2023, which although passed in Julie 1957 was published only in the issue of the Official Gazette for December of the same year. The following authorities cited by appellee appear to us to be of persuasive force:

A payment of taxes under a mistake of fact has been held not to be voluntary, and is therefore recoverable. (51 Am. Jur. 1023)

On principle, a recovery should be allowed where money is paid under a mistake of fact although such mistake of fact may be induced by a mistake of laws, or where there is both a mistake of fact and a mistake of law. (40 Am. Jur. 846)

When money is paid to another under the influence of a mistake of fact — that on the mistaken supposition of the existence of a specific fact which would entitle the other to the money — and it would not have been known that the fact making the payment was otherwise, it may be recovered. The ground upon which the right of recovery rests is that money paid through misapprehension of facts belongs, in equity , and in good conscience, to the person who paid it. (4 Am. Jur. 514)

We find no reason to attribute negligence to appellee in making the payments in question, especially considering that the new law involved a change in its status from a taxable to a tax-exempt institution; and if it continued to pay for a time after the exemption became effective it did so in a desire to abide by what it believed to be the law. No undue disadvantage should be visited upon it as a consequence thereof.

The decision appealed from is affirmed, without pronouncement as to costs.

G.R. No. 72964 January 7, 1988

FILOMENO URBANO, petitioner, vs.HON. INTERMEDIATE APPELLATE COURT AND PEOPLE OF THE PHILIPPINES, respondents.

 GUTIERREZ, JR., J.:

This is a petition to review the decision of the then Intermediate Appellate Court which affirmed the decision of the then Circuit Criminal Court of Dagupan City finding petitioner Filomeno Urban guilty beyond reasonable doubt of the crime of homicide.

The records disclose the following facts of the case.

At about 8:00 o'clock in the morning of October 23, 1980, petitioner Filomeno Urbano went to his ricefield at Barangay Anonang, San Fabian, Pangasinan located at about 100 meters from the tobacco seedbed of Marcelo Javier. He found the place where he stored his palay flooded with water coming from the irrigation canal nearby which had overflowed. Urbano went to the elevated portion of the canal to see what happened and there he saw Marcelo Javier and Emilio Erfe cutting grass. He asked them who was responsible for the opening of the irrigation canal and Javier admitted that he was the one. Urbano then got angry and demanded that Javier pay for his soaked palay. A quarrel between them ensued. Urbano unsheathed his bolo (about 2 feet long, including the handle, by 2 inches wide) and hacked Javier hitting him on the right palm of his hand, which was used in parrying the bolo hack. Javier who was then unarmed ran away from Urbano but was overtaken by Urbano who hacked him again hitting Javier on the left leg with the back portion of said bolo, causing a swelling on said leg. When Urbano tried to hack and inflict further injury, his daughter embraced and prevented him from hacking Javier.

Immediately thereafter, Antonio Erfe, Emilio Erfe, and Felipe Erfe brought Javier to his house about 50 meters away from where the incident happened. Emilio then went to the house of Barangay Captain Menardo Soliven but not finding him there, Emilio looked for barrio councilman Felipe Solis instead. Upon the advice of Solis, the Erfes together with Javier went to the police station of San Fabian to report the incident. As suggested by Corporal Torio, Javier was brought to a physician. The group went to Dr. Guillermo Padilla, rural health physician of San Fabian, who did not attend to Javier but instead suggested that they go to Dr. Mario Meneses because Padilla had no available medicine.

After Javier was treated by Dr. Meneses, he and his companions returned to Dr. Guillermo Padilla who conducted a medico-legal examination. Dr. Padilla issued a medico-legal certificate (Exhibit "C" dated September 28, 1981) which reads:

TO WHOM IT MAY CONCERN:

This is to certify that I have examined the wound of Marcelo Javier, 20 years of age, married, residing at Barangay Anonang, San Fabian, Pangasinan on October 23, 1980 and found the following:

1 -Incised wound 2 inches in length at the upper portion of the lesser palmar prominence, right.

As to my observation the incapacitation is from (7-9) days period. This wound was presented to me only for medico-legal examination, as it was already treated by the other doctor. (p. 88, Original Records)

Upon the intercession of Councilman Solis, Urbano and Javier agreed to settle their differences. Urbano promised to pay P700.00 for the medical expenses of Javier. Hence, on October 27, 1980, the two accompanied by Solis appeared before the San Fabian Police to formalize their amicable settlement. Patrolman Torio recorded the event in the police blotter (Exhibit A), to wit:

xxx xxx xxx

Entry Nr 599/27 Oct '80/103OH/ Re entry Nr 592 on page 257 both parties appeared before this Station accompanied by brgy. councilman Felipe Solis and settled their case amicably, for they are neighbors and close relatives to each other. Marcelo Javier accepted and granted forgiveness to Filomeno Urbano who shoulder (sic) all the expenses in his medical treatment, and promising to him and to this Office that this will never be repeated anymore and not to harbour any grudge against each other. (p. 87, Original Records.)

Urbano advanced P400.00 to Javier at the police station. On November 3, 1980, the additional P300.00 was given to Javier at Urbano's house in the presence of barangay captain Soliven.

At about 1:30 a.m. on November 14, 1980, Javier was rushed to the Nazareth General Hospital in a very serious condition. When admitted to the hospital, Javier had lockjaw and was having convulsions. Dr. Edmundo Exconde

who personally attended to Javier found that the latter's serious condition was caused by tetanus toxin. He noticed the presence of a healing wound in Javier's palm which could have been infected by tetanus.

On November 15, 1980 at exactly 4:18 p.m., Javier died in the hospital. The medical findings of Dr. Exconde are as follows:

Date Diagnosis

11-14-80 ADMITTED due to trismus

adm. at DX TETANUS

1:30 AM Still having frequent muscle spasm. With diffi-

#35, 421 culty opening his mouth. Restless at times. Febrile

11-15-80 Referred. Novaldin 1 amp. inj. IM. Sudden cessa-

tion of respiration and HR after muscular spasm.

02 inhalation administered. Ambo bag resuscita-

tion and cardiac massage done but to no avail.

Pronounced dead by Dra. Cabugao at 4:18 P.M.

PMC done and cadaver brought home by rela-

tives. (p. 100, Original Records)

In an information dated April 10, 1981, Filomeno Urbano was charged with the crime of homicide before the then Circuit Criminal Court of Dagupan City, Third Judicial District.

Upon arraignment, Urbano pleaded "not guilty." After trial, the trial court found Urbano guilty as charged. He was sentenced to suffer an indeterminate prison term of from TWELVE (12) YEARS of prision mayor, as minimum to SEVENTEEN (17) years, FOUR (4) MONTHS and ONE (1) DAY of reclusion temporal, as maximum, together with the accessories of the law, to indemnify the heirs of the victim, Marcelo Javier, in the amount of P12,000.00 without subsidiary imprisonment in case of insolvency, and to pay the costs. He was ordered confined at the New Bilibid Prison, in Muntinlupa, Rizal upon finality of the decision, in view of the nature of his penalty.

The then Intermediate Appellate Court affirmed the conviction of Urbano on appeal but raised the award of indemnity to the heirs of the deceased to P30,000.00 with costs against the appellant.

The appellant filed a motion for reconsideration and/or new trial. The motion for new trial was based on an affidavit of Barangay Captain Menardo Soliven (Annex "A") which states:

That in 1980, I was the barrio captain of Barrio Anonang, San Fabian, Pangasinan, and up to the present having been re-elected to such position in the last barangay elections on May 17, 1982;

That sometime in the first week of November, 1980, there was a typhoon that swept Pangasinan and other places of Central Luzon including San Fabian, a town of said province;

That during the typhoon, the sluice or control gates of the Bued irrigation dam which irrigates the ricefields of San Fabian were closed and/or controlled so much so that water and its flow to the canals and ditches were regulated and reduced;

That due to the locking of the sluice or control gates of the dam leading to the canals and ditches which will bring water to the ricefields, the water in said canals and ditches became shallow which was suitable for catching mudfishes;

That after the storm, I conducted a personal survey in the area affected, with my secretary Perfecto Jaravata;

That on November 5, 1980, while I was conducting survey, I saw the late Marcelo Javier catching fish in the shallow irrigation canals with some companions;

That few days there after,or on November l5, l980, I came to know that said Marcelo Javier died of tetanus. (p. 33, Rollo)

The motion was denied. Hence, this petition.

In a resolution dated July 16, 1986, we gave due course to the petition.

The case involves the application of Article 4 of the Revised Penal Code which provides that "Criminal liability shall be incurred: (1) By any person committing a felony (delito) although the wrongful act done be different from that which he intended ..." Pursuant to this provision "an accused is criminally responsible for acts committed by him in violation of law and for all the natural and logical consequences resulting therefrom." (People v. Cardenas, 56 SCRA 631).

The record is clear that Marcelo Javier was hacked by the petitioner who used a bolo as a result of which Javier suffered a 2-inch incised wound on his right palm; that on November 14, 1981 which was the 22nd day after the incident, Javier was rushed to the hospital in a very serious condition and that on the following day, November 15, 1981, he died from tetanus.

Under these circumstances, the lower courts ruled that Javier's death was the natural and logical consequence of Urbano's unlawful act. Hence, he was declared responsible for Javier's death. Thus, the appellate court said:

The claim of appellant that there was an efficient cause which supervened from the time the deceased was wounded to the time of his death, which covers a period of 23 days does not deserve serious consideration. True, that the deceased did not die right away from his wound, but the cause of his death was due to said wound which was inflicted by the appellant. Said wound which was in the process of healing got infected with tetanus which ultimately caused his death.

Dr. Edmundo Exconde of the Nazareth General Hospital testified that the victim suffered lockjaw because of the infection of the wound with tetanus. And there is no other way by which he could be infected with tetanus except through the wound in his palm (tsn., p. 78, Oct. 5, 1981). Consequently, the proximate cause of the victim's death was the wound which got infected with tetanus. And the settled rule in this jurisdiction is that an accused is liable for all the consequences of his unlawful act. (Article 4, par. 1, R.P.C. People v. Red, CA 43 O.G. 5072; People v. Cornel 78 Phil. 418).

Appellant's allegation that the proximate cause of the victim's death was due to his own negligence in going back to work without his wound being properly healed, and lately, that he went to catch fish in dirty irrigation canals in the first week of November, 1980, is an

afterthought, and a desperate attempt by appellant to wiggle out of the predicament he found himself in. If the wound had not yet healed, it is impossible to conceive that the deceased would be reckless enough to work with a disabled hand. (pp. 20-21, Rollo)

The petitioner reiterates his position that the proximate cause of the death of Marcelo Javier was due to his own negligence, that Dr. Mario Meneses found no tetanus in the injury, and that Javier got infected with tetanus when after two weeks he returned to his farm and tended his tobacco plants with his bare hands exposing the wound to harmful elements like tetanus germs.

The evidence on record does not clearly show that the wound inflicted by Urbano was infected with tetanus at the time of the infliction of the wound. The evidence merely confirms that the wound, which was already healing at the time Javier suffered the symptoms of the fatal ailment, somehow got infected with tetanus However, as to when the wound was infected is not clear from the record.

In Vda. de Bataclan, et al. v. Medina (102 Phil. 1181), we adopted the following definition of proximate cause:

xxx xxx xxx

... A satisfactory definition of proximate cause is found in Volume 38, pages 695-696 of American Jurisprudence, cited by plaintiffs-appellants in their brief. It is as follows:

... "that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred."And more comprehensively, "the proximate legal cause is that acting first and producing the injury, either immediately or by setting other events in motion, all constituting a natural and continuous chain of events, each having a close causal connection with its immediate predecessor, the final event in the chain immediately effecting the injury as a natural and probable result of the cause which first acted, under such circumstances that the person responsible for the first event should, as an ordinarily prudent and intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom." (at pp. 185-186)

The issue, therefore, hinges on whether or not there was an efficient intervening cause from the time Javier was wounded until his death which would exculpate Urbano from any liability for Javier's death.

We look into the nature of tetanus-

The incubation period of tetanus, i.e., the time between injury and the appearance of unmistakable symptoms, ranges from 2 to 56 days. However, over 80 percent of patients become symptomatic within 14 days. A short incubation period indicates severe disease, and when symptoms occur within 2 or 3 days of injury the mortality rate approaches 100 percent.

Non-specific premonitory symptoms such as restlessness, irritability, and headache are encountered occasionally, but the commonest presenting complaints are pain and stiffness in the jaw, abdomen, or back and difficulty swallowing. As the progresses, stiffness gives way to rigidity, and patients often complain of difficulty opening their mouths. In fact, trismus in the commonest manifestation of tetanus and is responsible for the familiar descriptive name of lockjaw. As more muscles are involved, rigidity becomes generalized, and sustained contractions called risus sardonicus. The intensity and sequence of muscle involvement is quite variable. In a small proportion of patients, only local signs and symptoms develop in the region of the injury. In the vast majority, however, most muscles are involved to some degree, and the signs and symptoms encountered depend upon the major muscle groups affected.

Reflex spasm usually occur within 24 to 72 hours of the first symptom, an interval referred to as the onset time. As in the case of the incubation period, a short onset time is associated with a poor prognosis. Spasms are caused by sudden intensification of afferent stimuli arising in the periphery, which increases rigidity and causes simultaneous and excessive contraction of muscles and their antagonists. Spasms may be both painful and dangerous. As the disease progresses, minimal or inapparent stimuli produce more intense and longer lasting spasms with increasing frequency. Respiration may be impaired by laryngospasm or tonic contraction of respiratory muscles which prevent adequate

ventilation. Hypoxia may then lead to irreversible central nervous system damage and death.

Mild tetanus is characterized by an incubation period of at least 14 days and an onset time of more than 6 days. Trismus is usually present, but dysphagia is absent and generalized spasms are brief and mild. Moderately severe tetanus has a somewhat shorter incubation period and onset time; trismus is marked, dysphagia and generalized rigidity are present, but ventilation remains adequate even during spasms. The criteria for severe tetanus include a short incubation time, and an onset time of 72 hrs., or less, severe trismus, dysphagia and rigidity and frequent prolonged, generalized convulsive spasms. (Harrison's Principle of Internal Medicine, 1983 Edition, pp. 1004-1005; Emphasis supplied)

Therefore, medically speaking, the reaction to tetanus found inside a man's body depends on the incubation period of the disease.

In the case at bar, Javier suffered a 2-inch incised wound on his right palm when he parried the bolo which Urbano used in hacking him. This incident took place on October 23, 1980. After 22 days, or on November 14, 1980, he suffered the symptoms of tetanus, like lockjaw and muscle spasms. The following day, November 15, 1980, he died.

If, therefore, the wound of Javier inflicted by the appellant was already infected by tetanus germs at the time, it is more medically probable that Javier should have been infected with only a mild cause of tetanus because the symptoms of tetanus appeared on the 22nd day after the hacking incident or more than 14 days after the infliction of the wound. Therefore, the onset time should have been more than six days. Javier, however, died on the second day from the onset time. The more credible conclusion is that at the time Javier's wound was inflicted by the appellant, the severe form of tetanus that killed him was not yet present. Consequently, Javier's wound could have been infected with tetanus after the hacking incident. Considering the circumstance surrounding Javier's death, his wound could have been infected by tetanus 2 or 3 or a few but not 20 to 22 days before he died.

The rule is that the death of the victim must be the direct, natural, and logical consequence of the wounds inflicted upon him by the accused. (People v. Cardenas, supra) And since we are dealing with a criminal conviction, the proof that the accused caused the victim's death must convince a rational mind beyond reasonable doubt. The medical findings, however, lead us to a distinct possibility that the infection of the wound by tetanus was an efficient intervening cause later or between the time Javier was wounded to the time of his death. The infection was, therefore, distinct and foreign to the crime. (People v. Rellin, 77 Phil. 1038).

Doubts are present. There is a likelihood that the wound was but the remote cause and its subsequent infection, for failure to take necessary precautions, with tetanus may have been the proximate cause of Javier's death with which the petitioner had nothing to do. As we ruled in Manila Electric Co. v. Remoquillo, et al. (99 Phil. 118).

"A prior and remote cause cannot be made the be of an action if such remote cause did nothing more than furnish the condition or give rise to the occasion by which the injury was made possible, if there intervened between such prior or remote cause and the injury a distinct, successive, unrelated, and efficient cause of the injury, even though such injury would not have happened but for such condition or occasion. If no danger existed in the condition except because of the independent cause, such condition was not the proximate cause. And if an independent negligent act or defective condition sets into operation the instances which result in injury because of the prior defective condition, such subsequent act or condition is the proximate cause." (45 C.J. pp. 931-932). (at p. 125)

It strains the judicial mind to allow a clear aggressor to go scot free of criminal liability. At the very least, the records show he is guilty of inflicting slight physical injuries. However, the petitioner's criminal liability in this respect was wiped out by the victim's own act. After the hacking incident, Urbano and Javier used the facilities of barangay mediators to effect a compromise agreement where Javier forgave Urbano while Urbano defrayed the medical expenses of Javier. This settlement of minor offenses is allowed under the express provisions of Presidential Decree G.R. No. 1508, Section 2(3). (See also People v. Caruncho, 127 SCRA 16).

We must stress, however, that our discussion of proximate cause and remote cause is limited to the criminal aspects of this rather unusual case. It does not necessarily follow that the petitioner is also free of civil liability. The well-settled doctrine is that a person, while not criminally liable, may still be civilly liable. Thus, in the recent case of People v. Rogelio Ligon y Tria, et al. (G.R. No. 74041, July 29, 1987), we said:

xxx xxx xxx

... While the guilt of the accused in a criminal prosecution must be established beyond reasonable doubt, only a preponderance of evidence is required in a civil action for damages. (Article 29, Civil Code). The judgment of acquittal extinguishes the civil liability of the accused only when it includes a declaration that the facts from which the civil liability might arise did not exist. (Padilla v. Court of Appeals, 129 SCRA 559).

The reason for the provisions of article 29 of the Civil Code, which provides that the acquittal of the accused on the ground that his guilt has not been proved beyond reasonable doubt does not necessarily exempt him from civil liability for the same act or omission, has been explained by the Code Commission as follows:

The old rule that the acquittal of the accused in a criminal case also releases him from civil liability is one of the most serious flaws in the Philippine legal system. It has given use to numberless instances of miscarriage of justice, where the acquittal was due to a reasonable doubt in the mind of the court as to the guilt of the accused. The reasoning followed is that inasmuch as the civil responsibility is derived from the criminal offense, when the latter is not proved, civil liability cannot be demanded.

This is one of those causes where confused thinking leads to unfortunate and deplorable consequences. Such reasoning fails to draw a clear line of demarcation between criminal liability and civil responsibility, and to determine the logical result of the distinction. The two liabilities are separate and distinct from each other. One affects the social order and the other, private rights. One is for the punishment or correction of the offender while the other is for reparation of damages suffered by the aggrieved party. The two responsibilities are so different from each other that article 1813 of the present (Spanish) Civil Code reads thus: "There may be a compromise upon the civil action arising from a crime; but the public action for the imposition of the legal penalty shall not thereby be extinguished." It is just and proper that, for the purposes of the imprisonment of or fine upon the accused, the offense should be proved beyond reasonable doubt. But for the purpose of indemnity the complaining party, why should the offense also be proved beyond reasonable doubt? Is not the invasion or violation of every private right to be proved only by a preponderance of evidence? Is the right of the aggrieved person any less private because the wrongful act is also punishable by the criminal law?

"For these reasons, the Commission recommends the adoption of the reform under discussion. It will correct a serious defect in our law. It will close up an inexhaustible source of injustice-a cause for disillusionment on the part of the innumerable persons injured or wronged."

The respondent court increased the P12,000.00 indemnification imposed by the trial court to P30,000.00. However, since the indemnification was based solely on the finding of guilt beyond reasonable doubt in the homicide case, the civil liability of the petitioner was not thoroughly examined. This aspect of the case calls for fuller development if the heirs of the victim are so minded.

WHEREFORE, the instant petition is hereby GRANTED. The questioned decision of the then Intermediate Appellate Court, now Court of Appeals, is REVERSED and SET ASIDE. The petitioner is ACQUITTED of the crime of homicide. Costs de oficio.

SO ORDERED.

G.R. No. L-24803 May 26, 1977

PEDRO ELCANO and PATRICIA ELCANO, in their capacity as Ascendants of Agapito Elcano, deceased,plaintiffs-appellants, vs.REGINALD HILL, minor, and MARVIN HILL, as father and Natural Guardian of said minor, defendants-appellees.

Cruz & Avecilla for appellants.

Marvin R. Hill & Associates for appellees.

 

BARREDO, J.:

Appeal from the order of the Court of First Instance of Quezon City dated January 29, 1965 in Civil Case No. Q-8102, Pedro Elcano et al. vs. Reginald Hill et al. dismissing, upon motion to dismiss of defendants, the complaint of plaintiffs for recovery of damages from defendant Reginald Hill, a minor, married at the time of the occurrence, and his father, the defendant Marvin Hill, with whom he was living and getting subsistence, for the killing by Reginald of the son of the plaintiffs, named Agapito Elcano, of which, when criminally prosecuted, the said accused was acquitted on the ground that his act was not criminal, because of "lack of intent to kill, coupled with mistake."

Actually, the motion to dismiss based on the following grounds:

1. The present action is not only against but a violation of section 1, Rule 107, which is now Rule III, of the Revised Rules of Court;

2. The action is barred by a prior judgment which is now final and or in res-adjudicata;

3. The complaint had no cause of action against defendant Marvin Hill, because he was relieved as guardian of the other defendant through emancipation by marriage.

(P. 23, Record [p. 4, Record on Appeal.])

was first denied by the trial court. It was only upon motion for reconsideration of the defendants of such denial, reiterating the above grounds that the following order was issued:

Considering the motion for reconsideration filed by the defendants on January 14, 1965 and after thoroughly examining the arguments therein contained, the Court finds the same to be meritorious and well-founded.

WHEREFORE, the Order of this Court on December 8, 1964 is hereby reconsidered by ordering the dismissal of the above entitled case.

SO ORDERED.

Quezon City, Philippines, January 29, 1965. (p. 40, Record [p. 21, Record on Appeal.)

Hence, this appeal where plaintiffs-appellants, the spouses Elcano, are presenting for Our resolution the following assignment of errors:

THE LOWER COURT ERRED IN DISMISSING THE CASE BY UPHOLDING THE CLAIM OF DEFENDANTS THAT -

I

THE PRESENT ACTION IS NOT ONLY AGAINST BUT ALSO A VIOLATION OF SECTION 1, RULE 107, NOW RULE 111, OF THE REVISED RULES OF COURT, AND THAT SECTION 3(c) OF RULE 111, RULES OF COURT IS APPLICABLE;

II

THE ACTION IS BARRED BY A PRIOR JUDGMENT WHICH IS NOW FINAL OR RES-ADJUDICTA;

III

THE PRINCIPLES OF QUASI-DELICTS, ARTICLES 2176 TO 2194 OF THE CIVIL CODE, ARE INAPPLICABLE IN THE INSTANT CASE; and

IV

THAT THE COMPLAINT STATES NO CAUSE OF ACTION AGAINST DEFENDANT MARVIN HILL BECAUSE HE WAS RELIEVED AS GUARDIAN OF THE OTHER DEFENDANT THROUGH EMANCIPATION BY MARRIAGE. (page 4, Record.)

It appears that for the killing of the son, Agapito, of plaintiffs-appellants, defendant- appellee Reginald Hill was prosecuted criminally in Criminal Case No. 5102 of the Court of First Instance of Quezon City. After due trial, he was acquitted on the ground that his act was not criminal because of "lack of intent to kill, coupled with mistake." Parenthetically, none of the parties has favored Us with a copy of the decision of acquittal, presumably because appellants do not dispute that such indeed was the basis stated in the court's decision. And so, when appellants filed their complaint against appellees Reginald and his father, Atty. Marvin Hill, on account of the death of their son, the appellees filed the motion to dismiss above-referred to.

As We view the foregoing background of this case, the two decisive issues presented for Our resolution are:

1. Is the present civil action for damages barred by the acquittal of Reginald in the criminal case wherein the action for civil liability, was not reversed?

2. May Article 2180 (2nd and last paragraphs) of the Civil Code he applied against Atty. Hill, notwithstanding the undisputed fact that at the time of the occurrence complained of. Reginald, though a minor, living with and getting subsistenee from his father, was already legally married?

The first issue presents no more problem than the need for a reiteration and further clarification of the dual character, criminal and civil, of fault or negligence as a source of obligation which was firmly established in this jurisdiction in Barredo vs. Garcia, 73 Phil. 607. In that case, this Court postulated, on the basis of a scholarly dissertation by Justice Bocobo on the nature of culpa aquiliana in relation to culpa criminal or delito and mereculpa or fault, with pertinent citation of decisions of the Supreme Court of Spain, the works of recognized civilians, and earlier jurisprudence of our own, that the same given act can result in civil liability not only under the Penal Code but also under the Civil Code. Thus, the opinion holds:

The, above case is pertinent because it shows that the same act machinist. come under both the Penal Code and the Civil Code. In that case, the action of the agent killeth unjustified and fraudulent and therefore could have been the subject of a criminal action. And yet, it was held to be also a proper subject of a civil action under article 1902 of the Civil Code. It is also to be noted that it was the employer and not the employee who was being sued. (pp. 615-616, 73 Phil.). 1

It will be noticed that the defendant in the above case could have been prosecuted in a criminal case because his negligence causing the death of the child was punishable by the Penal Code. Here is therefore a clear instance of the same act of negligence being a proper subject matter either of a criminal action with its consequent civil liability arising from a crime or of an entirely separate and independent civil action for fault or negligence under article 1902 of the Civil Code. Thus, in this jurisdiction, the separate individuality of a cuasi-delito or culpa aquiliana, under the Civil Code has been fully and clearly recognized, even with regard to a negligent act for which the wrongdoer could have been prosecuted and convicted in a criminal case and for which, after such a conviction, he could have been sued for this civil liability arising from his crime. (p. 617, 73 Phil.) 2

It is most significant that in the case just cited, this Court specifically applied article 1902 of the Civil Code. It is thus that although J. V. House could have been criminally prosecuted for reckless or simple negligence and not only punished but also made civilly liable because of his criminal negligence, nevertheless this Court awarded damages in an independent civil action for fault or negligence under article 1902 of the Civil Code. (p. 618, 73 Phil.) 3

The legal provisions, authors, and cases already invoked should ordinarily be sufficient to dispose of this case. But inasmuch as we are announcing doctrines that have been little understood, in the past, it might not he inappropriate to indicate their foundations.

Firstly, the Revised Penal Code in articles 365 punishes not only reckless but also simple negligence. If we were to hold that articles 1902 to 1910 of the Civil Code refer only to fault or negligence not punished by law, accordingly to the literal import of article 1093 of the Civil Code, the legal institution of culpa aquiliana would have very little scope and application in actual life. Death or injury to persons and damage to property- through any degree of negligence - even the slightest - would have to be Idemnified only through the principle of civil liability arising from a crime. In such a state of affairs, what sphere would remain for cuasi-delito or culpa aquiliana? We are loath to impute to the lawmaker any intention to bring about a situation so absurd and anomalous. Nor are we, in the interpretation of the laws, disposed to uphold the letter that killeth rather than the spirit that giveth life. We will not use the literal meaning of the law to smother and render almost lifeless a principle of such ancient origin and such full-grown development as culpa aquiliana or cuasi-delito, which is conserved and made enduring in articles 1902 to 1910 of the Spanish Civil Code.

Secondary, to find the accused guilty in a criminal case, proof of guilt beyond reasonable doubt is required, while in a civil case, preponderance of evidence is sufficient to make the defendant pay in damages. There are numerous cases of criminal negligence which can not be shown beyond reasonable doubt, but can be proved by a preponderance of evidence. In such cases, the defendant can and should be made responsible in a civil action under articles 1902 to 1910 of the Civil Code. Otherwise. there would be many instances of unvindicated civil wrongs. "Ubi jus Idemnified remedium." (p. 620,73 Phil.)

Fourthly, because of the broad sweep of the provisions of both the Penal Code and the Civil Code on this subject, which has given rise to the overlapping or concurrence of spheres already discussed, and for lack of understanding of the character and efficacy of the action for culpa aquiliana, there has grown up a common practice to seek damages only by virtue of the civil responsibility arising from a crime, forgetting that there is another remedy, which is by invoking articles 1902-1910 of the Civil Code. Although this habitual method is allowed by, our laws, it has nevertheless rendered practically useless and nugatory the more expeditious and effective remedy based on culpa aquiliana or culpa extra-contractual. In the present case, we are asked to help perpetuate this usual course. But we believe it is high time we pointed out to the harms done by such practice and to restore the principle of responsibility for fault or negligence under articles 1902 et seq. of the Civil Code to its full rigor. It is high time we caused the stream of quasi-delict or culpa aquiliana to flow on its own natural channel, so that its waters may no longer be diverted into that of a crime under the Penal Code. This will, it is believed, make for the better safeguarding or private rights because it realtor, an ancient and additional remedy, and for the further reason that an independent civil action, not depending on the issues, limitations and results of a criminal prosecution, and entirely directed by the party wronged or his counsel, is more likely to secure adequate and efficacious redress. (p. 621, 73 Phil.)

Contrary to an immediate impression one might get upon a reading of the foregoing excerpts from the opinion in Garcia that the concurrence of the Penal Code and the Civil Code therein referred to contemplate only acts of negligence and not intentional voluntary acts - deeper reflection would reveal that the thrust of the pronouncements therein is not so limited, but that in fact it actually extends to fault or culpa. This can be seen in the reference made therein to the Sentence of the Supreme Court of Spain of February 14, 1919, supra, which involved a case of fraud or estafa, not a negligent act. Indeed, Article 1093 of the Civil Code of Spain, in force here at the time of Garcia, provided textually that obligations "which are derived from acts or omissions in which fault or negligence, not punishable by law, intervene shall be the subject of Chapter II, Title XV of this book (which refers to quasi-delicts.)" And it is precisely the underline qualification, "not punishable by law", that Justice Bocobo emphasized could lead to an ultimo construction or interpretation of the letter of the law that "killeth, rather than the spirit that giveth lift- hence, the ruling that "(W)e will not use the literal meaning of the law to smother and render almost lifeless a principle of such ancient origin and such full-grown development as culpa aquiliana orquasi-delito, which is conserved and made enduring in articles 1902 to 1910 of the Spanish Civil Code." And so, because Justice Bacobo was Chairman of the Code Commission that drafted the original text of the new Civil Code, it is to be noted that the said Code, which was enacted after the Garcia doctrine, no longer uses the term, 11 not punishable by law," thereby making it clear that the concept of culpa aquiliana includes acts which are criminal in character or in violation of the penal law, whether voluntary or matter. Thus, the corresponding provisions to said Article 1093 in the new code, which is Article 1162, simply says, "Obligations derived fromquasi-delicto shall be governed by the provisions of Chapter 2, Title XVII of this Book, (on quasi-delicts) and by special laws." More precisely, a new provision, Article 2177 of the new code provides:

ART. 2177. Responsibility for fault or negligence under the preceding article is entirely separate and distinct from the civil liability arising from negligence under the Penal Code.

But the plaintiff cannot recover damages twice for the same act or omission of the defendant.

According to the Code Commission: "The foregoing provision (Article 2177) through at first sight startling, is not so novel or extraordinary when we consider the exact nature of criminal and civil negligence. The former is a violation of the criminal law, while the latter is a "culpa aquiliana" or quasi-delict, of ancient origin, having always had its own foundation and individuality, separate from criminal negligence. Such distinction between criminal negligence and "culpa extracontractual" or "cuasi-delito" has been sustained by decision of the Supreme Court of Spain and maintained as clear, sound and perfectly tenable by Maura, an outstanding Spanish jurist. Therefore, under the proposed Article 2177, acquittal from an accusation of criminal negligence, whether on reasonable doubt or not, shall not be a bar to a subsequent civil action, not for civil liability arising from criminal negligence, but for damages due to a quasi-delict or 'culpa aquiliana'. But said article forestalls a double recovery.", (Report of the Code) Commission, p. 162.)

Although, again, this Article 2177 does seem to literally refer to only acts of negligence, the same argument of Justice Bacobo about construction that upholds "the spirit that giveth lift- rather than that which is literal that killeth the intent of the lawmaker should be observed in applying the same. And considering that the preliminary chapter on human relations of the new Civil Code definitely establishes the separability and independence of liability in a civil action for acts criminal in character (under Articles 29 to 32) from the civil responsibility arising from crime fixed by Article 100 of the Revised Penal Code, and, in a sense, the Rules of Court, under Sections 2 and 3 (c), Rule 111, contemplate also the same separability, it is "more congruent with the spirit of law, equity and justice, and more in harmony with modern progress"- to borrow the felicitous relevant language in Rakes vs. Atlantic. Gulf and Pacific Co., 7 Phil. 359, to hold, as We do hold, that Article 2176, where it refers to "fault or negligencia covers not only acts "not punishable by law" but also acts criminal in character, whether intentional and voluntary or negligent. Consequently, a separate civil action lies against the offender in a criminal act, whether or not he is criminally prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if he is actually charged also criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the two, assuming the awards made in the two cases vary. In other words, the extinction of civil liability referred to in Par. (e) of Section 3, Rule 111, refers exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same act considered as a quasi-delict only and not as a crime is not estinguished even by a declaration in the criminal case that the criminal act charged has not happened or has not been committed by the accused. Briefly stated, We here hold, in reiteration of Garcia, thatculpa aquiliana includes voluntary and negligent acts which may be punishable by law.4

It results, therefore, that the acquittal of Reginal Hill in the criminal case has not extinguished his liability for quasi-delict, hence that acquittal is not a bar to the instant action against him.

Coming now to the second issue about the effect of Reginald's emancipation by marriage on the possible civil liability of Atty. Hill, his father, it is also Our considered opinion that the conclusion of appellees that Atty. Hill is already free from responsibility cannot be upheld.

While it is true that parental authority is terminated upon emancipation of the child (Article 327, Civil Code), and under Article 397, emancipation takes place "by the marriage of the minor (child)", it is, however, also clear that pursuant to Article 399, emancipation by marriage of the minor is not really full or absolute. Thus "(E)mancipation by marriage or by voluntary concession shall terminate parental authority over the child's person. It shall enable the minor to administer his property as though he were of age, but he cannot borrow money or alienate or encumber real property without the consent of his father or mother, or guardian. He can sue and be sued in court only with the assistance of his father, mother or guardian."

Now under Article 2180, "(T)he obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible. The father and, in case of his death or incapacity, the mother, are responsible. The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company." In the instant case, it is not controverted that Reginald, although married, was living with his father and getting subsistence from him at the time of the occurrence in question. Factually, therefore, Reginald was still subservient to and dependent on his father, a situation which is not unusual.

It must be borne in mind that, according to Manresa, the reason behind the joint and solidary liability of presuncion with their offending child under Article 2180 is that is the obligation of the parent to supervise their minor children in order to prevent them from causing damage to third persons. 5 On the other hand, the clear implication of Article 399, in providing that a minor emancipated by marriage may not, nevertheless, sue or be sued without the assistance of the parents, is that such emancipation does not carry with it freedom to enter into transactions or do any act that can give rise to judicial litigation. (See Manresa, Id., Vol. II, pp. 766-767, 776.) And surely, killing someone else invites judicial action. Otherwise stated, the marriage of a minor child does not relieve the parents of the duty to see to it that the child, while still a minor, does not give answerable for the borrowings of money and alienation or encumbering of real property which cannot be done by their minor married child without their consent. (Art. 399; Manresa, supra.)

Accordingly, in Our considered view, Article 2180 applies to Atty. Hill notwithstanding the emancipation by marriage of Reginald. However, inasmuch as it is evident that Reginald is now of age, as a matter of equity, the liability of Atty. Hill has become milling, subsidiary to that of his son.

WHEREFORE, the order appealed from is reversed and the trial court is ordered to proceed in accordance with the foregoing opinion. Costs against appellees.

THE OFFICE OF THE SOLICITOR GENERAL,                                 Petitioner,

-  versus  -

AYALA LAND INCORPORATED, ROBINSON’S LAND CORPORATION, SHANGRI-LA PLAZA CORPORATION and SM PRIME HOLDINGS, INC.,                                 Respondents.

G.R. No. 177056

Present:

YNARES-SANTIAGO, J.,       Chairperson,CHICO-NAZARIO,VELASCO, JR.,NACHURA, andPERALTA, JJ.

Promulgated:

September 18, 2009x- - - - - - - - - - - - - - - - - - - - - - - - - - - - -  - - - - - - - - - - - - - - - - - - - - - -x  

D E C I S I O N  CHICO-NAZARIO, J.:  

Before this Court is a Petition for Review on Certiorari,[1] under Rule 45 of the Revised Rules of Court, filed by petitioner Office of the Solicitor General (OSG), seeking the reversal and setting aside of the Decision[2] dated 25 January 2007 of the Court of Appeals in CA-G.R. CV No. 76298, which affirmed in toto the Joint Decision[3] dated 29 May 2002 of the Regional Trial Court (RTC) of Makati City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210; and (2) the Resolution[4] dated 14 March 2007 of the appellate court in the same case which denied the Motion for Reconsideration of the OSG.  The RTC adjudged that respondents Ayala Land Incorporated (Ayala Land), Robinsons Land Corporation (Robinsons), Shangri-la Plaza Corporation (Shangri-la), and SM Prime Holdings, Inc. (SM Prime) could not be obliged to provide free parking spaces in their malls to their patrons and the general public.

 Respondents Ayala Land, Robinsons, and Shangri-la maintain and operate shopping malls in various

locations in Metro Manila.  Respondent SM Prime constructs, operates, and leases out commercial buildings and other structures, among which, are SM City, Manila; SM Centerpoint, Sta. Mesa, Manila; SM City, North Avenue, Quezon City; and SM Southmall, Las Piñas.  

 The shopping malls operated or leased out by respondents have parking facilities for all kinds of motor

vehicles, either by way of parking spaces  inside the mall buildings or in separate buildings and/or adjacent lots that are solely devoted for use as parking spaces.  Respondents Ayala Land, Robinsons, and SM Prime spent for the construction of their own parking facilities.  Respondent Shangri-la is renting its parking facilities, consisting of land and building specifically used as parking spaces, which were constructed for the lessor’s account. 

 Respondents expend for the maintenance and administration of their respective parking

facilities.  They provide security personnel to protect the vehicles parked in their parking facilities and maintain order within the area.  In turn, they collect the following parking fees from the persons making use of their parking facilities, regardless of whether said persons are mall patrons or not:

 Respondent Parking Fees

Ayala Land On weekdays, P25.00 for the first four hours andP10.00 for every succeeding hour; on weekends, flat rate of P25.00 per day

Robinsons P20.00 for the first three hours and P10.00 for every succeeding hour

Shangri-la Flat rate of P30.00 per day

SM Prime P10.00 to P20.00 (depending on whether the parking space is outdoors or indoors) for the first three hours and 59 minutes, and P10.00 for every succeeding hour or fraction thereof

     The parking tickets or cards issued by respondents to vehicle owners contain the stipulation that respondents shall not be responsible for any loss or damage to the vehicles parked in respondents’ parking facilities. 

In 1999, the Senate Committees on Trade and Commerce and on Justice and Human Rights conducted a joint investigation for the following purposes: (1) to inquire into the legality of the prevalent practice of shopping malls of charging parking fees; (2) assuming arguendo that the collection of parking fees was legally authorized, to find out the basis and reasonableness of the parking rates charged by shopping malls; and (3) to determine the legality of the policy of shopping malls of denying liability in cases of theft, robbery, or carnapping, by invoking the waiver clause at the back of the parking tickets.  Said Senate Committees invited the top executives of respondents, who operate the major malls in the country; the officials from the Department of Trade and Industry (DTI), Department of Public Works and Highways (DPWH), Metro Manila Development Authority (MMDA), and other local government officials; and the Philippine Motorists Association (PMA) as representative of the consumers’ group. 

 After three public hearings held on 30 September, 3 November, and 1 December 1999, the afore-

mentioned Senate Committees jointly issued Senate Committee Report No. 225[5] on 2 May 2000, in which they concluded:

 In view of the foregoing, the Committees find that the collection of parking

fees by shopping malls is contrary to the National Building Code and is therefor [sic] illegal.  While it is true that the Code merely requires malls to provide parking spaces, without specifying whether it is free or not, both Committees believe that the reasonable and logical interpretation of the Code is that the parking spaces are for free.   This interpretation is not only reasonable and logical but finds support in the actual practice in other countries like the United States of America where parking spaces owned and operated by mall owners are free of charge.

 Figuratively speaking, the Code has “expropriated” the land for parking –

something similar to the subdivision law which require developers to devote so much of the land area for parks.

 Moreover, Article II of R.A. No. 9734 (Consumer Act of the Philippines) provides

that “it is the policy of the State to protect the interest of the consumers, promote the general welfare and establish standards of conduct for business and industry.”  Obviously, a contrary interpretation (i.e., justifying the collection of parking fees) would be going against the declared policy of R.A. 7394.

 Section 201 of the National Building Code gives the responsibility for the

administration and enforcement of the provisions of the Code, including the imposition of penalties for administrative violations thereof to the Secretary of Public Works.  This set up, however, is not being carried out in reality.

 In the position paper submitted by the Metropolitan Manila Development

Authority (MMDA), its chairman, Jejomar C. Binay, accurately pointed out that the Secretary of the DPWH is responsible for the implementation/enforcement of the National Building Code.  After the enactment of the Local Government Code of 1991, the local government units (LGU’s) were tasked to discharge the regulatory powers of the DPWH.  Hence, in the local level, the Building Officials enforce all rules/ regulations formulated by the DPWH relative to all building plans, specifications and designs including parking space requirements.  There is, however, no single national department or agency directly tasked to supervise the enforcement of the provisions of the Code on parking, notwithstanding the national character of the law.[6]

  

Senate Committee Report No. 225, thus, contained the following recommendations: In light of the foregoing, the Committees on Trade and Commerce and Justice

and Human Rights hereby recommend the following: 

1.         The Office of the Solicitor General should institute the necessary action to enjoin the collection of parking fees as well as to enforce the penal sanction provisions of the National Building Code.  The Office of the Solicitor General should likewise study how refund can be exacted from mall owners who continue to collect parking fees.

 

2.         The Department of Trade and Industry pursuant to the provisions of R.A. No. 7394, otherwise known as the Consumer Act of the Philippines should enforce the provisions of the Code relative to parking.  Towards this end, the DTI should formulate the necessary implementing rules and regulations on parking in shopping malls, with prior consultations with the local government units where these are located.  Furthermore, the DTI, in coordination with the DPWH, should be empowered to regulate and supervise the construction and maintenance of parking establishments.

 3.         Finally, Congress should amend and update the National Building Code to

expressly prohibit shopping malls from collecting parking fees by at the same time, prohibit them from invoking the waiver of liability.[7]

  Respondent SM Prime thereafter received information that, pursuant to Senate Committee Report No.

225, the DPWH Secretary and the local building officials of Manila, Quezon City, and Las Piñas intended to institute, through the OSG, an action to enjoin respondent SM Prime and similar establishments from collecting parking fees, and to impose upon said establishments penal sanctions under Presidential Decree No. 1096, otherwise known as the National Building Code of the Philippines (National Building Code), and its Implementing Rules and Regulations (IRR).  With the threatened action against it, respondent SM Prime filed, on 3 October 2000, a Petition for Declaratory Relief[8] under Rule 63 of the Revised Rules of Court, against the DPWH Secretary and local building officials of Manila, Quezon City, and Las Piñas.  Said Petition was docketed as Civil Case No. 00-1208 and assigned to the RTC of Makati City, Branch 138, presided over by Judge Sixto Marella, Jr. (Judge Marella).   In its Petition, respondent SM Prime prayed for judgment:

 a)         Declaring Rule XIX of the Implementing Rules and Regulations of the

National Building Code as ultra vires, hence, unconstitutional and void; b)        Declaring [herein respondent SM Prime]’s clear legal right to lease

parking spaces appurtenant to its department stores, malls, shopping centers and other commercial establishments; and

 c)         Declaring the National Building Code of the Philippines Implementing

Rules and Regulations as ineffective, not having been published once a week for three (3) consecutive weeks in a newspaper of general circulation, as prescribed by Section 211 of Presidential Decree No. 1096.       

 [Respondent SM Prime] further prays for such other reliefs as may be deemed

just and equitable under the premises.[9]

  

The very next day, 4 October 2000, the OSG filed a Petition for Declaratory Relief and Injunction (with Prayer for Temporary Restraining Order and Writ of Preliminary Injunction) [10]against respondents.  This Petition was docketed as Civil Case No. 00-1210 and raffled to the RTC of Makati, Branch 135, presided over by Judge Francisco B. Ibay (Judge Ibay).  Petitioner prayed that the RTC:

 1.         After summary hearing, a temporary restraining order and a writ of

preliminary injunction be issued restraining respondents from collecting parking fees from their customers; and

 2.         After hearing, judgment be rendered declaring that the practice of

respondents in charging parking fees is violative of the National Building Code and its Implementing Rules and Regulations and is therefore invalid, and making permanent any injunctive writ issued in this case.

 Other reliefs just and equitable under the premises are likewise prayed for.[11]

  

On 23 October 2000, Judge Ibay of the RTC of Makati City, Branch 135, issued an Order consolidating Civil Case No. 00-1210 with Civil Case No. 00-1208 pending before Judge Marella of RTC of Makati, Branch 138. 

 As a result of the pre-trial conference held on the morning of 8 August 2001, the RTC issued a Pre-Trial

Order[12] of even date which limited the issues to be resolved in Civil Cases No. 00-1208 and No. 00-1210 to the following:

 1.         Capacity of the plaintiff [OSG] in Civil Case No. 00-1210 to institute the

present proceedings and relative thereto whether the controversy in the collection of parking fees by mall owners is a matter of public welfare.

 2.                  Whether declaratory relief is proper. 3.                  Whether respondent Ayala Land, Robinsons, Shangri-La and SM

Prime are obligated to provide parking spaces in their malls for the use of their patrons or the public in general, free of charge.

 

4.                   Entitlement of the parties of [sic] award of damages.[13]

  

On 29 May 2002, the RTC rendered its Joint Decision in Civil Cases No. 00-1208 and No. 00-1210.  The RTC resolved the first two issues affirmatively.  It ruled that the OSG can initiate Civil Case No.

00-1210 under Presidential Decree No. 478 and the Administrative Code of 1987.[14]  It also found that all the requisites for an action for declaratory relief were present, to wit:

 The requisites for an action for declaratory relief are: (a) there is a justiciable

controversy; (b) the controversy is between persons whose interests are adverse; (c) the party seeking the relief has a legal interest in the controversy; and (d) the issue involved is ripe for judicial determination.

 SM, the petitioner in Civil Case No. 001-1208 [sic] is a mall operator who

stands to be affected directly by the position taken by the government officials sued namely the Secretary of Public Highways and the Building Officials of the local government units where it operates shopping malls.  The OSG on the other hand acts on a matter of public interest and has taken a position adverse to that of the mall owners whom it sued. The construction of new and bigger malls has been announced, a matter which the Court can take judicial notice and the unsettled issue of whether mall operators should provide parking facilities, free of charge needs to be resolved.[15]

  

As to the third and most contentious issue, the RTC pronounced that: 

The Building Code, which is the enabling law and the Implementing Rules and Regulations do not impose that parking spaces shall be provided by the mall owners free of charge.  Absent such directive[,] Ayala Land, Robinsons, Shangri-la and SM [Prime] are under no obligation to provide them for free. Article 1158 of the Civil Code is clear:

 “Obligations derived from law are not presumed.  Only

those expressly determined in this Code or in special laws are demandable and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book (1090).[”] x x x x The provision on ratios of parking slots to several variables, like shopping

floor area or customer area found in Rule XIX of the Implementing Rules and Regulations cannot be construed as a directive to provide free parking spaces, because the enabling law, the Building Code does not so provide. x x x.

 To compel Ayala Land, Robinsons, Shangri-La and SM [Prime] to provide

parking spaces for free can be considered as an unlawful taking of property right without just compensation.

 Parking spaces in shopping malls are privately owned and for their use, the

mall operators collect fees.  The legal relationship could be either lease or deposit.  In either case[,] the mall owners have the right to collect money which translates into income.  Should parking spaces be made free, this right of mall owners shall be gone.  This, without just compensation.  Further, loss of effective control over their property will ensue which is frowned upon by law.

 The presence of parking spaces can be viewed in another light.  They can be

looked at as necessary facilities to entice the public to increase patronage of their malls because without parking spaces, going to their malls will be inconvenient.  These are[,] however[,] business considerations which mall operators will have to decide for themselves.  They are not sufficient to justify a legal conclusion, as the OSG would like the Court to adopt that it is the obligation of the mall owners to provide parking spaces for free.[16]

  

The RTC then held that there was no sufficient evidence to justify any award for damages.           The RTC finally decreed in its 29 May 2002 Joint Decision in Civil Cases No. 00-1208 and No. 00-1210 that: 

FOR THE REASONS GIVEN, the Court declares that Ayala Land[,] Inc., Robinsons Land Corporation, Shangri-la Plaza Corporation and SM Prime Holdings[,] Inc. are not obligated to provide parking spaces in their malls for the use of their patrons or public in general, free of charge.

 All counterclaims in Civil Case No. 00-1210 are dismissed. 

No pronouncement as to costs.[17]

  

          CA-G.R. CV No. 76298 involved the separate appeals of the OSG [18] and respondent SM Prime[19] filed with the Court of Appeals.  The sole assignment of error of the OSG in its Appellant’s Brief was:

 THE TRIAL COURT ERRED IN HOLDING THAT THE NATIONAL BUILDING CODE DID NOT INTEND MALL PARKING SPACES TO BE FREE OF CHARGE[;][20]

  

while the four errors assigned by respondent SM Prime in its Appellant’s Brief were: 

I 

THE TRIAL COURT ERRED IN FAILING TO DECLARE RULE XIX OF THE IMPLEMENTING RULES AS HAVING BEEN ENACTED ULTRA VIRES, HENCE, UNCONSTITUTIONAL AND VOID. 

II 

THE TRIAL COURT ERRED IN FAILING TO DECLARE THE IMPLEMENTING RULES INEFFECTIVE FOR NOT HAVING BEEN PUBLISHED AS REQUIRED BY LAW. 

III 

THE TRIAL COURT ERRED IN FAILING TO DISMISS THE OSG’S PETITION FOR DECLARATORY RELIEF AND INJUNCTION FOR FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES. 

IV 

THE TRIAL COURT ERRED IN FAILING TO DECLARE THAT THE OSG HAS NO LEGAL CAPACITY TO SUE AND/OR THAT IT IS NOT A REAL PARTY-IN-INTEREST IN THE INSTANT CASE.[21]

  

          Respondent Robinsons filed a Motion to Dismiss Appeal of the OSG on the ground that the lone issue raised therein involved a pure question of law, not reviewable by the Court of Appeals.           The Court of Appeals promulgated its Decision in CA-G.R. CV No. 76298 on 25 January 2007.  The appellate court agreed with respondent Robinsons that the appeal of the OSG should suffer the fate of dismissal, since “the issue on whether or not the National Building Code and its implementing rules require shopping mall operators to provide parking facilities to the public for free” was evidently a question of law.   Even so, since CA-G.R. CV No. 76298 also included the appeal of respondent SM Prime, which raised issues worthy of consideration, and in order to satisfy the demands of substantial justice, the Court of Appeals proceeded to rule on the merits of the case.           In its Decision, the Court of Appeals affirmed the capacity of the OSG to initiate Civil Case No. 00-1210 before the RTC as the legal representative of the government, [22] and as the one deputized by the Senate of the Republic of the Philippines through Senate Committee Report No. 225.  

The Court of Appeals rejected the contention of respondent SM Prime that the OSG failed to exhaust administrative remedies.  The appellate court explained that an administrative review is not a condition precedent to judicial relief where the question in dispute is purely a legal one, and nothing of an administrative nature is to be or can be done. 

 The Court of Appeals likewise refused to rule on the validity of the IRR of the National Building Code,

as such issue was not among those the parties had agreed to be resolved by the RTC during the pre-trial conference for Civil Cases No. 00-1208 and No. 00-1210.  Issues cannot be raised for the first time on appeal.  Furthermore, the appellate court found that the controversy could be settled on other grounds, without touching on the issue of the validity of the IRR.  It referred to the settled rule that courts should refrain from passing upon the constitutionality of a law or implementing rules, because of the principle that bars judicial inquiry into a constitutional question, unless the resolution thereof is indispensable to the determination of the case. 

 Lastly, the Court of Appeals declared that Section 803 of the National Building Code and Rule XIX of

the IRR were clear and needed no further construction.  Said provisions were only intended to control the occupancy or congestion of areas and structures.  In the absence of any express and clear provision of law, respondents could not be obliged and expected to provide parking slots free of charge. 

 The fallo of the 25 January 2007 Decision of the Court of Appeals reads:

 WHEREFORE, premises considered, the instant appeals

are DENIED.  Accordingly, appealed Decision is hereby AFFIRMED in toto.[23]

  

          In its Resolution issued on 14 March 2007, the Court of Appeals denied the Motion for Reconsideration of the OSG, finding that the grounds relied upon by the latter had already been carefully considered, evaluated, and

passed upon by the appellate court, and there was no strong and cogent reason to modify much less reverse the assailed judgment.

 The OSG now comes before this Court, via the instant Petition for Review, with a single assignment of

error:        THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE RULING OF THELOWER COURT THAT RESPONDENTS ARE NOT OBLIGED TO PROVIDE FREE PARKING SPACES TO THEIR CUSTOMERS OR THE PUBLIC.[24]

  The OSG argues that respondents are mandated to provide free parking by Section 803 of the

National Building Code and Rule XIX of the IRR.    According to Section 803 of the National Building Code:

 SECTION 803.  Percentage of Site Occupancy 

(a)  Maximum site occupancy shall be governed by the use, type of construction, and height of the building and the use, area, nature, and location of the site; and subject to the provisions of the local zoning requirements and in accordance with the rules and regulations promulgated by the Secretary.

  

In connection therewith, Rule XIX of the old IRR,[25] provides: RULE XIX – PARKING AND LOADING SPACE REQUIREMENTS 

Pursuant to Section 803 of the National Building Code (PD 1096) providing for maximum site occupancy, the following provisions on parking and loading space requirements shall be observed:

 1.          The parking space ratings listed below are minimum off-street

requirements for specific uses/occupancies for buildings/structures:

 1.1      The size of an average automobile parking slot shall be

computed as 2.4 meters by 5.00 meters for perpendicular or diagonal parking, 2.00 meters by 6.00 meters for parallel parking.  A truck or bus parking/loading slot shall be computed at a minimum of 3.60 meters by 12.00 meters.  The parking slot shall be drawn to scale and the total number of which shall be indicated on the plans and specified whether or not parking accommodations, are attendant-managed. (See Section 2 for computation of parking requirements).

 x x x x

 1.7      Neighborhood shopping center – 1 slot/100 sq. m. of

shopping floor area  

The OSG avers that the aforequoted provisions should be read together with Section 102 of the National Building Code, which declares:

 SECTION 102.  Declaration of Policy It is hereby declared to be the policy of the State to safeguard life, health,

property, and public welfare, consistent with the principles of sound environmental management and control; and to this end, make it the purpose of this Code to provide for all buildings and structures, a framework of minimum standards and requirements to regulate and control their location, site, design, quality of materials, construction, use, occupancy, and maintenance.

  

The requirement of free-of-charge parking, the OSG argues, greatly contributes to the aim of safeguarding “life, health, property, and public welfare, consistent with the principles of sound environmental management and control.”  Adequate parking spaces would contribute greatly to alleviating traffic congestion when complemented by quick and easy access thereto because of free-charge parking.  Moreover, the power to regulate and control the use, occupancy, and maintenance of buildings and structures carries with it the power to impose fees and, conversely, to control -- partially or, as in this case, absolutely -- the imposition of such fees. 

The Court finds no merit in the present Petition. 

The explicit directive of the afore-quoted statutory and regulatory provisions, garnered from a plain reading thereof, is that respondents, as operators/lessors of neighborhood shopping centers, should provide parking and loading spaces, in accordance with the minimum ratio of one slot per 100 square meters of shopping floor area.  There is nothing therein pertaining to the collection (or non-collection) of parking fees by respondents.   In fact, the term “parking fees” cannot even be found at all in the entire National Building Code and its IRR. 

 Statutory construction has it that if a statute is clear and unequivocal, it must be given its literal

meaning and applied without any attempt at interpretation. [26]  Since Section 803 of the National Building Code and Rule XIX of its IRR do not mention parking fees, then simply, said provisions do not regulate the collection of the same.  The RTC and the Court of Appeals correctly applied Article 1158 of the New Civil Code, which states:      

 Art. 1158.  Obligations derived from law are not presumed.  Only

those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. (Emphasis ours.)

  

Hence, in order to bring the matter of parking fees within the ambit of the National Building Code and its IRR, the OSG had to resort to specious and feeble argumentation, in which the Court cannot concur. 

 The OSG cannot rely on Section 102 of the National Building Code to expand the coverage of Section

803 of the same Code and Rule XIX of the IRR, so as to include the regulation of parking fees.   The OSG limits its citation to the first part of Section 102 of the National Building Code declaring the policy of the State “to safeguard life, health, property, and public welfare, consistent with the principles of sound environmental management and control”; but totally ignores the second part of said provision, which reads, “and to this end, make it the purpose of this Code to provide for all buildings and structures, a framework of minimum standards and requirements to regulate and control their location, site, design, quality of materials, construction, use, occupancy, and maintenance.”  While the first part of Section 102 of the National Building Code lays down the State policy, it is the second part thereof that explains how said policy shall be carried out in the Code.  Section 102 of the National Building Code is not an all-encompassing grant of regulatory power to the DPWH Secretary and local building officials in the name of life, health, property, and public welfare.  On the contrary, it limits the regulatory power of said officials to ensuring that the minimum standards and requirements for all buildings and structures, as set forth in the National Building Code, are complied with.   

 Consequently, the OSG cannot claim that in addition to fixing the minimum requirements for parking

spaces for buildings, Rule XIX of the IRR also mandates that such parking spaces be provided by building owners free of charge.  If Rule XIX is not covered by the enabling law, then it cannot be added to or included in the implementing rules.  The rule-making power of administrative agencies must be confined to details for regulating the mode or proceedings to carry into effect the law as it has been enacted, and it cannot be extended to amend or expand the statutory requirements or to embrace matters not covered by the statute.   Administrative regulations must always be in harmony with the provisions of the law because any resulting discrepancy between the two will always be resolved in favor of the basic law.[27]

 From the RTC all the way to this Court, the OSG repeatedly referred to  Republic v.

Gonzales[28] and City of Ozamis v. Lumapas[29] to support its position that the State has the power to regulate parking spaces to promote the health, safety, and welfare of the public; and it is by virtue of said power that respondents may be required to provide free parking facilities.  The OSG, though, failed to consider the substantial differences in the factual and legal backgrounds of these two cases from those of the Petition at bar. 

 In Republic, the Municipality of Malabon sought to eject the occupants of two parcels of land of the

public domain to give way to a road-widening project.  It was in this context that the Court pronounced: Indiscriminate parking along F. Sevilla Boulevard and other main thoroughfares was prevalent; this, of course, caused the build up of traffic in the surrounding area to the great discomfort and inconvenience of the public who use the streets. Traffic congestion constitutes a threat to the health, welfare, safety and convenience of the people and it can only be substantially relieved by widening streets and providing adequate parking areas.  The Court, in City of Ozamis, declared that the City had been clothed with full power to control and

regulate its streets for the purpose of promoting public health, safety and welfare.  The City can regulate the time, place, and manner of parking in the streets and public places; and charge minimal fees for the street parking to cover the expenses for supervision, inspection and control, to ensure the smooth flow of traffic in the environs of the public market, and for the safety and convenience of the public.

 Republic and City of Ozamis involved parking in the local streets; in contrast, the present case deals

with privately owned parking facilities available for use by the general public.   In Republicand City of Ozamis, the concerned local governments regulated parking pursuant to their power to control and regulate their streets; in the instant case, the DPWH Secretary and local building officials regulate parking pursuant to their authority to ensure compliance with the minimum standards and requirements under  the National Building Code and its IRR.  With the difference in subject matters and the bases for the regulatory powers being invoked, Republic and City of Ozamisdo not constitute precedents for this case.     

 Indeed, Republic and City of Ozamis both contain pronouncements that weaken the position of the

OSG in the case at bar.  In Republic, the Court, instead of placing the burden on private persons to provide parking facilities to the general public, mentioned the trend in other jurisdictions wherein the municipal governments themselves took the initiative to make more parking spaces available so as to alleviate the traffic problems, thus:  

 Under the Land Transportation and Traffic Code, parking in designated areas

along public streets or highways is allowed which clearly indicates that provision for parking spaces serves a useful purpose. In other jurisdictions where traffic is at least as voluminous as here, the provision by municipal governments of parking space is not limited to parking along public streets or highways. There has been a marked trend to build off-street parking facilities with the view to removing parked cars from the streets. While the provision of off-street parking facilities or carparks has been commonly undertaken by private enterprise, municipal governments have been constrained to put up carparks in response to public necessity where private enterprise had failed to keep up with the growing public demand. American courts have upheld the right of municipal governments to construct off-street parking facilities as clearly redounding to the public benefit.[30]

  

In City of Ozamis, the Court authorized the collection by the City of minimal fees for the parking of vehicles along the streets: so why then should the Court now preclude respondents from collecting from the public a fee for the use of the mall parking facilities?  Undoubtedly, respondents also incur expenses in the maintenance and operation of the mall parking facilities, such as electric consumption, compensation for parking attendants and security, and upkeep of the physical structures.  

It is not sufficient for the OSG to claim that “the power to regulate and control the use, occupancy, and maintenance of buildings and structures carries with it the power to impose fees and, conversely, to control, partially or, as in this case, absolutely, the imposition of such fees.”  Firstly, the fees within the power of regulatory agencies to impose are regulatory fees.  It has been settled law in this jurisdiction that this broad and all-compassing governmental competence to restrict rights of liberty and property carries with it the undeniable power to collect a regulatory fee. It looks to the enactment of specific measures that govern the relations not only as between individuals but also as between private parties and the political society. [31]  True, if the regulatory agencies have the power to impose regulatory fees, then conversely, they also have the power to remove the same.  Even so, it is worthy to note that the present case does not involve the imposition by the DPWH Secretary and local building officials of regulatory fees upon respondents; but the collection by respondents ofparking fees from persons who use the mall parking facilities.  Secondly, assuming arguendo that the DPWH Secretary and local building officials do have regulatory powers over the collection of parking fees for the use of privately owned parking facilities, they cannot allow or prohibit such collection arbitrarily or whimsically.   Whether allowing or prohibiting the collection of such parking fees, the action of the DPWH Secretary and local building officials must pass the test of classic reasonableness and propriety of the measures or means in the promotion of the ends sought to be accomplished.[32]

 Keeping in mind the aforementioned test of reasonableness and propriety of measures or means, the

Court notes that Section 803 of the National Building Code falls under Chapter 8 onLight and Ventilation.  Evidently, the Code deems it necessary to regulate site occupancy to ensure that there is proper lighting and ventilation in every building.  Pursuant thereto, Rule XIX of the IRR requires that a building, depending on its specific use and/or floor area, should provide a minimum number of parking spaces.   The Court, however, fails to see the connection between regulating site occupancy to ensure proper light and ventilation in every building vis-à-vis regulating the collection by building owners of fees for the use of their parking spaces.   Contrary to the averment of the OSG, the former does not necessarily include or imply the latter.   It totally escapes this Court how lighting and ventilation conditions at the malls could be affected by the fact that parking facilities thereat are free or paid for.

 The OSG attempts to provide the missing link by arguing that:

 Under Section 803 of the National Building Code, complimentary parking

spaces are required to enhance light and ventilation, that is, to avoid traffic congestion in areas surrounding the building, which certainly affects the ventilation within the building itself, which otherwise, the annexed parking spaces would have served.  Free-of-charge parking avoids traffic congestion by ensuring quick and easy access of legitimate shoppers to off-street parking spaces annexed to the malls, and thereby removing the vehicles of these legitimate shoppers off the busy streets near the commercial establishments.[33]

  

The Court is unconvinced.  The National Building Code regulates buildings, by setting the minimum specifications and requirements for the same.  It does not concern itself with traffic congestion in areas surrounding the building.  It is already a stretch to say that the National Building Code and its IRR also intend to solve the problem of traffic congestion around the buildings so as to ensure that the said buildings shall have adequate lighting and ventilation.  Moreover, the Court cannot simply assume, as the OSG has apparently done, that the traffic congestion in areas around the malls is due to the fact that respondents charge for their parking facilities, thus, forcing vehicle owners to just park in the streets.  The Court notes that despite the fees charged by respondents, vehicle owners still use the mall parking facilities, which are even fully occupied on some days. Vehicle owners may be parking in the streets only because there are not enough parking spaces in the

malls, and not because they are deterred by the parking fees charged by respondents.   Free parking spaces at the malls may even have the opposite effect from what the OSG envisioned: more people may be encouraged by the free parking to bring their own vehicles, instead of taking public transport, to the malls; as a result, the parking facilities would become full sooner, leaving more vehicles without parking spaces in the malls and parked in the streets instead, causing even more traffic congestion.   

 Without using the term outright, the OSG is actually invoking police power to justify the regulation by

the State, through the DPWH Secretary and local building officials, of privately owned parking facilities, including the collection by the owners/operators of such facilities of parking fees from the public for the use thereof.   The Court finds, however, that in totally prohibiting respondents from collecting parking fees from the public for the use of the mall parking facilities, the State would be acting beyond the bounds of police power. 

 Police power is the power of promoting the public welfare by restraining and regulating the use of

liberty and property.  It is usually exerted in order to merely regulate the use and enjoyment of the property of the owner.  The power to regulate, however, does not include the power to prohibit.  A fortiori, the power to regulate does not include the power to confiscate.  Police power does not involve the taking or confiscation of property, with the exception of a few cases where there is a necessity to confiscate private property in order to destroy it for the purpose of protecting peace and order and of promoting the general welfare; for instance, the confiscation of an illegally possessed article, such as opium and firearms. [34]  

When there is a taking or confiscation of private property for public use, the State is no longer exercising police power, but another of its inherent powers, namely, eminent domain.   Eminent domain enables the State to forcibly acquire private lands intended for public use upon payment of just compensation to the owner.[35]

 Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and

possession of, the expropriated property; but no cogent reason appears why the said power may not be availed of only to impose a burden upon the owner of condemned property, without loss of title and possession. [36]  It is a settled rule that neither acquisition of title nor total destruction of value is essential to taking.   It is usually in cases where title remains with the private owner that inquiry should be made to determine whether the impairment of a property is merely regulated or amounts to a compensable taking.  A regulation that deprives any person of the profitable use of his property constitutes a taking and entitles him to compensation, unless the invasion of rights is so slight as to permit the regulation to be justified under the police power. Similarly, a police regulation that unreasonably restricts the right to use business property for business purposes amounts to a taking of private property, and the owner may recover therefor.[37]

         Although in the present case, title to and/or possession of the parking facilities remain/s with

respondents, the prohibition against their collection of parking fees from the public, for the use of said facilities, is already tantamount to a taking or confiscation of their properties.  The State is not only requiring that respondents devote a portion of the latter’s properties for use as parking spaces, but is also mandating that they give the public access to said parking spaces for free.  Such is already an excessive intrusion into the property rights of respondents.  Not only are they being deprived of the right to use a portion of their properties as they wish, they are further prohibited from profiting from its use  or even just recovering therefrom the expenses for the maintenance and operation of the required parking facilities. 

 The ruling of this Court in City Government of Quezon City v. Judge Ericta[38] is edifying. Therein, the

City Government of Quezon City passed an ordinance obliging private cemeteries within its jurisdiction to set aside at least six percent of their total area for charity, that is, for burial grounds of deceased paupers.   According to the Court, the ordinance in question was null and void, for it authorized the taking of private property without just compensation:

 There is no reasonable relation between the setting aside of at least six (6)

percent of the total area of all private cemeteries for charity burial grounds of deceased paupers and the promotion of' health, morals, good order, safety, or the general welfare of the people. The ordinance is actually a taking without compensation of a certain area from a private cemetery to benefit paupers who are charges of the municipal corporation. Instead of' building or maintaining a public cemetery for this purpose, the city passes the burden to private cemeteries.

 'The expropriation without compensation of a portion of private cemeteries is

not covered by Section 12(t) of Republic Act 537, the Revised Charter of Quezon City which empowers the city council to prohibit the burial of the dead within the center of population of the city and to provide for their burial in a proper place subject to the provisions of general law regulating burial grounds and cemeteries. When the Local Government Code, Batas Pambansa Blg. 337 provides in Section 177(q) that a sangguniang panlungsod may "provide for the burial of the dead in such place and in such manner as prescribed by law or ordinance" it simply authorizes the city to provide its own city owned land or to buy or expropriate private properties to construct public cemeteries. This has been the law, and practise in the past. It continues to the present. Expropriation, however, requires payment of just compensation.  The questioned ordinance is different from laws and regulations requiring owners of subdivisions to set aside certain areas for streets, parks, playgrounds, and other public facilities from the land they sell to buyers of subdivision lots. The necessities of public safety, health, and convenience are very clear from said requirements which are intended to insure the development of communities with salubrious and wholesome environments. The beneficiaries of the regulation, in turn,

are made to pay by the subdivision developer when individual lots are sold to homeowners.

  

          In conclusion, the total prohibition against the collection by respondents of parking fees from persons who use the mall parking facilities has no basis in the National Building Code or its IRR.  The State also cannot impose the same prohibition by generally invoking police power, since said prohibition amounts to a taking of respondents’ property without payment of just compensation.                    Given the foregoing, the Court finds no more need to address the issue persistently raised by respondent SM Prime concerning the unconstitutionality of Rule XIX of the IRR.  In addition, the said issue was not among those that the parties, during the pre-trial conference for Civil Cases No. 12-08 and No. 00-1210, agreed to submit for resolution of the RTC.  It is likewise axiomatic that the constitutionality of a law, a regulation, an ordinance or an act will not be resolved by courts if the controversy can be, as in this case it has been, settled on other grounds.[39]

 WHEREFORE, the instant Petition for Review on Certiorari is hereby DENIED.  The Decision dated 25

January 2007 and Resolution dated 14 March 2007 of the Court of Appeals in CA-G.R. CV No. 76298, affirming  in toto the Joint Decision dated 29 May 2002 of the Regional Trial Court of Makati City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210 are herebyAFFIRMED.  No costs.

 SO ORDERED.

G.R. No. L-11028             April 17, 1959

LAO CHIT, plaintiff-appellee, vs.SECURITY BANK and TRUST CO. and CONSOLIDATED INVESTMENT, INC., defendants-appellants.

Nicetas A. Suanes for appellee.Augusto S. Francisco for appellant Security Bank and Trust Co.Jesus S. Nava for appellant Consolidated Investments, Inc.

CONCEPCION, J.:

In May, 1949, the consolidated Investments, Inc., hereafter referred to as the lessor, leased to Domingo T. Dikit part of the lobby, on the ground floor of the Consolidated Building, at Plaza Goiti, Manila, to be used as offices of the proposed Bank of Manila, then being organized by said Dikit and Jose Silva. Pursuant to the lease contract between the parties (Exhibits 2, 2-A and 2-B), the lessee undertook to construct, at the expense thereof, such walls, partitions and other improvements as may be necessary to make the leased premises suitable for banking purposes, and such partitions and improvements "shall become the property" of the lessor "upon the termination and/or rescission" of said contract. It appears that, pursuant to another contract. It appears that, pursuant to another entered into June, 1949, between Dikit and Silva on the one hand, and plaintiff Lao Chit, on the other (Exhibit A-1, and A-2 and A-3), the latter furnished the materials and the work for said walls, partitions and improvements, at a total cost of P59,365, payable "as soon as the Bank of Manila opens for business, and is given a permit by the Central Bank." This permit however, was never issued. The proposed Bank of Manila did not open for business, and rentals due under said lease contract, at the rate of P5,000 a month, beginning from October, 1949, were not paid. On December 3, 1949, the lessor instituted Civil Case No. 9708 of the Municipal Court of Manila against Dikit, for unlawful detainer. After appropriate proceedings, said court rendered judgement on March 27, 1950, sentencing Dikit.

. . . to vacate the premises described in the complaint, and to pay the plaintiff the sum of P10,000.00, under the first cause of action, corresponding rentals due from October to November, 1949, plus the sum of P227.80, under the second cause of action, for electric consumption up to November 30, 1949; plus the rents that will become due from December 1, 1949, at the rate P5,000.00 per month until the date said defendant finally vacates and surrenders possession to the plaintiff and costs of this suit. (Exhibit 3.)

Dikit appealed from this decision to the Court of First Instance of Manila, where the case was docketed as Civil Case No. 11214 of said court. He likewise, applied, in the Supreme Court — in Case G.R. No. L-3621, entitled "Domingo Dikit vs. Hon Ramon Icasiano" — for a writ of certiorari against the municipal judge who had rendered the aforementioned decision in the ejectment case. Said cases No. 11214 and L-3621 were soon dismissed, however, upon agreement of the parties, dated May 22, 1951, whereby Dikit, among other things, relinquished whatever rights have to the possession of the leased premises and disclaimed all rights to and over any and all improvements introduced therein while he was in possession thereof.

Prior to said decision, but after the commencement of the said Case No. 9708 Lao Chit had filed Civil Case No. 10178 of the Court of First Instance of Manila, against Dikit and Silva, for the recovery of what was due from them by reason of the aforementioned improvements introduced by Lao Chit. On June 30, 1953, judgement was rendered in said Case No. 10178 the dispositive part of which reads as follows:

WHEREFORE, judgement is hereby rendered in favor of the plaintiff and against the defendants, sentencing the latter to pay the former, jointly and severally, the sum of P59,365.00, which is the total of the claim under the second, third and fourth causes of action, the same to be paid within 15 days from notice, with legal interest from the date of the filing of the complaint until its full payment; and in the event the defendants fail to pay within the period of grace herein fixed, the fixtures herein referred to (which by express agreement of the parties shall remain the plaintiff's property until they are fully paid for) shall be returned to the plaintiff. The defendants shall also pay jointly and severally the plaintiff by way of damages an amount equivalent to 12% of the aforementioned sum of P59,365.00. The defendants shall likewise pay the plaintiff, jointly and severally, another sum equivalent to 25% of the amounts claimed in the first and sixth causes of action, besides amount claimed in the first and sixth causes of action, besides an amount equivalent to six (6%) of the sums due and payable under the second and third causes of action as attorney's fees, with costs against them. (Exhibit A.)

In due course, the corresponding writ of execution (Exhibits D-1 and D-3) of this judgment was subsequently issued. Later on it was returned by the sheriff unsatisfied, with the statement that neither Dikit nor Silva had any property registered in their respective names, and that the whereabouts of Silva was unknown (Exhibits D-2 and D-4). Meanwhile, or on September 10, 1953, Lao Chit brought the present action against the Security Bank and Trust Company (Hereafter referred to as the Bank), to which the lessor had, since July 1, 1951, leased the premises in question (after it had been vacated by Silva), together with the fixtures and improvements introduced therein by Lao Chit. In its complaint, Lao Chit demanded payment of P1,000 a month, by way of rental for the use of said fixtures and improvements by the Bank, in addition to expenses of litigation, attorney's fees and costs. In its answer, the Bank alleged that it held and used said improvements pursuant to its contract of lease with the lessor and that it had paid the rentals due and complied with its other obligations under said contract, and set up a counterclaim for damages. Soon thereafter, or on November 5, 1953, Lao Chit demanded payment of the aforementioned sum of P59,365, plus P1,000 a month from June, 1951, from the lessor, which did not heed the demand, whereupon the complaint herein was, on December 18, 1953, amended to include said lessor as one of the defendants. The latter alleged, in its answer, that the improvements in question were introduced at the initiative and expense of Dikit and Silva, as lessees of the premises above referred to, and that, as permanent fixtures, said improvements form an integral part of the Consolidated Investments Building, and belong to the lessor and owner thereof, not to plaintiff herein, who has no contractual or juridical relation with the lessor. The lessor, likewise, sought to recover, by way of counterclaim, the sum of P50,000, as damages for its inclusion as defendant herein, aside from attorney's fees and costs. In due course, the Court of First Instance of Manila rendered judgment on December 28, 1955, the dispositive part of which reads:

WHEREFORE, judgment is hereby rendered, sentencing the defendant, Consolidated Investments, Inc., to pay to the plaintiff the value of the permanent improvements in the sum of P59,365.00, and, together with the defendant, Security Bank and Trust Company, to pay, jointly and severally, for the use of the permanent improvements, at the rate of P1,000.00 monthly from June, 1951 to July 31, 1954, and thereafter, until January, 1955, by the defendant, Consolidated Investments, Inc., alone, at the same rate, and in both instances, plus legal interest until full payment thereof; in addition, the defendant, Consolidated Investments, Inc., is further ordered to pay to the plaintiff the amount equivalent to 80% of whatever amount is due from it, as reimbursement for plaintiff's litigation expenses, including attorney's contingent fees, aside from moral, nominal, moderate and exemplary damages in the amount of P2,000.00, and the costs of suit.

Defendants' counterclaim are hereby both dismissed for lack of merits and in view of the above conclusion of the Court.

Their respective motions for reconsideration and new trial having been denied, the defendants have appealed from this decision.

It is apparent to us that the lower court erred in rendering judgment against the Bank. This defendant had occupied and used the premises in question, including the partitions, fixtures and other improvements made therein by Lao Chit, pursuant to a contract of lease entered into with lessor, the right of which to enter into said contract is not disputed. Moreover, the Bank had paid the rentals and fulfilled its other obligations under said contract. Again, it cannot be denied that the improvements introduced by Lao Chit became property of the lessor, not only because such improvements are permanent in nature and cannot be removed without impairing the building to which they were attached, but, also, because the contract of lease between Dikit and Silva on the hand, and the lessor, on the other hand, provided explicitly that the latter shall own those improvements "upon the expiration and/or rescission" of said contract, and the same has already been resolved. Although Lao Chit was not a party to said contract, this stipulation is binding upon him, he having introduced said improvements pursuant to his contract with Dikit, from whom he derived, therefore, his right to enter the building and make the improvements. In short, insofar as the construction thereof, Lao Chit was, vis-a-vis the lessor, a mere agent or

representative of Dikit and, as such, was privy to the undertakings of Dikit under his contract of lease with the lessor.

The lower court held the latter liable to Lao Chit upon the ground that Lao Chit was a builder in good faith, under the provisions of the Old Civil Code, and under the theory of undue enrichment.

As regards the first ground, Article 361 of the Civil Code of Spain, on which the lower court relied, provides:

The owner of land on which anything has been built, sown, or planted, in good faith, shall be entitled to appropriate the thing so built, sown, or planted, upon paying the compensation mentioned in Articles 453 and 454, or to compel the person who has built or planted to pay him the value of the land, and the person who sowed thereon to pay the proper rent thereof.

It is well settled, however, that this provisions refers to one who builds upon a land which he believes to be hisproperty (Alburo vs. Villanueva, 7 Phil., 277; Cortes vs. Ramon, 46 Phil., 184; Rivera vs. Trinidad, 48 Phil., 396; Fojas vs. Velasco, 51 Phil., 520; Montinola vs. Bantug, 71 Phil., 449-450; Lopez Inc. vs. Philippines & Eastern Trading Co., Inc., 98 Phil., 348; 52 Off. Gaz., 1452). Neither Lao Chit, nor Dikit, claimed the Consolidated Investments Building as his own. Dikit was a mere lessee and Lao Chit was his agent, as such, in the construction of the improvements under consideration. In any event, the Spanish text of said Article 361, which is the original, reads:

El dueño del terreno en que se edificare, sembrare o plantare de buena fe, tendra derecho a hacer suya la obra, siembra o plantacion, previa la indemnizacion establecida en los articulos 453 y 454, o a obligar al que edifico o planto a pagar el precio del terreno, y al que sembro, la renta correspondiente. (Emphasis supplied.)

Clearly this provision is limited in its application to "buildings" constructed on another's land or "terreno", not to partitions, railings, counters, shelves and other fixtures made in a building belonging to the owner of the land. Although the verb "edificar" in Spanish is roughly synonymous with "build" in English, the latter is broader in its connotation than the former. Literally, "edificar" is to undertake the construction of an edifice, such as a fort, castle, house, church, market, tower, stadium, barrack, stable or other similar structure. Upon the other hand, one may build a house, as well as a fence, partition, window, door, or even a desk or chair. It is apparent, therefore, that Lao Chit is not entitled to the benefit of said Article 361.

The lower court, moreover, said:

. . . convincing evidence abounds, to wit: that the improvements were made in the presence of, and with the knowledge and consent, and even under the personal supervision, on the part of the duly authorized representative of the defendant, Consolidated Investments, Inc., which owns the building. Thus, it may even be said that it was the defendant, Consolidated Investments Inc., which had acted in bad faith. (Record on Appeal of Consolidated Investments, Inc., p. 56.)

and quoted, in support thereof, the second paragraph of Article 364 of the Spanish Civil Code, reading:

Bad faith on the part of the owner is deemed to exist whenever the act has been done in his presence, with his knowledge and tolerance, and without opposition on his part.

The foregoing view is, likewise, untenable. To begin with, this Article 364, involves a person who builds, plants or sows upon a land not knowing that it belongs to another. Inasmuch as, there is no contractual relation between them, their rights are governed by law, not by contract.

Secondly, under his contract of lease with the lessor, Dikit had a legal right to make the improvements in question and the lessor was legally bound to permit Dikit and his agent Lao Chit to enter the leased premises and construct said improvements. Surely, compliance with this valid contractual obligation does not, and cannot, constitute bad faith on the part of the lessor. Upon the other hand, the lessor could not legally object to, or obstruct, the work done by Lao Chit, without being chargeable with bad faith in the performance of said contractual obligation with Dikit.

In order to justify the application of the principle that no one should be permitted to unjustly enrich himself at the expense of another, His Honor the Trial Judge cited Article 356 of the Civil Code of Spain, which provides:

He who receives fruits is obliged to pay any expenses which may have been incurred by another in the production, gathering, and preservation thereof.

We agree with the lessor that this Article is not in point, for:

(a) Said provision is part of Section I, Chapter II, Title II, Book II, of the Spanish Civil Code, which section regulates the "right of accession with respect to the products of property," and the work done and the improvements introduced by Lao Chit are not "products" of the lessor's property.

(b) Said Article 356 refers to "expenses" of production, gathering and preservation" of fruits received by the owner of the property, not to improvements, whereas the claim of Lao Chit is based upon "improvements" introduced, not "expenses" incurred by him for the "production, gathering and preservation" of fruits. In the language of Manresa:

. . . el Codigo exige el propietario pague al tercer poseedor que fue de la cosa los gastos de produccion, y en su caso los de recoleccion y conservacion. El propietario no puede excusarse alegando la mala fe del tercero, porque sea de buena o de mala fe, lo cierto es que este ha hecho un gasto, no solo util para el propietario, sino necesario, y sin el cual el propietario no hubiera obtenido frutos de su fundo, resultando ademas que, de no mediar indemnizacion, se consagraria el injusto principio de que uno puede enriquecerse a costa y con daño de otro. Para afirmarse por completo en esta opinion debe concordarse el articulo que comentamos con los 452 a 456, relativos a los efectos de la posesion de buena y mala fe, y que no examinamos ahora porque el asunto se trata luego con mas detalles.

Los gastos de produccion y demas, para que puedan conceptuarse reembolsables por el propietario en el caso que suponemos, deben tener dos caracteres: primero, que esten dedicados a la produccion anual; es decir, que no se trata en este supuesto de las bonificaciones generales del fundo. Semejantes bonificaciones entran en la categoria de las mejoras, que se regulan en otro lugar del Codigo (al tratar de la posesion), y segundo, que no sean superfluos, excesivos o de puro lujo, sino que deben ser hechos en aquella medida natural que la condicion del cultivo o trabajo de que se trata exige. (3 Manresa [6th ed.], 196; Emphasis supplied.)

(c) The right to recover under the principle of undue enrichment is justifiable under Article 1887 of the Spanish Civil Code, reading:

Quasi contracts are licit and purely voluntary acts which create an obligation on the part of the actor in favor of a third person, and, at times, a reciprocal obligation between the parties concerned.

Its counterpart in the Civil Code of the Philippines is Article 2142, which we quote:

Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

The former is part of Title XVI, Book IV of the Spanish Civil Code, entitled "obligations incurred without contract", whereas the latter is included in Title XVII, Book IV of the Civil Code of the Philippines, regulating "extra-contractual obligations" or obligations beyond, outside of, or outside the scope of, a contract. The construction of the improvements in question was not a "purely voluntary act" or "unilateral act" of Lao Chit. He introduced them in a compliance with a bilateral "obligation" he undertook under his contract with Dikit. The right of Dikit to enter into such contract, in turn, sprang from his lease contract with the lessor. As a privy to Dikit's rights under this contract, insofar as said improvements are concerned, Lao Chit's title thereto, as against the lessor, is governed, therefore, by such contract of lease, not by any quasi-contract, or by the principles of equity, as distinguished from law, contracts or quasi-contracts.

(d) For the principle of undue enrichment to apply, there must be "enrichment" and the same must be "undue" or "unjust".

In the case at bar, Dikit failed to pay the agreed monthly rental of P5,000 from October, 1949. Up to July 1, 1951, when the premises in question were leased to the Bank, the rentals due from Dikit aggregated, therefore, P105,000. Thus, despite the fact that the lessor had become the owner of the improvements in question, worth P59,365.00, is still suffered a loss of over P45,000.00. Such "loss" negates the idea of "enrichment". Neither may the latter be deemed to have taken place in the sense that said improvements had increased the productive capacity of the leased premises, for, despite said improvements, the Bank agreed to pay, beginning from July 1, 1951, only P4,000 a month, or P1,000 a month less than the rental stipulated with Dikit.

Regardless of the foregoing, Lao Chit had no reason to believe — and he does not claim to have acted under the belief — that Dikit owned the leased premises. In fact, the circumstances surrounding the case are such as to leave the room for doubt that Lao Chit knew that Dikit was not the owner of said property and that the same belonged to the lessor. Besides, Lao Chit should have known that, as Dikit's agent, in the construction of the improvements, he (Lao Chit) was subject to the limitations imposed upon Dikit by his contract with the lessor and that the improvements in question became property of the owner of the building, not only by operation of law, as accessions to said building, but, also, for specific stipulation in the contract of lease between Dikit and the lessor. Inasmuch as the acquisition of said improvements by the owner of the building and lessor is ordained by law and provided for by said contract, which is admittedly valid, the resulting enrichment — if any — by said owner and lessor, is neither "undue" nor "unjustly".

Upon the other hand, he had been reasonably vigilant, Lao Chit could have demanded from Dikit a mortgage, or a bond, or some other security, for the protection of his rights, yet he (Lao Chit) did not do so. Should the lessor be required to pay Lao Chit what he is entitled to recover from Dikit, but which he (Lao Chit) cannot — due to his oversight, carelessness or negligence — collect from Dikit, the effect would be to relieve Lao Chit of the consequences of his own inadvertence or negligence, and hold the lessor responsible therefor. This would be neither fair, nor just, nor equitable.

Lastly, the lower court declared that the improvements in question belong to Lao Chit, because it had been so held in Case No. 10718 instituted by him against Dikit and Silva. Obviously, however, the proceedings in that case and the decision therein rendered are not binding upon the lessor, the same being neither a party in said case, nor a successor to the interest of the defendants therein. Besides, the aforementioned finding is not borne out by Lao Chit's contract with Dikit and Silva (Exhibits A-1, A-2, A-2-a and A-3). Indeed, even if Dikit and Silva had agreed with Lao Chit — and they had no such agreement — that he would own the improvements until payment of the price thereof, the stipulation would be, neither valid, nor binding upon the lessor, for Dikit and Silva had no authority whatsoever to waive the statutory right of accession of the lessor to and over said improvements (Arts. 353 and 358, Civil Code of Spain; Arts. 440 and 445, Civil Code of the Philippines).

Wherefore, the decision appealed from is hereby reversed and another one shall be entered dismissing the complaint, with costs against plaintiff-appellee Lao Chit. It is so ordered.

G.R. No. 97995 January 21, 1993

PHILIPPINE NATIONAL BANK, petitioner, vs.COURT OF APPEALS AND B.P. MATA AND CO., INC., respondents.

Roland A. Niedo for petitioner.

Benjamin C. Santos Law Office for respondent.

 ROMERO, J.:

Rarely is this Court confronted with a case calling for the delineation in broad strokes of the distinctions between such closely allied concepts as the quasi-contract called "solutio indebiti" under the venerable Spanish Civil Code and the species of implied trust denominated "constructive trusts," commonly regarded as of Anglo-American origin. Such a case is the one presented to us now which has highlighted more of the affinity and less of the dissimilarity between the two concepts as to lead the legal scholar into the error of interchanging the two. Presented below are the factual circumstances that brought into juxtaposition the twin institutions of the Civil Law quasi-contract and the Anglo-American trust.

Private Respondent B.P. Mata & Co. Inc. (Mata), is a private corporation engaged in providing goods and services to shipping companies. Since 1966, it has acted as a manning or crewing agent for several foreign firms, one of which is Star Kist Foods, Inc., USA (Star Kist). As part of their agreement, Mata makes advances for the crew's medical expenses, National Seaman's Board fees, Seaman's Welfare fund, and standby fees and for the crew's basic personal needs. Subsequently, Mata sends monthly billings to its foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic transfer through banks for credit to the latter's account.

Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC) of Los Angeles which had an agency arrangement with Philippine National Bank (PNB), transmitted a cable message to the International Department of PNB to pay the amount of US$14,000 to Mata by crediting the latter's account with the Insular Bank of Asia and America (IBAA), per order of Star Kist. Upon receipt of this cabled message on February 24, 1975, PNB's International Department noticed an error and sent a service message to SEPAC Bank. The latter replied with instructions that the amount of US$14,000 should only be for US$1,400.

On the basis of the cable message dated February 24, 1975 Cashier's Check No. 269522 in the amount of US$1,400 (P9,772.95) representing reimbursement from Star Kist, was issued by the Star Kist for the account of Mata on February 25, 1975 through the Insular Bank of Asia and America (IBAA).

However, fourteen days after or on March 11, 1975, PNB effected another payment through Cashier's Check No. 270271 in the amount of US$14,000 (P97,878.60) purporting to be another transmittal of reimbursement from Star Kist, private respondent's foreign principal.

Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of US$14,000 (P97,878.60) after it discovered its error in effecting the second payment.

On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000 against Mata arguing that based on a constructive trust under Article 1456 of the Civil Code, it has a right to recover the said amount it erroneously credited to respondent Mata. 1

After trial, the Regional Trial Court of Manila rendered judgment dismissing the complaint ruling that the instant case falls squarely under Article 2154 on solutio indebiti and not under Article 1456 on constructive trust. The lower court ruled out constructive trust, applying strictly the technical definition of a trust as "a right of property, real or personal, held by one party for the benefit of another; that there is a fiduciary relation between a trustee and a cestui que trust as regards certain property, real, personal, money or choses in action." 2

In affirming the lower court, the appellate court added in its opinion that under Article 2154 on solutio indebiti, the person who makes the payment is the one who commits the mistake vis-a-vis the recipient who is unaware of such a mistake. 3 Consequently, recipient is duty bound to return the amount paid by mistake. But the appellate court concluded that petitioner's demand for the return of US$14,000 cannot prosper because its cause of action had already prescribed under Article 1145, paragraph 2 of the Civil Code which states:

The following actions must be commenced within six years:

xxx xxx xxx

(2) Upon a quasi-contract.

This is because petitioner's complaint was filed only on February 4, 1982, almost seven years after March 11, 1975 when petitioner mistakenly made payment to private respondent.

Hence, the instant petition for certiorari proceeding seeking to annul the decision of the appellate court on the basis that Mata's obligation to return US$14,000 is governed, in the alternative, by either Article 1456 on constructive trust or Article 2154 of the Civil Code on quasi-contract. 4

Article 1456 of the Civil Code provides:

If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

On the other hand, Article 2154 states:

If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.

Petitioner naturally opts for an interpretation under constructive trust as its action filed on February 4, 1982 can still prosper, as it is well within the prescriptive period of ten (10) years as provided by Article 1144, paragraph 2 of the Civil Code. 5

If it is to be construed as a case of payment by mistake or solutio indebiti, then the prescriptive period for quasi-contracts of six years applies, as provided by Article 1145. As pointed out by the appellate court, petitioner's cause of action thereunder shall have prescribed, having been brought almost seven years after the cause of

action accrued. However, even assuming that the instant case constitutes a constructive trust and prescription has not set in, the present action has already been barred by laches.

To recall, trusts are either express or implied. While express trusts are created by the intention of the trustor or of the parties, implied trusts come into being by operation of law. 6 Implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent or which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties.  7

In turn, implied trusts are subdivided into resulting and constructive trusts. 8 A resulting trust is a trust raised by implication of law and presumed always to have been contemplated by the parties, the intention of which is found in the nature of the transaction, but not expressed in the deed or instrument of conveyance. 9 Examples of resulting trusts are found in Articles 1448 to 1455 of the Civil Code. 10 On the other hand, a constructive trust is one not created by words either expressly or impliedly, but by construction of equity in order to satisfy the demands of justice. An example of a constructive trust is Article 1456 quoted above. 11

A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense 12 for in a typical trust, confidence is reposed in one person who is named a trustee for the benefit of another who is called the cestui que trust, respecting property which is held by the trustee for the benefit of the cestui que trust. 13 A constructive trust, unlike an express trust, does not emanate from, or generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends holding the property for the beneficiary. 14

In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA, had no intent of holding the same for a supposed beneficiary or cestui que trust, namely PNB. But under Article 1456, the law construes a trust, namely a constructive trust, for the benefit of the person from whom the property comes, in this case PNB, for reasons of justice and equity.

At this juncture, a historical note on the codal provisions on trust and quasi-contracts is in order.

Originally, under the Spanish Civil Code, there were only two kinds of quasi contracts: negotiorum gestio andsolutio indebiti. But the Code Commission, mindful of the position of the eminent Spanish jurist, Manresa, that "the number of quasi contracts may be indefinite," added Section 3 entitled "Other Quasi-Contracts." 15

Moreover, even as Article 2142 of the Civil Code defines a quasi-contract, the succeeding article provides that: "The provisions for quasi-contracts in this Chapter do not exclude other quasi-contracts which may come within the purview of the preceding article." 16

Indubitably, the Civil Code does not confine itself exclusively to the quasi-contracts enumerated from Articles 2144 to 2175 but is open to the possibility that, absent a pre-existing relationship, there being neither crime nor quasi-delict, a quasi-contractual relation may be forced upon the parties to avoid a case of unjust enrichment. 17 There being no express consent, in the sense of a meeting of minds between the parties, there is no contract to speak of. However, in view of the peculiar circumstances or factual environment, consent is presumed to the end that a recipient of benefits or favors resulting from lawful, voluntary and unilateral acts of another may not be unjustly enriched at the expense of another.

Undoubtedly, the instant case fulfills the indispensable requisites of solutio indebiti as defined in Article 2154 that something (in this case money) has been received when there was no right to demand it and (2) the same was unduly delivered through mistake. There is a presumption that there was a mistake in the payment "if something which had never been due or had already been paid was delivered; but he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause." 18

In the case at bar, a payment in the corrected amount of US$1,400 through Cashier's Check No. 269522 had already been made by PNB for the account of Mata on February 25, 1975. Strangely, however, fourteen days later, PNB effected another payment through Cashier's Check No. 270271 in the amount of US$14,000, this time purporting to be another transmittal of reimbursement from Star Kist, private respondent's foreign principal.

While the principle of undue enrichment or solutio indebiti, is not new, having been incorporated in the subject on quasi-contracts in Title XVI of Book IV of the Spanish Civil Code entitled "Obligations incurred without contract," 19the chapter on Trusts is fairly recent, having been introduced by the Code Commission in 1949. Although the concept of trusts is nowhere to be found in the Spanish Civil Code, the framers of our present Civil Code incorporated implied trusts, which includes constructive trusts, on top of quasi-contracts, both of which embody the principle of equity above strict legalism. 20

In analyzing the law on trusts, it would be instructive to refer to Anglo-American jurisprudence on the subject. Under American Law, a court of equity does not consider a constructive trustee for all purposes as though he were in reality a trustee; although it will force him to return the property, it will not impose upon him the numerous fiduciary obligations ordinarily demanded from a trustee of an express trust. 21 It must be borne in mind that in an express trust, the trustee has active duties of management while in a constructive trust, the duty is merely to surrender the property.

Still applying American case law, quasi-contractual obligations give rise to a personal liability ordinarily enforceable by an action at law, while constructive trusts are enforceable by a proceeding in equity to compel the defendant to surrender specific property. To be sure, the distinction is more procedural than substantive.  22

Further reflection on these concepts reveals that a constructive "trust" is as much a misnomer as a "quasi-contract," so far removed are they from trusts and contracts proper, respectively. In the case of a constructive trust, as in the case of quasi-contract, a relationship is "forced" by operation of law upon the parties, not because of any intention on their part but in order to prevent unjust enrichment, thus giving rise to certain obligations not within the contemplation of the parties. 23

Although we are not quite in accord with the opinion that "the trusts known to American and English equity jurisprudence are derived from the fidei commissa of the Roman Law," 24 it is safe to state that their roots are firmly grounded on such Civil Law principles are expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari potest,"25 particularly the concept of constructive trust.

Returning to the instant case, while petitioner may indeed opt to avail of an action to enforce a constructive trust or the quasi-contract of solutio indebiti, it has been deprived of a choice, for prescription has effectively blocked quasi-contract as an alternative, leaving only constructive trust as the feasible option.

Petitioner argues that the lower and appellate courts cannot indulge in semantics by holding that in Article 1456 the recipient commits the mistake while in Article 2154, the recipient commits no mistake. 26 On the other hand, private respondent, invoking the appellate court's reasoning, would impress upon us that under Article 1456, there can be no mutual mistake. Consequently, private respondent contends that the case at bar is one of solutio indebiti and not a constructive trust.

We agree with petitioner's stand that under Article 1456, the law does not make any distinction since mutual mistake is a possibility on either side — on the side of either the grantor or the grantee. 27 Thus, it was error to conclude that in a constructive trust, only the person obtaining the property commits a mistake. This is because it is also possible that a grantor, like PNB in the case at hand, may commit the mistake.

Proceeding now to the issue of whether or not petitioner may still claim the US$14,000 it erroneously paid private respondent under a constructive trust, we rule in the negative. Although we are aware that only seven (7) years lapsed after petitioner erroneously credited private respondent with the said amount and that under Article 1144, petitioner is well within the prescriptive period for the enforcement of a constructive or implied trust, we rule that petitioner's claim cannot prosper since it is already barred by laches. It is a well-settled rule now that an action to enforce an implied trust, whether resulting or constructive, may be barred not only by prescription but also by laches. 28

While prescription is concerned with the fact of delay, laches deals with the effect of unreasonable delay.  29 It is amazing that it took petitioner almost seven years before it discovered that it had erroneously paid private respondent. Petitioner would attribute its mistake to the heavy volume of international transactions handled by the Cable and Remittance Division of the International Department of PNB. Such specious reasoning is not persuasive. It is unbelievable for a bank, and a government bank at that, which regularly publishes its balanced financial statements annually or more frequently, by the quarter, to notice its error only seven years later. As a universal bank with worldwide operations, PNB cannot afford to commit such costly mistakes. Moreover, as between parties where negligence is imputable to one and not to the other, the former must perforce bear the consequences of its neglect. Hence, petitioner should bear the cost of its own negligence.

WHEREFORE, the decision of the Court of Appeals dismissing petitioner's claim against private respondent is AFFIRMED.

Costs against petitioner.

SO ORDERED.

G.R. No. 146807      May 9, 2002

PADCOM CONDOMINIUM CORPORATION, petitioner, vs.ORTIGAS CENTER ASSOCIATION, INC., respondent.

DAVIDE, JR., C.J.:

Challenged in this case is the 30 June 2000 decision1 of the Court of Appeals in CA-G.R. CV No. 60099, reversing and setting aside the 1 September 1997 decision2 of the Regional Trial Court of Pasig City, Branch 264, in Civil Case No. 63801.3

Petitioner Padcom Condominium Corporation (hereafter PADCOM) owns and manages the Padilla Office Condominium Building (PADCOM Building) located at Emerald Avenue, Ortigas Center, Pasig City. The land on which the building stands was originally acquired from the Ortigas & Company, Limited Partnership (OCLP), by Tierra Development Corporation (TDC) under a Deed of Sale dated 4 September 1974. Among the terms and conditions in the deed of sale was the requirement that the transferee and its successor-in-interest must become members of an association for realty owners and long-term lessees in the area later known as the Ortigas Center. Subsequently, the said lot, together with improvements thereon, was conveyed by TDC in favor of PADCOM in a Deed of Transfer dated 25 February 1975.4

In 1982, respondent Ortigas Center Association, Inc. (hereafter the Association) was organized to advance the interests and promote the general welfare of the real estate owners and long-term lessees of lots in the Ortigas Center. It sought the collection of membership dues in the amount of two thousand seven hundred twenty-four pesos and forty centavos (P2,724.40) per month from PADCOM. The corporate books showed that PADCOM owed the Association P639,961.47, representing membership dues, interests and penalty charges from April 1983 to June 1993.5 The letters exchanged between the parties through the years showed repeated demands for payment, requests for extensions of payment, and even a settlement scheme proposed by PADCOM in September 1990.

In view of PADCOM’s failure and refusal to pay its arrears in monthly dues, including interests and penalties thereon, the Association filed a complaint for collection of sum of money before the trial court below, which was docketed as Civil Case No. 63801. The Association averred that purchasers of lands within the Ortigas Center complex from OCLP are obligated under their contracts of sale to become members of the Association. This obligation was allegedly passed on to PADCOM when it bought the lot from TDC, its predecessor-in-interest.6

In its answer, PADCOM contended that it is a non-stock, non-profit association, and for it to become a special member of the Association, it should first apply for and be accepted for membership by the latter’s Board of Directors. No automatic membership was apparently contemplated in the Association’s By-laws. PADCOM added that it could not be compelled to become a member without violating its right to freedom of association. And since it was not a member of the Association, it was not liable for membership dues, interests and penalties.7

During the trial, the Association presented its accountant as lone witness to prove that PADCOM was, indeed, one of its members and, as such, did not pay its membership dues.1âwphi1.nêt

PADCOM, on the other hand, did not present its evidence; instead it filed a motion to dismiss by way of demurrer to evidence. It alleged that the facts established by the Association showed no right to the relief prayed for. It claimed that the provisions of the Association’s By-laws and the Deed of Transfer did not contemplate automatic membership. Rather, the owner or long-term lessee becomes a member of the Association only after applying with and being accepted by its Board of Directors. Assuming further that PADCOM was a member of the Association, the latter failed to show that the collection of monthly dues was a valid corporate act duly authorized by a proper resolution of the Association’s Board of Directors.8

After due consideration of the issues raised in the motion to dismiss, the trial court rendered a decision dismissing the complaint.9

The Association appealed the case to the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 60099. In its decision10 of 30 June 2000, the Court of Appeals reversed and set aside the trial court’s dismissal of Civil Case No. 63801, and decreed as follows:

WHEREFORE, the appealed decision dated September 1, 1997 is REVERSED and SET ASIDE and, in lieu thereof, a new one is entered ordering the appellee (PADCOM) to pay the appellant (the Association) the following:

1) P639,961.47 as and for membership dues in arrears inclusive of earned interests and penalties; and

2) P25,000.00 as and for attorney’s fees.

Costs against the appellees.

SO ORDERED.

The Court of Appeals justified its ruling by declaring that PADCOM automatically became a member of the Association when the land was sold to TDC. The intent to pass the obligation to prospective transferees was evident from the annotation of the same clause at the back of the Transfer Certificate of Title covering the lot. Despite disavowal of membership, PADCOM’s membership in the Association was evident from these facts: (1) PADCOM was included in the Association’s list of bona fide members as of 30 March 1995; (2) Narciso Padilla, PADCOM’s President, was one of the Association’s incorporators; and (3) having received the demands for payment, PADCOM not only acknowledged them, but asked for and was granted repeated extensions, and even proposed a scheme for the settlement of its obligation. The Court of Appeals also ruled that PADCOM cannot evade payment of its obligation to the Association without violating equitable principles underlying quasi-contracts. Being covered by the Association’s avowed purpose to promote the interests and welfare of its members, PADCOM cannot be allowed to expediently deny and avoid the obligation arising from such membership.

Dissatisfied with the adverse judgment of the Court of Appeals, PADCOM filed the petition for review in this case. It raises the sole issue of whether it can be compelled to join the association pursuant to the provision onautomatic membership appearing as a condition in the Deed of Sale of 04 September 1974 and the annotation thereof on Transfer Certificate of Title No. 457308.

PADCOM contends that it cannot be compelled to be a member of the Association solely by virtue of the "automatic membership" clause that appears on the title of the property and the Deed of Transfer. In 1975, when it bought the land, the Association was still inexistent. Therefore, the provision on automatic membership was anticipatory in nature, subject to the actual formation of the Association and the subsequent formulation of its implementing rules.

PADCOM likewise maintains that the Association’s By-laws requires an application for membership. Since it never sought membership, the Court of Appeals erred in concluding that it was a member of the Association by implication. Aside from the lack of evidence proving such membership, the Association has no basis to collect monthly dues since there is no board resolution defining and prescribing how much should be paid.

For its part, the Association claims that the Deed of Sale between OCLP and TDC clearly stipulates automatic membership for the owners of lots in the Ortigas Center, including their successors-in-interest. The filing of applications and acceptance thereof by the Board of Directors of the Association are, therefore, mere formalities that can be dispensed with or waived. The provisions of the Association’s By-laws cannot in any manner alter or modify the automatic membership clause imposed on a property owner by virtue of an annotation of encumbrance on his title.

The Association likewise asserts that membership therein requires the payment of certain amounts for its operations and activities, as may be authorized by its Board of Directors. The membership dues are for the common expenses of the homeowners for necessary services.

After a careful examination of the records of this case, the Court sees no reason to disturb the assailed decision. The petition should be denied.

Section 44 of Presidential Decree No. 152911 mandates that:

SEC. 44. Statutory liens affecting title. – Every registered owner receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a certificate of title for value and in good faith, shall hold the same free from all encumbrances except those noted on said certificate and any of the following encumbrances which may be subsisting, namely: xxx

Under the Torrens system of registration, claims and liens of whatever character, except those mentioned by law, existing against the land binds the holder of the title and the whole world.12

It is undisputed that when the land in question was bought by PADCOM’s predecessor-in-interest, TDC, from OCLP, the sale bound TDC to comply with paragraph (G) of the covenants, conditions and restrictions of the Deed of Sale, which reads as follows:13

G. AUTOMATIC MEMBERSHIP WITH THE ASSOCIATION:

The owner of this lot, its successor-in-interest hereby binds himself to become a member of the ASSOCIATION which will be formed by and among purchasers, fully paid up Lot BUYERS, Building Owners and the COMPANY in respect to COMPANY OWNED LOTS.

The OWNER of this lot shall abide by such rules and regulations that shall be laid down by the ASSOCIATION in the interest of security, maintenance, beautification and general welfare of the OFFICE BUILDING zone. The ASSOCIATION when organized shall also, among others, provide for and collect assessments which shall constitute a lien on the property, junior only to liens of the Government for taxes.

Evidently, it was agreed by the parties that dues shall be collected from an automatic member and such fees or assessments shall be a lien on the property.

This stipulation was likewise annotated at the back of Transfer Certificate of Title No. 457308 issued to TDC.14And when the latter sold the lot to PADCOM on 25 February 1975, the Deed of Transfer expressly stated:15

NOW, THEREFORE, for and in consideration of the foregoing premises, the DEVELOPER, by these presents, cedes, transfers and conveys unto the CORPORATION the above-described parcel of land evidenced by Transfer Certificate of Title No. 457308, as well as the Common and Limited Common Areas of the Condominium project mentioned and described in the Master Deed with Declaration of Restrictions (Annex "A" hereof), free from all liens and encumbrances, except those already annotated at the back of said Transfer Certificate of Title No. 457308, xxx

This is so because any lien annotated on previous certificates of title should be incorporated in or carried over to the new transfer certificates of title. Such lien is inseparable from the property as it is a right in rem, a burden on the property whoever its owner may be. It subsists notwithstanding a change in ownership; in short, the personality of the owner is disregarded.16 As emphasized earlier, the provision on automatic membership was annotated in the Certificate of Title and made a condition in the Deed of Transfer in favor of PADCOM. Consequently, it is bound by and must comply with the covenant.1âwphi1.nêt

Moreover, Article 1311 of the Civil Code provides that contracts take effect between the parties, their assigns and heirs. Since PADCOM is the successor-in-interest of TDC, it follows that the stipulation on automatic membership with the Association is also binding on the former.

We are not persuaded by PADCOM’s contention that the By-laws of the Association requires application for membership and acceptance thereof by the Board of Directors. Section 2 of the By-laws17 reads:

Section 2. Regular Members. – Upon acceptance by the Board of Directors of Ortigas Center Association, Inc., all real estate owners, or long-term lessees of lots within the boundaries of the Association as defined in the Articles of Incorporation become regular members, provided, however that the long-term lessees of a lot or lots in said area shall be considered as the regular members in lieu of the owners of the same. Likewise, regular membership in the Association automatically ceases upon the cessation of a member to be an owner or long-term lessee of real estate in the area.

A lessee shall be considered a long-term lessee if his lease is in writing and for a period of two (2) years or more. Membership of a long-term lessee in the Association shall be co-terminus with his legal possession (or his lease) of the lot/s in the area. Upon the lessee’s cessation of membership in the Association, the owner shall automatically succeed the lessee as member thereat.

As lot owner, PADCOM is a regular member of the Association. No application for membership is necessary. If at all, acceptance by the Board of Directors is a ministerial function considering that PADCOM is deemed to be a regular member upon the acquisition of the lot pursuant to the automatic membership clause annotated in the Certificate of Title of the property and the Deed of Transfer.

Neither are we convinced by PADCOM’s contention that the automatic membership clause is a violation of its freedom of association. PADCOM was never forced to join the association. It could have avoided such membership

by not buying the land from TDC. Nobody forced it to buy the land when it bought the building with the annotation of the condition or lien on the Certificate of Title thereof and accepted the Deed. PADCOM voluntarily agreed to be bound by and respect the condition, and thus to join the Association.

In addition, under the principle of estoppel, PADCOM is barred from disclaiming membership in the Association. In estoppel, a person, who by his act or conduct has induced another to act in a particular manner, is barred from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to another.18

We agree with the Court of Appeals’ conclusion from the facts or circumstances it enumerated in its decision and enumerated above that PADCOM is, indeed, a regular member of the Association. These facts and circumstances are sufficient grounds to apply the doctrine of estoppel against PADCOM.

Having ruled that PADCOM is a member of the Association, it is obligated to pay its dues incidental thereto. Article 1159 of the Civil Code mandates:

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

Assuming in gratis argumenti that PADCOM is not a member of the Association, it cannot evade payment without violating the equitable principles underlying quasi-contracts. Article 2142 of the Civil Code provides:

Art. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

Generally, it may be said that a quasi-contract is based on the presumed will or intent of the obligor dictated by equity and by the principles of absolute justice. Examples of these principles are: (1) it is presumed that a person agrees to that which will benefit him; (2) nobody wants to enrich himself unjustly at the expense of another; or (3) one must do unto others what he would want others to do unto him under the same circumstances.19

As resident and lot owner in the Ortigas area, PADCOM was definitely benefited by the Association’s acts and activities to promote the interests and welfare of those who acquire property therein or benefit from the acts or activities of the Association.1âwphi1.nêt

Finally, PADCOM’s argument that the collection of monthly dues has no basis since there was no board resolution defining how much fees are to be imposed deserves scant consideration. Suffice it is to say that PADCOM never protested upon receipt of the earlier demands for payment of membership dues. In fact, by proposing a scheme to pay its obligation, PADCOM cannot belatedly question the Association’s authority to assess and collect the fees in accordance with the total land area owned or occupied by the members, which finds support in a resolution dated 6 November 1982 of the Association’s incorporating directors20 and Section 2 of its By-laws.21

WHEREFORE, the petition is hereby DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.

G.R. No. 82670 September 15, 1989

DOMETILA M. ANDRES, doing business under the name and style "IRENE'S WEARING APPAREL,"petitioner, vs.MANUFACTURERS HANOVER & TRUST CORPORATION and COURT OF APPEALS, respondents.

Roque A. Tamayo for petitioner.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private respondent.

 CORTES, J.:

Assailed in this petition for review on certiorari is the judgment of the Court of Appeals, which, applying the doctrine of solutio indebiti, reversed the decision of the Regional Trial Court, Branch CV, Quezon City by deciding in favor of private respondent.

Petitioner, using the business name "Irene's Wearing Apparel," was engaged in the manufacture of ladies garments, children's wear, men's apparel and linens for local and foreign buyers. Among its foreign buyers was Facets Funwear, Inc. (hereinafter referred to as FACETS) of the United States.

In the course of the business transaction between the two, FACETS from time to time remitted certain amounts of money to petitioner in payment for the items it had purchased. Sometime in August 1980, FACETS instructed the First National State Bank of New Jersey, Newark, New Jersey, U.S.A. (hereinafter referred to as FNSB) to transfer $10,000.00 to petitioner via Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to as PNB).

Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover and Trust Corporation to effect the above- mentioned transfer through its facilities and to charge the amount to the account of FNSB with private respondent. Although private respondent was able to send a telex to PNB to pay petitioner $10,000.00 through the Pilipinas Bank, where petitioner had an account, the payment was not effected immediately because the payee designated in the telex was only "Wearing Apparel." Upon query by PNB, private respondent sent PNB another telex dated August 27, 1980 stating that the payment was to be made to "Irene's Wearing Apparel." On August 28, 1980, petitioner received the remittance of $10,000.00 through Demand Draft No. 225654 of the PNB.

Meanwhile, on August 25, 1980, after learning about the delay in the remittance of the money to petitioner, FACETS informed FNSB about the situation. On September 8, 1980, unaware that petitioner had already received the remittance, FACETS informed private respondent about the delay and at the same time amended its instruction by asking it to effect the payment through the Philippine Commercial and Industrial Bank (hereinafter referred to as PCIB) instead of PNB.

Accordingly, private respondent, which was also unaware that petitioner had already received the remittance of $10,000.00 from PNB instructed the PCIB to pay $10,000.00 to petitioner. Hence, on September 11, 1980, petitioner received a second $10,000.00 remittance.

Private respondent debited the account of FNSB for the second $10,000.00 remittance effected through PCIB. However, when FNSB discovered that private respondent had made a duplication of the remittance, it asked for a recredit of its account in the amount of $10,000.00. Private respondent complied with the request.

Private respondent asked petitioner for the return of the second remittance of $10,000.00 but the latter refused to pay. On May 12, 1982 a complaint was filed with the Regional Trial Court, Branch CV, Quezon City which was decided in favor of petitioner as defendant. The trial court ruled that Art. 2154 of the New Civil Code is not applicable to the case because the second remittance was made not by mistake but by negligence and petitioner was not unjustly enriched by virtue thereof [Record, p. 234]. On appeal, the Court of Appeals held that Art. 2154 is applicable and reversed the RTC decision. The dispositive portion of the Court of Appeals' decision reads as follows:

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and another one entered in favor of plaintiff-appellant and against defendant-appellee Domelita (sic) M. Andres, doing business under the name and style "Irene's Wearing Apparel" to reimburse and/or return to plaintiff-appellant the amount of $10,000.00, its equivalent in Philippine currency, with interests at the legal rate from the filing of the complaint on May 12, 1982 until the whole amount is fully paid, plus twenty percent (20%) of the amount due as attomey's fees; and to pay the costs.

With costs against defendant-appellee.

SO ORDERED. [Rollo, pp. 29-30.]

Thereafter, this petition was filed. The sole issue in this case is whether or not the private respondent has the right to recover the second $10,000.00 remittance it had delivered to petitioner. The resolution of this issue would hinge on the applicability of Art. 2154 of the New Civil Code which provides that:

Art. 2154. If something received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.

This provision is taken from Art. 1895 of the Spanish Civil Code which provided that:

Art. 1895. If a thing is received when there was no right to claim it and which, through an error, has been unduly delivered, an obligation to restore it arises.

In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice Bocobo explained the nature of this article thus:

Article 1895 [now Article 2154] of the Civil Code abovequoted, is therefore applicable. This legal provision, which determines the quasi-contract of solution indebiti, is one of the concrete manifestations of the ancient principle that no one shall enrich himself unjustly at the expense of another. In the Roman Law Digest the maxim was formulated thus: "Jure naturae acquum est, neminem cum alterius detrimento et injuria fieri locupletiorem." And the Partidas declared: "Ninguno non deue enriquecerse tortizeramente con dano de otro." Such axiom has grown through the centuries in legislation, in the science of law and in court decisions. The lawmaker has found it one of the helpful guides in framing statutes and codes. Thus, it is unfolded in many articles scattered in the Spanish Civil Code. (See for example, articles, 360, 361, 464, 647, 648, 797, 1158, 1163, 1295, 1303, 1304, 1893 and 1895, Civil Code.) This time-honored aphorism has also been adopted by jurists in their study of the conflict of rights. It has been accepted by the courts, which have not hesitated to apply it when the exigencies of right and equity demanded its assertion. It is a part of that affluent reservoir of justice upon which judicial discretion draws whenever the statutory laws are inadequate because they do not speak or do so with a confused voice. [at p. 632.]

For this article to apply the following requisites must concur: "(1) that he who paid was not under obligation to do so; and, (2) that payment was made by reason of an essential mistake of fact" [City of Cebu v. Piccio, 110 Phil. 558, 563 (1960)].

It is undisputed that private respondent delivered the second $10,000.00 remittance. However, petitioner contends that the doctrine of solutio indebiti, does not apply because its requisites are absent.

First, it is argued that petitioner had the right to demand and therefore to retain the second $10,000.00 remittance. It is alleged that even after the two $10,000.00 remittances are credited to petitioner's receivables from FACETS, the latter allegedly still had a balance of $49,324.00. Hence, it is argued that the last $10,000.00 remittance being in payment of a pre-existing debt, petitioner was not thereby unjustly enriched.

The contention is without merit.

The contract of petitioner, as regards the sale of garments and other textile products, was with FACETS. It was the latter and not private respondent which was indebted to petitioner. On the other hand, the contract for the transmittal of dollars from the United States to petitioner was entered into by private respondent with FNSB. Petitioner, although named as the payee was not privy to the contract of remittance of dollars. Neither was private respondent a party to the contract of sale between petitioner and FACETS. There being no contractual relation between them, petitioner has no right to apply the second $10,000.00 remittance delivered by mistake by private respondent to the outstanding account of FACETS.

Petitioner next contends that the payment by respondent bank of the second $10,000.00 remittance was not made by mistake but was the result of negligence of its employees. In connection with this the Court of Appeals made the following finding of facts:

The fact that Facets sent only one remittance of $10,000.00 is not disputed. In the written interrogatories sent to the First National State Bank of New Jersey through the Consulate General of the Philippines in New York, Adelaide C. Schachel, the investigation and reconciliation clerk in the said bank testified that a request to remit a payment for Facet Funwear Inc. was made in August, 1980. The total amount which the First National State Bank of New Jersey actually requested the plaintiff-appellant Manufacturers Hanover & Trust Corporation to remit to Irene's Wearing Apparel was US $10,000.00. Only one remittance was requested by First National State Bank of New Jersey as per instruction of Facets Funwear (Exhibit "J", pp. 4-5).

That there was a mistake in the second remittance of US $10,000.00 is borne out by the fact that both remittances have the same reference invoice number which is 263 80.

(Exhibits "A-1- Deposition of Mr. Stanley Panasow" and "A-2-Deposition of Mr. Stanley Panasow").

Plaintiff-appellant made the second remittance on the wrong assumption that defendant-appellee did not receive the first remittance of US $10,000.00. [Rollo, pp. 26-27.]

It is evident that the claim of petitioner is anchored on the appreciation of the attendant facts which petitioner would have this Court review. The Court holds that the finding by the Court of Appeals that the second $10,000.00 remittance was made by mistake, being based on substantial evidence, is final and conclusive. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante v. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:

The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of fact being conclusive" [Chan v. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions]. This Court has emphatically declared that "it is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have been committed by the lower court" [Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued v. Court of Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596]. "Barring, therefore, a showing that the findings complained of are totally devoid of support in the record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand, for this Court is not expected or required to examine or contrast the oral and documentary evidence submitted by the parties" [Santa Ana, Jr. v. Hernandez, G.R. No. L-16394, December 17, 1966, 18 SCRA 9731. [at pp. 144-145.]

Petitioner invokes the equitable principle that when one of two innocent persons must suffer by the wrongful act of a third person, the loss must be borne by the one whose negligence was the proximate cause of the loss.

The rule is that principles of equity cannot be applied if there is a provision of law specifically applicable to a case [Phil. Rabbit Bus Lines, Inc. v. Arciaga, G.R. No. L-29701, March 16, 1987,148 SCRA 433; Zabat, Jr. v. Court of Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA 587; Rural Bank of Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18, 1985, 135 SCRA 409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case of De Garcia v. Court of Appeals, G.R. No. L-20264, January 30, 1971, 37 SCRA 129, citing Aznar v. Yapdiangco, G.R. No. L-18536, March 31, 1965, 13 SCRA 486, held:

... The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559. Between a common law principle and a statutory provision, the latter must prevail in this jurisdiction. [at p. 135.]

Having shown that Art. 2154 of the Civil Code, which embodies the doctrine of solutio indebiti, applies in the case at bar, the Court must reject the common law principle invoked by petitioner.

Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the fact that from the time the second $10,000.00 remittance was made, five hundred and ten days had elapsed before private respondent demanded the return thereof. Needless to say, private respondent instituted the complaint for recovery of the second $10,000.00 remittance well within the six years prescriptive period for actions based upon a quasi-contract [Art. 1145 of the New Civil Code].

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

TITAN-IKEDA CONSTRUCTION         G.R. No. 158768& DEVELOPMENTCORPORATION,                                      Petitioner,           Present:

                                                                    PUNO, C.J., Chairperson,                                                                   SANDOVAL-GUTIERREZ,          -v e r s u s-                                        CORONA,                                                                   AZCUNA and

LEONARDO-DE CASTRO, JJ.                                                                  PRIMETOWN PROPERTYGROUP, INC.,                                      Respondent.         Promulgated:                                                                    February 12, 2008  x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x 

D E C I S I O N CORONA, J.:            This petition for review on certiorari[1] seeks to set aside the decision of the Court of Appeals (CA) in CA-G.R. CV No. 61353[2] and its resolution[3] denying reconsideration.           In 1992, respondent Primetown Property Group, Inc. awarded the contract for the structural works [4] of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda Construction and Development Corporation. [5] The parties formalized their agreement in a construction contract[6]dated February 4, 1993.[7]

           Upon the completion of MPT's structural works, respondent awarded the P130,000,000 contract for the tower's architectural works[8] (project) to petitioner. Thus, on January 31, 1994, the parties executed a supplemental agreement.[9]  The salient portions thereof were:

 1.                  the [project] shall cover the scope of work of the detailed construction bid

plans and specifications and bid documents dated 28 September 1993, attached and forming an integral part hereof as Annex A.

 2.                  the contract price for the said works shall be P130 million. 3.                  the payment terms shall be “full swapping” or full payment in condominium

units. The condominium units earmarked for the [petitioner] are shown in the attached Annex B.

 4.                  the [respondent] shall transfer and surrender to [petitioner] the

condominium units abovestated in accordance with the following schedule: 

(a)                80% of units — upon posting and acceptance by [respondent] of the performance bond [and]

 (b)               20% or remaining balance — upon completion of the project as

provided in the construction contract and simultaneous with the posting by [petitioner] of the reglementary guarantee bond.

 5.                  the contract period shall be fifteen (15) months reckoned from the release of

the condominium certificates of title (CCTs) covering eighty percent (80%) of the units transferable to [petitioner] as aforesaid[.]

            Significantly, the supplemental agreement adopted those provisions of the construction contract which it did not specifically discuss or provide for.[10] Among those carried over was the designation of GEMM Construction Corporation (GEMM) as the project's construction manager.[11]             Petitioner started working on the project in February 1994.           On June 30, 1994, respondent executed a deed of sale [12]  (covering 114 condominium units and 20 parking slots of the MPT collectively valued by the parties at P112,416,716.88)[13] in favor of petitioner pursuant to the “full-swapping” payment provision of the supplemental agreement.           Shortly thereafter, petitioner sold some of its units to third persons.[14]

           In September 1995, respondent engaged the services of Integratech, Inc. (ITI), an engineering consultancy firm, to evaluate the progress of the project.[15]  In its September 7, 1995 report,[16]ITI informed respondent that petitioner, at that point, had only accomplished 31.89% of the project (or was 11 months and six days behind schedule).[17]

 

          Meanwhile, petitioner and respondent were discussing the possibility of the latter’s take over of the project’s supervision. Despite ongoing negotiations, respondent did not obtain petitioner’s consent in hiring ITI as the project’s construction manager. Neither did it inform petitioner of ITI’s September 7, 1995 report.           On October 12, 1995, petitioner sought to confirm respondent's plan to take over the project. [18] Its letter stated:

                         The mutual agreement arrived at sometime in the last week of August 1995 for [respondent] to take over the construction supervision of the balance of the [project] from [petitioner's] [e]ngineering staff and complete [the] same by December 31, 1995 as promised by [petitioner's] engineer.             The [petitioner's] accomplished works as of this date of [t]ake over is of acceptable quality in materials and workmanship.             This mutual agreement on the take over should not be misconstrued in any other way except that the take over is part of the long range plan of [respondent] that [petitioner], in the spirit of cooperation, agreed to hand over the construction supervision to  [respondent] as requested.  (emphasis supplied)[19]

  

Engineers Antonio Co, general construction manager of respondent, and Luzon Y. Tablante, project manager of petitioner, signed the letter.   INTEGRATECH’S (ITI’S) REPORT

 In its September 7, 1995 report, ITI estimated that petitioner should have accomplished 48.71% of the

project as of the October 12, 1995 takeover date. [20] Petitioner repudiated this figure[21]  but qualifiedly admitted that it did not finish the project. [22] Records showed that respondent did not merely take over the supervision of the project but took full control thereof.[23]

           Petitioner consequently conducted an inventory.[24] On the basis thereof, petitioner demanded from respondent the payment of its balance amounting to P1,779,744.85.[25]

           On February 19, 1996, petitioner sent a second letter to respondent demanding P2,023,876.25. This new figure included the cost of materials (P244,331.40) petitioner advanced from December 5, 1995 to January 26, 1996.[26]           On November 22, 1996, petitioner demanded from respondent the delivery of MPT's management certificate[27] and the keys to the condominium units and the payment of its (respondent's) balance.[28]

           Because respondent ignored petitioner's demand, petitioner, on December 9, 1996, filed a complaint for specific performance[29] in the Housing and Land Use Regulatory Board (HLURB).           While the complaint for specific performance was pending in the HLURB, respondent sent a demand letter to petitioner asking it to reimburse the actual costs incurred in finishing the project (orP69,785,923.47).[30] In view of the pendency of the HLURB case, petitioner did not heed respondent's demands.           On April 29, 1997, the HLURB rendered a decision in favor of petitioner. [31] It ruled that the instrument executed on June 30, 1994 was a deed of absolute sale because the conveyance of the condominium units and parking slots was not subject to any condition.[32]   Thus, it ordered respondent to issue MPT’s management certificate and to deliver the keys to the condominium units to petitioner. [33]  Respondent did not appeal this decision. Consequently, a writ of execution was issued upon its finality.[34]

 Undaunted by the finality of the HLURB decision, respondent filed a complaint for collection of sum of

money[35] against petitioner in the Regional Trial Court (RTC) of Makati City, Branch 58 on July 2, 1997. It prayed for the reimbursement of the value of the project’s unfinished portion amounting to  P66,677,000.[36]

           During trial, the RTC found that because respondent modified the MPT's architectural design, petitioner had to adjust the scope of work.[37] Moreover, respondent belatedly informed petitioner of those modifications. It also failed to deliver the concrete mix and rebars according to schedule. For this reason, petitioner was not responsible for the project's delay.[38] The trial court thus allowed petitioner to set-off respondent's other outstanding liabilities with respondent’s excess payment in the project.[39] It concluded that respondent owed petitioner P2,023,876.25.[40] In addition, because respondent refused to deliver the keys to the condominium units and the management certificate to petitioner, the RTC found that petitioner lost rental income amounting to US$1,665,260. [41]  The dispositive portion of the RTC decision stated:

             WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered dismissing [respondent's] [c]omplaint for lack of merit. On the other hand, finding preponderance of evidence to sustain [petitioner's] counterclaim, judgment is hereby rendered in favor of [petitioner] ordering [respondent] to pay the former: 1.                  The unpaid balance of the consideration for [petitioner's]  services in [the

project] in the amount of P2,023,867.25 with legal interest from the date of demand until fully paid;

 2.                  Compensatory damages in the amount of US$1,665,260 or its peso

equivalent at the current foreign exchange rate representing lost rental income due only as of July 1997 and the accrued lost earnings from then on until the date of actual payment, with legal interest from the date of demand until fully paid; and

 3.                  Attorney's fees in the amount of P100,000 as acceptance fee, P1,000

appearance fee per hearing and 25% of the total amount awarded to [petitioner].

             With costs against the [respondent].                                   SO ORDERED.[42]   

           Respondent appealed the RTC decision to the CA.[43] The appellate court found that respondent fully performed its obligation when it executed the June 30, 1994 deed of absolute sale in favor of petitioner.[44] Moreover, ITI's report clearly established that petitioner had completed only 48.71% of the project as of October 12, 1995, the takeover date. Not only did it incur delay in the performance of its obligation but petitioner also failed to finish the project.  The CA ruled that respondent was entitled to recover the value of the unfinished portion of the project under the principle of unjust enrichment.[45]  Thus:

            WHEREFORE, the appealed decision is REVERSED and a new one entered dismissing [petitioner's] counterclaims of P2,023,867.25 representing unpaid balance for [its] services in [the project]; US$1,665,260 as accrued lost earnings, and attorney's fees. [Petitioner] is hereby ordered to return to [respondent] the amount of P66,677,000 representing the value of unfinished [portion of the project], plus legal interest thereon until fully paid. Upon payment by [petitioner] of the aforementioned amount, [respondent] is hereby ordered to deliver the keys and [m]anagement [c]ertificate of the [Makati Prime Tower] paid to [petitioner] as consideration for the [project].[46]

           Petitioner moved for reconsideration but it was denied. Hence, this petition.           Petitioner contends that the CA erred in giving weight to ITI's report because the project evaluation was commissioned only by respondent,[47] in disregard of industry practice. Project evaluations are agreed upon by the parties and conducted by a disinterested third party.[48]

           We grant the petition.   REVIEW OF CONFLICTING FACTUAL FINDINGS            As a general rule, only questions of law may be raised in a petition for review on certiorari. Factual issues are entertained only in exceptional cases such as where the findings of fact of the CA and the trial court are conflicting.[49]            Here, a glaring contradiction exists between the factual findings of the RTC and the CA. The trial court found that respondent contributed to the project's delay because it belatedly communicated the modifications and failed to deliver the necessary materials on time. The CA, however, found that petitioner incurred delay in the performance of its obligation. It relied on ITI's report which stated that petitioner had accomplished only 48.71% of the project as of October 12, 1995.   JANUARY 31, 1994 SUPPLEMENTAL AGREEMENT WAS EXTINGUISHED            A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. [50] This case involved two contracts entered into by the parties with regard to the project.           The parties first entered into a contract for a piece of work [51] when they executed the supplemental agreement. Petitioner as contractor bound itself to execute the project for respondent, the owner/developer, in consideration of a price certain (P130,000,000). The supplemental agreement was reciprocal in nature because the obligation of respondent to pay the entire contract price depended on the obligation of petitioner to complete the project (and vice versa). 

          Thereafter, the parties entered into a second contract. They agreed to extinguish the supplemental agreement as evidenced by the October 12, 1995 letter-agreement which was dulyacknowledged by their respective representatives.[52]

           While the October 12, 1995 letter-agreement stated that respondent was to take over merely the supervision of the project, it actually took over the whole project itself. In fact, respondent subsequently hired two contractors in petitioner's stead.[53] Moreover, petitioner's project engineer at site only monitored the progress of architectural works undertaken in its condominium units. [54]Petitioner never objected to this arrangement; hence, it voluntarily surrendered its participation in the project.  Moreover, it judicially admitted in its answer that respondent took over the entire project, not merely its supervision, pursuant to its (respondent’s) long-range plans.[55]

           Because the parties agreed to extinguish the supplemental agreement, they were no longer required to fully perform their respective obligations. Petitioner was relieved of its obligation to complete the project while respondent was freed of its obligation to pay the entire contract price. However, respondent, by executing the June 30, 1994 deed of absolute sale, was deemed to have paid P112,416,716.88. Nevertheless, because petitioner applied part of what it received to respondent’s outstanding liabilities,[56] it admitted overpayment.          Because petitioner acknowledged that it had been overpaid, it was obliged to return the excess to respondent. Embodying the principle of solutio indebiti, Article 2154 of the Civil Code provides:

 Article 2154. If something is received when there is no right to demand it and it was unduly delivered through mistake, the obligation to return it arises.  

 For the extra-contractual obligation of solutio indebiti to arise, the following requisites must be

proven: 

1.      the absence of a right to collect the excess sums and 

2.      the payment was made by mistake.[57]

             With regard to the first requisite, because the supplemental agreement had been extinguished by the mutual agreement of the parties, petitioner became entitled only to the cost of services it actually rendered (i.e., that fraction of the project cost in proportion to the percentage of its actual accomplishment in the project). It was not entitled to the excess (or extent of overpayment).           On the second requisite, Article 2163 of the Civil Code provides:

 Article 2163. It is presumed that there was a mistake in the payment if something which had never been due or had already been paid was delivered; but, he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause.  (emphasis supplied)In this instance, respondent paid part of the contract price under the assumption that petitioner would

complete the project within the stipulated period. However, after the supplemental agreement was extinguished, petitioner ceased working on the project. Therefore, the compensation petitioner received in excess of the cost of its actual accomplishment as of October 12, 1995 was never due. The condominium units and parking slots corresponding to the said excess were mistakenly delivered by respondent and were therefore not due to petitioner.             Stated simply, respondent erroneously delivered excess units to petitioner and the latter, pursuant to Article 2154, was obliged to the return them to respondent.[58] Article 2160 of the Civil Code provides:    

           Article 2160. He who in good faith accepts an undue payment of a thing

certain and determinate shall only be responsible for the impairment or loss of the same or its accessories and accessions insofar as he has thereby been benefited. If he has alienated it, he shall return the price or assign the action to collect the sum. 

 One who receives payment by mistake in good faith is, as a general rule, only liable to return the thing

delivered.[59] If he benefited therefrom, he is also liable for the impairment or loss of the thing delivered and its accessories and accessions.[60] If he sold the thing delivered, he should either deliver the proceeds of the sale or assign the action to collect to the other party.[61]             The situation is, however, complicated by the following facts:

a)      the basis of the valuation (P112,416,716.99) of the condominium units and parking slots covered by the June 30, 1994 deed of sale is unknown;

 b)     the percentage of petitioner's actual accomplishment in the project has not been determined and c)     the records of this case do not show the actual number of condominium units and parking slots

sold by petitioners. 

Because this Court is not a trier of facts, the determination of these matters should be remanded to the RTC for reception of further evidence.           The RTC must first determine the percentage of the project petitioner actually completed and its proportionate cost.[62]  This will be the amount due to petitioner. Thereafter, based on the stipulated valuation in the June 30, 1994 deed of sale, the RTC shall determine how many condominium units and parking slots correspond to the amount due to petitioner. It will only be the management certificate and the keys to these units that petitioner will be entitled to. The remaining units, having been mistakenly delivered by respondent, will therefore be the subject of solutio indebiti.           What exactly must petitioner give back to respondent? Under Article 2160 in relation to Article 2154, it should return to respondent the condominium units and parking slots in excess of the value of its actual accomplishment (i.e., the amount due to it) as of October 12, 1995. If theseproperties include units and/or slots already sold to third persons, petitioner shall deliver the proceeds of the sale thereof or assign the actions for collection to respondent as required by Article 2160. DELAY IN THE COMPLETION OF THE PROJECT            Mora or delay is the failure to perform the obligation in due time because of dolo (malice) orculpa (negligence).[63]  A debtor is deemed to have violated his obligation to the creditor from the time the latter makes a demand. Once the creditor makes a demand, the debtor incurs mora or delay.[64]

           The construction contract[65] provided a procedure for protesting delay:

Article XIVDELAYS AND ABANDONMENT

 15.1. If at any time during the effectivity of this contract, [PETITIONER] shall incur unreasonable delay or slippages of more than fifteen percent (15%) of the scheduled work program, [RESPONDENT] should notify [PETITIONER] in writing to accelerate the work and reduce, if not erase, slippage. If after the lapse of sixty (60) days from receipt of such notice, [PETITIONER] fails to rectify the delay or slippage, [RESPONDENT] shall have the right to terminate this contract except in cases where the same was caused by force majeure. “FORCE MAJEURE” as contemplated herein, and in determination of delay includes, but is not limited to, typhoon, flood, earthquake, coup d'etat, rebellion, sedition, transport strike, stoppage of work, mass public action that prevents workers from reporting for work, and such other causes beyond [PETITIONER'S] control.[66] (emphasis supplied)

 xxx                   xxx                   xxx

           Respondent never sent petitioner a written demand asking it to accelerate work on the project and reduce, if not eliminate, slippage. If delay had truly been the reason why respondent took over the project, it would have sent a written demand as required by the construction contract. Moreover, according to the October 12, 1995 letter-agreement, respondent took over the project for the sole reason that such move was part of its (respondent's) long-term plan.           Respondent, on the other hand, relied on ITI's September 7, 1995 report. The construction contract named GEMM, not ITI, as construction manager.[67] Because petitioner did not consent to the change of the designated construction manager, ITI's September 7, 1995 report could not bind it.           In view of the foregoing, we hold that petitioner did not incur delay in the performance of its obligation.RECOVERY OF ADDITIONAL COSTS RESULTING FROM CHANGES            The supplemental agreement was a contract for a stipulated price.[68] In such contracts, the recovery of additional costs (incurred due to changes in plans or specifications) is governed by Article 1724 of the Civil Code.

             Article 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans and specifications agreed upon with the landowner, can neither withdraw from the contract nor demand an increase in the price on account of higher cost of labor or materials, save when there has been a change in plans and specifications, provided: 

1.      such change has been authorized by the proprietor in writing; and 

2.      the additional price to be paid to the contractor has been determined in writing by both parties.

           In Powton Conglomerate, Inc. v. Agcolicol,[69] we reiterated that a claim for the cost of additional work arising from changes in the scope of work can only be allowed upon the: 

1.      written authority from the developer/owner ordering/allowing the changes in work; and 

2.      written agreement of parties with regard to the increase in cost (or price) due to the change in work or design modification. [70]

 Furthermore:

 Compliance with the two requisites of Article 1724, a specific provision governing additional works, is a condition precedent of the recovery. The absence of one or the other bars the recovery of additional costs. Neither the authority for the changes made nor the additional price to be paid therefor may be proved by any other evidence for purposes of recovery.[71] (emphasis supplied)

           Petitioner submitted neither one. In addition, petitioner’s project coordinator Estellita Garcia testified that respondent never approved any change order.[72] Thus, under Article 1724 and pursuant to our ruling in Powton Conglomerate, Inc., petitioner cannot recover the cost it incurred in effecting the design modifications. A contractor who fails to secure the owner or developer's written authority to changes in the work or written assent to the additional cost to be incurred cannot invoke the principle of unjust enrichment.[73]

RECOVERY OF COMPENSATORY DAMAGES

          Indemnification for damages comprehends not only the loss suffered (actual damages ordamnum emergens) but also the claimant's lost profits (compensatory damages or lucrum cessans). For compensatory damages to be awarded, it is necessary to prove the actual amount of the alleged loss by preponderance of evidence.[74]

           The RTC awarded compensatory damages based on the rental pool rates submitted by petitioner [75] and on the premise that all those units would have been leased had respondent only finished the project by December 31, 1995.[76] However, other than bare assertions, petitioner submitted no proof that the rental pool was in fact able to lease out the units. We thus hold that the “losses” sustained by petitioner were merely speculative and there was no basis for the award.  REMAND OF OTHER CLAIMS            Since respondent did not repudiate petitioner's other claims stated in the inventory [77] in the RTC and CA, it is estopped from questioning the validity thereof.[78] However, because some of petitioner's claims have been disallowed, we remand the records of this case to the RTC for the computation of respondent's liability.[79]            WHEREFORE, the petition is hereby GRANTED.           The March 15, 2002 decision and May 29, 2003 resolution of the Court of Appeals in CA-G.R. CV No. 61353 and the August 5, 1998 decision of the Regional Trial Court, Branch 58, Makati City in Civil Case No. 97-1501 are hereby SET ASIDE. New judgment is entered: 

1.      ordering petitioner Titan-Ikeda Construction and Development Corporation to return to respondent Primetown Property Group, Inc. the condominium units and parking slots corresponding to the payment made in excess of the proportionate  (project) cost of its actual accomplishment as of October 12, 1995, subject to its (petitioner’s) allowable claims as stated in the inventory and

2.     dismissing petitioner Titan-Ikeda Construction and Development Corporation’s claims for the cost of additional work (or change order) and damages.

           The records of this case are remanded to the Regional Trial Court of Makati City, Branch 58 for: 

1.                 the reception of additional evidence to determine(a)      the percentage of the architectural work actually completed by petitioner Titan-

Ikeda Construction and Development Corporation as of October 12, 1995 on the Makati Prime Tower and

(b)     the number of condominium units and parking slots sold by petitioner Titan-Ikeda Construction and Development Corporation to third persons;

 2.                 the computation of petitioner Titan-Ikeda Construction and Development Corporation's

actual liability to respondent Primetown Property Group, Inc. or vice-versa, and the determination of imposable interests and/or penalties, if any.

           SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 170498               January 9, 2013

METROPOLITAN BANK & TRUST COMPANY, Petitioner, vs.ABSOLUTE MANAGEMENT CORPORATION, Respondent.

D E C I S I O N

BRION, J.:

We resolve petitioner Metropolitan Bank & Trust Company's (Metro bank's) petition for review on certiorari1seeking the reversal of the decision2 dated August 25, 2005 and the resolution3 dated November 17, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 86336. The assailed decision affirmed the order4 dated May 7, 2004 of the Regional Trial Court (RTC) of Quezon City, Branch 80. The RTC had denied the admission of Metrobank's Fourth-Party Complaint5 against the Estate of Jose L. Chua for being a money claim that falls under Section 5, Rule 86 of the Rules of Court; the claim should have been filed in the pending judicial settlement of Chua’s estate before the RTC of Pasay City. The CA affirmed the RTC’s order based on the same ground.

Factual Antecedents

On October 5, 2000, Sherwood Holdings Corporation, Inc. (SHCI) filed a complaint for sum of money against Absolute Management Corporation (AMC). The complaint was docketed as Civil Case No. Q-00-42105 and was assigned to the RTC of Quezon City, Branch 80.6

SHCI alleged in its complaint that it made advance payments to AMC for the purchase of 27,000 pieces of plywood and 16,500 plyboards in the sum of P12,277,500.00, covered by Metrobank Check Nos. 1407668502, 140768507, 140768530, 140768531, 140768532, 140768533 and 140768534. These checks were all crossed, and were all made payable to AMC. They were given to Chua, AMC’s General Manager, in 1998.7

Chua died in 1999, 8 and a special proceeding for the settlement of his estate was commenced before the RTC of Pasay City. This proceeding was pending at the time AMC filed its answer with counterclaims and third-party complaint.9

SHCI made demands on AMC, after Chua’s death, for allegedly undelivered items worth P8,331,700.00. According to AMC, these transactions could not be found in its records. Upon investigation, AMC discovered that in 1998, Chua received from SHCI 18 Metrobank checks worth P31,807,500.00. These were all payable to AMC and were crossed or "for payee’s account only."10

In its answer with counterclaims and third-party complaint,11 AMC averred that it had no knowledge of Chua’s transactions with SHCI and it did not receive any money from the latter. AMC also asked the RTC to hold Metrobank liable for the subject checks in case it is adjudged liable to SHCI.

Metrobank filed a motion for bill of particulars,12 seeking to clarify certain ambiguous statements in AMC’s answer. The RTC granted the motion but AMC failed to submit the required bill of particulars. Hence, Metrobank filed a motion to strike out the third-party complaint.13

In the meantime, Metrobank filed a motion to dismiss14 against AMC on the ground that the latter engaged in prohibited forum shopping. According to Metrobank, AMC’s claim against it is the same claim that it raised against Chua’s estate in Special Proceedings No. 99-0023 before the RTC of Pasay City, Branch 112. The RTC subsequently denied this motion.15

The RTC of Quezon City opted to defer consideration16 of Metrobank’s motion to strike out third-party complaint17 and it instead granted AMC’s motion for leave to serve written interrogatories on the third-party defendant.18 While Metrobank filed its answer to the written interrogatories, AMC was again directed by the RTC, in an order19 dated August 13, 2003, to submit its bill of particulars. Instead, AMC filed a motion for reconsideration20 which was denied in an order21 dated October 28, 2003. AMC still did not file its bill of particulars. The RTC, on the other hand, did not act on Metrobank’s motion to strike out AMC’s third-party complaint.22

In its answer23 dated December 1, 2003, Metrobank admitted that it deposited the checks in question to the account of Ayala Lumber and Hardware, a sole proprietorship Chua owned and managed. The deposit was allegedly done with the knowledge and consent of AMC. According to

Metrobank, Chua then gave the assurance that the arrangement for the handling of the checks carried AMC’s consent. Chua also submitted documents showing his position and interest in AMC. These documents, as well as AMC’s admission in its answer that it allowed Chua to manage AMC with a relative free hand, show that it knew of Chua’s arrangement with Metrobank. Further, Chua’s records show that the proceeds of the checks were remitted to AMC which cannot therefore now claim that it did not receive these proceeds.

Metrobank also raised the defense of estoppel. According to Metrobank, AMC had knowledge of its arrangements with Chua for several years. Despite this arrangement, AMC did not object to nor did it call the attention of Metrobank about Chua’s alleged lack of authority to deposit the checks in Ayala Lumber and Hardware’s account. At this point, AMC is already estopped from questioning Chua’s authority to deposit these checks in Ayala Lumber and Hardware’s account.

Lastly, Metrobank asserted that AMC gave Chua unbridled control in managing AMC’s affairs. This measure of control amounted to gross negligence that was the proximate cause of the loss that AMC must now bear.

Subsequently, Metrobank filed a motion for leave to admit fourth-party complaint24 against Chua’s estate. It alleged that Chua’s estate should reimburse Metrobank in case it would be held liable in the third-party complaint filed against it by AMC.

The RTC’s Ruling

In an order25 dated May 7, 2004, the RTC denied Metrobank’s motion. It likewise denied Metrobank’s motion for reconsideration in an order26 dated July 7, 2004.

The RTC categorized Metrobank’s allegation in the fourth-party complaint as a "cobro de lo indebido"27 – a kind of quasi-contract that mandates recovery of what has been improperly paid. Quasi-contracts fall within the concept of implied contracts that must be included in the claims required to be filed with the judicial settlement of the deceased’s estate under Section 5, Rule 86 of the Rules of Court. As such claim, it should have been filed in Special Proceedings No. 99-0023, not before the RTC as a fourth-party complaint. The RTC, acting in the exercise of its general jurisdiction, does not have the authority to adjudicate the fourth-party complaint. As a trial court hearing an ordinary action, it cannot resolve matters pertaining to special proceedings because the latter is subject to specific rules.

Metrobank responded to the RTC ruling by filing a petition for certiorari28 under Rule 65 before the CA.

The CA’s Ruling

The CA affirmed the RTC’s ruling that Metrobank’s fourth-party complaint should have been filed in Special Proceedings No. 99-0023.29 According to the CA, the relief that Metrobank prayed for was based on a quasi-contract and was a money claim categorized as an implied contract that should be filed under Section 5, Rule 86 of the Rules of Court.

Based on the statutory construction principle of lex specialis derogat generali, the CA held that Section 5, Rule 86 of the Rules of Court is a special provision that should prevail over the general provisions of Section 11, Rule 6 of the Rules of Court. The latter applies to money claims in ordinary actions while a money claim against a person already deceased falls under the settlement of his estate that is governed by the rules on special proceedings. If at all, rules for ordinary actions only apply suppletorily to special proceedings.

The Present Petition

In its present petition for review on certiorari,30 Metrobank asserts that it should be allowed to file a fourth-party complaint against Chua’s estate in the proceedings before the RTC; its fourth-party complaint was filed merely to enforce its right to be reimbursed by Chua’s estate in case Metrobank is held liable to AMC. Hence, Section 11, Rule 6 of the Rules of Court should apply.

AMC, in its comment,31 maintains the line that the CA and the RTC rulings should be followed, i.e., that Metrobank’s claim is a quasi-contract that should be filed as a claim under Section 5, Rule 86 of the Rules of Court.

AMC also challenges the form of Metrobank’s petition for failure to comply with Section 4, Rule 45 of the Rules of Court. This provision requires petitions filed before the Supreme Court to be accompanied by "such material portions of the record as would support the petition."

According to AMC, the petition’s annexes are mostly Metrobank’s pleadings and court issuances. It did not append all relevant AMC pleadings before the RTC and the CA. For this reason, the petition should have been dismissed outright.

Issues

The parties’ arguments, properly joined, present to us the following issues:

1) Whether the petition for review on certiorari filed by Metrobank before the Supreme Court complies with Section 4, Rule 45 of the Rules of Court; and

2) Whether Metrobank’s fourth-party complaint against Chua’s estate should be allowed.

The Court’s Ruling

The Present Petition Complies With Section 4, Rule 45 of the Rules of Court

AMC posits that Metrobank’s failure to append relevant AMC pleadings submitted to the RTC and to the CA violated Section 4, Rule 45 of the Rules of Court,32 and is a sufficient ground to dismiss the petition under Section 5, Rule 45 of the Rules of Court.33

We disagree with AMC’s position.

In F.A.T. Kee Computer Systems, Inc. v. Online Networks International, Inc.,34 Online Networks International, Inc. similarly assailed F.A.T. Kee Computer Systems, Inc.’s failure to attach the transcript of stenographic notes (TSN) of the RTC proceedings, and claimed this omission to be a violation of Section 4, Rule 45 of the Rules of Court that warranted the petition’s dismissal. The Court held that the defect was not fatal, as the TSN of the proceedings before the RTC forms part of the records of the case. Thus, there was no incurable omission that warranted the outright dismissal of the petition.

The Court significantly pointed out in F.A.T. Kee that the requirement in Section 4, Rule 45 of the Rules of Court is not meant to be an absolute rule whose violation would automatically lead to the petition’s dismissal.35 The Rules of Court has not been intended to be totally rigid. In fact, the Rules of Court provides that the Supreme Court "may require or allow the filing of such pleadings, briefs, memoranda or documents as it may deem necessary within such periods and under such conditions as it may consider appropriate";36 and "[i]f the petition is given due course, the Supreme Court may require the elevation of the complete record of the case or specified parts thereof within fifteen (15) days from notice."37 These provisions are in keeping with the overriding standard that procedural rules should be liberally construed to promote their objective and to assist the parties in obtaining a just, speedy and inexpensive determination of every action or proceeding.38

Under this guiding principle, we do not see Metrobank’s omission to be a fatal one that should warrant the petition’s outright dismissal. To be sure, the omission to submit the adverse party’s pleadings in a petition before the Court is not a commendable practice as it may lead to an unduly biased narration of facts and arguments that masks the real issues before the Court. Such skewed presentation could lead to the waste of the Court’s time in sifting through the maze of the parties’ narrations of facts and arguments and is a danger the Rules of Court seeks to avoid.

Our examination of Metrobank’s petition shows that it contains AMC’s opposition to its motion to admit fourth-party complaint among its annexes. The rest of the pleadings have been subsequently submitted as attachments in Metrobank’s Reply. A reading of these pleadings shows that their arguments are the same as those stated in the orders of the trial court and the Court of Appeals. Thus, even if Metrobank’s petition did not contain some of AMC’s pleadings, the Court still had the benefit of a clear narration of facts and arguments according to both

parties’ perspectives. In this broader view, the mischief that the Rules of Court seeks to avoid has not really been present. If at all, the omission is not a grievous one that the spirit of liberality cannot address.

The Merits of the Main Issue

The main issue poses to us two essential points that must be addressed. First, are quasi-contracts included in claims that should be filed pursuant to Rule 86, Section 5 of the Rules of Court? Second, if so, is Metrobank’s claim against the Estate of Jose Chua based on a quasi-contract?

Quasi-contracts are included inclaims that should be filed under Rule86, Section 5 of the Rules of Court

In Maclan v. Garcia,39 Gabriel Maclan filed a civil case to recover from Ruben Garcia the necessary expenses he spent as possessor of a piece of land. Garcia acquired the land as an heir of its previous owner. He set up the defense that this claim should have been filed in the special proceedings to settle the estate of his predecessor. Maclan, on the other hand, contended that his claim arises from law and not from contract, express or implied. Thus, it need not be filed in the settlement of the estate of Garcia’s predecessor, as mandated by Section 5, Rule 87 of the Rules of Court (now Section 5, Rule 86).

The Court held under these facts that a claim for necessary expenses spent as previous possessor of the land is a kind of quasi-contract. Citing Leung Ben v. O’Brien,40 it explained that the term "implied contracts," as used in our remedial law, originated from the common law where obligations derived from quasi-contracts and from law are both considered as implied contracts. Thus, the term quasi-contract is included in the concept "implied contracts" as used in the Rules of Court. Accordingly, liabilities of the deceased arising from quasi-contracts should be filed as claims in the settlement of his estate, as provided in Section 5, Rule 86 of the Rules of Court.41

Metrobank’s fourth-party complaint isbased on quasi-contract

Both the RTC and the CA described Metrobank’s claim against Chua’s estate as one based on quasi-contract. A quasi-contract involves a juridical relation that the law creates on the basis of certain voluntary, unilateral and lawful acts of a person, to avoid unjust enrichment.42 The Civil Code provides an enumeration of quasi-contracts,43 but the list is not exhaustive and merely provides examples.44

According to the CA, Metrobank’s fourth-party complaint falls under the quasi-contracts enunciated in Article 2154 of the Civil Code.45 Article 2154 embodies the concept "solutio indebiti" which arises when something is delivered through mistake to a person who has no right to demand it. It obligates the latter to return what has been received through mistake.46

Solutio indebiti, as defined in Article 2154 of the Civil Code, has two indispensable requisites: first, that something has been unduly delivered through mistake; and second, that something was received when there was no right to demand it.47

In its fourth-party complaint, Metrobank claims that Chua’s estate should reimburse it if it becomes liable on the checks that it deposited to Ayala Lumber and Hardware’s account upon Chua’s instructions.

This fulfills the requisites of solutio indebiti. First, Metrobank acted in a manner akin to a mistake when it deposited the AMC checks to Ayala Lumber and Hardware’s account; because of Chua’s control over AMC’s operations, Metrobank assumed that the checks payable to AMC could be deposited to Ayala Lumber and Hardware’s account. Second, Ayala Lumber and Hardware had no right to demand and receive the checks that were deposited to its account; despite Chua’s control over AMC and Ayala Lumber and Hardware, the two entities are distinct, and checks exclusively and expressly payable to one cannot be deposited in the account of the other. This disjunct created an obligation on the part of Ayala Lumber and Hardware, through its sole proprietor, Chua, to return the amount of these checks to Metrobank.

The Court notes, however, that its description of Metrobank’s fourth-party complaint as a claimclosely analogous to solutio indebiti is only to determine the validity of the lower courts’ orders denying it. It is not an adjudication determining the liability of Chua’s estate against Metrobank. The appropriate trial court should still determine whether Metrobank has a lawful claim against Chua’s estate based on quasi-contract.1âwphi1

Metrobank’s fourth-party complaint,as a contingent claim, falls within theclaims that should be filed underSection 5, Rule 86 of the Rules ofCourt

A distinctive character of Metrobank’s fourth-party complaint is its contingent nature – the claim depends on the possibility that Metrobank would be adjudged liable to AMC, a future event that may or may not happen. This characteristic unmistakably marks the complaint as a contingent one that must be included in the claims falling under the terms of Section 5, Rule 86 of the Rules of Court:

Sec. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. – All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice. [italics ours]

Specific provisions of Section 5, Rule86 of the Rules of Court prevail overgeneral provisions of Section 11, Rule6 of the Rules of Court

Metrobank argues that Section 11, Rule 6 of the Rules of Court should apply because it impleaded Chua’s estate for reimbursement in the same transaction upon which it has been sued by AMC. On this point, the Court supports the conclusion of the CA, to wit:

Notably, a comparison of the respective provisions of Section 11, Rule 6 and Section 5, Rule 86 of the Rules of Court readily shows that Section 11, Rule 6 applies to ordinary civil actions while Section 5, Rule 86 specifically applies to money claims against the estate. The specific provisions of Section 5, Rule 86 x x x must therefore prevail over the general provisions of Section 11, Rule 6.48

We read with approval the CA’s use of the statutory construction principle of lex specialis derogat generali, leading to the conclusion that the specific provisions of Section 5, Rule 86 of the Rules of Court should prevail over the general provisions of Section 11, Rule 6 of the Rules of Court; the settlement of the estate of deceased persons (where claims against the deceased should be filed) is primarily governed by the rules on special proceedings, while the rules provided for ordinary claims, including Section 11, Rule 6 ofthe Rules of Court, merely apply suppletorily.49

In sum, on all counts in the considerations material to the issues posed, the resolution points to the affirmation of the assailed CA decision and resolution. Metrobank's claim in its fourth-party complaint against Chua's estate is based on quasi-contract. It is also a contingent claim that depends on another event. Both belong to the category of claims against a deceased person that should be filed under Section 5, Rule 86 of the Rules of Comi and, as such, should have been so filed in Special Proceedings No. 99-0023.

WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The decision of the Court of Appeals dated August 25, 2005, holding that the Regional Trial Court of Quezon City, Branch 80, did not commit grave abuse of discretion in denying Metropolitan Bank & Trust Company's motion for leave to admit fourth-party complaint Is

AFFIRMED. Costs against Metropolitan Bank & Trust Company.

SO ORDERED.

March 15, 1907

G.R. No. 2684THE FIDELITY AND DEPOSIT COMPANY OF MARYLAND, plaintiff-appellant,vs.WILLIAM A. WILSON, ET AL., defendants-appellees.

Hartigan, Marple, Rohde & Gutierrez for appellant.F.G. Waite and H.D. Terrell for appellees.

MAPA, J.:

The defendant Wilson was, on the 1st of October, 1902, an employee of the Government of the Philippine Islands, as disbursing officer of the Bureau of Coast Guard and Transportation. For the security of the Government the plaintiff company and another company. The American Surety Company of New York, became sureties on the official bond of Wilson for the sum of $ 15,000, United State currency. Wilson defaulted in the sum of $ 8,931.80, United States currency, and the said two surety companies, after demand duly made upon them by the Government, were compelled to pay and, as a matter of fact, did pay to said Government, in accordance with said bond, the sum of $ 4,465.90, United States currency, each.

Wilson, who had left the Philippine Islands, was captured in the city of Montreal, Canada, for the purpose of being tried before the courts of the Philippine Islands for the defalcation of said sum. When apprehended Wilson had on his person the sum of $ 785 in gold, consisting of the following:

1 bill of $5, No. 333,448, on the Bank of Montreal.1 United States bill, silver certificate, $10, series of 1891.3 United States $10 notes, series of 1882.5 United States $10 notes, series of 1891.24 United States $10 notes, series of 1880.45 United States $10 notes, series of 1901.

This sum and amount was turned over to the custody of Mr. Branagan, the Insular Treasurer.

The facts of this case, among others, are the following: On October 17, 1904, the plaintiff filed a complaint against Wilson and The American Surety Company asking, first, that judgment be rendered against Wilson for the sum of $4,464.90, that amount having been paid by plaintiff to the Government under plaintiff's surety bond; second, that there be applied to the payment of said judgment the said sum of $785 found in possession of Wilson and that said plaintiff be preferred in its right to the said money and to receive the same; and third, that a depositary be named by the court for the purpose of caring for and administering said amount during the pendency of the case.

On the same date, October 17, a depositary was named, such depositary taking in charge the said $785 on that date, the said sum of money being at this time in the possession of said depositary.

On October 26, 1904, H.D. Terrell filed a complaint as intervenor in the case, alleging that on September 3, of the same year, the defendant Wilson had ceded and transferred to the said Terrell all of his, the said Wilson's rights in and to the said $785 in payment on account of a larger sum then owed by said Wilson to the said H.D. Terrell for professional services already rendered and to be rendered as attorney for said Wilson, under agreement with the same; that Treasurer Branagan was duly notified on the 17th day of October, 1904, of this transfer, at which time the Treasurer had said sum in his care, and this before the notifications of the appointment of said depositary in the principal case. Basing his claim on these facts, Terrell claims the right of ownership in and to the said sum and asks that the same be delivered to him as the legitimate owner to the exclusion of the other parties in the case.

In this case of intervention The Fidelity and Deposit Company of Maryland, the plaintiff in the principal cause, and The American Surety Company of New York together in cooperation and against the claim of the intervenor Terrell, both of them, alleging on their part, better right that the intervenor to receive the sum in question, asked that the said sum be delivered to them in equal shares and portions as part payment and on account of the amounts which they had paid respectively to the Government as sureties on the bond of Wilson. In this way the first pretension or claim of preference as alleged by The Fidelity and Deposit Company in its complaint was modified with respect to and as against The American Surety Company of New York. It is asserted by these companies, as a basis of their right and claim, that the funds in question are a portion of the money taken from the Government by Wilson and therefore the property of the said Government and that they became subrogated to rights of the Government in and to the said sum by reason of the payment by them as sureties on the bond of Wilson.

Judgment was rendered against Wilson by default, the latter not having answered to the complaint of Terrell were true, in this way coming into the case in cooperation with said Terrell in his pretension.

After due trial of the cause a judgment was rendered by the court declaring proven, among others, the facts as stated in the first part of his decision and found as a conclusion of law that the said intervenor Terrell "became the owner and with the right to the possession of said funds before the commencement of this action and still has the right to the possession of the same."

In accordance with this conclusion and the facts as set out in the judgment, the following order was made by the court: "Let judgment be entered in favor of the party plaintiff, The Fidelity and Deposit Company of Maryland, and against the defendant Wilson, for the sum of $4,465.90, United States currency, the equivalent of P8,931.80, Philippine currency, together with interest on the same at the rate of 6 per cent per annum from the 22nd day of October, 1903, and for the costs of this action, and in favor of the intervenor H.D. Terrell and against all the other parties of this action, plaintiff and defendant, for the possession of the funds now in the hands of the depositary appointed by this court, ... amounting in value to the sum of $785, United States currency, and in the event that the identical money can not be delivered, then its equivalent of the total of the same — that is to say, 1,570 pesos, Philippine currency — without cost. . . ."

The plaintiff only in the principal suit — that is to say, The Fidelity and Deposit Company — filed its exception to the judgment. The American Surety Company of New York failing to appeal, the judgment with respect to that company became final, hence this court can not decide with regard to that. The same should be said with regard to that part of the judgment against Wilson for the payment to The Fidelity and Deposit Company of the sum $4,465.90, no appeal from said judgment having been made by Wilson.

There was no new trial asked for and the parties in this instance expressly admit, as proven, the facts as set out in the decision rendered.

The only assignment of error alleged by the appellant in its brief, is in the following terms: "The court erred" its says, "in rendering judgment in favor of the intervenor H.D. Terrell for the $785 in the hands of the depositary." Therefore, that part of the judgment of the lower court that refers to this point is the only thing, in fact, submitted to us for review.

According to our point of view, the only question here is to deduce and determine the true legal effects of the transfer made by Wilson in favor of Terrell.

This transfer is made literally in the following terms:

MANILA, P.I., September 3, 1904.

To whom it concerns:

For value received, I hereby transfer and cede to Judge H. D. Terrell all my rights, title, and interest in the following-described property belonging to me and now in the hands of Frank A. Branagan, Treasurer of the Philippine Archipelago, under the attachment of the court of Manila. (Here appears the description of the bank bills transferred, hereinabove described.)

(Signed) W.A. WILSON.

As is seen, this transfer was made before the filing of the complaint of the appellant, and in addition thereto, it is said that the Insular Treasurer, Mr. Branagan, was also notified before the filing of said complaint. The last does not appear to be clear in the record for the reason that the said notification served on Branagan was so served on October 17, 1904, precisely the same date upon which the complaint was filed and appointment of the depositary was made by the court in virtue of the same, and upon which said date the depositary took possession of the said funds, the subject matter of this suit. There is no data at hand to show in a precise manner which of the said acts took place before the other. It is true that the judgment of the lower court states that Terrell became the owner of the funds before the commencement of the action, but we consider this rather as a conclusion of law than of fact; that is to say, that fact that the notification of the said transfer had been served on Treasurer Branagan before the filing of the complaint. However, it may be, this may be admitted as true and so taken into consideration in this decision.

Terrell claims, and the court below so holds in its judgment, that in virtue of said transfer the ownership of Wilson in and to the funds was transferred to Terrell in fact and in law. If this had been the case, the judgment would have been just and legal and would, therefore, be affirmed herein.

But our opinion is contrary to that sustained by the trial court in regard to this point. We are of the opinion that the transfer by itself, and afterwards the notification of the same of Treasurer Branagan, did not produce nor could it produce the effect of transfer to Terrell of the ownership of the funds so transferred and which were then in the possession of the said Treasurer. To have this effect, it would have been necessary that the delivery of the funds had been made directly Terrell, which fact has not been proved at any time. There is no question as to this last point. The funds were in the possession of Branagan and afterwards were transferred to the possession of the depositary appointed, by the court where such funds now are, and this without their ever having been taken

possession of the intervenor Terrell. It is not alleged, nor it is claimed by Terrell, that the delivery of the funds was ever made in any manner recognized by the law. He claims the right of ownership from the mere fact of having derived the same, not from the fact of any delivery, but from the very fact of the transfer and of his subsequent notification to Treasurer Branagan, it being, in addition, very clear that such notification does not constitute, in any manner, the fact of delivery as established by articles 1462, 1463, and 1464 of the Civil Code, all of which cover, in full this subject-matter.

Therefore, in our Civil Code it is a fundamental principle in all matters of contracts and a well-known doctrine of law that "non mudis pactis, sed traditione dominia rerum transferuntur." In conformity with said doctrine as established in paragraph 2 of article 609 of said code, that "the ownership and other property rights are acquired and transmitted by law, by gift, by testate or intestate succession, and, in consequence of certain contracts, by tradition." And as the logical application of this disposition article 1095 prescribes the following: "A creditor has the rights to the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire a real right." (and the ownership is surely such) "until the property has been delivered to him."

In accordance with such disposition and provisions the delivery of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue for a contract. As Manresa states in his Commentaries on the Civil Code, volume 10, pages 339 and 340: "Our law does not admit the doctrine of the transfer of property by mere consent but limits the effect of the agreement to the due execution of the contract. ... The ownership, the property right, is only deprived from the delivery of a thing . . . ."

Applying this doctrine concretely to the contract of transfer set up by Terrell as the basis of his complaint in intervention, the author says, at page 341 of the volume and work above cited: "The transfer of the ownership in the contract of such transfer, does not produce the effect by the fact of the mere consent, but is acquired by tradition and in the due observance of general precepts." Therefore, by reason of the non-delivery Terrell did not acquire the ownership of the property transferred to him by Wilson. It is only the jus ad rem, and not the jus in re, that was acquired by Terrell by virtue of the transfer, made by the consent of the transferor and the transferee but not consummated by the delivery which never came to pass and which delivery was the object of such transfer.

But if Terrell could not be considered as the owner of said funds in question, it is undeniable that he had rights with regard to the same as a creditor by virtue of that transfer. The same right, that of a creditor, and no other is the right of the appellant in that it has not been contradicted that the rights of the Government, in its judicial relation to Wilson, had not been subrogated to the appellant. The allegation of the appellant that the bank bills taken from the person of Wilson are the property of the Government, in order to be taken into consideration, is to conclude that they belong to the appellant as owner of the same by reason of said subrogation of right, as aforesaid. This has no fundamental basis for the reason that such bank bills have never been duly identified. Without any proof of identification it is not possible to know if said bank bills are really a part of the funds of the Government appropriated by Wilson. The Government under such circumstances could not allege specifically the right of ownership of said bank bills.

Now, the creditors, the appellant and the appellee are both claiming at the same time the delivery of the funds in question for the payment of their respective credits and it becomes a question of preference of creditors, since the sum, the object of the suit, is not sufficient to satisfy the claims of both parties.

According to our view, neither of the two creditors should enjoy preference with regard to the other. Preference is determined by the nature of the credit in some cases and by the priority of date in others. The first, when it deals with privileged credits, which different kinds of privileged credits are enumerated in articles 1922, 1923, and 1924 of the Civil Code; and the second, when such credits are without special privilege, but are set forth in a public document or a final judgment. (Par. 3, article 1924.) In neither of these two classes do we find the credit of the appellant or that of the appellee. The credit of the appellee is only shown in a private document, and the right, or credit, of the appellant is that derived by reason of the payment made by appellant to the Government as a surety on the bond of Wilson, and nothing more than this appears in the allegations and admissions of the parties during the trial of the case. It does not appear by the bill of exceptions in this case that any document was ever presented in justification of such payment. Neither does the decision refer to any document as showing, as proven, said payment. These two credits not coming under any of the articles herein cited, the same pertain to a general class, and therefore do not enjoy any preference, in accordance with provisions of article 1925 of the Civil Code. This being so, the two creditors should be paid of pro rata from the funds in question and without consideration of the dates. (Rule 3, of article 1929.)

The judgment appealed from is, therefore, reversed with respect to the order of the trial court ordering the delivery of said funds, in their total amount, to the intervenor, H.D. Terrell, and in place of said order of said trial court we order that the payment and delivery of said funds be made to said Terrell and to the appellant, The Fidelity and Deposit Company of Maryland, pro rata, with respect to their respective credits, without special provision as to days from the notification hereof let judgment be entered in accordance herewith, and ten days thereafter let the case be remanded to the court from whence it came for proper action. So ordered.

November 21, 1913

G.R. No. 6913THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,vs.GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin de la Peña, defendant-appellant.

J. Lopez Vito, for appellant.Arroyo and Horrilleno, for appellee. 

MORELAND, J.:

This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awarding to the plaintiff the sum of P6,641, with interest at the legal rate from the beginning of the action.

It is established in this case that the plaintiff is the trustee of a charitable bequest made for the construction of a leper hospital and that father Agustin de la Peña was the duly authorized representative of the plaintiff to receive the legacy. The defendant is the administrator of the estate of Father De la Peña.

In the year 1898 the books Father De la Peña, as trustee, showed that he had on hand as such trustee the sum of P6,641, collected by him for the charitable purposes aforesaid. In the same year he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortly thereafter and during the war of the revolution, Father De la Peña was arrested by the military authorities as a political prisoner, and while thus detained made an order on said bank in favor of the United States Army officer under whose charge he then was for the sum thus deposited in said bank. The arrest of Father De la Peña and the confiscation of the funds in the bank were the result of the claim of the military authorities that he was an insurgent and that the funds thus deposited had been collected by him for revolutionary purposes. The money was taken from the bank by the military authorities by virtue of such order, was confiscated and turned over to the Government.

While there is considerable dispute in the case over the question whether the P6,641 of trust funds was included in the P19,000 deposited as aforesaid, nevertheless, a careful examination of the case leads us to the conclusion that said trust funds were a part of the funds deposited and which were removed and confiscated by the military authorities of the United States.

That branch of the law known in England and America as the law of trusts had no exact counterpart in the Roman law and has none under the Spanish law. In this jurisdiction, therefore, Father De la Peña's liability is determined by those portions of the Civil Code which relate to obligations. (Book 4, Title 1.)

Although the Civil Code states that "a person obliged to give something is also bound to preserve it with the diligence pertaining to a good father of a family" (art. 1094), it also provides, following the principle of the Roman law, major casus est, cui humana infirmitas resistere non potest, that "no one shall be liable for events which could not be foreseen, or which having been foreseen were inevitable, with the exception of the cases expressly mentioned in the law or those in which the obligation so declares." (Art. 1105.)

By placing the money in the bank and mixing it with his personal funds De la Peña did not thereby assume an obligation different from that under which he would have lain if such deposit had not been made, nor did he thereby make himself liable to repay the money at all hazards. If the money had been forcibly taken from his pocket or from his house by the military forces of one of the combatants during a state of war, it is clear that under the provisions of the Civil Code he would have been exempt from responsibility. The fact that he placed the trust fund in the bank in his personal account does not add to his responsibility. Such deposit did not make him a debtor who must respond at all hazards.

We do not enter into a discussion for the purpose of determining whether he acted more or less negligently by depositing the money in the bank than he would if he had left it in his home; or whether he was more or less negligent by depositing the money in his personal account than he would have been if he had deposited it in a separate account as trustee. We regard such discussion as substantially fruitless, inasmuch as the precise question is not one of negligence. There was no law prohibiting him from depositing it as he did and there was no law which changed his responsibility by reason of the deposit. While it may be true that one who is under obligation to do or give a thing is in duty bound, when he sees events approaching the results of which will be dangerous to his trust, to take all reasonable means and measures to escape or, if unavoidable, to temper the effects of those events, we do not feel constrained to hold that, in choosing between two means equally legal, he is culpably negligent in selecting one whereas he would not have been if he had selected the other.

The court, therefore, finds and declares that the money which is the subject matter of this action was deposited by Father De la Peña in the Hongkong and Shanghai Banking Corporation of Iloilo; that said money was forcibly taken from the bank by the armed forces of the United States during the war of the insurrection; and that said Father De la Peña was not responsible for its loss.

The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing by his complaint.

February 29, 1916

G.R. No. 10244SANTIAGO CRUZADO, plaintiff-appellant,vs.ESTEFANIA BUSTOS and MANUEL ESCALER, defendants-appellees.

Felix Ferrer for appellant.Augusto Gonzalez for appellees.

TORRES, J.:

This appeal, by bill of exceptions, was taken from the judgment of June 17, 1914, in which the trial judge absolved defendants from the complaint and plaintiff from the cross-complaint, without express finding as to costs. Counsel for plaintiff appealed from this judgment and moved for a new trial. This motion was denied, exception was taken by appellant, and, on the filing of the proper bill of exceptions, the same was approved, certified, and transmitted to the clerk of this court, together with a transcript of the evidence introduced at the trial.

Counsel for the plaintiff Santiago Cruzado filed a written complaint on October 8, 1910, amended on September 25, 1913, in which he alleged that plaintiff was the owner of certain rural property situated in the barrio of Dolores, formerly San Isidro, of the municipality of Bacolor, Pampanga, containing an area of 65 balitas and bounded as set forth in the complaint; that Estafania Bustos, during her lifetime, and now the administrator of her estate, together with the other defendant, Manuel Escaler, had, since the year 1906 up to the present, been detaining the said parcel of land, and had refused to deliver the possession thereof to plaintiff and to recognize his ownership of the same, notwithstanding the repeated demands made upon them; that by such detention, the plaintiff had suffered losses and damages to the amount of P3,500. He therefore asked for judgment declaring plaintiff to be the owner of the said parcel of land and ordering defendants to return it to plaintiff and to pay the latter P3,500 for losses and damages, and the costs.

The demurrer filed by the defendant Bustos having been overruled, in her answer she made a general denial of each and all of the allegations of the complaint, and of each and all of the paragraphs thereof, and, as a special defense, alleged that the title to the said land, produced by the plaintiff, was not a lawful one, for the reason that only a simulated sale of the land was made by the between herself and the deceased Agapito Geronimo Cruzado, plaintiff's father, and that for more than thirty years preceding the present time she had been the sole, exclusive, and lawful owner of the said parcel of land in question; that she had been holding it quietly, peaceably, publicly and in good faith; that it formed an integral part of another larger parcel of land, both parcels aggregating a total area of 100 balitas, 9 loanes, and 41 square brazas; that in September, 1891, with plaintiff's knowledge, the defendant Bustos sold and conveyed all the said property to the other defendant Manuel Escaler who then acquired the possession and ownership of the said parcel of land, and had retained such ownership and possession up to the present time; that at no time and on no account whatever had plaintiff or any other person except defendants acquired possession of the said parcel of land or any part thereof, nor any right or title therein. She therefore prayed to be absolved from the complaint, with the costs against plaintiff.

The other defendant, Manuel Escaler, in an amended answer to the aforementioned complaint, denied each and all of the allegations therein contained and each and all of its clauses, and, as a special defense, alleged that plaintiff's title to the said land was illegal as only a simulated sale was made by and between Agapito Geronimo Cruzado, plaintiff's predecessor in interest, and Bernardino Dizon; that defendants had been in possession of the said parcel of land for more than thirty years; that the defendant Escaler in good faith purchased the land in question from Estefania Bustos, widow of Dizon, without ever having had any notice of any defect in the vendor's title; that plaintiff had knowledge of the contract of sale of the land in question yet did nothing to oppose its purchase by the defendant Escaler, wherefore the latter, in acquiring the property, did so under the belief that the plaintiff Santiago Cruzado had no right or interest therein. He therefore prayed that the complaint be dismissed, with the costs against plaintiff, and that an injunction issue to restrain the latter from interfering with the defendant Escaler in the enjoyment of his property and rights and from performing any act prejudicial to his interests.

On the case coming to trial, both parties adduced evidence, among which was included the deposition of Inocencio Rosete.

Counsel for defendants, in a cross-complaint set forth: that as shown by the evidence, the defendant Escaler acquired in good faith from Estefania Bustos the land in question at a time when there was no record whatever in the property registry to show that this land belonged to a third person or any other than the vendor; that, on entering into possession of the property, Escaler spent P4,000 in-improvements and in the repair of a long dike to prevent the erosion of the land by the frequent overflows of the adjoining estuary; that of this sum P2,000 was paid by Escaler and the remaining P2,000 by Estafania Bustos, in her capacity as lessee of the land; and that in case the judgment of the court should be adverse to defendants, these latter, as owners in good faith, were entitled to be indemnified by plaintiff for the said expenses. He therefore asked that plaintiff be ordered to reimburse half of the said P4,000 to each of the defendants in case judgment should be rendered favorable to plaintiff.

The latter's counsel, in answer to the said cross-complaint, specifically denied each and all of the allegations thereof and, in special defense, reproduced plaintiff's amended complaint in all its parts and alleged that the facts set forth in the cross-complaint did not constitute a cause of action. He therefore prayed that plaintiff be absolved from the cross-complaint and that judgment be rendered against defendants, in conformity with the prayer of his complaint.

After the evidence was all in, counsel for the defendant Escaler moved that the deposition of the witness Inocencio Espanol Rosete be admitted into the record, and in support of his motion stated that with the authorization of the court the said deposition had been taken on November 21, 1913, in the municipality of Arayat in the presence of plaintiff's attorney; that the said declaration of the deponent was duly forwarded to the clerk of the court, and there attached to the record, but through an unintentional oversight of defendant's attorney, it was not presented in evidence at the trial; that this deposition was very important for the defendants' defense; and that the deponent was and continued to be unable to appear before the court on account of a threatened attack of brain fever which might develop during the journey from Arayat to San Fernando.

Plaintiff's counsel asked that the foregoing motion be overruled and that the deposition of the witness Rosete be stricken from the record, because defendants' motion was made out of time and was contrary to the rules of procedure, and there was no reason for altering the order of procedure, as requested by defendants, for, when the period for the reception of the evidence of both parties is closed, an alteration in the order of procedure such as asked by defendants would be improper and illegal, counsel citing the decision of this court in the case of Garcia vs. Reyes.[[1]] He alleged, moreover, that the said deposition necessarily affected the main issue in controversy and that to allow the motion would be in contravention of the provisions of section 364 of the Code of Civil Procedure . He therefore asked that the said motion be overruled. The court, however, ordered that the deposition of the witness Inocencio Rosete be admitted in evidence, and that plaintiff's exception be noted. In view of the foregoing, the judgment aforementioned was rendered.

The questions herein submitted for the decision of this court are:

1. Is it or is it not true that the deed of sale, Exhibit A, (p. 40 of the record) of 65 balitas of land situated in the municipality of Bacolor, Pampanga, executed by Estefania Bustos, with the assistance of her husband Bernardino Dizon, in favor of Agapito Geronimo Cruzado, for the sum of P2,200, was simulated, not with intent to defraud any third person, but for the sole purpose of making it appear that the vendee, Cruzado, then a candidate for the position of procurador on the date of the said deed, September 7,1875, possessed real estate to the value of P2,200 with which to guarantee the faithful discharge of the duties of the office of procurador?

2. It is or is it not true that, notwithstanding such apparent alienation of the 65 balitas of land, the supposed vendee continued in possession thereof, without the supposed purchaser having taken possession of the property until September 10, 1891, when its owner Bustos sold to Escaler, not only the said 65 balitas of land, but also all the remainder of a large tract of agricultural land of which the portion appearing as sold to Agapito G. Cruzado formed and forms a part, and that Escaler was then and, until the date of plaintiff's claim, continued to be in peaceable, uninterrupted possession of the said whole tract of land, including the aforementioned portion of 65 balitas?

3. Has the right of ownership prescribed which Manuel Escaler is and has been enjoying in the land which Estefania Bustos had sold to him and which includes the parcel of 65 balitas claimed by plaintiff, Santiago Cruzado, or has the right of any real or personal action he might exercise by reason of the sale to Cruzado prescribed on account of the lapse of the respective periods fixed by law, between the 7th of September, 1875, the date of said sale, and the 8th of October, 1910, that of the filing of the complaint?

To judge from the evidence adduced in this case, there is ample ground for holding that the said deed of sale of a parcel of 65 balitas of land was simulated, not to defraud any creditor or other person interested in the land nor for the purpose of eluding any lawful obligation on the part of its owner, Estafania Bustos, but for the sole purpose of doing a favor, of rendering a special service to Agapito Geronimo Cruzado, father of the plaintiff Santiago Cruzado.

During his lifetime Agapito G. Cruzado aspired to hold the office of procurador in the Court of First Instance of Pampanga, but notwithstanding that he possessed the required ability for the discharge of the duties of that position, he was unable to give the required bond, an indispensable condition for his appointment, as he was possessed of no means or real property wherewith to guarantee the proper discharge of his duties in the manner prescribed by the laws then in force.

In the certified copy of the record of the case tried in the Secretaria de Gobierno of the abolished Real Audiencia de Manila, issued by the Assistant Executive Secretary and chief of the division of archives, there appears on page 178 a decree by the presidencia of this latter tribunal, issued by virtue of the resolution passed by the sala de gobierno on November 24, 1875, whereby it was ordered that Agapito Geronimo Cruzado should be noticed that within the period of 30 days he must show proof of having furnished a bond of P700 in cash or of P2,100 in real property as security for the position of procurador to which he had been appointed, with the understanding that should be fail to furnish such bond he would not be issued the certificate entitling him to practice the profession of procurador.

After complying with the requirements of the said court and executing the mortgage deed of the land purchased by the procurador elect Cruzado from Estefania Bustos, on March 18, 1876, the mortgage was recorded in the old mortgage registry then kept in the office of the Ayuntamiento of Manila during the former sovereignty, and thereafter Agapito G. Cruzado received his appointment and commenced to discharge the duties of his position.

The above-related facts conclusively prove that Estefania Bustos executed the deed of sale Exhibit A in favor of the deceased Cruzado in order to enable the latter, by showing that he was a property owner, to hold the office of procurador. This position he held for many years, thanks to the liberality of the pretended vendor, who, notwithstanding the statements contained in the deed of sale, does not appear to have been paid anything as a result of the sham sale, a sale which was affected, not in prejudice or fraud of any person, nor those who were entitled to hold Cruzado liable for the proper discharge of the duties of his office, because, had the need arisen, any liability of his could have been covered by the value of the land, the sale of which was fictitiously set forth in that deed as lawfully belonging to Cruzado, and then Estefania Bustos would have had no right either to object to or escape the consequences of that alienation, although simulated.

The simulation of the said sale was effected by making a pretended contract which bore the appearance of truth, when really and truly there was no contract, because the contracting parties did not in fact intend to execute one, but only to formulate a sale in such a manner that, for the particular purposes sought by Bustos and Cruzado, it would appear to have been celebrated solely that Cruzado might hold his office of procurador on the strength of the security afforded by the value of the land feignedly sold.

The record does not show when the procurador Cruzado died, but it is unquestionable that he was still living during the last months of 1882, judging from the certificate which he himself issued to Norberto Decena (Exhibit 3). He must have died sometime between the years 1882 and 1890, to judge from the contents of the letters plaintiff addressed to Natalio Dizon, one of the children of Estefania Bustos, on July 7, 1891, and July 4, 1896, and from the fact that in the said year 1890 Agapito G. Cruzado was no longer a practicing procurador in the Court of First Instance of Pampanga..

It is true that even after the death of the aforesaid procurador, any liability he might have incurred in connection with the exercise of his office could have been, upon presentation of the proper claim, collected out of the value of the land apparently sold by Estafania Bustos and pledged as security for the proper discharge of the duties of his office. On October 8, 1910, when his son Santiago Cruzado filed his complaint, already more than twenty years had elapsed since 1889, if plaintiff's father died in 1889 and not between 1883 and 1889; therefore, any right of action to foreclose the mortgage, or any personal action with regard to the value of the encumbered land, as the result of any liability incurred in the performance of his duties as procurador, has more than prescribed. (Art. 1964, Civil Code, and secs. 38, 39 and 43, Act. No. 190.).

On the termination of the sovereignty of Spain over this Archipelago, the Spanish courts here established went out of existence on January 31, 1899, the Pampanga court indeed being abolished about the middle of 1897 as a result of the revolution against the former sovereignty. The personnel of those courts also ceased to render service as such. It may therefore be affirmed that, if the said lien on the land in question has not terminated by its no longer having any object, it is at least undeniable that prescription has already run with respect to any action that might have been brought against the pledged land to recover for any liability which might have been incurred by the procurador Cruzado during his lifetime in connection with his office, so that this real estate may now be considered as free from that hypothecary encumbrance.

At the present time we have only to explain what rights Agapito G. Cruzado transmitted at his death to his son, the herein plaintiff, by virtue of the deed of sale of the land in litigation, executed by its owner Estefania Bustos.

It is unquestionable that the contract of sale of the 65 balitas of land was perfect and binding upon both contracting parties, since they both appear in that instrument to have agreed upon the thing sold, to wit, the

65 balitas of land, and upon the price, P2,200; but it is also undeniable that the said contract was not consummated, inasmuch as, notwithstanding that the deed of sale Exhibit A was accomplished and this document was kept by the pretended purchaser, it is positively certain that the latter did not pay the purchase price of P2,200, and never took possession of the land apparently sold in the said deed. All that this vendee afterwards did was to pledge the land — on March 14, 1876, that is, six months and some days after the 7th of September, 1875, the date when he purchased it — as security for the faithful discharge of the duties of his office of procurador of the Court of First Instance of Pampanga.

The plaintiff, Santiago Cruzado, a son of the vendee, claiming that the said land was being detained by the vendor, or by the administrator of the latter's estate or her death after the commencement of these proceedings, and by the other defendant Manuel Escaler, prayed the court to declare him to be the owner thereof, to order the defendants to return it to him and to pay him for losses and damages, and the costs.

The action brought by the plaintiff is evidently one for recovery of possession, founded on the right transmitted to him by his father at his death, — a right arising from the said simulated deed of sale of the land in question. This action is of course improper, not only because the sale was simulated, but also because it was not consummated. The price of the land was not paid nor did the vendee take possession of the property from the 7th of September, 1875, when the said sale was feigned, until the time of his death; nor did any of his successors, nor the plaintiff himself until the date of his claim, enter into possession of the land.

It is indeed true that it is not necessary that the thing sold or its price should have been delivered in order that the contract of purchase and sale be deemed perfect on account of its being consensual, and from it reciprocal obligations arise mutually to compel the parties to effect its fulfillment; but there is no transmission of ownership until the thing, as in the case at bar, the land, has been delivered, and the moment such delivery is made the contract of purchase and sale is regarded as consummated. Article 1450 of the Civil Code, relied upon in this connection by the appellant, refers solely to the perfection of the contract and not to its consummation.

The purchaser is also a creditor with respect to the products of the thing sold, and article 1095 of the Civil Code prescribes as follows:

A creditor has a right to the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire a property right thereto until it has been delivered to him.

The provisions of this article are in agreement with that of the second paragraph of article 609 of the same Code, which is of the following tenor:

Ownership is acquired by retention.

Ownership and other property rights are required and transmitted by law, by gift, by testate or intestate succession, and, in consequence of certain contracts, by tradition.

They can also be acquired by prescription.

The provisions of the said article 1095 are also in accord with those of article 1462 which reads:

A thing sold shall be considered as delivered, when it is placed in the hands and possession of the vendee.

When the sale should be made by means of a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if in said instrument the contrary does not appear or may be clearly inferred.

It is true that the deed of sale Exhibit A remained in possession of the vendee Cruzado, but the sale is not to be considered as consummated by this because the said vendee never entered into possession of the land and neither did his son the plaintiff. The latter, moreover, was unable to prove that at any time as owner of the land he collected the fruits harvested thereon, or that any other person cultivated the said land in the name and representation of his deceased father or of the plaintiff himself. The fiction created by means of the execution and delivery of a public instrument produces no effect if the person acquiring it never takes possession of the thing sold or acquired, as happened in the case at bar.

If, as prescribed by the preinserted article 1095, the creditor, and in the present case the vendee, does not acquire a property right in the land purchased until the property has been delivered to him or he has taken

possession of it, it is unquestionable that, as neither the plaintiff nor his predecessor in interest took possession of the land in litigation, neither of them acquired any property right therein and, consequently, could not and cannot now bring an action for recovery of possession which arises out of a property right in a thing which belongs to them and not a mere right productive of a personal obligation. The plaintiff Santiago Cruzado could only, in a proper case, exercise the personal right of action flowing from the right possessed by his father to compel the vendor to fulfill the contract made in a public instrument to deliver the land sold or to give him possession of it, in consequence of the said contract, though simulated and executed for the sole purpose that the deceased Cruzado in default of P700 in cash might appear to own real estate with which to insure the proper performance of his duties as procurador, an office he then desired to hold.

The supreme court of Spain in a decision of cassation of June 1, 1990, established the following doctrine:

That articles 1258 and 1450 of the Civil Code and the decisions of cassation of June 30, 1854, April 13 and December 13, 1861, June 30, 1864, and April 19 and December 15, 1865, do not warrant the conclusion that whoever purchases personal or real property may exercise with respect thereto all rights of action inherent in its ownership, without it having, in some way or another, been placed at his disposal. On the contrary, the distinction between the perfecting and the consummation of a contract marks the diversity of relations of the contracting parties among themselves and of the owner with respect to what constitutes this property.

This principle is in harmony with those set up by the same high tribunal in its decision of January 19, 1898, and March 8, 1901.

In this last decision, also rendered on an appeal in cassation, the doctrine enunciated in the excerpt copied here below was established:

That the contract of purchase and sale, as consensual, is perfected by consent as to the price and the thing and is consummated by the reciprocal delivery of the one and the other, the full ownership of the thing sold being conveyed to the vendee, from which moment the rights of action derived from this right may be exercised.

It is, then, of the utmost importance to examine whether in the said sale the purchase price was paid and whether the vendee took possession of the land supposed to have been sold.

The record discloses that Cruzado during his lifetime was, before he became a procurador, an official escribiente or clerk charged with the duty of coursing records and proceedings in the Court of Pampanga; that his salary was hardly sufficient to maintain him and his family; that on account of the insufficiency of his monthly stipend, he was frequently obliged to borrow money from his friends, notwithstanding that he with his family lodged in the house of Bernardino Dizon, the husband of the vendor Bustos, situated in the municipality of Bacolor, with whom Cruzado maintained intimate relations of friendship, and on this account the said couple were content to live in a country house they owned on one of their rice fields. Such was the testimony of several witnesses who lived in that municipality, and who knew and had considerable dealings with the plaintiff's father for many years. It was the opinion of these witnesses that the deceased Agapito G. Cruzado was a poor man, for the reason that his monthly salary scarcely provided for the needs of himself and his family, and they therefore believed that he could not have furnished the sum of P2,200 to purchase the land in question, and, furthermore, if the plaintiff's father had possessed this sum, he would have made the deposit of the sum of P700, the amount of security required by the Presidencia of the former Real Audiencia de Manila for his appointment as procurador, since, having the means, he would have preferred to deposit this smaller sum rather than to have used P2,200 in acquiring a piece of land from which he would derive no benefit whatever, as in fact he never did, as he must have known that in spite of the simulated sale of the property its owner would continue in its possession and would cultivate it, as she did do until her death. It is, therefore, unquestionable that the price of the sale was not paid, an omission which would indicate that it was in effect simulated.

Aside from the fact that the spouses Estafania Bustos and Bernardino Dizon had no need to sell the said 65 balitas of land, or of fencing or separating this parcel from the large tract of land that belonged to them and of which it formed a part, for the reason that they were rich and at that time were not in need of money to cultivate their extensive landholdings, it is also to be noted that the portion of land sold was worth very much more than the P2,200 which, in the said instrument, purported to be its price.

In addition to the foregoing, the proceedings in the case at bar furnish ample proof that Agapito Geronimo Cruzado during his lifetime stated to various persons that he succeeded in giving bond for his appointment as procurador by means of the said instrument of simulated sale, executed in his favor by the spouses Dizon and Bustos, as he did not have the money to make the deposit required for his appointment. So close were the relations that then existed between the Cruzado family and that of Dizon and Bustos, that later on the plaintiff married a daughter of these latter; hence, plaintiff, in the beginning of his letters Exhibits 8 and 9 addressed to Natalio Dizon, a son of the vendor Estefania Bustos, calls his correspondent his "dear and esteemed brother-in-law." It is therefore not stranger that these spouses should have wished to help plaintiff's predecessor in interest by assisting him to obtain the office of procurador, even to the extent of making a feigned sale.

However, years afterwards, prompted by an intuition of possible future difficulties, Dizon and his wife Bustos went to the office of Agapito G. Cruzado and required him to cancel the said deed of sale, in order to avoid any lawsuit after their death. Cruzado promised to look for money wherewith to substitute the mortgage bond. This demand had to be repeated several times, because Cruzado did not cancel the deed as he promised.

Furthermore, it is shown that the instrument Exhibit A is merely a second copy obtained by the plaintiff from the chief of division of archives, without prior summons or notification of the vendor Estefania Bustos, who was still living, in conformity with the provisions contained in article 18 of the Notarial Law of February 15, 1889, and without the plaintiff's having explained what became of the first copy. Besides, the clerk and notary who certified that instrument did not attest therein that in his presence the vendee Cruzado paid over the sum of P2,200, the price of the land sold, and as the vendor denied having received this sum, the obligation devolved upon plaintiff to prove that his deceased father had paid the price stated in that instrument. By this not having done so, his omission constitutes additional proof that the sale of the land, the recovery of possession of which plaintiff now seeks, was really simulated.

The supreme court of Spain, in a decision dated February 20, 1899, rendered on an appeal in cassation, laid down the doctrine that, in accordance with the provisions of article 40 of the Mortgage Law, in the alienation of real property it is understood that no price has been paid if the notary does not attest its delivery or the contracting parties do not prove that it was previously paid.

The courts are allowed full latitude to accept the presumption that the purchase price has not been paid when the notary before whom the instrument was executed does not attest the delivery of the money, and when, such delivery being denied by one of the contracting parties, the other does not adduce proof of its payment, especially when such presumption is corroborated by other circumstantial evidence which, all together, undoubtedly prove that the sale was feigned and simulated for certain purposes sought to be attained by the parties, though, as in the case at bar, the simulation was not effected in fraud of creditors.

Besides the failure to pay the purchase price, the record discloses another very important fact, to wit, that neither the vendee nor his heirs, among these latter, the plaintiff, had at any time taken possession of the land which in the said instrument Exhibit A appeared to have been sold, for, by the testimony of seven competent witnesses examined at the trial it is decisively and conclusively proven that the alleged vendor, Estefania Bustos, and her husband while he was living, notwithstanding the said alienation, continued to possess the said land supposedly sold to plaintiff's father, and cultivated it, as she had done long before the sale of September, 1875, and continued to do so up to the date of the complaint filed by Santiago Cruzado; in the first period, until September 10, 1891, as the owner of the land, and from this date, when the whole of the large tract of land of which the said portion apparently sold forms a part was sold to the other defendant Manuel Escaler, the original owner Estefania Bustos continued in the material possession of the land, but now as the lessee of the new owner, until 1908, when she was substituted by Marcelo Rodriguez as the new lessee of the property. The plaintiff at no time after his father's death occupied the land in litigation, notwithstanding his allegation that he has been collecting rentals from Estefania Bustos, his mother-in-law, by reason of his having leased the land to her.

The plaintiff endeavored to prove that during the years 1882 and 1883 he personally took charge of and tilled the disputed land on shares through his tenants named Florentino de los Reyes, Lino Cortes, Macario de los Reyes and Regino de los Reyes, all of whom corroborated plaintiff's testimony in this regard. However, six of the defendants' witnesses positively stated that they never were aware that the said tenants had worked on the land in question during either the said two years or in any other, for these latter were working on the adjacent lands belonging to other owners. Pablo Angeles, one of the defendants' witnesses, testified that Regino and Florentino de los Reyes were his tenants on shares and were employed on his land adjoining that in question. He was positively certain that they never worked on the disputed land during or about the years aforementioned, because the carabaos used by his said two tenants belonged to him and he never would have permitted them to use these animals in working land that did not belong to him. He added that Regino's children, Macario and Basilio, were at that time so young, being about eight years of age, that they were not yet able to work in the fields.

The plaintiff must have been well convinced that he had no right whatever in the land supposedly purchased by his father. The latter never demanded its possession from its owner Estefania Bustos and never thought of declaring the property as belonging to him, for the purposes of the land tax, from the time this tax was established in this country, notwithstanding that the plaintiff, knowing his obligation, filed a sworn declaration relative to a lot he owned in the municipality of Bacolor. This procedure of plaintiff's proves that he did not believe himself to be the owner of the land he claims and which its present owner Manuel Escaler has constantly declared for the purpose of assessment.

Moreover, about the middle of the year 1891, the plaintiff Santiago Cruzado begged his brother-in-law Natalio Dizon to tell the latter's mother, plaintiff's mother-in-law, that Cruzado desired the lease four balitas of the land in question, and some days afterwards, possibly because he received no reply from his said brother-in-law, he addressed a letter to Dizon (Exhibit 9, page 152 of the record, translated on page 154) in which he repeated his request and asked for a reply; but notwithstanding that his brother-in-law Dizon told him that he could not dispose of any part of the said land for the reason that his mother Estefania Bustos was negotiating for the sale of all the land she possessed in the sitio of Sicat to Manuel Escaler, plaintiff went to Dizon's house on an occasion when

Paulino de la Cruz was there. Cruz was a representative of Escaler and had been charged to inform himself of the situation, condition and quality of the land which Bustos was about to sell to his principal and was at the said house for the purpose of being shown the land offered for sale. On this occasion plaintiff learned that negotiations were being made for the sale of all the land owned by Estefania Bustos of which the 65 balitas in litigation formed a part. Plaintiff did not then or afterwards make any statement or objection whatever in defense of his rights and interest, if he really believed that he was entitled to the land shown in the instrument Exhibit A to have been purchased by his father.

Plaintiff made no protest whatsoever, because he well knew that the said sale was simulated and that his father had acquired no right whatever in the property; he was therefore anxious to lease fourbalitas of the same land, a purpose in which he was unsuccessful because a deal was then already going forward for the sale of the said land to its present owner, Manuel Escaler, who in fact did but it on September 10, 1891. If plaintiff were convinced that he was the owner of the land, as he rashly asserted that he was in his complaint for recovery of possession, it is not understood why about the middle of the year 1891 he wished to lease, not all the 65 balitas, but only four of them, as stated in his said letter, Exhibit 9.

From that time the new owner Manuel Escaler took possession of all the land sold by Estefania Bustos, including the 65 balitas in litigation, and continued in its possession as the owner thereof until October 8, 1910, when plaintiff filed his claim. Thus, more than the ten years required by law for ordinary prescription had already elapsed, as Escaler purchased the land and was holding it in good faith under a lawful title and was not disturbed in his continuous and peaceable possession, one that was adverse to the whole world. It is therefore unquestionable that he has absolutely acquired by prescription the ownership of the disputed land, and the action brought by plaintiff, founded solely on a simulated sale executed by the original owner of the land, not to the prejudice, but to the benefit, of the pretended vendee, cannot prevail against Escaler's rights.

The registration obtained by the plaintiff in the property registry of the second copy of the said instrument Exhibit A, about two months before filing his action for recovery, to wit, on August 23, 1910, has not improved the deed of sale nor made it more effective, nor could it affect the rights held by the original owner and the present proprietor of the land in question, inasmuch as their predecessor in interest, by default of payment of the price of the sale and on account of his never having taken possession of the land sold, was not the owner thereof, nor did he acquire any property right whatever therein. Consequently at his death he could not have transmitted to the plaintiff as his successor any greater right than a personal right to exact the fulfillment of a contract, and as plaintiff was not the owner of the land, he could not validly register it.

Article 1473 of the Civil Code prescribes:

If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be personal property.

Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.

Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

On the sale of the land to the defendant Escaler, neither he nor the plaintiff had had it entered in the property registry, but the said new owner, Escaler, took possession of the land on the date of its acquisition, September 10,1891, and has retained possession thereof up to the present time. So that when plaintiff registered the land he was not in possession thereof and no longer had any right whatever therein, because it already belonged to the defendant Escaler, its lawful owner.

However, even though it were proper for plaintiff to bring the real action for recovery derived, though we do not admit that it could be, from the simulated sale before mentioned, both this action as well as the personal action — the only one available in a proper case, as before demonstrated, pursuant to the provisions of article 1095 of the Civil Code — have both certainly prescribed, for the reason that the periods fixed by law for filing such actions have much more than elapsed.

Article 1939 of the Civil Code says:

Prescription, which began to run before the publication of this code, shall be governed by the prior laws; but if, after this code became operative, all the time required in the same for prescription has elapsed, it shall be effectual, even if according to said prior laws a longer period of time may be required.

Personal actions prescribe after ten years; and the same with the writ of execution therein issued, after twenty years; while real actions prescribe after thirty years: according to Law 5, Title 8, Book 1 of the Novisima Recopilacion, and Law 21, Title 29, Partida 3, which were those in force on the date of the execution of the deed of sale, Exhibit A.

From September 7, 1875, to October 8, 1910, when the complaint was filed, thirty-five years have elapsed. Therefore, not only in accordance with the laws aforecited, but also pursuant to the provisions of articles 1963 and 1964 of the Civil Code, the periods fixed for the prescription of the personal action which could, in a proper case, have been exercised, as well as for the real action for recovery of possession brought by the plaintiff without right so to do, have more than prescribed.

For all the foregoing reasons, whereby the errors assigned to the judgment appealed from have been duly refuted, the said judgment should be, as it is hereby, affirmed, with the costs against the appellant. So ordered.

G.R. No. 77365 April 7, 1992

RITA CALEON, petitioner, vs.AGUS DEVELOPMENT CORPORATION and COURT OF APPEALS, respondents.

 BIDIN, J.:

This is a petition for review on certiorari seeking the reversal of the January 28, 1987 decision of the Court of Appeals in CA-G.R. SP No. 10990 entitled "Rita Caleon V. Hon. Samilo Barlongay, et al." dismissing the petition for review of the decision of the Regional Trial Court of Manila, Branch 34, which affirmed the decision of the Metropolitan Trial Court of Manila, Branch XII, ejecting the petitioner.

The undisputed facts of the case are as follows:

Private respondent Agus Development Corporation is the owner of a parcel of land denominated as Lot 39, Block 28, situated at 1611-1619 Lealtad, Sampaloc, Manila, which it leased to petitioner Rita Caleon for a monthly rental of P180.00. Petitioner constructed on the lot leased a 4-door apartment building.

Without the consent of the private respondent, the petitioner sub-leased two of the four doors of the apartment to Rolando Guevarra and Felicisima Estrada for a monthly rental of P350.00 each. Upon learning of the sub-lease, private respondent through counsel demanded in writing that the petitioner vacate the leased premises (Rollo, Annex "A", p. 20).

For failure of petitioner to comply with the demand, private respondent filed a complaint for ejectment (Civil Case No. 048908) with the Metropolitan Trial Court of Manila, Branch XII against the petitioner citing as ground therefor the provisions of Batas Pambansa Blg. 25, Section 5, which is the unauthorized sub-leasing of part of the leased premises to third persons without securing the consent of the lessor within the required sixty (60)-day period from the promulgation of the new law (B.P. 25). (Rollo, Petition, p. 8).

After trial, the court a quo rendered its decision ordering petitioner and all persons claiming possession under her (a) to vacate the premises alluded to in the complaint; (b) to remove whatever improvement she introduced on the property; (c) to pay private respondent the amount of P2,000.00 as attorney's fees; and (d) to pay the costs (Rollo, Annex "A", p. 19).

Petitioner appealed the decision to the Regional Trial Court and on November 24, 1980, presiding judge of the RTC, the Hon. Samilo Barlongay, affirmed in toto the decision of the Metropolitan Trial Court (Rollo, Annex "A", p. 19).

The decision of the Regional Trial Court was appealed to the Court of Appeals for review. The respondent Court of Appeals rendered its decision dated January 28, 1987, the dispositive portion of which reads as follows:

PREMISES CONSIDERED, the petition not being prima facie meritorious, the same is outright dismissed.

SO ORDERED. (Rollo, Annex "A", p. 21)

Hence, the petition for review on certiorari.

The principal issue in this case is whether or not the lease of an apartment includes a sublease of the lot on which it is constructed, as would constitute a ground for ejectment under Batas Pambansa BLg. 25.

Petitioner is of the view that Batas Pambansa Blg. 25 is not applicable because what she leased was her own apartment house which does not include a sublease of the lot she leased from private respondent on which the apartment is constructed.

Petitioner's contention is untenable.

This issue has already been laid to rest in the case of Duellome v. Gotico (7 SCRA 841 [1963]) where this Court ruled that the lease of a building naturally includes the lease of the lot, and the rentals of the building includes those of the lot. Thus:

. . . the lease of a building would naturally include the lease of the lot and that the rentals of the building include the rentals of the lot.

xxx xxx xxx

Furthermore, under our Civil Code, the occupancy of a building or house not only suggests but implies the tenancy or possession in fact of the land on which they are constructed. This is not a new pronouncement. An extensive elaboration of this rule was discussed by this Court in the case ofBaquiran, et al., v. Baquiran, et al., 53 O.G. p. 1130.

. . . the Court of Appeals should have found the herein appellees lessees of the house, and for all legal purposes, of the lot on which it was built as well.

But petitioner insists that the ruling in the aforecited case is not applicable to the case at bar because the former is a damage suit while the latter is an ejectment case.

Be that as it may, this Court has categorically answered in the affirmative, the principal question, common to both cases and on which rests the resolution of the issues involved therein. Under the above ruling it is beyond dispute that petitioner in leasing her apartment has also subleased the lot on which it is constructed which lot belongs to private respondent. Consequently, she has violated the provisions of Section 5, Batas Pambansa Blg. 25 which is a ground for Ejectment.

Section 5 of Batas Pambansa Blg. 25 enumerates the grounds for judicial ejectment, among which is the subleasing of residential units without the written consent of the owner/lessor, to wit:

Se. 5 Grounds for judicial ejectment. Ejectment shall be allowed on the following grounds:

a) Subleasing or assignment of lease of residential units in whole or in part, with the written consent of the owner/lessor: Provided that in the case of subleases or assignments executed prior to the approval of this Act, the sublessor/assignor shall have sixty days from the effectivity of this Act within which to obtain the written approval of the owner/lessor or terminate the sublease or assignment.

Section 2(b) of Batas Pambansa Blg. 25 defines the term residential unit as follows:

Sec. 2. Definition of Terms — Unless otherwise indicated wherever in this Act, the following shall have the following meaning:

xxx xxx xxx

b. A residential unit — refers to an apartment, house and/or land on which another's dwelling is located used for residential purposes and shall include not only buildings, parts

or units thereof used solely as dwelling places, except motels, motel rooms, hotels, hotel rooms, boarding houses, dormitories, rooms and bedspaces for rent, but also those used for home industries, retail stores, or other business purposes if the owner thereof and his family actually live therein and use it principally for dwelling purposes: . . .

Petitioner argued further that Batas Pambansa Blg. 25 cannot be applied in this case because there is a perfected contract of lease without any express prohibition on subleasing which had been in effect between petitioner and private respondent long before the enactment of Batas Pambansa Blg. 25. Therefore, the application of said law to the case at bar is unconstitutional as an impairment of the obligation of contracts.

It is well settled that all presumptions are indulged in favor of constitutionality; one who attacks a statute, alleging unconstitutionality must prove its invalidity beyond a reasonable doubt (Victoriano v. Elizalde Rope Workers' Union, 59 SCRA 54 [1974]). In fact, this Court does not decide questions of a constitutional nature unless that question is properly raised and presented in appropriate cases and is necessary to a determination of the case,i.e., the issue of constitutionality must be the very lis mota presented (Tropical Homes, Inc. v. National Housing Authority, 152 SCRA 540 [1987]).

In any event, it is now beyond question that the constitutional guaranty of non-impairment of obligations of contract is limited by and subject to the exercise of police power of the state in the interest of public health, safety, morals and general welfare (Kabiling, et al. v. National Housing Authority, 156 SCRA 623 [1987]). In spite of the constitutional prohibition, the State continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to safeguarding said interest may modify or abrogate contracts already in effect (Victoriano v. Elizalde Rope Workers' Union, et al., supra). In fact, every contract affecting public interest suffers a congenital infirmity in that it contains an implied reservation of the police power as a postulate of the existing legal order. This power can be activated at anytime to change the provisions of the contract, or even abrogate it entirely, for the promotion or protection of the general welfare. Such an act will not militate against the impairment clause, which is subject to and limited by the paramount police power (Villanueva v. Castañeda, 154 SCRA 142 [1987]).

Batas Pambansa Blg. 25, "An Act Regulating Rentals of Dwelling Units or of Land On Which Another's Dwelling is Located and For Other Purposes" shows that the subject matter of the law is the regulation of rentals and is intended only for dwelling units with specified monthly rentals constructed before the law became effective (Baens v. Court of Appeals, 125 SCRA 634 [1983]).

Batas Pambansa Blg. 25 is derived from P.D. No. 20 which has been declared by this Court as a police power legislation, applicable to leases entered into prior to July 14, 1971 (effectivity date of RA 6539), so that the applicability thereof to existing contracts cannot be denied (Gutierrez v. Cantada, 90 SCRA 1 [1979]).

Finally, petitioner invokes, among others, the promotion of social justice policy of the New Constitution. Like P.D. No. 20, the objective of Batas Pambansa Blg. 25 is to remedy the plight of lessees, but such objective is not subject to exploitation by the lessees for whose benefit the law was enacted. Thus, the prohibition provided for in the law against the sublease of the premises without the consent of the owner. As enunciated by this Court, it must be remembered that social justice cannot be invoked to trample on the rights of property owners, who under our Constitution and laws are also entitled to protection. The social justice consecrated in our Constitution was not intended to take away rights from a person and give them to another who is not entitled thereto (Salonga v. Farrales, 105 SCRA 360 [1981]).

WHEREFORE, the Petition is Denied for lack of merit and the assailed decision of the Court of Appeals is Affirmed.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT Manila

EN BANC

October 26, 1907 G.R. No. 3676 PONS Y COMPANIA, plaintiff-appellee, vs. LA COMPANIA MARITIMA, defendant-appellant. Rosado, Sanz and Opisso, for appellant. W. A. Kincaid, for appellee. JOHNSON, J.: On or about 19th day of February, 1906, the plaintiff turned over to the defendant certain goods, wares, and merchandise to be transported from the city of Manila to the pueblo of Tobaco. These goods were put on board the steamship Venus, which ship belonged to and was under the control of the defendant. The said ship left Manila with the goods, wares, and merchandise on board on or about the said 19th day of February and arrived at the pueblo of Tobaco some days later. Upon the arrival of the ship at the pueblo of Tobaco, and in fact some days before, the captain in charge of the vessel discovered that a portion of the said goods, wares, and merchandise were submerged in

water in the hold of the ship and were practically destroyed. The plaintiff claims that the damages done to his goods amounted to the sum of P738.45, and no question is raised as to the amount of damage done. On the 26th day of April, 1906, the plaintiff commenced an action in the Court of First Instance of the city of Manila against the defendant, for the purpose of recovering the sum of P738.45, the amount of damage alleged to have been done to said goods, wares, and merchandise. To the complaint of the plaintiff the defendant filed a general and special answer, alleging for his special defense that the damages occasioned to said merchandise were not caused by his negligence, but by circumstances over which he had no control. The issue thus formed was finally brought on for trial on the 11th day of October, 1906. The judge of the Court of First Instance of the city of Manila, after hearing the evidence adduced during the trial of the cause, made the following finding of facts:

1. That the plaintiff is a regular company registered and doing business in the city of Manila. 2. That the defendant is a corporation authorized and registered in the city of Manila. 3. That the defendant is the owner and does business in vessel for the transportation of passengers and merchandise between the city of Manila and other points in the Philippine Islands. 4. That on or about the 20th or 22d of February, 1906, the plaintiff delivered certain merchandise to the defendant, under an agreement to transport the same from the city of Manila to the pueblo of Tobaco in the steamshipVenus of the property of the defendant. 5. That among the merchandise so delivered there was a box of shoes; that when the said box of shoes had arrived at the pueblo of Tobaco it was found to have been immersed in water during the voyage, while it was deposited in the bodega (hold) of the ship, and that the contents of said box were entirely destroyed; that the value of the shoes contained in said box was P738.45.

Upon these facts the judge of the lower court concluded that there was nothing in the proof adduced during the trial of the cause which was sufficient to relieve the defendant of the responsibility occasioned by the damage done to said merchandise, and therefore rendered a judgment against the defendant and in favor of the plaintiff for the sum of P738.45, with interest at the rate of 6 per cent from the 26th day of April, 1906, and costs. From this judgment the defendant appealed to this court and made the following assignment of errors:

1. In making the defendant-appellant responsible for damages caused by force majeure. 2. In declaring that the third person, to whom the damaged merchandise appears to have been sold by the plaintiff, refused to pay the said plaintiff for the value thereof. 3. In not declaring the plaintiff's lack of right to bring this action.

In the lower court practically the only defense that was offered by the defendant was to the effect that a pipe or tube running from one of the tanks in the stern of the vessel, for the purpose of allowing air to escape, had become rusted and punctured full of holes, so that when the tank was filled with water on that side of the vessel, owing to the list of the ship, the water ran up into this tube or pipe and escape through the holes into the bodega of the vessel and thus some of the merchandise in transportation became wet and was damaged. This was the defense relied upon by the defendant and the one relied upon in the above first assignment of error. The defendant and appellant claims that the injuries occasioned to the merchandise in question were caused by fuerza mayor. If it is true that the injuries were the result of fuerza mayor, then the defendant is entirely relieved from responsibility and liability. (Art. 620, Commercial Code.) Upon the question of the cause of the injury the chief engineer, in charge during the voyage when the said damage was done, testified as follows:

Q. After the damage did you see the pipe? - A. After the damage took place the inspector was informed when we arrived in Manila. Q. Did you see the pipe at that time? - A. Yes, sir; after the wooden covering was opened. Q. In what condition was the pipe? - A. It was broken. Q. How was it broken? - A. There were porous holes in the pipe and the water came out. Q. Will you explain what you mean by porous? - A. The pipe was made of cast iron and I believe the pipe, on account of being old, had rusted through. Q. Do you mean on account of the age of the pipe it had rusted and eaten through? - A. Yes, sir. Q. So the damage caused was on account of the pipe having been old? - A. I am unable to tell you. Q. So owing to the rust you have seen, you believe that the holes that you found in that pipe were on account of the pipe being old? - A. I suppose so. Q. What was the thickness of that pipe? - A. One-half inch.

x x x x x x x x x

Q. Was that pipe unfit for use? - A. Yes, sir. Carlos Pombo, ship inspector, testified relating to the cause of the injury as follows: Q. To what do you attribute the breaking of that pipe? - A. It could be attributed to many causes; it was probably more or less to the amount of water in the bilge keel; it might be through some accident; it might have been caused by the filling up of the tank; very likely the loading of some heavy stuff on board and it falling on the board covering of the pipe might have caused the breaking of it.

We are satisfied from an examination of the record brought to this court that the damages occasioned were not of such a character as to be characterized as force majeure. Where the officers of a vessel fail to make such frequent inspection of their ship as to discover the existence of rusted parts, from which injuries to cargo result, we are of the opinion that such injuries can not be attributed to force majeure, but rather to the negligence of the officials of such ship. An examination of the Spanish and American authorities concerning the meaning of force majeure shows that the jurisprudence of these two countries practically agree upon the meaning of this phrase. Blackstone, in his Commentaries on English Law, defines it as -

Inevitable accident or casualty; an accident produced by any physical cause which is irresistible; such as lightning, tempest, perils of the sea, inundation, or earthquake; the sudden illness or death of a person. (2 Blackstone's Commentaries, 122; Story on Bailments, sec. 25.)

Escriche, in his Diccionario de Legislacion y Jurisprudencia, defines fuerza mayor as follows:

The event which we could neither foresee nor resist; as, for example, the lightning stroke, hail, inundation, hurricane, public enemy, attack by robbers; Vis mayor est, says Cayo, ea quæ consilio humano neque provideri neque vitari potest. - Accident and mitigating circumstances.

Bouvier defines the same as -

Any accident due to natural causes, directly, exclusively without human intervention, such as could not have been prevented by any kind of oversight, pains, and care reasonably to have been expected. (Law Reports, 1 Common Pleas Division, 432; Law Reports, 10 Exchequer, 255.)

Cockburn, chief justice, in a well-considered English case (1 Common Pleas Division, 34, 432), said that where a captain -

Uses all the known means to which prudent and experienced captains ordinarily have recourse, he does all that can be reasonably require of him; and if, under such circumstances, he is overpowered by storm or other natural agency, he is within the rule which gives immunity from the effects of such vis major.

The term generally applies, broadly speaking, to natural accidents, such as those caused by lightning, earthquake, tempests, public enemy, etc. Article 618 of the Commercial Code provides, among other things, that -

The captain shall be civilly liable to the agent and the latter to the third persons, who may have made contracts with the former, for all the damages suffered by the vessel and its cargo by reason of want of skill or negligence on his part.

In the present case the captain admits that the injury was occasioned by reason of a rusted pipe. The rust, of course, was occasioned by natural causes, but the failure to discover the unsafe condition of the pipe was due to the negligence of the persons in charge of the vessel and for this negligence the owner of the boat is liable to the persons injured. Upon the second assignment of error above noted, the plaintiff contends that the merchandise in question was by him to be delivered to the purchaser of the same at Tabaco, and that he was under obligation to deliver the same in good condition. If this be true, then whatever damages were done to the said merchandise prior to delivery were damages done to the plaintiff. This contention of the plaintiff is supported by the fact that the purchaser of the merchandise, immediately upon discovering the damaged condition of the same, presented a claim against the plaintiff concerning the said damages. Upon the question the lower court, in its decision, said: The evidence is rather meager upon this question, but I find that the person to whom the merchandise was sold immediately reclaimed from the plaintiff the loss thereof, and refused to pay for the merchandise, and that the plaintiff suffered the loss of the merchandise and the damages arising therefrom. We are of the opinion, therefore, and so hold, that the plaintiff herein was the proper party to bring said action. This conclusion, in our opinion, also disposes of the third assignment of error above noted. For all of the foregoing reasons, we are of the opinion, and so hold, that the judgment of the lower court should be affirmed, with costs. After the expiration of twenty days let judgment be entered against the defendant and in favor of the plaintiff for the sum of P738.45, with interest at the rate of 6 per cent from the 26th day of April, 1906, with costs. So ordered. Arellano, C.J., Torres, Willard and Tracey, JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

September 18, 1915

G.R. No. 10006YAP KIM CHUAN, plaintiff-appellee,vs.ALFONSO M. TIAOQUI, defendant-appellant.

Alfredo Chicote and Agustin Alvarez Salazar for appellant.D.R. Williams and Albino Z. Sycip for appellee.

TORRES, J.:

This is an appeal filed through a bill of exceptions by counsel for the defendant from the judgment of March 20, 1914, whereby the Honorable A.S. Crossfield, judge, sentenced him to pay to the plaintiff the sum of P1,019 with legal interest at the rate of 6 per cent a year, from August 4, 1903, and the costs.

Under the rate of August 4, 1913, counsel for the plaintiff filed a written complaint in the Court of First Instance of Manila, alleging as his first cause of action that on March 15, 1913, plaintiff leased the building at No. 218 Calle Rosario, owned by the defendant, up to December 31 of the same year, undertaking to pay therefor the sum of P310 from said March 15 to June 30, 1913, and P315 from the subsequent first of July until the termination of the lease; and that on April 14, 1913, because of the leaks in the roof of the storeroom of said building, without fault or negligence on the plaintiff's part, some of his merchandise stored in said storeroom was so wet and damaged as to cause him a loss amounting to P1,169. He set forth as his second cause of action that subsequent to this occurrence, to wit, on April 15, 1913, a list of the damaged goods was made out in the presence of the plaintiff, the defendant and a notary public; that afterwards the defendant expressly authorized the plaintiff to sell he damaged goods at any price, promising to pay the difference between the selling price and the regular price of the articles in good condition; that by virtue of said authorization and promise, plaintiff accordingly disposed of all the damaged goods that could be sold, at a loss of P1,169; and that notwithstanding the repeated demands made upon him to pay this amount, according to promise, said defendant had refused and refuses to pay. Therefore, judgment is prayed against the defendant, sentencing him to pay to the plaintiff the sum of P1,169 with legal interest, and the costs.

On September 3, 1913, defendant filed his answer in writing, admitting certain paragraphs of the foregoing complaint but specifically denying the rest, and alleging as a special defense that the building the plaintiff occupies had been recently finished, the construction thereof having been under the direction and inspection of an engineer, after approval of the plans and specifications by the engineering and sanitation departments of the city of Manila; that it was opened for use after acceptation of the work by the city engineer and approval by the said departments of engineering and sanitation; that about 5 o'clock in the afternoon of April 14, 1913, there fell over the city of Manila a torrential rain the heaviest from the month of January of that year; that because of the large amount of water and the extraordinary violence of the downpour many buildings in the Escolta and adjacent business sections, not only many buildings of wood merely, but even those of reinforced concrete, were flooded by the overflowing of the drains, gutters, and by filtrations, because the gutters of the eaves and roofs were inadequate for holding the extraordinarily excessive rainfall on that occasion; that the wetting the plaintiff's merchandise sustained from that rainfall was not caused wholly by the leaks and drips but was in large part due to the improper situation or location of said merchandise inside the building; that in neither case was there fault of negligence on defendant's part, said occurrence having been unforeseen, or, even being foreseen, unavoidable; that it is true an inventory of the plaintiff's damaged goods was made in the presence of the interested parties before a notary public; that said plaintiff presented to the defendant his claim for the damages sustained, asking the latter to pay them; that the truth is that the defendant never authorized plaintiff to sell the said merchandise inventoried, as set forth in the complaint; that it is not the truth the defendant promised, either expressly or tacitly, to make good to the plaintiff any loss sustained through the difference between the price of the articles in good condition and the price thereof after being damaged, for, as recorded in the document drawn up on April 15, 1913, signed by the plaintiff, the defendant's intervention therein did not signify a tacit acceptance of any liability for the alleged loss sustained by the plaintiff, but was merely to determine the cause thereof and the manner in which the water got into the building. As another special defense he alleged that on August 2, 1913, defendant transferred all his own rights, claims, and obligations in the lease, as well as the absolute ownership of the building occupied by plaintiff's store, to Señoras Romana, Cecilia, Luisa, and Maria, of the surname Tantungco y Guepangco who, by agreement set down in the instrument of transfer, took over all the premises covered by the lease made by the defendant to the plaintiff from the date thereof, to wit, March 15, 1913, and subsequently they were parties directly interested in the present suit.

After trial and introduction of the evidence by both parties, the court rendered the judgment that has been set forth, whereupon defendant saved his exception and filed a written motion for reopening of the case and a new trial. This motion was denied, with exception on appellant's part and presentation of the corresponding bill of exceptions, which was approved and forwarded to the clerk of this court.

The question raised in this case No. 10006, and in two others of the same nature, Nos. 10007 and 10008, is whether the owner of a tenement occupied by each of the defendants in the three cases cited, each in his respective rooms or apartment, is responsible for the deterioration through the wetting of the cloth and other goods that said plaintiffs as tenants had in same and its storerooms, as a result of the torrential and extraordinary rain which fell upon the city for nearly an hour in the afternoon of April 14, 1913.

Defendant's building, composed of four apartments, had just been finished and a few months ago was inspected by the city engineer and approved for the use for which it was intended. There is no record that said building presented any indication or sign of having defects in its roof such as might cause leaks and damage to the

merchandise placed therein, to enable the Chinese contractor Machuca to hand over the same, as finished, the work was previously approved by the architect who superintended the construction and finally by the city engineer, who authorized the use and occupancy of the building for leasing, therefore it is to be presumed, in the absence of proof to the contrary, that the owner who invested many thousands of pesos in the construction would not have approved or accepted the work on his building unless he had been convinced that the building, finished by the contractor, and approved by his architect who superintended the work and by the city engineer, had been properly construed, and therefore that in leasing it to the plaintiff-tenants he acted in the greatest good faith; that they on their part, in taking over and occupying the leased premises, did so satisfied and persuaded that the building was adequate and would serve for the use they had for it and that it had no defect which would cause any injury or loss to their interests.

The principal rights and obligations of lessor and lessee are comprised in the two following articles of the Civil Code ."ART. 1554. The lessee is obliged: 1. To deliver to the lessee the thing which is the object of the contract. 2. To make thereon, during the lease, all the necessary repairs in order to preserve it in condition to serve for the purpose to which it was destined. 3. To maintain the lessee in the peaceful enjoyment of the lease during all the time of the contract. ART. 1555. The lessee is obliged: 1. To pay the price of the lease in the manner agreed upon. 2. To use the thing leased as a diligent father of a family would, applying the same to the use agreed upon; and, in the absence of an agreement, to the use which may be inferred from the nature of the thing leased according to the custom of the land. 3. To pay the expenses arising from the instrument constituting the contract. ART. 1556. If the lessor or lessee should not comply with the obligations mentioned in the preceding articles, they may request the rescission of the contract and indemnity for losses and damages, or only the latter, leaving the contract in force."

Did the defendant owner of the building in question fail to carry out any obligation imposed by the law in the foregoing articles, or at least some obligation imposed in the lease? There is no evidence in the case that he failed in the performance of the obligations he assumed in executing the lease, nor does there appear to have been stipulated therein the liability now imputed to him.

Article 1562 of the same code reads: "If, at the time of the lease of the estate, the condition of the same was not mentioned, the law presumes that the lessee received it in good condition, unless there be proof to the contrary."

Have the plaintiffs proven that when they accepted defendant's building it was uninhabitable and inadequate for the use for which they leased it? There is no evidence in the case to prove such a circumstance.

Nor have the plaintiffs themselves even in the least way proven that the three of them, or any one of them, notified the defendant after they had occupied the premises that repairs were necessary thereon for keeping the same in condition suitable for the use intended, and never did they notify the defendant that the roof was defective or had holes or cracks that might cause leakage and the wetting of the merchandise within the building. The fact is that neither the lessor no the lessees knew that the roof was defective and was going to leak when it rained, for they only became aware of the leaks during the rainstorm on the afternoon of the day mentioned, April 14; and therefore only on the hypothesis that the lessor had known of such defect and had concealed it from the plaintiffs could he be held responsible for the consequences thereof on account of the leakages that occurred, especially when it has not been duly proven that the defendant lessor failed to perform any of the obligations imposed by the law in the article quoted, 1554, by which he might be held responsible to the plaintiffs for damages and losses for which indemnity is unwarrantedly sought.

Besides the articles quoted therein is nothing in the Civil Code by virtue whereof the lessor may be declared responsible for the damages and losses the lessees may have sustained as a consequence of the leaks in the roof of the building leased and for the other troubles they have encountered.

If a a consequence of the torrential rainfall mentioned, which in scarcely an hour filled the squares, streets and lots of the city of Manila, and if as a result of the large quantity of water that fell the yard of the premises in question was flooded and the roof leaked, there being no outlet for the water through the drain-pipes, by reason whereof the plaintiffs had to break open four bell traps in the yard so that the water would quickly and swiftly flow away thus preventing a greater inundation of the yard of the premises, the occurrence was undoubtedly due to force majeure, being a fortuitous event which could not have been foreseen by the owner or the plaintiffs-tenants, or many other proprietors of stores whose interiors were flooded as a result of that heavy rainfall, and consequently the damages and losses the water inflicted upon the plaintiffs could not be ascribed to the owner of the premises so as to hold him liable for the indemnity.

Article 1105 of the same Code prescribes: "No one shall be liable for events which could not be foreseen, or which having been foreseen were inevitable, with the exception of the cases expressly mentioned in the law or those in which the obligation so declares."

The wetting sustained by the goods and merchandise of the plaintiffs as a consequence of the heavy torrential rainfall on the afternoon mentioned, which caused leaks in the building and flooded the yard, is not a case

expressly mentioned by the law for which the owner of the premises is responsible, and further it does not appear to have been provided against in the lease to be seen in folio 15, letter A, by virtue whereof the lessor would be liable to an indemnity for the damages and losses cause his tenants by that rainfall; and so, in accordance with the provisions of the article quoted above, the defendant is not responsible for the results of the torrential rainfall that has been described.

A fortuitous event is an accident independent of the obligor's will to carry out some stipulation and it is plain that for him to escape the imputation of not performing his obligation he must be placed in a situation arising from an unforeseen event, or in one where, even if he had foreseen it, still he could not have avoided it, by reason of the fact that its unexpectedness and inevitability places it beyond human control.

It was not stipulated in the lease executed between the defendant and the plaintiffs that, if the goods and merchandise the defendant-tenants might have on the premises should get wet, the defendant would as lessor thereof be liable to indemnity , nor have the plaintiffs been able to allege such liability in their claim; and we do not know of any article of the Civil Code included in the chapter which deals with leasing of urban property that makes any provision for such liability on the part of the owner of the property.

If, on the said afternoon of April 14, it rained so heavily and so abundantly that the proof of the building occupied by the plaintiffs, even though in good condition, according to the municipal architect's certificate, leaked, and if as a consequence of that torrential rainfall said merchandise of the plaintiffs got wet, the occurrence is not imputable to the lessor owner of the building, nor according to any evidence in the case to the lessor's fault. Being evidently a fortuitous event, unforeseeable by any of the litigating parties, inevitable on account of force majeure, the case discloses no proof of any kind that the defendant Tiaoqui knew that the roof of the building leased to the plaintiffs had cracks or defects in it that would cause leakages, just as the plaintiff-tenants did not know that fact themselves, for otherwise they would have notified the defendant-lessor in due season and demanded repair thereof so as to avoid injury to their interests.

Nobody, neither the defendant nor the plaintiffs, could have been foreseen that on the said afternoon of April 14 it was going to rain in torrents and in an extraordinary manner, wherefore it is neither right nor proper to ascribe the wetting of the merchandise of the plaintiff-tenants to negligence, carelessness, or fault on the defendant's part. It was a case of accident and force majeure which could not have been foreseen and which nobody could have prevented, and the fact that the defendant repaired and fixed the leaks in the roof the next day cannot be taken as proof of his liability, for he did not know and could not have foreseen that it was going to rain in torrents the said afternoon and that the roof of the building would leak and show defects.

It would be an absurdity which the law cannot authorize for said tenant to be entitled to claim damages from the owner because the roof a building leaked and some of the tenant's good got wet, for no provision of the law relating to leases of urban property places any such obligation on the owner to pay indemnity for damages, when he himself did not know that there was any defect to accuse such damages.

Article 1553 of the Civil Code declares that the provisions relating to warranty contained in the title of purchase and sale are applicable to leases.

In connection with a lease warranty is the obligation to repair or correct the error whereunder the lessee took over the property leased, but when the law declares that the lessor must warrant the thing leased, but when the law declares that the lessor must warrant the thing leased, it is not to be understood that he must also indemnify the lessee. Liability for the warranty is not equivalent to liability in damages, as the latter is an obligation distinct from the former.

For proper understanding of the provisions of articles 1484 and 1485 of the Civil Code dealing with warranty it is necessary to remember that under their provisions the lessor is liable for the warranty of the thing leased against any hidden defects this liability for warranty of the thing leased does not amount to an obligation to indemnify the tenant for damages, which is only to be allowed when there is proof that the lessor acted with fraud and in bad faith by concealing to the lessee.

Article 1486 of the Code reads:

In the cases of the two preceding articles (1484 and 1485) the vendee (sc. lessee) may choose between withdrawing from the contract, the expenses which he may have incurred being returned to him, or demanding a proportional reduction of the price, according to the judgment of experts.

If the vendor (sc. lessor) knew of the faults or hidden defects in the thing sold (sc. leased) and did not give notice thereof to the vendee (sc. lessee), the latter shall have the same option, and furthermore, be imdemnified for the lossess and damages should be choose the rescission.

It must be kept in mind that the foregoing article and the two previously quoted appear in the title on contracts of purchase and sale and are in every way applicable, according to article 1553 of the same code, to leases.

Hence, while the lessor is obligated by the general rule to warranty of the thing leased, whether or not he may know of the existence therein of defects that render it inadequate for the use the tenant intends, he is only liable for an indemnity for damages in addition to the warranty when he knew of the defects in the thing leased and had not revealed them to the lessee, a procedure which induces the presumption that he acted with fraud and in bad faith; but in order to hold him responsible for the damages and losses caused by such defects there must be the express condition that the lessee should choose rescission of the contract, according to the prescription of the second paragraph of the article quoted above, whence it is inferred that, should the lessee insist upon continuing the contract by occupying the property, he must be understood to have waived the indemnity.

The plaintiffs, without choosing warranty of the property leased, supposing that they were entitled to require it, set up a direct claim for indemnity for losses and damages from the lessor, without having proven that the latter had knowledge of the defects in the roof of the building leased and in spite of such knowledge did not reveal it to the plaintiff- tenants, thus acting with malice and bad faith; and yet they continued to occupy the property without having sought or demanded rescission of the contract; wherefore, even supposing that the lessor were liable under the law for losses and damages, the plaintiffs were not and are not entitled to claim such, because they in fact waived the indemnity. Read the above-quoted article of the code carefully.

As for the rest, article 1101 of the Civil Code reads:

Those who in fulfilling their obligations are guilty of fraud, negligence, or delay, and those who in any manner whatsoever act in contravention of the stipulations of the same, shall be subject to indemnity for the losses and damages caused thereby.

It has not been demonstrated in the that the defendant lessor failed to fulfill the conditions of the lease or that he acted with fraud, negligence or delay in the fulfillment of said conditions. (Arts. 1102-1104, Civil Code.).

In a judgment on appeal of October 29, 1887, the supreme court of Spain, in applying said article 1101 of the civil code of that country, identical with the one in force in these Islands, laid down the principle that, according to established jurisprudence, indemnity for losses and damages cannot be claimed when they are caused by a fortuitous event.

As for the other facts alleged by the parties, which have been the subject of the evidence adduced by them, the record contains a certificate from the Observatory in this city to the effect that the rain which fell over the city of April 14, 1913, was the heaviest from January to the said month of April of that year, for 48.3 mm. of water were registered in the rain-gauge, an amount of rainfall notably excessive and the greatest during that period of four months.

Counsel for the plaintiffs has strongly insisted in his briefs that the defendant-lessor agreed and stipulated to pay the amount of the deterioration or depreciation of the goods and merchandise that were wet.

It has not been duly proven in the case that the lessor Tiaoqui admitted, or agreed to pay, the amount of the losses and damages sustained by the plaintiffs because they sold the merchandise, wet by the rainfall that afternoon, for a lower price than it was really worth. The declarations of the three plaintiffs do not constitute sufficient proof to offset the positive denial of the defendant Tiaoqui; and the witnesses called by said plaintiffs, far from confirming their allegations, made affirmations contradictory among themselves and at variance with the assertion of the plaintiffs interested, for the latter aver that two of them demanded of Tiaoqui and were promised by him that he would pay a half of the difference caused by the lower price at the sale of the goods, while the witnesses cited stated under oath that Tiaoqui agreed to pay the whole amount resulting from the depreciation in the value of the merchandise.

In fact, the record reveals that the defendant Tiaoqui denied in a sworn statement (folios 25 and 28) that he had agreed to pay damages to the plaintiffs and alleged that, not only did he make plain that his intervention in the notarial instrument drawn up the day after the disaster did not signify that he tacitly accepted any responsibility arising from the alleged losses in the merchandise, but furthermore, when demand was made by two of them that he pay the amount averred as the extent of said respective losses, he replied that he could not pay it; and he added that, when for the second time the plaintiffs saw him for the purpose he would investigate whether there were defects in the roof of the building to cause leaks, in which case he would collect from the contractor Machuca and that the sum the latter might pay he would deliver to the plaintiffs to cover said losses and damages, but that if said contractor did not pay up or if the leaks had resulted from the torrential rain which fell over Manila he would not pay them a cent. The promise contained in the first part of the defendant's answer plainly has a condition attached to it, and there is no record that the plaintiffs accepted it or that they agreed to the condition mentioned, and therefore it cannot serve as ground for an adverse finding.

The contractor Rafael Machuca Gotauco testified that he constructed the defendant's building, located in Calle Rosario, according to plans and specifications which were kept before him, and that after the work had been finished the architect certified that said building was well constructed; and he added that he did not know why the water penetrated at the junction of the roof of the building with the firewall, for that junction had been carefully made, but thought it must have been due to that torrential rainfall.

The attorney, Vicente Miranda, testified in his sworn statement that on the afternoon in question he was in Clarke's situated in the Escolta and that as a consequence of the rainfall the persons there had to put their feet on the tables because the water rose so high that it overflowed the sidewalk. This the witness Aurelio Acuña corroborates in his testimony by saying that his store at No. 21 Calle Rosario was filled with water flowing from the yard and the street, so that he sustained damages, and that he saw his neighbors had to bail the water out of the interior of their stores or shops with pails and washbasins. Attorney Miranda added that over a week after a occurrence he had interviews with Attorney O'Brien, counsel for the plaintiff Tan Tiap, and they two talked about the liability of the defendant for the losses and damages sustained by the plaintiff Tan Tiap, and he did not then hear that the defendant Tiaoqui had promised to pay the plaintiffs a part or all of the amount of the losses and damages they may have sustained through the wetting of their goods and merchandise.

Summing up, the record fully demonstrates that the defendant Alfonso M. Tiaoqui is not liable under the law to pay indemnity for losses and damages because of the wetting of the goods and merchandise of Yap Kim Chuan, plaintiff in case No. 10006; of Marciano Ong Qui Sing plaintiff in case No. 10007; and Tan Tiap, plaintiff in case No. 10008; and that on the other hand these cases do not reveal satisfactory and conclusive evidence that the defendant lessor Tiaoqui to make up all or part of the loss or depreciation on the sale of the goods and merchandise that was wet.

It is be observed that as the three said cases are based on analogous facts, having the same origin, they were tried together and the parol and documentary evidence adduced by the parties in each of said cases all taken in No. 10006; and as the questions of fact and of law raised in all three cases are the same, the legal grounds for the final decision in all three cases are set forth only in the decision of the first of them, in order to avoid useless and unnecessary repetition.

Roman Tantungco and three others, represented by the same counsel for the defendant, as owners of the building leased to the plaintiffs after August 2, 1913, through the transfer made by her defendant, prayed that they be allowed to intervene in these three cases, that the said cases be finally dismissed and that they be absolved from the complaints filed. These contentions were opposed by the plaintiffs, but the record does not show that any action was taken on the motions presented by the parties.

For the foregoing reasons the judgment appealed from, as rendered in this case No. 10006, must be reversed, and the defendant Alfonso M. Tiaoqui absolved, as we do absolve him, from the complaint filed by Yap Kim Chuan, without special finding as to costs in both instances. So ordered.

July 25, 1916

G.R. No. 10283LIMPANGCO SONS, plaintiff-appellant,vs.YANGCO STEAMSHIP CO., defendant-appellee.

Lawrence, Ross, and Block for appellant.Haussermann, Cohn, and Fisher for appellee.

PER CURIAM:

The following grounds moved the court to a reversal in this case:

On the 3d day of August, 1913, plaintiff employed defendant to tow from Guagua to Manila two cascos loaded with 2,041.80 piculs of sugar, property of the plaintiff, of the value of P11,229.90. On that date the cascos left Guagua towed by the launches Tahimic and Matulin , belonging to the defendant. When the launches, together with their tows, arrived off the Malabon River, the patron of the launch Matulin , whether of his own motion, as contended by the casco men, or whether at the instance of the patrones of the cascos, as he testified, decided to leave the cascos in the Malabon River. The launch Tahimic towed the cascos into the Malabon River and the launch Matulin continued the trip to Manila. The reason why this was done, according to the testimony of the patron of the Matulin , was that, at that time, the weather was threatening, and the cascos, heavily loaded as they were, to continue the voyage to Manila.

On Friday following, August 8, 1913, the launch Matulin was in the Malabon River and the patron talked to the men in charge of the two cascos, which were at that time tied up at Tansa, and told them that on the following day, the 9th of August, at daybreak, he would await them off the mouth of the Malabon River, outside the bar, and that, if the weather was then favorable, he would tow them to Manila. It was agreed between the patron of the Matulin and the patrones of the cascos that the later should move out of the river by means of their tikines or bamboo poles and, thus propelled, proceed to the place where the launch Matulin was to be waiting for them. On the following day, 9th of August, 1913, at 6 a. m., the patron of the Matulin arrived with his launch off the mouth of the Malabon River and anchored outside of the shallows, something like 1,500 meters from the mouth of the river. In accordance with the agreement with the patron of the Matulin and under his instructions, the crews poled their cascos out of the river following the channel. When they passed the shallow water they were met with high seas and strong winds. The bamboo poles were unavailing, and , finding themselves in danger of being washed ashore and destroyed, they claim they called to the Matulin , which was in plain sight, for help. The patron of the Matulin, they allege, made no effect to assist them and, by reason of the high seas and strong winds, they were driven ashore or on the shoals and their cargoes lost. The patron of the Matulin e testified that he was unable to render assistance to cascos by reason of the shallow water in which they were at the time they were caught by the winds and waves and washed ashore.

We are of the opinion that the judgment must be reversed on defendant's own statement of facts. Defendant, in its brief, states the facts substantially as above, except that it denies that the crews of the cascos, in their distress, called to the patron of the Matulin for assistance, or that the cascos were in deep water at the time the wind and waves began to drive them toward the shore. We have no doubt, however, from the facts and circumstances related that the crews of the cascos did call for help when they saw the dangerous position in which they had been placed by the orders of the captain of the launch. It would be a natural thing for them to do under the circumstances, and we have no doubt that they did. But whether they really did or not we regard as of very little importance; and the same may be said with respect to the position of the cascos when they first received the winds and waves. It was evident to the captain of the Matulin that the cascos were in distress, in the open bay with winds and waves driving them ashore; and if he had had anything like a proper conception of his duty he would have gone to their assistance. Nor does the argument avail that he could not do so because his launch was of such draft that it would have been impossible to navigate the shallow water in which the cascos were at the time the elements began to drive them toward the shoals. That fact does not furnish a legal excuse. He came for the purpose of towing the cascos to Manila; he knew that it was the reason when the southwest monsoon or other winds could be expected to blow at any moment; he knew that two heavily loaded cascos with nothing to propel them but bamboo poles in the hands of their crews and nothing to maintain their position in the water except anchors so small as to be of little avail even in a moderate sea, would be at the mercy of wind and wave, if there should be any, the moment they emerged from the mouth of the river. He must have known, if he had any reasonable conception of his duty, that the cascos. propelled simply by bamboo poles, could make no headway against wind and sea, and that it would be well night impossible, in view of the weather which at any moment might prevail, to traverse a distance of 1,500 meters in an open sea. Fifteen hundred meters is almost a mile; and that the captain of theMatulin should have expected that the two cascos could successfully face the weather which would naturally be expected at that time while the crews "poled" their heavily laden craft in the open bay for almost a mile demonstrates that he had no proper conception of his obligation. It must be remembered that the Malabon River opens into Manila Bay toward the southwest, almost directly in the teeth of the winds prevailing at the time. Every wind across Manila Bay from the southwest blows almost squarely into the mouth of the Malabon River; and every craft passing from the river in the bay in the monsoon season must be prepared to meet that the obstacle to its progress. In view of this and the further fact that strong southwest winds were the rule rather than the exception at that reason of the year, was the captain of the Matulin exercising reasonable care when he asked the crews of two heavily loaded cascos carrying more than 2,000 piculs of sugar of the value of more than P11,000 to attempt to cross a stretch of open water, nearly a mile in width, with nothing to propel them but bamboo poles? And under the circumstances described, did the captain of theMatulin perform his full duty when he ordered or even permitted the cascos to attempt such a journey when he himself was without power or means to help them in case of need?

A vessel which undertakes a towage service is liable for reasonable care of the tow, and that reasonable care is measured by the dangers and hazards to which the tow is or may be exposed, which it is the duty of the master of the tug to know and to guard against not only by giving proper instructions for the management of the tow, but by watching her when in a dangerous locality, to see that his directions are obeyed. The duty of the tug to a tow is a continuous one from the time service commences until it is completed. Its responsibility includes not only the proper and safe navigation of the tug on the journey, but to furnish safe, sound and reasonable appliances and instrumentalities for the service to be performed, as well as the giving of proper instructions as to the management of the tow; and if the locality in which the two finds itself at any given time is more than ordinarily dangerous, the tug is held to a proportionately higher degree of care and skill. It is well recognized that in towing a boat built only for the shallow water of an inland stream, as the cascos mentioned in this case are, greater care must necessarily be used when venturing upon an ocean voyage than with a vessel fitted for deep water; and this applies not only in the choice of routes, to select the one having the smoothest water and affording shelter is stormy weather, but in the handling of the tow. (The Jane McCrea, 121 Fed., 932; The Printer, 164 Fed., 314; The Somers N. Smith, 120 Fed., 569; Ross vs. Erie R. Co., 120 Fed., 703; 38 Cyc., 564.)

In the case at bar the defendant failed to meet any of these requirements; it neglected to furnish suitable appliances and instrumentalities; for the tug itself, as is demonstrated by the facts in this case, was unsuitable for the purpose in hand. As we have said, it is negligence to leave two heavily loaded cascos in Manila Bay at the mercy of weather likely to exist in the month of August for a distance of 1,500 meters with no other motive power than bamboo poles. Also the captain of the Matulin failed to give proper instructions to the tow. If it was

negligence not to provide himself with appliances by which the cascos could be protected while passing from the mouth of the river to the launch, it was negligence for him to ask the cascos to move out into the open sea under such circumstances. It is clear, therefore, that the defendant directly or through the captain failed in every duty laid upon it by the law, even though the law applicable under the facts and circumstances of this case require the use of only ordinary diligence and care; but, as a matter of fact, the law required the exercise of more than ordinary care under the circumstances existing at the time the cascos were lost. The fact of time and season and of the probability that in coming out of the river they would be met with wind and wave and, in their helpless condition, would in all probability, if so met, be driven on the shoals, made the situation of the cascos one of more than ordinary danger; and the tug should be held to a proportionately higher degree of care and skill.

While the captain of the Matulin would not have been responsible for an act of God by which the cascos were lost, it was his duty to foresee what the weather was likely to be, and to take such precautions as were necessary to protect his tow. It was not an act of God by which the cascos were lost; it was the direct result of the failure of the captain of the Matulin to meet the responsibilities which the occasion placed on him. To be exempt from liability because of an act of God the tug must be free from any previous negligence or misconduct by which that loss or danger may have been occasioned. For, although the immediate or proximate cause of the loss in any given instance may have been what is termed an act of God, yet, if the tug unnecessarily exposed the two to such accident by any culpable act or omission of its own, it is not excluded. (Manresa, vol. 8, pages 91 et seq.; art. 1105, Civil Code.)

These are the grounds upon which the decision in this case was rested. So ordered.

Torres, Moreland, and Araullo, JJ., concur. Johnson, J., concurs in the result. Trent, J., dissents.

DECISION ON MOTION FOR REHEARING

November 2, 1916

MORELAND, J.:

This is a motion for a rehearing in a case decided by this court in which we held that the plaintiff was entitled to a judgment against the defendant. The action was one for negligence in towing two cascos from Guagua to Manila whereby they and their cargoes were lost. Reference is made to the decision in the main case for a statement of the facts.

On this motion the defendant contends that "the decision of this honorable court in the above entitled cause is based upon the ground that it was negligence for the patron of the defendant's launch to permit the patrones of the cascos to attempt to move their vessels from their mooring place in the Malabon River to the place where the launch was waiting for them outside the bar."

While, says the defendant, "the case was tried below solely upon the theory that the negligence imputed to defendant consisted in the failure of the launch to go to the assistance of the cascos when the roughness of the sea made them unmanageable."

With this allegation as a basis the defendant says in its motion:

The decision of this honorable court is based upon the theory of the case which was not advanced by plaintiff at the trial and is wholly at variance with the issues of law tendered at the trial. The case was tried on the assumption that if it was in fact impossible for the launch to go to the aid of the cascos, no liability for the loss would rest upon the defendant. It was never once contended in the course of the trial that it was negligence per se for the defendant to permit the cascos to make their way from the mouth of the river to the bar.

We are of the opinion that the defendant limits too severely the theory on which the case was tried below. The complaint alleges facts sufficient to state a cause of action against the defendant from several points of view. As shown by the statement of facts in the decision in the main case, which was but a restatement of the facts alleged in the complaint, the defendant was charged with negligence for everything done by him subsequent to the time when he placed the cascos in the Malabon River instead of continuing with them to Manila. Indeed, the complaint even alleges that the placing of the cascos in the mouth of the Malabon River was in itself an act of negligence. To say the least, the theory of the plaintiff was that the negligence of the defendant began from the placing of the cascos in the river. While the fact that the defendant's launch did not go to the assistance of the cascos when they found themselves unable to navigate the waters of the bay was, perhaps, dwelt upon with more emphasis than

the other features of the case, there does not appear any intention on the part of the plaintiff of relying solely on that theory and to renounce his rights against the defendant arising from other acts of negligence and to stand alone upon the act on which particular emphasis was placed.

Moreover, the act of the patron of defendant's launch of calling the cascos out of the shelter of the Malabon River into the dangers of the bay, while an act of negligence on the part of the defendant'spatron under the circumstances, is so closely connected both in point of time and in nature with the inability of the patron to go to their assistance after they were called out as to make the two inseparable to the extent that logically they cannot be divided for the purpose of claiming that one of the acts or omissions was accepted as the theory of the case to the exclusion of the other. We held in the main case that it was not only negligence for the patron of the defendant's launch to order the cascos out of the shelter of the river into the dangers of the bay; but we also held that the failure of the defendant to provide suitable means by which it could extend assistance to the cascos after they had reached the waters of the bay was also negligence under all the circumstances. Indeed, one of the principal grounds of our decision was that the defendant, after putting the property of the plaintiff in a dangerous position, found itself without means of averting the catastrophe which its own acts invited.

For these reasons we are of the opinion that the theory on which the case was tried below was not so narrow as the defendant assumes. Nor was the decision of this court so circumscribes as counsel maintains. All of the facts upon which our decision was based were proved in the trial and were discussed by the trial court. While he may not have drawn conclusions from some of the facts, that was due more to the circumstance that he found for the defendant than that he was simply following a particular theory in the trial of the cause.

Finally, the brief filed in the trial court by the plaintiff puts these questions:

First, Was there reasonable ground for the defendant leaving the cascos in the Malabon River? Second, Was not the loss of the cascos and their cargoes due to the negligence of the patron of the launch 'Matulin '?

In arguing these questions counsel said: "The contract of towage is by its nature indivisible." Continuing the argument he called attention to the fact that the patron of the Matulin summoned the cascos from the Malabon River into the bay in the early morning and then left them to the mercy of the wind and waves. Counsel then argued the legal responsibility of the defendant. He asserted that thepatron of the defendant's launch should have known the hours of the ebb and flow of the tide and the condition of the bay and that he should not have called the cascos from the mouth of the river until the conditions were such that they could navigate without assistance or until, if they needed assistance, he was able to offer it.

It is undoubtedly the law that, where a cause has been tried upon the theory that the pleadings are at issue, or that a particular issue is made by the pleadings, or where an issue is tacitly accepted by all parties as properly presented for trial and as the only issue, the appellate court will proceed upon the same theory. (Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep., 504; Molina vs. Somes, 24 Phil. Rep., 49.) It would be unjust and oppressive for the appellate court to adopt a theory at variance with that on which the case was presented to and tried by the lower court. It would surprise the parties, take them unaware and off their guard, and would, in effect, deprive them of their day in court. There is a difference, however, between a change in the theory of the case and a shifting of the incidence of the emphasis placed during the trial or in the briefs. The theory of the case is primarily determined by the pleadings. But the parties may, by express or implied agreement during the trial, adopt and follow some other theory, in which case the theory so adopted will control the case. Where, however, the theory of the case as set out in the pleadings remains the theory throughout the progress of the cause, the change of emphasis from one phase of the case as presented by one set of facts to another phase made prominent by another set of facts, all of which facts were received in evidence without objection as clearly pertinent to the issues framed by the parties in their pleadings, does not result in a change of theory, and particularly not where the two sets of facts are so closely related both as to time and nature that they are to all intents and purposes inseparable. In the case under discussion the action was based on the negligence of defendant which resulted in the loss of plaintiff's cascos and their cargoes of sugar. The complaint contains a complete history of the case and a statement of all of the defendant's acts from the time it received the cascos in tow until they were lost. Those acts were proved in the trial. Plaintiff emphasized in particular those facts which showed that defendant's patron refused or neglected to go to the assistance of the cascos after he had summoned them from the safety of the river into the hazards to the bay and when he saw them drifting helplessly on the shoals. But there was in the case the fact that the patron did call the cascos out of the river into the bay knowing that he could not assist them should they need assistance before they reached the deeper water where the launch could navigate, and knowing the state of the tide and that bad weather might supervene at any moment at the season of the year. The court on appeal emphasized, perhaps, but not intentionally, as it was unnecessary, the latter facts, holding that it was negligence, under all the conditions, for the defendant to summon the cascos from the river into the bay while the defendant had so circumstanced itself as to be unable to render assistance to the cascos if they should need it. These two sets of facts are so closely related and inseparably connected in the theory of plaintiff's case as stated in the pleadings and as tried that we do not believe it can reasonably be urged that there was a change of theory in the appellate court. This court simply developed plaintiff's theory and its facts; it did not change them. The motion is denied. So ordered.