ObliCon 1139-1155

Obligations and Contracts 1139-1155
1

Tan vs. Court of Appeals
This is a petition to review the decision as well as the resolution of the Court of Appeals which affirmed the order dated June 16,
1989 of the Regional Trial Court of Quezon City, Branch 88 in Civil Case No. Q-89-2357 convicting petitioners Julia L. Tan and
James L. Tan of indirect contempt and sentencing each of them to suffer a penalty of imprisonment of ten (10) days and to pay a
fine of P500.00 each.
Petitioner Julia L. Tan is an 84 year old widow who is the Principal of Grace Christian High School offering both elementary and
secondary courses while petitioner James L. Tan is the Administrative Consultant of the school.
This case arose from the refusal of the petitioners to admit and enroll certain students for the school year 1987-1988 because
heated controversies, acts of misbehavior, and a refusal to dialogue with the school administration led the school authorities to
believe that it would be best for all concerned if these children enrolled in other schools.
Two separate petitions for mandamus with prayers for preliminary mandatory injunction were eventually filed with the Regional
Trial Court of Quezon City. The first case docketed as Civil Case No. Q-51039 was assigned to Branch 79 of the court. The
second case which led to the present petition was docketed as Civil Case No. Q-89-2357 and was assigned to Branch 88. The
latter case was filed by Vicente Luy and his daughter Vonette Luy, who were also petitioners in Civil Case No. Q-51039.
On July 1, 1987, Branch 79 in Civil Case No. Q-51039 issued an order granting the issuance of a writ of preliminary injunction.
The school and the petitioners were ordered to allow enrollment of the subject children.
While the two cases were pending in court, the children were enrolled and continued their studies. During the enrollment period in
May, 1989, however, the petitioners refused the enrollment in the first year high school of Carmella Ang See, Michael Robert Ang,
Karen Gay Dipasupil and Vonette Luy on the ground that the school was under no legal duty to still accept them in the high school
after graduating them from the elementary course.
On May 23, 1989, Vicente Luy (father of Vonette Luy) together with other parents Josefina Ang, Teresita Ang See and Teresita
Dipasupil filed in Branch 79, a motion to hold in indirect contempt the petitioners for refusing to enroll their children in alleged
disobedience of the writ of preliminary injunction issued on July 1, 1987.
On May 25, 1989, Branch 88 issued an order in the second case granting the prayer for the issuance of the writ of preliminary
mandatory injunction and ordering the petitioners to enroll Vonette Luy in the first year high school.
In the meantime, the herein petitioners challenged in the Court of Appeals (CA-G.R. SP No. 13179) the order granting the writ of a
preliminary mandatory injunction by Branch 79.
On June 26, 1989, the Court of Appeals set aside the order prompting the respondents to file a petition forcertiorari with us. The
case was docketed as G.R. No. 90063.
In a resolution dated December 12, 1989, we dismissed the petition for lack of merit and resolved "that . . . the children here
affected shall be allowed to finish the current school year (including the summer term if any), as the questioned order of the Court
of Appeals shall take effect only as of the beginning of school year 1990-1991."
Meanwhile, the case in Branch 88 continued its independent course. Thus, on June 16, 1989, the trial court upon motion of
Vicente Luy issued the questioned order. This order is now challenged by the petitioners in this case.
The facts of the controversy which led to the two cases against the petitioners are stated in this Court's Resolution in G.R. NO.
90063, "Yap Chin Fah, et al. v. Court of Appeals, et al.", December 12, 1989 as follows:
Sometime in 1986, private respondent Grace Christian High School ("Grace Christian") applied with the then Ministry of
Education, Culture and Sports (MECS) for a tuition-fee increase of fifteen percent (15%) for the School Year (SY) 1986-87. Private
respondent Grace Christian had applied for, and been granted, yearly increments in tuition fees from SY 1973-74 (except for SY
1983-84) until SY 1985-1986. On 18 December 1986, Grace Christian received a notice from the MECS that its fee-increase
application had been definitely approved on 10 November 1986.
Meanwhile, a group of parents whose children are enrolled in Grace Christian, allegedly alarmed by what they perceived to be the
deterioration despite the periodic fee increases in academic standards and physical facilities of the school, formed the

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Grace Christian High School Parents-Teachers Association ("Association"). The Association, composed of a majority of the
parents (despite its name, no faculty member sits on the executive committee) demanded: (a) recognition as an organization; and
(b) representation in Grace Christian's policy-making process, viz., faculty selection and improvement of the physical plant.
Feeling that their demands had been largely ignored, the Association in October 1985 asked for a formal dialogue with the school
administration. During a heated exchange in this dialogue, one of the petitioners herein, William Tiu, stood up and pointed a finger
and shouted at Grace Christian's vice-principal, and later spat on the latter.
On 23 September 1986, Grace Christian had been granted provisional authority by the MECS to impose a fifteen percent (15%)
increase in tuition fee for SY 1986-1987. Thereupon, some of the above-mentioned group of parents lobbied with the other
parents urging non-payment of the fee increase. During the enrollment period for the second semester of SY 1986-1987, a
number of parents, among them petitioners (comprising nine [9] members or officers of the 19 member executive committee, of
the Association) refused to pay the incremental fee: Grace Christian in turn refused to receive these parents' payment of regular
(i.e., the fee before the fifteen [15%] increase) tuition fee for that semester. On 16 December 1986, Grace Christian reminded the
parents about the payment of the approved increased tuition fee for the second semester.
From 23 February to 5 March 1987, a group of parents, petitioners included, staged a rally outside the school gates. Banners and
placards critical of the school administration were set up. The latent animosity between the Association (or some members
thereof) and Grace Christian began to flare up. Petitioners first came out with statements in the print and broadcast media
attacking Grace Christian's periodic fee increases and allegedly deteriorating academic standards. Some of the petitioners, armed
with video-cameras, forced their way into the school premises and interrupted a class in session, urging students therein to speak
using the allotted class hour against school policies. Some of the students walked out of their classrooms to join their
parents in the rally outside.
On 27 February 1987, the Association through a letter asked Secretary Quisumbing of the Department of Education, Culture, and
Sports (DECS) to reconsider the 23 September 1986 (as well as the 10 November 1986) order granting the school's application
for a fee increase. On 12 March 1987, the Association obtained a "freeze-order" from the DECS, enjoining Grace Christian from
imposing the already approved fifteen percent (15%) fee increase, until the DECS shall have received proof that sixty percent
(60%) of the increase had been apportioned to salaries of Grace Christian's faculty. After submission by Grace Christian of proof
of payment of salary increases to the faculty, the DECS in an Indorsement dated 16 March 1987 lifted the "freeze-order," thereby
allowing the school to resume collection of the fifteen percent (15%) fee increase.
Meanwhile, the already adversarial relationship between Grace Christian and the Association further deteriorated when the school
administrators overheard several of the Prep (pre-school) students chanting slogans against the school and its teachers,
indicating that their parents had imbued them with hostility or at least disdain and scorn for the school.
During the period 14-18 April 1987, petitioners were individually and personally informed through a letter by the principal of Grace
Christian that, as they were severely critical of the school's policies, it would be best for all concerned if their children enrolled in
some other school. On 25 May 1987, the first day of the enrollment period for SY 1987-88, petitioners were informed that as their
respective children were in the list of "referral" cases, the school principal would confer with them either in the afternoon of 29 May
1987, the last day of enrollment, or on 30 May 1987. Petitioners felt that their children were being singled out by the school and
decided not to see the principal and instead proceeded to the DECS for advise. The DECS in a lst Indorsement dated 1 June
1987 ordered private respondent School to enroll petitioner's children. The latter however refused to enroll these students,
prompting petitioners to file an action for mandamus in court. The trial court on 11 June 1987, to maintain the status quo between
the parties, ordered the temporary enrollment of petitioner's children. (Resolution-GR No. 90063, pp. 1-4)
While Civil Case No. Q-51039 was being considered on appeal by the Court of Appeals and later the Supreme Court, the
proceedings were also going on in Civil Case No. Q-89-2357, which had been filed by Vonette C. Luy and her father Vicente Luy
and assigned to Branch 88 on April 26, 1989.
The Luy petition alleged:
xxx xxx xxx
. . . [T]hat during the school year 1989-1990 appellants unjustifiably refused to admit her in the High School Department, despite
the fact that she was given a reservation slip which she was instructed to fill up and "return not later than April 15, 1989 together
with report card for this year." Before April 15, 1989, she submitted the reservation slip to the school principal, but the principal
informed her that she would no longer be admitted because her father was very vocal against certain school policies and
activities. As the school principal refused to allow her to enroll in the High School Department, her father wrote a letter complaint
dated April 7, 1989 to the Department of Education, Culture and Sports (DECS). The Department indorsed the letter to the school

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for immediate comment and/or appropriate action (Exhibits "E" and "D"). In reply, the lawyer of the school wrote the DECS to
reiterate the school's decision not to enroll Vonette Luy in its High School Department (Exhibit "E"). (Rollo, pp. 40-41)
The school and herein petitioners Julia and James Tan opposed the issuance of the writ of preliminary mandatory injunction on
the grounds that:
xxx xxx xxx
. . . (a) the right of a student to enroll in a private school is not absolute; (b) Vonette C. Luy failed to exhaust all administrative
remedies; and (c) there is no clear legal basis for the issuance of a writ of preliminary mandatory injunction. (Rollo, p. 41)
On May 25, 1989, Judge Tirso D.C. Velasco issued the writ, stating
In view of the foregoing, the petitioner has clearly established her right to be admitted to the First Year, High School Department,
Grace Christian School, Quezon City and the unmitigated duty of respondents to admit the petitioner to the aforesaid High School
Department.
The Writ of Preliminary Mandatory Injunction is hereby GRANTED and the respondents are ordered to allow the enrollment of
petitioner in the High School Department, Grace Christian High School, Quezon City, after posting a bond of Five Thousand
Pesos of compliance to this Court within three (3) days from receipt hereof. (pp. 73-74, Records.) (Rollo, pp. 41-42)
A motion for reconsideration was filed followed by a supplemental motion for reconsideration. The petitioners stated that the
Department of Education, Culture, and Sports had decided their administrative case upholding the right of the school to refuse
enrollment in the first year high school of Vonette Luy as well as the other students similarly situated. (See Annex "D", Rollo, pp.
52-53)
Significantly, the petitioners also pointed out to the court that Vicente Luy and his daughter were engaging in forum shopping
because Civil Case No. Q-51039 had been filed earlier by Mr. Luy himself and various other parents. There was pending exactly
the same cause of action on contempt and both cases were raising the same issues.
As earlier stated, the first case on the grant of mandatory injunction was at that time already with the Court of Appeals.
On June 9, 1989, Vicente Luy filed a motion to declare the petitioners in contempt of court for refusing to enroll Vonette Luy in
high school.
We note that on this same date, June 9, 1989, the other court presided over by Judge Godofredo Legaspi denied the similar
motion for contempt filed by Mr. Luy, Josefina Ang, Teresita Ang See, and Teresita Dipasupil.
On June 13, 1989, Judge Tirso Velasco ordered the petitioners to comply with the writ of preliminary mandatory injunction or he
would act on the motion for contempt. The petitioners opposed this order stating that Judge Legaspi had just denied the similar
motion for contempt in the other case (Civil Case No. Q-51039). In this opposition, the petitioners again charged Mr. Luy with
forum shopping contending that the first case he filed with others should take precedence over Civil Case No. Q-89-2357 pending
before Judge Velasco's court.
On June 16, 1989, Judge Velasco issued the order questioned in this petition, stating:
IN VIEW HEREOF, and for continuously defying not only the writ of this court but also the three Orders of June 7, June 13 and
June 15, 1989, the Court finds the two respondents Julia L. Tan and James Tan guilty beyond reasonable doubt of indirect
contempt and hereby sentences each of them to suffer a penalty of imprisonment of ten (10) days and to pay the cost. They are
likewise fined P500.00 each.
The Court orders that a warrant of arrest be immediately issued and served upon them to start service of sentence. The Court will
determine whether, during this period of time, petitioner Vonette Luy shall have been enrolled in respondent school for if not a
determination shall be made whether respondents shall be continuously held in custody until compliance by them of the court's
writ of preliminary mandatory injunction. (Rollo, p. 57)

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Only ten (10) days later, on June 26, 1989, the Court of Appeals set aside the writ issued by Judge Velasco which had
commanded the herein petitioners to enroll the protesting school children. It lifted the writ of preliminary injunction it had issued. A
motion for reconsideration was denied.
The parents went to our Court. We initially issued a status quo order, enjoining the parties to maintain the situation existing before
the decision of the Court of Appeals was rendered.
On December 12, 1989, however, we decided the controversy in favor of herein petitioners and the school. The Court in G.R. No.
90063 declared the petition of the parents and their children unmeritorious. We stated:
ACCORDINGLY, the Court Resolved to DISMISS the Petition for lack of merit. However, the children here affected shall be
allowed to fill the current school year (including the summer term, if any), as the questioned Order of the Court of Appeals shall
take effect only as of the beginning of SY 1990-91."(Padilla, J., took no part, Gutierrez, Jr., J., is on official leave)." (at p. 7)
The petition in this case is impressed with merit.
Our ruling in Yap Chin Fah et al. v. Hon. Court of Appeals, et al. was already long final when the Fourth Division of the Court of
Appeals rendered its October 22, 1990 decision practically ignoring and rendering naught the ratio decidendi which impelled us to
dismiss the earlier petition. This cannot be countenanced.
We stressed in Ver v. Quetulio (163 SCRA 80 [1988]), citing Ang Ping v. Regional Trial Court of Manila, Br. 40(154 SCRA 77
[1987]):
As early as 1922, this Court declared in Shioji v. Harvey (43 Phil. 333) that "the only function of a lower court, when the j udgment
of a higher court is returned to it, is the ministerial one of issuing the order of execution. A lower court is without supervisory
jurisdiction to interpret or to reverse the judgment of the higher court."
This is especially true where it is a Supreme Court decision or resolution which states with finality how the particular case before it
has been resolved. We ruled in Tugade v. Court of Appeals (85 SCRA 226):
Respondent Court of Appeals is really devoid of any choice at all. It could not have ruled in any other way on the legal question
raised. This Tribunal having spoken, its duty was to obey. It is a simple as that. There is relevance to this excerpt from Barrera v.
Barrera (34 SCRA 98 [1970]). "The delicate task of ascertaining the significance that attaches to a constitutional or statutory
provision, an executive order, a procedural norm or a municipal ordinance is committed to the judiciary. It thus discharges a role
no less crucial than that appertaining to the other two departments in the maintenance of the rule of law. To assure stability in
legal relations and avoid confusion, it has to speak with one voice. It does so with finality, logically and rightly, through the highest
judicial organ, this Court. What it says then should be definitive and authoritative, binding on those occupying the lower ranks in
the judicial hierarchy. They have to defer and to submit." (Ibid, 107). The opinion in Barrera further emphasizes the point: "Such a
thought was reiterated in an opinion of Justice J.B.L. Reyes and further emphasized in these words: "Judge Gaudencio Cloribel
need not be reminded that the Supreme Court, by tradition and in our system of judicial administration, has the last word on what
the law is; it is the final arbiter of any justiciable controversy. There is only one Supreme Court from whose decisions all other
courts should take their bearings. (Justice J.B.L. Reyes spoke thus in Albert v. Court of First Instance of Manila (Branch VI, 23
SCRA 948, 961). (Emphasis supplied)
The respondent Court of Appeals should have been aware that in the related case (G.R. No. 90063), we had already set aside the
writ of preliminary injunction similar to the writ from which emanated the contempt order directing that the petitioners be
imprisoned and made to pay fines. If this Court had already found a preliminary injunction invalid and sustained the school's
position that there was no unmistakable and indubitable right to enroll the petitioners' children, any lower court's decision to the
contrary is not only unenforceable and ineffective, but certainly cannot be the basis for a contempt order.
Our ruling in the related case of Yap Chin Fah, et al. v. Hon. Court of Appeals, et al., states:
As the Court of Appeals pointed out, petitioners here failed to exhaust their administrative remedies before resorting to court
action, as they had failed to: (a) see the principal of Grace Christian on 29 May 1987, their scheduled conference date; (b) wait for
the resolution of the letter of reconsideration/clarification of lst Indorsement dated 1 June 1987 filed by Grace Christian with the
DECS Assistant Regional Director; and (c) appeal to the DECS Secretary to finally resolve their disagreements with Grace
Christian, the right to appeal from the decision of a subordinate officer to a superior one constituting "a plain, speedy and
adequate remedy in the ordinary course of law" within the meaning of the Rules of Court. The Education Act of 1982 vests in the

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DECS the primary authority to hear and resolve disputes by and among members of the educational community similar to those
between petitioners and Grace Christian.
Moreover, a writ of preliminary mandatory injunction lies only when the right sought to be enforced is clear, unmistakable and
indubitable (Rivera v. Florendo, 144 SCRA, 643 [1986]). In the instant case, no such clear right was shown. It is true that private
schools not unlike public utilities and other private corporations whose businesses impinge on the public interest are subject
to reasonable regulation and supervision of the State (Const., Art. XIV [4] [1]). At the same time, however, private schools have
the right to establish reasonable rules and regulations for the admission, discipline and promotion of students. This right to
establish and enforce reasonable rules and regulations extends as well to parents and parent-teacher associations, as parents are
under a social and moral (if not legal obligation, individually and collectively, to assist and cooperate with the schools. In the
instant case, since petitioners have failed to comply with the conditions and prerequisites for admission, i.e., registration within the
prescribed dates, payment of duly-approved tuition fees, and compliance with school rules and regulations, Grace Christian
cannot be regarded as having acted arbitrarily or capriciously in refusing to re-enroll petitioners' children.
xxx xxx xxx
Lastly, where relations between parents and students on the one hand, and teachers and administrators upon the other hand,
have deteriorated to the level here exhibited, a private school may, in the interest of the rest of the student body and of the faculty
and management as a whole, and of the children of the parents affected, require the affected children to be enrolled elsewhere.
The maintenance of a morally conducive and orderly educational environment will be seriously imperiled if, under the
circumstances of this case, Grace Christian is forced to admit petitioners' children and to reintegrate them to the student body. It
may even be argued that petitioners' children have been innocent victims in a deplorable confrontation between some parents and
respondent School, but the situation here finds some analogy in labor cases where, because of pre-existing and supervening
strained relations, reinstatement is not always a feasible solution. (G.R. No. 90063, December 12, 1989, pp. 5-6; 7)
The issue before us was the right to enroll in high school of students who graduated from the elementary department of the same
institution. Exactly the same issue is raised in the case which gave rise to the contempt order and to the present petition. Under
the common facts of the two cases, both the DECS and this Court have found the petitioners' position valid.
We cannot close this case without deploring the action of Vicente Luy and his counsel for filing Civil Case No. Q-89-2357 in 1989
when exactly the same issues were already before Branch 79 in Civil Case No. Q-51039 filed by, among others, Mr. Luy in 1987.
This results not only in unnecessarily clogging the heavily burdened dockets of our courts but also in the unseemly sight of two
Branches of the same trial court and two Divisions of the Court of Appeals issuing contradictory decisions one in favor of the
school and the other in favor of the students and their parents. This problem of forum shopping is now before our Committee on
the Revision of the Rules of Court.
Pending any amendment of the Rules or a circular remedying this problem, lawyers and litigants alike are warned to be more
candid with courts of justice and not engage in forum shopping through deliberate splitting of actions or appeals in the hope that
even as one case is dismissed, another would still be open.
The Court of Appeals in this case was also misled. It ruled:
It is important to note that Civil Case No. Q-51039 was filed for the purpose of requiring appellants to maintain the eight (8)
students in the roll of students in the Elementary Department. This prayer was granted when the court issued the writ of
preliminary mandatory injunction asked for. Herein appellants thereafter complied with the said order. It was only when the school
refused to admit the eight (8) students in its High School Department that they filed the motion for contempt. Said motion was
denied because what the initial petition prayed for was for the issuance of a writ of preliminary mandatory injunction to mai ntain
the enrollment in the Elementary Department of the students and not their admission in the High School Department of said
school. Therefore, the right of the students to be admitted in the High School Department was not in issue hence, the court was
correct in ruling that it had no jurisdiction to declare the appellants in contempt of court for the act complained of, thereby
dismissing the charge without considering its merits. (Rollo, pp. 45-46)
Civil Case No. Q-51039 was filed by Vicente Luy and other parents not only to continue enrolling their children in the elementary
department but also to compel the enrollment of their other children in the high school department of Grace Christian School. As
pointed out by the petitioners, there were eighteen (18) students involved in Civil Case No. Q- 51039, not eight (8) as stated by
the Court of Appeals. Vonette Luy had two sisters, Vivian Luy and Virna Luy who were high school students and who joined in t he
petition. The case involved not only elementary grade but also high school students.

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No thinking person can dispute the fact that our country is suffering from the effects of a serious deterioration of academic and
other standards in our educational system. This Court is disturbed by the big number of candidates taking the bar examinations
who, after six (6) years in the elementary grades, four (4) years in high school, and eight (8) years in college appear to be
functionally semi-illiterate judging from the answers they give to bar examination questions. The same is true of other disciplines,
professions, and occupations. A drastic upgrading of educational standards especially in the elementary and high school level s is
imperative.
It is for the above reason that Government should uphold and encourage schools and colleges which endeavor to maintain the
highest standards of education. We have consistently sustained the rights of students to legitimately address their grievances both
to school authorities, media, and the general public to the extent of sometimes countenancing uncivil and rowdy behavior.
However, we have not hesitated to strike down violence and anarchy when certain students and their inevitable supporters misuse
the grant of "ordered liberty" mandated by the Constitution. Educators who insist on high standards and who enforce reasonable
rules of discipline deserve support from courts of justice and other branches of Government.
WHEREFORE, the petition is hereby GRANTED. The questioned DECISION and RESOLUTION of the Court of Appeals are
REVERSED and SET ASIDE. The petitioners are ACQUITTED of the offense of indirect contempt of court.
SO ORDERED.

Dira vs. Tanega

Direct appeal by plaintiff-appellant Vicente Dira from a decision of the Court of First Instance of Leyte, dated February 13, 1964,
dismissing, on the grounds of prescription and laches, the complaint in its Civil Case No. 2886, an action for accounting of a share
in an alleged partnership, payment of salaries and other money claims, without pronouncement as to costs.
The material facts as found by the trial judge are as follows:
That sometime in March 1946, plaintiff and defendant together with Francisco Pagulayan entered into a partnership for the
purpose of engaging in the printing business in the City of Tacloban and that the terms of the said partnership was for a period of
five (5) years from the organization thereof; that this fact was admitted by the defendant in his answer; that, in the articles of co-
partnership, the plaintiff was designated as President and his salary as such was P150.00 a month, that, during his incumbency
as President until the expiration of the period, the defendant who was the manager-treasurer of the partnership never paid him his
salary; that at the time the plaintiff was also the editor of the Leyte-Samar Tribune and in accordance with their Articles of
Partnership established the said periodicals, the plaintiff as editor was to receive a salary of P100.00 a month; that this salary and
the accrued amount therein was not also paid by the defendant, who was the business manager of the enterprise; that the capit al
of the said partnership was P5,000.00 equally divided among the partners; that this amount was used by the partnership to
purchase printing equipment from the 64th Naval Construction Battalion, U.S.N. and which printing equipment are in the
possession of the defendant up to now; that, before the purchase by the three of them of the printing equipment, the plaintiff
obtained a personal loan from Francisco Pagulayan in the amount of P1,100.00 and he pledged his share in the said equipment to
pay the same; that upon the request of the plaintiff, the defendant paid the said amount to Francisco Pagulayan and this time
plaintiff used his share in the partnership as guarantee for the defendant's payment; that on June 3, 1946, Francisco Pagulayan
sold his share of the partnership to the defendant and who by virtue thereof became 2/3 owner of the business; that the defendant
presented Exhibit "5" which purports to be a letter of demand to plaintiff asking him to settle his account, but due to his failure to
do so, he (defendant) assumed full ownership of the business, he changed the name from the Leyte-Samar Press to Taega
Press; that from the time the partnership was organized and went into business, the defendant as Manager-Treasurer never
rendered any accounting of the business operations, or paid the share of the plaintiff in the profits; and that the present action of
partnership accounting and sum of money was only filed in Court by the plaintiff against the defendant on February 10, 1961, that
is after a lapse of 9 years, 10 months and 11 days after the expiration of the contract of partnership, Exhibit 'A' on February 28,
1951. (Pp. 49-51, R. on A.)
xxx xxx xxx
It is undisputed that the defendant had been in the exclusive possession of all the printing equipment since 1946. Plaintiff himself
admitted that the defendant conducted himself as absolute owner of the printing equipment. He testified that defendant changed
location of the printing press which place he (Dira) did not know. According to defendant himself, he believed in good faith and
acted accordingly since 1947 that he was the sole owner of the printing press, after the refusal of the plaintiff to pay his
indebtedness of P1,100.00 to him. From the above facts, it can be deduced that defendant had acquired ownership of the printi ng

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equipment and accessories in question as Article 1132 of the Civil Code provides that the ownership of movables prescribes
through uninterrupted possession of eight years, without need of any condition. Surely 1946 or 1947 to 1961, more than four
and/or eight years had elapsed.
Plaintiff stated that defendant ignored him and did not give him any participation, since 1947, in the business, yet he did not
demand an immediate accounting of the business. For his failure to demand accounting five years before February 10, 1961, from
the defendant, he had forfeited his right by prescription. In support, Article 1153 of the Civil Code, among other things, provides
that the period for prescription of actions to demand accounting runs from the day the persons who should render same cease i n
their functions, and Article 1149 of the Civil Code provides that "all other actions whose periods are not fixed in this Code or in
other laws within five years from the time the right of action accrues."
It is an incontrovertible fact that the plaintiff had filed this action against the defendant on February 10, 1961, nearly ten years after
the expiration of the contract of partnership between them on March, 1951. ... (Pp, 56-57, R. on A.)
In his complaint, plaintiff-appellant prayed for payment of his salaries not only as President of the partnership but also as editor of
the Leyte-Samar Tribune which admittedly he had not been paid from the start, for accounting of the partnership affairs, for
payment of his alleged share in the rental value of the printing equipment and accessories used by the partnership, of which he
also claimed part-ownership proportionally to his share in the partnership, and for damages, attorney's fees and costs. The
defendant-appellee admitted practically all the material allegations of the complaint about the organization of the partnership and
the terms thereof as well as the non-payment of the salaries claimed by appellant, but, in defense, he alleged that the whole
business of the partnership became his alone in 1947 after he had acquired by purchase the share of Francisco Pagulayan and
had taken over the share of appellant, since the latter failed to pay the P1,100 he had requested appellee to pay to Pagulayan, as
security for the payment of which, he had pledge his said share to appellee; that since 1947, the place of the business was
transferred by him, he had its name changed to Taega Press and he had always been operating openly and publicly the said
printing business from 1947 without any intervention or participation of appellant and without said appellant making any clai m of
any kind in connection therewith until the filing of the complaint on February 10, 1961, hence, all the claims and causes of action
of the appellant had already prescribed.
Upon the facts found by His Honor quoted above, We agree with His Honor in upholding appellee's defense of prescription. From
any angle that this case may be viewed, it is obvious that appellant's causes of action barred by the statute of limitations.
Appellee took exclusive control of the partnership affairs since 1947, publicly and openly and after having notified appellant that he
would do so should the latter fail to comply with his letter of demand, Exhibit "5", dated April 19, 1947. Nowhere in the facts found
by the trial judge does it appear that appellant did anything about said demand or that he ever contested the action of the appellee
of transferring the place of business and changing its name to Taega Press. There is nothing to show that he had taken any
move for the payment to him of his unpaid salaries both as President of the business and as editor of the Leyte-Samar Tribune.
Under these circumstances, it would be giving premium to inaction and indifference to still hold that appellant could sue appellee,
almost fourteen years after the latter, with prior notice to the former, had openly and publicly taken over exclusive control of the
partnership business as if it were his own and only a little short of ten years after the expiration of the stipulated term of
partnership. His claims for salaries accrued after each month they were unpaid. Whether we assume that these claims lost basis
in 1947 when appellee took over the businesses of the printing press and the newspaper or in 1951, upon the expiration of the
term of the agreements, by all standards, these claims had already prescribed when the present suit was filed. On the other hand,
under Article 1153 of the Civil Code, a demand for "accounting runs from the day the persons who should render the same ceases
in their functions," which in this case as in 1947, when the appellee began to operate the businesses as exclusively his own.
Again, inasmuch as the longest period in the chapter on prescription of the Civil Code is ten years, it is evident that appel lant's
action for accounting is already barred. The same is true with the claim for rentals and recovery of proportional ownership of the
printing equipment and accessories, as to which, appellant's period to bring his actions accrued also in 1947, fourteen years
before this suit was filed.
As a matter of fact, appellant impliedly admits the correctness of this position, since in this appeal his only contention is that both
as his partner and as pledgee of his share, the appellee became his trustee, in legal contemplation, or that, in the eyes of the law,
a relationship of trusteeship arose between him and appellee, hence his actions against him are imprescriptible. Appellant's pose
is without merit. In bad faith or in good faith, after eight years of actual adverse possession, appellee acquired clear ownership of
appellant's share by acquisitive prescription. According to Art. 1132 of the Civil Code, "the ownership of personal property also
prescribes through uninterrupted possession for eight years, without need of any other condition." So, appellee became
undisputed owner of appellant's share since 1955 or six years before this action was filed and since said year the allegation of
trusteeship had already lost any basis whatsoever. Under Article 1140 of same Code, "Actions to recover movables shall

8

prescribe eight years from the time the possession thereof is lost, unless the possessor has acquired the ownership by
prescription for a less period" or for an equal period, in which latter case, the right to sue prescribes together with the title.
Equally untenable is appellant's reliance on the theory that as a member of the partnership, appellee continued as a trustee even
after 1947, when said appellee took the business for himself and even after 1951, the expiry date of the agreements. The
provisions of Article 1785 to the effect that: .
When a partnership for a fixed term or particular undertaking is continued after the termination of such term or particular
undertaking without any express agreement, the rights and duties of the partners remain the same as they were at such
termination, so far as is consistent with a partnership at will.
A continuation of the business by the partners or such of them as habitually acted therein during the term, without any settl ement
or liquidation of the partnership affairs, is prima facie evidence of a continuation of the partnership.
and Article 1829 thus:
On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed.
are clearly inapplicable here, for the simple reason that those articles are premised on a continuation of the partnership as such,
which is not our case, because here appellee repudiated the partnership as early as 1947 with either actual or presumed
knowledge of the appellant. By analogy, at least, with the rule as to a co-ownership, which a partnership essentially is, prescription
does not run in favor of any of the co-owners only as long as the co-owner claiming against the others "expressly or impliedly
recognizes the co-ownership," a circumstance irreconcilably inconsistent with appellee's conduct of transferring the place of
business, changing its name and not paying appellant any of the salaries agreed upon in the articles of partnership.
What is more, this case may well be decided on the basis of laches as was done by the trial judge. In other words, even if
prescription were not properly applicable, We could still hold that under the facts proven in the record and found by the lower
court, appellant has been guilty of laches and his stale demands may not gain the ears of the court. We note, however, that in his
answer, the appellee limit his defense specifically to prescription which is a separate defense from laches. Not that such
particularity of appellee's defense is fatal, because, after all, it does not appear that the evidence proving laches were objected to
by appellant, (Section 5, Rule 10, Rules of Court) but We do not feel that in this case We need to go beyond the specific def ense
expressly invoked by the appellant. This is mentioned only, lest appellant may still entertain any hope regarding this case.
WHEREFORE, the judgment of the lower court is affirmed, with costs against appellant.

Espanol vs. Philippine Veterans Administration

This is a petition for review on certiorari to set aside and/or modify the decision dated January 14, 1975, in Civil Case No. 93382
of the Court of First Instance of Manila, ordering by way of mandamus the Chairman and Members of the Board of Administrators,
Philippine Veterans Administration to restore Maria U. Espaol's monthly pension.
Maria U. Espaol was the widow of the deceased veteran German Espaol, who died in the service during World War II, She
applied for monthly pension under R.A. No. 65 with the Philippine Veterans Administration (now Philippine Veterans Affairs
Office). Her application was approved and she received her monthly pension and her minor children their monthly dependent's
pension. But on November 1, 1951, the Philippine Veterans Administration (PVA), in pursuance of its administrative policy,
providing that those beneficiaries of veterans receiving pensions from the U.S. Veterans Administration are no longer entitled to
receive pension from the PVA, cancelled Maria U. Espaol's monthly pension and that of her then minor children (p. 5, Appellant's
Brief; p. 10, rec.).
On February 25, 1974, or after more than 22 years from the date when her monthly pension was cancelled, Maria U. Espaol filed
with the CFI of Manila a petition for mandamus against PVA for the restoration and continued payment of her monthly pension
including that of her dependents effective from the date of cancellation.
After PVA filed its answer, in which factual issues were admitted, judgment on the pleadings was rendered by the lower court, on
January 14, 1975, the dispositive portion of which reads:

9

WHEREFORE, finding merit in the petition, let mandamus issue, ordering the restoration of petitioner's monthly pension plus
whatever increase are allowed by law except that of petitioner's children who are now above 18 years of age (p. 10, rec.).
The PVA appealed to the Court of Appeals, which elevated the appeal to this Court, as only errors or questions of law were
involved (pp. 4-5, CA decision; pp. 38-39, rec.).
WE find the appeal to be without merit.
I
The contention of appellant PVA that the action of appellee Maria U. Espaol to compel the restoration of her monthly pension
and that of her children, effective from the date of cancellation on November 1, 1951, has already prescribed, inasmuch as the
same was filed more than 10 years from the date of cancellation, is without merit.
Article 1144 of the New Civil Code provides that actions based on an obligation created by law shall be brought within 10 years
from the time the right of action accrues. It is important to reckon the date, when the right of action accrues, as the same is the
beginning for counting the 10-year prescriptive period.
The right of action accrues when there exists a cause of action, which consists of 3 elements, namely: a) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; b) an obligation on the part of defendant to respect
such right; and c) an act or omission on the part of such defendant violative of the right of the plaintiff (Cole vs. Vda. de Gregorio,
116 SCRA 670 [1982]; Mathay vs. Consolidated Bank & Trust Co., 58 SCRA 559 [1974]; Vda. de Enriquez vs. De la Cruz, 54
SCRA 1 [1973]). It is only when the last element occurs or takes place that it can be said in law that a cause of action has arisen
(Cole vs. Vda. de Gregorio, supra).
The appellee cannot be said to have a cause of action, in compelling appellant to continue paying her monthl y pension on
November 1, 1951, because appellant's act of cancellation, being pursuant to an administrative policy, cannot be considered a
violation of appellee's right to receive her monthly pension.
It is elementary rule in administrative law that administrative regulations and policies enacted by administrative bodies to interpret
the law which they are entrusted to enforce, have the force of law, are entitled to great respect (Sierra Madre Trust vs. Secretary
of Agriculture and Natural Resources, 121 SCRA 384 [1983]; Asturias Sugar Central Inc. vs. Commissioner of Customs, 29 SCRA
617 [1969]; Antique Sawmill Inc. vs. Zayco, et al., 17 SCRA 316 [1966]), and have in their favor a presumption of legality. Thus,
appellant's act of cancelling appellee's monthly pension being presumed legal and valid, cannot be taken as a violation of
appellee's right to receive her monthly pension under R.A. No. 65.
In the case of Del Mar vs. The Philippine Veterans Administration (51 SCRA 340 [1973]), this Court did not consider prescription
in favor of PVA, even though the action of Del Mar was filed on June 20, 1964 or more than 10 years from the cancellation of his
monthly pension in March, 1950; because the action of Del Mar was basically to declare the questioned administrative policy
invalid, which action does not prescribe.
It is only when this Court declared invalid the questioned administrative policy in the case of Del Mar vs. The Philippine Veterans
Administration, supra, promulgated on June 27, 1973, can the appellee be said to have a cause of action to compel appellant to
resume her monthly pension; because it is at that point in time, when the presumption of legality of the questioned administrative
policy had been rebutted and thus it can be said with certainty that appellant's act was in violation of appellee's right to receive her
monthly pension.
The 10-year prescriptive period, therefore, should be counted from June 27, 1973 when the case of Del Mar vs. The Philippine
Veterans Administration, supra, was promulgated, and not from November 1, 1951, the date of cancellation by appellant of
appellee's pension. The action of appellee, which was brought on February 25, 1974, is therefore well within the 10-year
prescriptive period.
II
Appellant's contention that appellee's action for mandamus cannot prosper because no prior exhaustion of administrative remedy
was made, as appellee had not made any prior demand on appellant, is without merit.

10

It is a rule that when a case involves solely legal questions, the litigant need not exhaust all administrative remedies before judicial
relief is sought (One Heart Sporting Club, Inc. vs. CA, 108 SCRA 416 [1981]; Bagatsing vs. Ramirez, 74 SCRA 306 [1976]; Del
Mar vs. The Philippine Veterans Administration, supra; Mendoza vs. SSS, 44 SCRA 373 [1972]).
III
The contention of appellant that it cannot be ordered by mandamus to resume paying appellee's monthly pension because in the
case of Board of Administrators, Philippine Veterans Administration vs. Hon. Maria Agcaoili and Mauro Abrera (58 SCRA 72
[1974]), it was held that disbursement of public funds must be covered by corresponding appropriation, is likewise untenable.
WE find the Agcaoili case inapplicable to appellee's claim. Since the action for mandamus filed by claimant Mauro Abrera in said
case was to compel PVA to pay him the additional benefits provided for by R.A. No. 5753 (An Act further amending R.A. 65, as
amended, by increasing the Pension of totally disabled Veterans of WWII and their Living Dependents), this Court rightly
dismissed his action because Congress made no actual appropriations to cover all increased claims covered by R.A. No. 5753. In
the case at bar, appellee does not seek to recover increased benefits under R.A. No. 5753, but for the restoration of her monthly
pension and her children's monthly dependent's pension provided for by R.A. No. 65, as amended, the coverage of which
Congress had already appropriated funds therefor. Besides, R.A. No. 5753 covering disabled veterans is alien to appellee's cl aim
for benefits due to her as a surviving spouse of a deceased veteran. The action by appellee for mandamus against appellant,
thus, exists.
WHEREFORE, THE DECISION OF THE COURT OF FIRST INSTANCE DATED JANUARY 14, 1975 IS HEREBY AMENDED,
AND APPELLANT, CHAIRMAN AND MEMBERS OF THE BOARD, PHILIPPINE VETERANS ADMINISTRATION (NOW
PHILIPPINE VETERANS AFFAIRS OFFICE) IS HEREBY ORDERED TO:
1. PAY APPELLEE, MARIA U. ESPAOL, HER MONTHLY PENSION PLUS WHATEVER INCREMENTS THAT MAY BE
PROVIDED FOR BY LAW, EFFECTIVE NOVEMBER 1, 1951, AS LONG AS SHE QUALIFIES; AND
2. PAY APPELLEE'S QUALIFIED MINOR CHILDREN THEIR MONTHLY DEPENDENT'S PENSION PLUS WHATEVER
INCREMENTS THAT MAY BE PROVIDED FOR BY LAW, EFFECTIVE NOVEMBER 1, 1951.
COSTS AGAINST RESPONDENT-APPELLANT.
SO ORDERED.
Huang vs. Court of Appeals
Sometime in 1965 respondent Dolores Sandoval wanted to buy two (2) lots in Dasmarias Village, Makati, but was advised by
petitioner Milagros Huang, wife of her brother, petitioner Ricardo Huang, that the policy of the subdivision owner forbade the
acquisition of two (2) lots by a single individual. Consequently, Dolores purchased Lot 21 and registered it in her name. She also
purchased the adjacent lot, Lot 20, but heading the advice of Milagros, the deed of sale was placed in the name of Ricardo and
Registered in his name under TCT No. 204783. Thereafter, Dolores constructed a residential house on
Lot 21. Ricardo also requested her permission to construct a small residential house on Lot 20 to which she agreed inasmuch as
she was then the one paying for apartment rentals of the Huang spouses. She also allowed Ricardo to mortgage Lot 20 to the
Social Security System to secure the payment of his loan of P19,200.00 to be spent in putting up the house. However, she actualy
financed the construction of the house, the swimming pool and the fence thereon on the understanding that the Huang spouses
would merely hold title in trust for her beneficial interest.
On 19 March 1968, to protect her rights and interests as the lawful owner of Lot 20 and its improvements, Dolores requested the
Huangs to execute in her favor a deed of absolute sale with assumption of mortgage over the property. The letter obliged.
On 15 March 1980, the Huang spouses leased the house to Deltron-Sprague Electronics Corporation for its various executives as
official quarters without first securing the permission of Dolores. Dolores tolerated the lease of the property as she did not need it
at that time. But, after sometime, the lessees started prohibiting the Sandoval family from using the swimming pool and the
Huangs then began challenging the Sandovals' ownership of the property.
On 26 August 1980, Dolores lodged a complaint before the office of the Barangay Captain praying that the spouses Ricardo and
Milagros Huang be made to execute the necessary request to the SSS for the approval of the deed of sale with assumption of

11

mortgage, as well as for the release in her favor of the owner's duplicate certificate of title in its possession so that the deed could
be duly annotated on the title and/or a new certificate of title issued in her name. But no amicable settlement was reached, so that
on 16 December 1980 the Lupong Tagapayapa issued a certification that the controversy was ripe for judicial action.
On 22 December 1980, Ricardo and Milagros Huang filed a complaint against the spouses Dolores and Aniceto Sandoval in the
then Court of First Instance of Rizal, docketed as Civil Case No. 39702, seeking the nullity of the deed of sale with assumption of
mortgage and/or quieting of title to Lot 20. They alleged that the Sandovals made them sign blank papers which turned out to be a
deed of sale with assumption of mortgage over Lot 20.
Meanwhile, on 19 February 1981, Dolores paid the balance of Ricardo's loan to the SSS and requested the release to her of TCT
No. 204783 and the real estate mortgage thereon, but SSS refused. On the same date, she filed a complaint against the Huang
spouses and the SSS before the same trial court, docketed as Civil Case No. 40288, praying among other things that: (a) the SSS
be restrained from releasing the owner's copy of TCT No. 204783 to the Huangs; (b) the SSS be ordered instead to release to her
said title as well as the mortgaged thereon; and (c) the Registered of Deeds of Rizal be ordered to register the deed of sale,
cancel TCT No. 204783 and issue another one in her name.
Both cases were consolidated and jointly tried. On the basis of the evidence presented, the trial court found that it was indeed
Dolores who brought Lot 20 but had it registered in the name of Ricardo; and, it was she who built the house and swimming pool
thereon and the fence enclosing Lots 20 and 21. As regards the deed of sale with assumption of mortgage, the trial court found
that it was signed voluntarily by the Huang spouses so much so that their claim that they were misled into signing it was
unbelievable. Thus, on 23 November 1988, judgment was rendered in favor of the Sandoval spouses thus:
In Civil Case No. 39702 (1) The complaint of the Huang spouses was dismissed; (2) The Sandovals were declared owners of
Lot 20 and all the improvements thereon; (3) The deed of sale with assumption of mortgage was declared valid; (4) The Huang
spouses and all persons acting in their behalf were ordered to vacate the property and turn over the possession to the Sandovals;
(5) The Huang spouses were ordered jointly and severally to
(a) deliver to the Sandoval spouses all the rentals and other income from Lot 20 which they received, and (b) pay to the
Sandovals P5,000.00 as exemplary damages, P10,000.00 as attorney's fees, and the costs of suit; and, (6) The Register of
Deeds of Rizal was ordered to (a) register the deed of sale with assumption of mortgage; (b) cancel TCT No. 204783, and (c)
issue, in lieu thereof, a transfer certificate of title in the name of "Dolores Sandoval married to Aniceto Sandoval" upon compliance
with all the legal requirements.
In Civil Case No. 40288 (1) Ricardo, Milagros or the SSS who has custody of the owner's copy of TCT No. 204783 was
ordered to surrender it to the Registry of Deeds of Rizal within ten (10) days from the finality of the decision, otherwise, for failure
to do so, the title shall be deemed annulled and the Register of Deeds shall issue another owner's copy thereof in favor of t he
Sandovals, and (2) SSS was ordered to execute a discharge of the mortgage annotated on TCT No. 204783 and deliver it to
Dolores within ten (10) days from the finality of the decision. 1
The Huang spouses filed a motion for reconsideration and new
trial and/or rehearing but it was denied by the trial court in its order of 26 July 1989. 2
On appeal to the Court of Appeals, the decision of the trial court was affirmed. 3 The motion to reconsider the decision was
denied. 4 Hence the instant recourse.
Petitioners assert that the finding of the Court of Appeals of a resulting or implied trust between them and Dolores is not supported
by evidence. On the contrary, the deed of sale with assumption of mortgage has all the elements of an equitable mortgage.
Granting arguendo that a resulting or implied trust exists between the parties, its enforcement is already barred by prescription.
Petitioners argue that when the suit in the trial court was filed by Dolores on
19 February 1981 more than ten (10) years had already lapsed since TCT
No. 204783 was issued on 11 October 1967. They also contend that jurisprudence has established the rule that the prescriptive
period for an action for reconveyance based on fraud is ten (10) years, and that a resulting or implied trust is totally incompatible
with the deed of sale with assumption of mortgage, hence, the existence of said deed cannot be vaguelly dismissed as a mere
security. It is the position of petitioners that the terms of the contract are rendered conclusive upon the parties and
evidence aliunde is not admissible to vary, contradict or dispute a complete and enforceable agreement embodied in a document.

12

The exhaustive decision of the trial court based as it is on a painstaking review of the entire records deserves our affirmance.
Indeed, we find no reason to disturb the factual conclusions therein.
Ricardo claimed that he bought Lot 20 with his own money on installment: the first installment of P19,341.00 was paid on 5
November 1965, and the second installment of P39,279.75 was paid on 4 April 1966. He said that the money came from his
salary as employee of the Universal Textile Mills, his commission as rice sales agent, his involvement in politics and other
undeclared income.
But Ricardo's pretense was easily unmasked by the following circumstances: (1) His annual income as employee of Textile Mills
was only P6,795.05 in 1964, 5 P6,295.05 in 1965 6 and P7,154.15 in 1966; 7 as of 10 June 1967, he was only receiving a monthly
salary of P600.00; 8 (2) His commission as rice sales agent of Dolores was earned in connection with a 1973 transaction, and so
he could not have used this commission in 1965 and 1966 for the purchase of Lot 20; (3) He never bothered to explain how he
made money out of politics and how much he realized from it; and, (4) There is no evidence on the source, nature and amount of
his undeclared income. The only logical conclusion then is that the money which was used to buy Lot 20 did not belong to him.
On the part of Dolores, she was able to prove by overwhelming evidence that she purchased Lot 20 with her own funds. She
testified that Milagros informed her that she could not buy two (2) lots in the village in her name; instead, she suggested that one
of the lots be bought in the name of Ricardo. This testimony we never refuted by Ricardo. Moreover, the Agreements to Purchase
and Sell Lots 20 9 and 21 10 were both executed on 5 November 1965 and the first installments for both lots were paid on the
same date, while the second installments were paid on 4 April 1966. These facts suggest that the lots were bought in a single
transaction by only one person.
Dolores also testified that she gave the amount corresponding to the first installments for both lots to Milagros. Dolores was able
to establish that she withdrew P19,500.00 from her deposit at the National City Bank of New York 11 and issued a Prudential
Bank check for P19,341.00. 12 In payment of the second installments for the two lots, she withdrew P24,000.00 from the First
National City Bank 13 and issued a check for P54,927.90. 14 Viewed together with the foregoing circumstances is the admission
of Ricardo himself that Dolores constructed the swimming pool on Lot 20 and enclosed Lots 20 and 21 with a fence at her own
expense.
Aside from Lot 20, Ricardo also asserted ownership of the house thereon which he claimed to have started constructing on 13
December 1967 and that it was "semi-accomplished" by 8 March 1968.
Weighed against the testimony of Dolores that for the cost of labor alone in the construction of the house she spent P45,000.00
while the other expenses are listed in Exhs. "20," and "21" and "21-A" to "J," Ricardo could not have spent therefor because, as
previously shown, his income was not sufficient enough. Neither could the P19,200.00 loan which he obtained from the SSS
suffice. Dolores even had to shell out P5,062.68 on 7 May 1968 to pay for arrears in the rental of the apartment being occupied by
the Huangs from November 1966 to February 1968; electric bills from March 1965 to December 1967; and, water bills up to
February 1966, 15 to prevent the Huangs from being ejected from their apartment. Dolores' ownership of the house is confirmed
further by the presence of her personal properties therein, e.g., chandelier, 16 furniture, 17 (c) Tai-ping rugs 18 and Sacred Heart
statue. 19
As a whole, spouses Huang's evidence failed to help them in their bid to establish ownership over Lot 20 and its improvements.
They should know the Chinese proverb that "one simply cannot attain his purpose of chewing food well if he were to do it by
means of loose teeth."
Regarding the deed of sale with assumption of mortgage, Ricardo alleged that Dolores and his cousin, Rene Javier, pressured
and misled him into signing it because of his P30,000.00 indebtedness to Dolores; the deed was "blank" in the sense that it did not
have a title when he signed it; he did not read it contents; and, he did not acknowledge it before a notary public.
Ricardo's version of the circumstances under which he signed the deed of question is incredible. Human experience argues
against the claim that a highly educated and mature man like Ricardo would sign a deed of sale without reading or knowing its
contents. Ricardo graduated with the degree of Bachelor of Science in Architecture in 1955, and when he signed the deed he was
about 39 years old. There is no evidence on record that Dolores "pressured" Ricardo to sign the deed. In fact, Milagros signed the
document at the instance of Ricardo himself. The deed, which was duly notarized, enjoys the presumption of regularity in its

13

execution. The claim of Ricardo that he was indebted to Dolores in the amount of P30,000.00, which he used in his pretense that
he was coerced by her, was never established.
On the contrary, the testimony of Dolores is more in accord with reason and clearly disproves Ricardo's gratuitous allegations.
She testified that she asked Ricardo and Milagros to sign the deed of sale for her and her children's protection because time
would come when they would want the property for themselves. Besides, according to her, the Huang spouses read the contents
of the deed and signed it before the notary public without any compulsion from her. We are therefore drawn to the inevitable
conclusion that the Huang spouses voluntarily signed the deed before the notary public with full knowledge of its contents and in
recognition of Dolores' ownership over Lot 20 and its improvements.
We shall discuss the merit, nay, the demerit of the Huang petition. First, there is need to define the basic concepts in a trust
relationship. Trust is a fiduciary relationship with respect to property which involves the existence of equitable duties imposed
upon the holder of the title to the property to deal with it for the benefit of another. 20 A person who establishes a trust is called the
trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee; and the
person for whose benefit the trust has been created is referred to as the beneficiary 21 or cestui que trust. Trust is either express
or implied. Express trust is created by the intention of the trustor or of the parties. Implied trust comes into being by operation of
law. 22 The latter kind or neither constructive or resulting trust. A constructive trust is imposed where a person holding title to
property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he were
permitted to retain it. The duty to convey the property arises because it was acquired through fraud, duress, undue influence or
mistake, or through breach of a fiduciary duty, or through the wrongful disposition of another's property. On the other hand, a
resulting trust arises where a person makes or causes to be made a disposition of property under circumstances which raise an
inference that he does not intend that the person taking or holding the property should have the beneficial interest in the
property. 23 It is founded on the presumed intention of the parties, and as a general rule, it arises where, and only where such
may be reasonably presumed to be the intention of the parties, as determined from the facts and circumstances existing at the
time of the transaction out of which it is sought to be established. 24
In the present case, Dolores provided the money for the purchase of
Lot 20 but the corresponding deed of sale and transfer certificate of title were placed in the name of Ricardo Huang because she
was advised that the subdivision owner prohibited the acquisition of two (2) lots by a single individual. Guided by the foregoing
definitions, we are in conformity with the common finding of the trial court and respondent court that a resulting trust was created.
Ricardo became the trustee of Lot 20 and its improvements for the benefit of Dolores as owner. The pertinent law is Art. 1448 of
the New Civil Code which provides that there is an implied trust when property is sold and the legal estate is granted to one party
but the price is paid by another for the purpose of having the beneficial interest for the property. A resulting trust arises because of
the presumption that he who pays for a thing intends a beneficial interest therein for himself. 25
Petitioners' assertion that the deed of sale with assumption of mortgage has all the elements of an equitable mortgage must
outrightly be rejected as it was apparently never brought to the attention of the trial court nor averred before respondent court.
Well settled is the rule that, ordinarily, issues not raised in the trial court, let alone in the Court of Appeals, cannot be raised for the
first time before this Court 26 as it would be offensive to the basic rule of fair play, justice and due process. 27
Petitioners raise the issue of prescription. But the action to compel the trustee to convey the property registered in his name for
the benefits of the cestui que trust does not prescribe. 28 If at all, it is only when the trustee repudiates the trust that the period of
prescription commences to run. 29
The prescriptive period is ten (10) years from the repudiation of the trust. It is ten (10) years because just as a resulting trust is an
offspring of the law, so is the corresponding obligation to convey the property and the title thereto to the true owner. In this
context, and vis-a-vis prescription, Art. 1144 of the New Civil Code, which is the law applicable, provides: "The following actions
must be brought within ten years from the time the right of action accrues: (a) Upon a written contract; (b) Upon an obligation
created by law; (c) Upon a
judgment." 30
Thus, the reckoning point is repudiation of the trust by the trustee because from that moment his possession becomes adverse,
which in the present case gave rise to a cause of action by Dolores against the Huang spouses. 31 However, before the period of
prescription may start, it must be shown that:

14

(a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust; (b) such positive acts
of repudiation have been made known to the cestui que trust; and, (c) the evidence thereon is clear and conclusive. In Laguna v.
Levantino 32 and Valdez v. Olorga, 33 we held that acts which may be adverse to strangers may not be sufficiently adverse to
the cestui que trust. A mere silent possession of the trustee unaccompanied by acts amounting to an ouster of the cestui que
trust cannot be construed as an adverse possession. Mere perception of rents and profits by the trustee, and erecting fences and
buildings adapted for the cultivation of the land held in trust, are not equivalent to unequivocal acts of ouster of the cestui que
trust.
We agree with the trial court that the action filed by Dolores has not prescribed. Firstly, Ricardo has not performed any
unequivocal act of repudiation amounting to an ouster of Dolores. The only acts which may be considered as indicative of his
intention not to respect the trust anymore were his leasing the house without the prior knowledge of Dolores; his refusal to carry
out the demand of Dolores that he must ask the lessees to vacate the house; and, his refusal to give the necessary papers to
Dolores to enable her to get the title from the SSS. Secondly, the foregoing acts are not positive acts of repudiation; and, thirdly,
the evidence on such acts is unclear and inconclusive. But even if the foregoing acts were manifest acts of repudiation made
known to Dolores, the fact remains that they were done at the earliest only on 15 March 1980 when Ricardo leased Lot 20 and its
improvements to Deltron. Dolores' complaint before the trial court was filed on 19 February 1981, or within the 10-year prescriptive
period.
Petitioners are of the mistaken notion that the 10-year prescriptive period is counted from the date of issuance of the Torrens
certificate of title. This rule applies only to the remedy of reconveyance which has its basis on Sec. 53,
par. 3, P.D. No. 1529, otherwise known as the Property Registration Decree, 34 and Art. 1456 of the Civil Code. 35Reconveyance
is available in case of registration of property procured by fraud thereby creating a constructive trust between the parties, a
situation which does not obtain in this case.
Without expressly stating so, petitioners' line of argument invokes
Rule 130, Sec. 7, of the Rules of Court then prevailing which states: "When the terms of an agreement have been reduced to
writing, it is to be considered as containing all such terms and, therefore, there can be, between the parties and their successors-
in-interest, no evidence of the terms of the agreement other than the contents of the writing."
The Huangs were less than candid to the Court when they merely invoked the general rule and completely ignoring the exceptions
that are also explicitly provided therein: (a) where a mistake or imperfection of the writing or its failure to express the true intent
and agreement of the parties, or the validity of the agreement is put in issue by the pleadings; and, (b) when there is an intrinsic
ambiguity in the writing. In the present case, parol evidence is admissible because the deed of sale with assumption of mortgage
failed to express the true intent and agreement of the parties. We concur with the finding of the appellate court that the deed was
executed by the parties as security for the protection of the rights and interest of Dolores as the true and lawful owner of Lot 20
and its improvements.
Petitioners state prefatorily in their petition that this case involves sibling oppression. It does not. Rather, it is a battle between
greed and thirst for justice, between a fortunate sister and a less fortunate brother, with the latter taking advantage of the former's
bounty.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals dated 28 September 1992 and its resolution
dated 8 January 1993, both sustaining the decision of the Regional Trial Court, are AFFIRMED, with costs against petitioners.
SO ORDERED.
Municipality of Opon vs. Caltex
Suit lodged in 1956 to recover P37,050.00 in municipal license taxes paid for the years 1950-1955. The Cebu court
dismissed the complaint. 1 The Court of Appeals modified, allowed recovery of P27,900.00. 2Petitioners defendants below
came to this Court on appeal.
The facts, the Court of Appeals found, are: "Plaintiff-appellant Caltex (Philippines) Inc., is a domestic corporation engaged
in the business of importing, distributing and selling gasoline, kerosene and other petroleum products. For the purpose of storing

15

its imported petroleum products it has an establishment called 'Caltex Opon Terminal' located in the Municipality of Opon, Cebu.
In addition, the said 'Caltex Opon Terminal' has a tin can factory whereby plaintiff-appellant manufactures 5-gallon tin cans for its
use in the sale and distribution of its petroleum products. Pursuant, however, to a service agreement dated August 1, 1946 and
entered into between plaintiff-appellant and Tidewater Associated Oil Company (hereinafter called Tidewater), plaintiff-appellant
agreed to arrange, within its ability to do so, in drum and package factories owned and operated by it, to manufacture, suppl y
and/or fill cans and drums for Tidewater, provided the latter reimburses herein plaintiff-appellant for all cost and expense caused
thereby, plus three (3%) per cent of such cost and expense. From 1950 to 1955, plaintiff-appellant tin can factory at its 'Caltex
Opon Terminal' manufactured 8,037,775 tin cans out of which 6,883,429 were used for the sale and distribution of its own
products and 1,154,346 tin cans were delivered to Tidewater by virtue of the service agreement abovementioned. An annual
breakdown of the foregoing figures is provided by Exhibit '1' and plaintiff-appellant's brief, as follows:
Year
Used by
Caltex
Delivered to
Tidewater
Total Tins
Manufactured
Percentage for
Tidewater
1950 1,115,839 153,674 1,269,513 12.014%
1951 1,346,091 196,527 1,542,618 12.739%
1952 1,141,645 131,276 1,272,921 10.312%
1953 1,152,559 213,612 1,366,171 15.635%
1954 1,026,549 209,848 1,236,397 16.972%
1955 1,100,746 249,409 1,350,155 18.472%

6,883,429

1,154,346

8,037,775

14.361%
Ordinance No. 9, series of 1949, of defendant-appellee Municipality of Opon, Cebu, imposes a municipal license tax on tin
factory on the basis of its maximum annual output capacity, with a schedule of graduated rates. Pursuant to this ordinance,
defendants-appellees levied and collected from plaintiff-appellant license taxes based on the production of the tin factory at its
'Caltex Opon Terminal' for the years 1950 to 1955 as follows:
Official Receipt No. Date Amount
A-10495701 Jan. 20, 1950 P3,750.00
A-16556672 Jan. 15, 1951 6,300.00
A-1453325 Jan. 15, 1952 7,700.00
A-7863313 Jan. 8, 1953 6,350.00
B-3044810 Jan. 15, 1954 6,800.00
B-9788189 Jan. 11, 1955 6,150.00

T o t a l . . . . . . . . . . P37,050.00

16

The gist of the decision of the Court of Appeals, speaking through Presiding Justice Jose P. Bengzon, now Associate
Justice of this Court, is that respondent is entitled to recover P27,900.00 representing license taxes paid for the manufacture of tin
cans used in the sale and distribution of its own products (P30,750 less P2,850, the amount paid in 1950, action as to which has
prescribed); and that the sum of P6,300.00, collected as license taxes corresponding to the tin cans respondent produced for
Tidewater was properly collectible.
1. Petitioners' line of argument is this: respondent company is liable for the entire output of the tin can factory because profit
is the motivating factor in the manufacture thereof. Petitioners' view is that the tin cans whether for its own use or for Tidewater
upon the contract heretofore stated, are taxable. Reason therefor, so petitioners point out, is that the license tax is based on the
maximum annual output capacity of the factory.
Ordinance No. 9 here involved is entitled "An Ordinance imposing a Municipal License Tax on Tin Can Factory on the Basis
of its Maximum Annual Output Capacity." Section 1, in part, provides: "A municipal license tax on tin factory" is imposed upon "(a)
Tin factory with a maximum output capacity of 30,000 tins P150.00"
Tersely put then, the issue is narrowed down to whether respondent tin can factory is taxable as a separate business of
respondent. And this because petitioners insist that even the tin cans manufactured for use by respondent itself should be
subjected to municipal tax.
On this point, we are not hampered by lack of precedent. The reach of petitioner municipality's licensing power under this
very same Ordinance No. 9 had already been the subject of a judicial test in Standard Vacuum Oil Company vs. Antigua, 3 96
Phil. 909, 913. The language there is expressive. We said that "when a person or company is already taxed on its main
business, it may not be further taxed for doing something or engaging in an activity or work which is merely a part of, incidental to
and is necessary to its main business." 4
The Standard Oil case does not stand alone. In City of Manila vs. Fortune Enterprises, Inc. 5 this Court ruled that the
business of auto supplies, battery charging and upholstery is part of the main business of automobile repairing and is, therefore,
not taxable separately. Mr. Justice Jose B. L. Reyes, speaking for this Court, wrote down the following guidelines:
. . . The foregoing ruling 6brings out the point that where something is done as a mere incident to, or as a necessary
consequence of the principal business it is not ordinarily taxed as an independent business in itself; and that what is usually taken
as essential is the main activity in which the taxpayer is engaged. All the various transactions tending to better accomplish the
principal end in view must be treated as merely incidental to the principal purpose of the business, in the absence of
circumstances evidencing a different intent.
In the sale and distribution of its products in liquid form respondent uses containers. The container is a part of the product
sold. By maintaining its factory for tin cans respondent is assured of continuous supply thereof. Therefore, the tin cans it
manufactures for its ownership are not within the coverage of petitioner municipality's taxing power under Ordinance No. 9.
Withal, the problem does not end here. The entire-output-of-factory argument advanced by petitioners needs further
articulation. For petitioners insist that respondent's factory also serves the needs of another entity Tidewater. To be noted here
is that of the tin cans produce for the period 1950-1955, 85.63% were used by respondent; 14.361% delivered to Tidewater.
Jurisprudential support is not wanting for the decision of the Court of Appeals establishing a dividing line between the tin cans
manufactured for respondent's own business and those for Tidewater.
In Manila Press, Inc. vs. Sarmiento, supra, this Court separately treated the quarterly license tax liability of plaintiff therein
thus: The papers, stationeries and office supplies on which customers' names were printed were held subject to the tax on
the printing business because, for the printing jobs performed for its customers, "the principal service was that of a printer"; but the
sales of papers, stationeries and office supplies "on which no printing work was performed," for the taxpayer "merely acted as
retail dealer."
So it is, that in our case, the distinction made by the Court of Appeals is not without reason. For the tin cans produced for
Tidewater license tax was correctly assessed. But for those produced by respondent for its own use, no license tax is due,
because the manufacture thereof is "incidental to" and tends "to better accomplish the principal end in view" its main business.

17

2. The second assignment of error that respondent's action to recover taxes paid for the years 1951 to 1953 has also
prescribed offers no novel question of law. A rule which has earned acceptance is that the period for prescription of action to
recover municipal license taxes is six years under Article 1145 (2) of the Civil Code. 7 The two-year prescriptive period in Section
306 of the National Internal Revenue Code relied upon by petitioners finds no application. For, this codal provision, as we have
said in one case, 8 "clearly refers exclusivelyto claims for refund of `national internal revenue tax' erroneously or illegally collected"
and not "to a refund of `local or municipal license fees' illegally collected."
For the reasons given, the judgment under review is hereby affirmed.1wph1.t
No costs. So ordered.
Callanta vs. Carnation Philippines, Inc.
The issue raised in this petition for certiorari is whether or not an action for illegal dismissal prescribes in three [3] years pursuant
to Articles 291 and 292 of the Labor Code which provide:
Art. 291. Offenses. Offenses penalized under this Code and the rules and regulations issued pursuant thereto shall prescribe in
three [3] years.
xxx xxx xxx
Art. 292. Money Claims. All money claims arising from employer-employee relations accruing during the effectivity of this Code
shall be filed within three [3] years from the time the cause of action accrued; otherwise, they shall be forever barred.
xxx xxx xxx
Petitioner Virgilio Callanta was employed by private respondent Carnation Philippines, Inc. [Carnation, for brevity] in January 1974
as a salesman in the Agusan del Sur area. Five [51 years later or on June 1, 1979, respondent Carnation filed with the Regional
Office No. X of the Ministry of Labor and Employment [MOLE], an application for clearance to terminate the employment of Virgilio
Callanta on the alleged grounds of serious misconduct and misappropriation of company funds amounting to P12,000.00, more or
less.
Upon approval on June 26, 1979 by MOLE Regional Director Felizardo G. Baterbonia, of said clearance application, petitioner
Virgilio Callanta's employment with Carnation was terminated effective June 1, 1979.
On July 5, 1982, Virgilio Callanta filed with the MOLE, Regional Office No. X, a complaint for illegal dismissal with claims for
reinstatement, backwages, and damages against respondent Carnation.
In its position paper dated October 5, 1982, respondent Carnation put in issue the timeliness of petitioner's complaint alleging that
the same is barred by prescription for having been filed more than three [3] years after the date of Callanta's dismissal.
On March 24, 1983, Labor Arbiter Pedro C. Ramos rendered a decision finding the termination of Callanta's employment to be
without valid cause. Respondent Carnation was therefore ordered to reinstate Virgilio Callanta to his former position with
backwages of one [1] year without qualification including all fringe benefits provided for by law and company policy, within ten [10]
days from receipt of the decision. It was likewise provided that failure on the part of respondent to comply with the decision shall
entitle complainant to full backwages and all fringe benefits without loss of seniority rights.
On April 18, 1983, respondent Carnation appealed to respondent National Labor Relations Commission [NLRC] which in a
decision dated February 25, 1985, 1 set aside the decision of the Labor Arbiter. It declared the complaint for illegal dismissal filed
by Virgilio Callanta to have already prescribed. Thus:
Records show that Virgilio Callanta was dismissed from his employment with respondent company effective June 1, 1979; and
that on 5 July 1982, he filed the instant complaint against respondent for: Unlawful Dismissal with Backwages, etc.
The provisions of the Labor Code applicable are:

18

Art. 291. Offenses. Offenses penalized under this Code and the rules and regulations issued pursuant thereto shall prescribe in
three [3] years.
Art. 292. Money claims. All money claims arising from employer-employee relations accruing during the effectivity of this Code
shall be filed within three [3] years from the time the cause of action accrued; otherwise, they shall be forever barred.
Obviously, therefore, the causes of action, i.e., "Unlawful Dismissal" and "Backwages, etc." have already prescribed, the
complaint therefore having been filed beyond the three-year period from accrual date.
With this finding, there is no need to discuss the other issues raised in the appeal.
WHEREFORE, in view of the foregoing, the Decision appealed from is hereby SET ASIDE and another one entered, dismissing
the complaint.
SO ORDERED.
Hence, this petition, which We gave due course in the resolution dated September 18, 1985. 2
Petitioner contends that since the Labor Code is silent as to the prescriptive period of an action for illegal dismissal with claims for
reinstatement, backwages and damages, the applicable law, by way of supplement, is Article 1146 of the New Civil Code which
provides a four [4]-year prescriptive period for an action predicated upon "an injury to the rights of the plaintiff" considering that an
action for illegal dismissal is neither a "penal offense" nor a mere "money claim," as contemplated under Articles 291 and 292,
respectively, of the Labor Code. Petitioner further claims that an action for illegal dismissal is a more serious violation of the rights
of an employee as it deprives him of his means of livelihood; thus, it should correspondingly have a prescriptive period longer than
the three 13] years provided for in "money claims."
Public respondent, on the other hand, counters with the arguments that a case for illegal dismissal falls under the general
category of "offenses penalized under this Code and the rules and regulations pursuant thereto" provided under Article 291 or a
money claim under Article 292, so that petitioner's complaint for illegal dismissal filed on July 5, 1982, or three [3] years, one [1]
month and five [5] days after his alleged dismissal on June 1, 1979, was filed beyond the three-year prescriptive period as
provided under Articles 291 and 292 of the Labor Code, hence, barred by prescription; that while it is admittedly a more serious
offense as it involves an employee's means of livelihood, there is no logic in assuming that it has a longer prescriptive period, as
naturally, one who is truly aggrieved would immediately seek the redress of his grievance; that assuming arguendo that the law
does not provide for a prescriptive period for the enforcement of petitioner's right, it is nevertheless beyond dispute that the said
right has already lapsed into a stale demand; and that considering the seriousness of the act committed by petitioner, private
respondent was justified in terminating the employment.
We find for petitioner.
Verily, the dismissal without just cause of an employee from his employment constitutes a violation of the Labor Code and its
implementing rules and regulations. Such violation, however, does not amount to an "offense" as understood under Article 291 of
the Labor Code. In its broad sense, an offense is an illegal act which does not amount to a crime as defined in the penal law, but
which by statute carries with it a penalty similar to those imposed by law for the punishment of a crime. 3 It is in this sense that a
general penalty clause is provided under Article 289 of the Labor Code which provides that "... any violation of the provisions of
this code declared to be unlawful or penal in nature shall be punished with a fine of not less than One Thousand Pesos
[P1,000.00] nor more than Ten Thousand Pesos [10,000.00], or imprisonment of not less than three [3] months nor more than
three [3] years, or both such fine and imprisonment at the discretion of the court." [Emphasis supplied.]
The confusion arises over the use of the term "illegal dismissal" which creates the impression that termination of an employment
without just cause constitutes an offense. It must be noted, however that unlike in cases of commission of any of the probihi ted
activities during strikes or lockouts under Article 265, unfair labor practices under Article 248, 249 and 250 and illegal recruitment
activities under Article 38, among others, which the Code itself declares to be unlawful, termination of an employment without just
or valid cause is not categorized as an unlawful practice.

19

Besides, the reliefs principally sought by an employee who was illegally dismissed from his employment are reinstatement to his
former position without loss of seniority rights and privileges, if any, backwages and damages, in case there is bad faith in his
dismissal. As an affirmative relief, reinstatement may be ordered, with or without backwages. While ordinarily, reinstatement is a
concomitant of backwages, the two are not necessarily complements, nor is the award of one a condition precedent to an award
of the other. 4 And, in proper cases, backwages may be awarded without ordering reinstatement . In either case, no penalty of fine
nor improsonment is imposed on the employer upon a finding of illegality in the dismissal. By the very nature of the reliefs sought,
therefore, an action for illegal dismissal cannot be generally categorized as an "offense" as used under Article 291 of the Labor
Code, which according to public respondent, must be brought within the period of three[3] years from the time the cause of action
accrued, otherwise, the same is forever barred.
It is true that the "backwwages" sought by an illegally dismissed employee may be considered, by reason of its practical effect, as
a "money claim." However, it is not the principal cause of action in an illegal dismissal case but the unlawful deprivation of the
one's employment committed by the employer in violation of the right of an employee. Backwages is merely one of the reliefs
which an illegally dismissed employee prays the labor arbiter and the NLRC to render in his favor as a consequence of the
unlawful act committed by the employer. The award thereof is not private compensation or damages 5 but is in furtherance and
effectuation of the public objectives of the Labor Code. 6 even though the practical effect is the enrichment of the individual, the
award of backwages is not inredness of a private right, but, rather, is in the nature of a command upon the employer to make
public reparation for his violation of the Labor Code. 7
The case of Valencia vs. Cebu Portland Cement, et al., 106 Phil. 732, a 1959 case cited by petitioner, is applicable in the instant
case insofar as it concerns the issue of prescription of actions. In said case, this Court had occasion to hold that an action for
damages involving a plaintiff seperated from his employment for alleged unjustifiable causes is one for " injury to the rights of the
plaintiff, and must be brought within four [4] years. 8
In Santos vs. Court of Appeals, 96 SCRA 448 [1980], this Court, thru then Chief Justice Enrique M. Fernando, sustained the sand
of the Solicitor General that the period of prescription mentioned under Article 281, now Article 292, of the Labor Code, refers to
and "is limited to money claims, an other cases of injury to rights of a workingman being governed by the Civil Code." Accordingly,
this Court ruled that petitioner Marciana Santos, who sought reinstatement, had four [4] years within which to file her compl aint for
the injury to her rights as provided under Article 1146 of the Civil Code.
Indeed there is, merit in the contention of petitioner that the four [4]-year prescriptive period under Article 1146 of the New Civil
Code, applies by way of supplement, in the instant case, to wit:
Art. 1146. The following actions must be instituted within four years.
[1] Upon an injury to the lights of the plaintiff.
xxx xxx xxx
[Emphasis supplied]
As this Court stated in Bondoc us. People's Bank and Trust Co., 9 when a person has no property, his job may possibly be his
only possession or means of livelihood, hence, he should be protected against any arbitrary and unjust deprivation of his job.
Unemployment, said the Court in Almira vs. B.F. Goodrich Philippines, 10 brings "untold hardships and sorrows on those
dependent on the wage earners. The misery and pain attendant on the loss of jobs thus could be avoided if there be acceptance
of the view that under all the circumstances of this case, petitioners should not be deprived of their means of livelihood."
It is a principle in American jurisprudence which, undoubtedly, is well-recognized in this jurisdiction that one's employment,
profession, trade or calling is a "property right," and the wrongful interference therewith is an actionable wrong. 11 The right is
considered to be property within the protection of a constitutional guaranty of due process of law. 12 Clearly then, when one is
arbitrarily and unjustly deprived of his job or means of livelihood, the action instituted to contest the legality of one's dismissal from
employment constitutes, in essence, an action predicated "upon an injury to the rights of the plaintiff," as contemplated under Art.
1146 of the New Civil Code, which must be brought within four [4] years.

20

In the instant case, the action for illegal dismissal was filed by petitioners on July 5, 1982, or three [3] years, one [1] month and
five [5] days after the alleged effectivity date of his dismissal on June 1, 1979 which is well within the four [4]-year prescriptive
period under Article 1146 of the New Civil Code.
Even on the assumption that an action for illegal dismissal falls under the category of "offenses" or "money claims" under Articles
291 and 292, Labor Code, which provide for a three-year prescriptive period, still, a strict application of said provisions will not
destroy the enforcement of fundamental rights of the employees. As a statutory provision on limitations of actions, Articles 291
and 292 go to matters of remedy and not to the destruction of fundamental rights. 13 As a general rule, a statute of limitation
extinguishes the remedy only. Although the remedy to enforce a right may be barred, that right may be enforced by some other
available remedy which is not barred. 14
More so, in the instant case, where the delay in filing the case was with justifiable cause. The threat to petitioner that he would be
charged with estafa if he filed a complaint for illegal dismissal, which private respondent did after all on June 22, 1981, justifi es,
the delayed filing of the action for illegal dismissal with the Regional Office No. X, MOLE on July 5, 1982. Laches will not in that
sense strengthen the cause of public respondent. Besides, it is deemed waived as it was never alleged before the Labor Arbiter
nor the NLRC.
Public respondent dismissed the action for illegal dismissal on the sole issue of prescription of actions. It did not resolve the case
of illegal dismissal on the merits. Nonetheless, to resolve once and for all the issue of the legality of the dismissal, We find that
petitioner, who has continuously served respondent Carnation for five [5] years was, under the attendant circumstances, arbitrarily
dismissed from his employment. The alleged shortage in his accountabilities should have been impartially investigated with all due
regard for due process in view of the admitted enmity between petitioner and E.L. Corsino, respondent's auditor. 15 Absent such
an impartial investigation, the alleged shortage should not have been attended with such a drastic consequence as termination of
the employment relationship. Outright dismissal was too severe a penalty for a first offense, considering that the alleged shortage
was explained to respondent's Auditor, E.L. Corsino, in accordance with respondent's accounting and auditing policies.
The indecent haste of his dismissal from employment was, in fact, aggravated by the filing of the estafa charge against petitioner
with the City Fiscal of Butuan City on June 22, 1981, or two [2] years after his questioned dismissal. After the case had remained
pending for five [5] years, the Regional Trial Court of Agusan del Norte and Butuan City, Branch V finally dismissed the same
provisionally in an order dated February 21, 1986 for failure of the prosecution's principal witness to appear in court. Admittedly,
loss of trust and confidence arising from the same alleged misconduct is sufficient ground for dismissing an employee from hi s
employment despite the dismissal of the criminal case. 16 However, it must not be indiscriminately used as a shield to dismiss an
employee arbitrarily. 17 For, who can stop the employer from filing all the charges in the books for the simple exercise of it, and
then hide behind the pretext of loss of confidence which can be proved by mere preponderance of evidence.
We grant the petition and the decision of the NLRC is hereby reversed and set aside. Although We are strongly inclined to affirm
that part of the decision of the Labor Arbiter ordering the reinstatement of petitioner to his former position without loss of seniority
rights and privileges, a supervening event, which petitioner mentioned in his motion for early decision dated January 6,
1986 18 that is, FILIPRO, Inc.'s taking over the business of Carnation, has legally rendered the order of reinstatement difficult to
enforce, unless there is an express agreement on assumption of liabilities 19 by the purchasing corporation, FILIPRO, Inc.
Besides, there is no law requiring that the purchasing corporation should absorb the employees of the selling corporation. 20 In
any case, the very concept of social justice dictates that petitioner shall be entitled to backwages of three [3] years. 21
WHEREFORE, respondent Carnation Philippines, Inc. is hereby ordered to pay petitioner Virgilio Callanta backwages for three [3]
years without qualification and deduction. This decision is immediately executory. No costs.
SO ORDERED.
Feria (Chairman), Alampay, Gutierrez, Jr., and Paras, JJ., concur.
Coca-cola Bottlers Philippines vs. Court of Appeals
This case concerns the proprietress of a school canteen which had to close down as a consequence of the big drop in its sales of
soft drinks triggered by the discovery of foreign substances in certain beverages sold by it. The interesting issue posed is whether

21

the subsequent action for damages by the proprietress against the soft drinks manufacturer should be treated as one for breach of
implied warranty against hidden defects or merchantability, as claimed by the manufacturer, the petitioner herein which must
therefore be filed within six months from the delivery of the thing sold pursuant to Article 1571 of the Civil Code, or one f or quasi-
delict, as held by the public respondent, which can be filed within four years pursuant to Article 1146 of the same Code.
On 7 May 1990, Lydia L. Geronimo, the herein private respondent, filed a complaint for damages against petitioner with the
Regional Trial Court (RTC) of Dagupan City.
1
The case was docketed as Civil Case No. D-9629. She alleges in her complaint that
she was the proprietress of Kindergarten Wonderland Canteen docketed as located in Dagupan City, an enterprise engaged in the
sale of soft drinks (including Coke and Sprite) and other goods to the students of Kindergarten Wonderland and to the public; on
or about 12 August 1989, some parents of the students complained to her that the Coke and Sprite soft drinks sold by her
contained fiber-like matter and other foreign substances or particles; he then went over her stock of softdrinks and discovered the
presence of some fiber-like substances in the contents of some unopened Coke bottles and a plastic matter in the contents of an
unopened Sprite bottle; she brought the said bottles to the Regional Health Office of the Department of Health at San Fernando,
La Union, for examination; subsequently, she received a letter from the Department of Health informing her that the samples she
submitted "are adulterated;" as a consequence of the discovery of the foreign substances in the beverages, her sales of soft
drinks severely plummeted from the usual 10 cases per day to as low as 2 to 3 cases per day resulting in losses of from P200.00
to P300.00 per day, and not long after that she had to lose shop on 12 December 1989; she became jobless and destitute; she
demanded from the petitioner the payment of damages but was rebuffed by it. She prayed for judgment ordering the petitioner to
pay her P5,000.00 as actual damages, P72,000.00 as compensatory damages, P500,000.00 as moral damages, P10,000.00 as
exemplary damages, the amount equal to 30% of the damages awarded as attorney's fees, and the costs.
2

The petitioner moved to dismiss
3
the complaint on the grounds of failure to exhaust administrative remedies and prescription.
Anent the latter ground, the petitioner argued that since the complaint is for breach of warranty under Article 1561 of the said
Code. In her Comment
4
thereto, private respondent alleged that the complaint is one for damages which does not involve an
administrative action and that her cause of action is based on an injury to plaintiff's right which can be brought within four years
pursuant to Article 1146 of the Civil Code; hence, the complaint was seasonably filed. Subsequent related pleadings were
thereafter filed by the parties.
5

In its Order of 23 January 1991,
6
the trial court granted the motion to dismiss. It ruled that the doctrine of exhaustion of
administrative remedies does not apply as the existing administrative remedy is not adequate. It also stated that the complaint is
based on a contract, and not on quasi-delict, as there exists pre-existing contractual relation between the parties; thus, on the
basis of Article 1571, in relation to Article 1562, the complaint should have been filed within six months from the delivery of the
thing sold.
Her motion for the reconsideration of the order having been denied by the trial court in its Order of 17 April 1991,
7
the private
respondent came to this Court via a petition for review on certiorari which we referred to the public respondent "for proper
determination and disposition.
8
The public respondent docketed the case as CA-G.R. SP No. 25391.
In a decision promulgated on 28 January 1992,
9
the public respondent annulled the questioned orders of the RTC and directed it
to conduct further proceedings in Civil Case No. D-9629. In holding for the private respondent, it ruled that:
Petitioner's complaint being one for quasi-delict, and not for breach of warranty as respondent contends, the applicable
prescriptive period is four years.
It should be stressed that the allegations in the complaint plainly show that it is an action or damages arising from respondent's
act of "recklessly and negligently manufacturing adulterated food items intended to be sold or public consumption" (p. 25, rollo). It
is truism in legal procedure that what determines the nature of an action are the facts alleged in the complaint and those averred
as a defense in the defendant's answer (I Moran 126; Calo v. Roldan, 76 Phil. 445; Alger Electric, Inc. v. CA, 135 SCRA 340).
Secondly, despite the literal wording of Article 2176 of the Civil code, the existence of contractual relations between the parties
does not absolutely preclude an action by one against the other forquasi-delict arising from negligence in the performance of a
contract.
In Singson v. Court of Appeals (23 SCRA 1117), the Supreme Court ruled:
It has been repeatedly held: that the existence of a contract between the parties does not bar the commission of a tort by the one
against the other and the consequent recovery of damages therefor
. . . . Thus in Air France vs. Carrascoso, . . . (it was held that) although the relation between a passenger and a carrier i s
"contractual both in origin and in nature the act that breaks the contract may also be a tort.

22

Significantly, in American jurisprudence, from which Our law on Sales was taken, the authorities are one in saying that he
availability of an action or breach of warranty does not bar an action for torts in a sale of defective goods.
10

Its motion for the reconsideration of the decision having been denied by the public respondent in its Resolution of 14 May
1993,
11
the petitioner took his recourse under Rule 45 of the Revised Rules of Court. It alleges in its petition that:
I.
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE AND REVERSIBLE ERROR IN RULING THAT ARTICLE
2176, THE GENERAL PROVISION ON QUASI-DELICTS, IS APPLICABLE IN THIS CASE WHEN THE ALLEGATIONS OF THE
COMPLAINT CLEARLY SHOW THAT PRIVATE RESPONDENT'S CAUSE OF ACTION IS BASEDON BREACH OF A SELLER'S
IMPLIED WARRANTIES UNDER OUR LAW ON SALES.
II.
CORROLARILY, THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE AND REVERSIBLE ERROR IN
OVERRULING PETITIONER'S ARGUMENT THAT PRIVATE RESPONDENT'S CAUSE OF ACTION HAD PRESCRIBED
UNDER ARTICLE 1571 OF THE CIVIL CODE.
12

The petitioner insists that a cursory reading of the complaint will reveal that the primary legal basis for private respondent's cause
of action is not Article 2176 of the Civil Code on quasi-delict for the complaint does not ascribe any tortious or wrongful conduct
on its part but Articles 1561 and 1562 thereof on breach of a seller's implied warranties under the law on sales. It contends the
existence of a contractual relation between the parties (arising from the contract of sale) bars the application of the law on quasi-
delicts and that since private respondent's cause of action arose from the breach of implied warranties, the complaint should have
been filed within six months room delivery of the soft drinks pursuant to Article 171 of the Civil Code.
In her Comment the private respondent argues that in case of breach of the seller's implied warranties, the vendee may, under
Article 1567 of the Civil Code, elect between withdrawing from the contract or demanding a proportionate reduction of the pri ce,
with damages in either case. She asserts that Civil Case No. D-9629 is neither an action for rescission nor for proportionate
reduction of the price, but for damages arising from a quasi-delict and that the public respondent was correct in ruling that the
existence of a contract did not preclude the action for quasi-delict. As to the issue of prescription, the private respondent insists
that since her cause of action is based on quasi-delict, the prescriptive period therefore is four (4) years in accordance with Article
1144 of the Civil Code and thus the filing of the complaint was well within the said period.
We find no merit in the petition. The public respondent's conclusion that the cause of action in Civil Case No. D-9629 is found
on quasi-delict and that, therefore, pursuant to Article 1146 of the Civil Code, it prescribes in four (4) years is supported by the
allegations in the complaint, more particularly paragraph 12 thereof, which makes reference to the reckless and negligent
manufacture of "adulterated food items intended to be sold for public consumption."
The vendee's remedies against a vendor with respect to the warranties against hidden defects of or encumbrances upon the thing
sold are not limited to those prescribed in Article 1567 of the Civil Code which provides:
Art. 1567. In the case of Articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract
and demanding a proportionate reduction of the price, with damages either
case.
13

The vendee may also ask for the annulment of the contract upon proof of error or fraud, in which case the ordinary rule on
obligations shall be applicable.
14
Under the law on obligations, responsibility arising from fraud is demandable in all obligations
and any waiver of an action for future fraud is void. Responsibility arising from negligence is also demandable in any obligation,
but such liability may be regulated by the courts, according to the circumstances.
15
Those guilty of fraud, negligence, or delay in
the performance of their obligations and those who in any manner contravene the tenor thereof are liable for damages.
16

The vendor could likewise be liable for quasi-delict under Article 2176 of the Civil Code, and an action based thereon may be
brought by the vendee. While it may be true that the pre-existing contract between the parties may, as a general rule, bar the
applicability of the law on quasi-delict, the liability may itself be deemed to arise from quasi-delict, i.e., the acts which breaks the
contract may also be a quasi-delict. Thus, in Singson vs. Bank of the Philippine Islands,
17
this Court stated:

23

We have repeatedly held, however, that the existence of a contract between the parties does not bar the commission of a tort by
the one against the other and the consequent recovery of damages therefor.
18
Indeed, this view has been, in effect, reiterated in a
comparatively recent case. Thus, inAir France vs. Carrascoso,
19
involving an airplane passenger who, despite hi first-class ticket,
had been illegally ousted from his first-class accommodation and compelled to take a seat in the tourist compartment, was held
entitled to recover damages from the air-carrier, upon the ground of tort on the latter's part, for, although the relation between the
passenger and a carrier is "contractual both in origin and nature . . . the act that breaks the contract may also be a tort.
Otherwise put, liability for quasi-delict may still exist despite the presence of contractual relations.
20

Under American law, the liabilities of a manufacturer or seller of injury-causing products may be based on negligence,
21
breach of
warranty,
22
tort,
23
or other grounds such as fraud, deceit, or misrepresentation.
24
Quasi-delict, as defined in Article 2176 of the
Civil Code, (which is known in Spanish legal treaties asculpa aquiliana, culpa extra-contractual or cuasi-delitos)
25
is homologous
but not identical to tort under the common law,
26
which includes not only negligence, but also intentional criminal acts, such as
assault and battery, false imprisonment and deceit.
27

It must be made clear that our affirmance of the decision of the public respondent should by no means be understood as
suggesting that the private respondent's claims for moral damages have sufficient factual and legal basis.
IN VIEW OF ALL THE FOREGOING, the instant petition is hereby DENIED for lack of merit, with costs against the petitioner.
SO ORDERED.

Alied Banking Corporation vs. Court of Appeals

This petition for review on certiorari assails (a) the July 31, 1996 Decision
1
of the Court of Appeals, ordering respondent G.G.
Sportswear Manufacturing Corp. to reimburse petitioner US $20,085; and exonerating the guarantors from liability; and (b) the
January 17, 1997 Resolution
2
denying the motion for reconsideration.
The facts are undisputed.
On January 6, 1981, petitioner Allied Bank, Manila (ALLIED) purchased Export Bill No. BDO-81-002 in the amount of US
$20,085.00 from respondent G.G. Sportswear Mfg. Corporation (GGS). The bill, drawn under a letter of credit No. BB640549
covered Men's Valvoline Training Suit that was in transit to West Germany (Uniger via Rotterdam) under Cont. #73/S0299. The
export bill was issued by Chekiang First Bank Ltd., Hongkong. With the purchase of the bill, ALLIED credited GGS the peso
equivalent of the aforementioned bill amounting toP151,474.52 and the receipt of which was acknowledged by the latter in its
letter dated June 22, 1981.
On the same date, respondents Nari Gidwani and Alcron International Ltd. (Alcron) executed their respective Letters of Guaranty,
holding themselves liable on the export bill if it should be dishonored or retired by the drawee for any reason.
Subsequently, the spouses Leon and Leticia de Villa and Nari Gidwani also executed a Continuing Guaranty/Comprehensive
Surety (surety, for brevity), guaranteeing payment of any and all such credit accommodations which ALLIED may extend to GGS.
When ALLIED negotiated the export bill to Chekiang, payment was refused due to some material discrepancies in the documents
submitted by GGS relative to the exportation covered by the letter of credit. Consequently, ALLIED demanded payment from all
the respondents based on the Letters of Guaranty and Surety executed in favor of ALLIED. However, respondents refused to pay,
prompting ALLIED to file an action for a sum of money.
In their joint answer, respondents GGS and Nari Gidwani admitted the due execution of the export bill and the Letters of Guaranty
in favor of ALLIED, but claimed that they signed blank forms of the Letters of Guaranty and the Surety, and the blanks were only
filled up by ALLIED after they had affixed their signatures. They also added that the documents did not cover the transaction
involving the subject export bill.
On the other hand, the respondents, spouses de Villa, claimed that they were not aware of the existence of the export bill; they
signed blank forms of the surety; and averred that the guaranty was not meant to secure the export bill.
Respondent Alcron, for its part, alleged that as a foreign corporation doing business in the Philippines, its branch in the Philippines
is merely a liaison office confined to the following duties and responsibilities, to wit: acting as a message center between its office

24

in Hongkong and its clients in the Philippines; conducting credit investigations on Filipino clients; and providing its office in
Hongkong with shipping arrangements and other details in connection with its office in Hongkong. Respondent Alcron further
alleged that neither its liaison office in the Philippines nor its then representative, Hans-Joachim Schloer, had the authority to issue
Letters of Guaranty for and in behalf of local entities and persons. It also invoked laches against petitioner ALLIED.
GGS and Nari Gidwani filed a Motion for Summary Judgment on the ground that since the plaintiff admitted not having protested
the dishonor of the export bill, it thereby discharged GGS from liability. But the trial court denied the motion. After the presentation
of evidence by the petitioner, only the spouses de Villa presented their evidence. The other respondents did not. The trial court
dismissed the complaint.
On appeal, the Court of Appeals modified the ruling of the trial court holding respondent GGS liable to reimburse petitioner
ALLIED the peso equivalent of the export bill, but it exonerated the guarantors from their liabilities under the Letters of Guaranty.
The CA decision reads as follows:
For the foregoing considerations, appellee GGS is obliged to reimburse appellant Allied Bank the amount ofP151,474.52 which
was the equivalent of GGS's contracted obligation of US$20,085.00.
The lower court however correctly exonerated the guarantors from their liability under their Letters of Guaranty. A guaranty is an
accessory contract. What the guarantors guaranteed in the instant case was the bill which had been discharged. Consequently,
the guarantors should be correspondingly released.
WHEREFORE, judgment is hereby rendered ordering defendant-appellee G.G. Sportswear Mfg. Corporation to pay appellant the
sum of P151,474.52 with interest thereon at the legal rate from the filing of the complaint, and the costs.
SO ORDERED.
The petitioner filed a Motion for Reconsideration, but to no avail. Hence, this appeal, raising a single issue:
WHETHER OR NOT RESPONDENTS NARI, DE VILLA AND ALCRON ARE LIABLE UNDER THE LETTERS OF GUARANTY
AND THE CONTINUING GUARANTY/ COMPREHENSIVE SURETY NOTWITHSTANDING THE FACT THAT NO PROTEST
WAS MADE AFTER THE BILL, A FOREIGN BILL OF EXCHANGE, WAS DISHONORED.
4

The main issue raised before us is: Can respondents, in their capacity as guarantors and surety, be held jointly and severall y
liable under the Letters of Guaranty and Continuing Guaranty/Comprehensive Surety, in the absence of protest on the bill in
accordance with Section 152 of the Negotiable Instruments Law?
5

The petitioner contends that part of the Court of Appeals' decision exonerating respondents Nari Gidwani, Alcron International
Ltd., and spouses Leon and Leticia de Villa as guarantors and/or sureties. Respondents rely on Section 152 of the Negotiable
Instruments Law to support their contention.
Our review of the records shows that what transpired in this case is a discounting arrangement of the subject export bill, between
petitioner ALLIED and respondent GGS. Previously, we ruled that in a letter of credit transaction, once the credit is established,
the seller ships the goods to the buyer and in the process secures the required shipping documents of title. To get paid, the seller
executes a draft and presents it together with the required documents to the issuing bank. The issuing bank redeems the draft and
pays cash to the seller if it finds that the documents submitted by the seller conform with what the letter of credit requires. The
bank then obtains possession of the documents upon paying the seller. The transaction is completed when the buyer reimburses
the issuing bank and acquires the documents entitling him to the goods.
6
However, in most cases, instead of going to the issuing
bank to claim payment, the buyer (or the beneficiary of the draft) may approach another bank, termed the negotiating bank, to
have the draft discounted.
7
While the negotiating bank owes no contractual duty toward the beneficiary of the draft to discount or
purchase it, it may still do so. Nothing can prevent the negotiating bank from requiring additional requirements, like contracts of
guaranty and surety, in consideration of the discounting arrangement.
In this case, respondent GGS, as the beneficiary of the export bill, instead of going to Chekiang First Bank Ltd. (issuing bank),
went to petitioner ALLIED, to have the export bill purchased or discounted. Before ALLIED agreed to purchase the subject export
bill, it required respondents Nari Gidwani and Alcron to execute Letters of Guaranty, holding them liable on demand,in case the
subject export bill was dishonored or retired for any reason.
8


25

Likewise, respondents Nari Gidwani and spouses Leon and Leticia de Villa executed Continuing Guaranty/Comprehensive Surety,
holding themselves jointly and severally liable on any and all credit accommodations, instruments, loans, advances, credits and/or
other obligation that may be granted by the petitioner ALLIED to respondent GGS.
9
The surety also contained a clause whereby
said sureties waive protest and notice of dishonor of any and all such instruments, loans, advances, credits and/or
obligations.
10
These letters of guaranty and surety are now the basis of the petitioner's action.
At this juncture, we must stress that obligations arising from contracts have the force of law between the parties and should be
complied with in good faith.
11
Nothing can stop the parties from establishing stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
12

Here, Art. 2047 of the New Civil Code is pertinent. Art. 2047 states,
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, Chapter 3, Title I of this Book shall be
observed. In such case the contract is called a suretyship.
In this case, the Letters of Guaranty and Surety clearly show that respondents undertook and bound themselves as guarantors
and surety to pay the full amount of the export bill.
Respondents claim that the petitioner did not protest
13
upon dishonor of the export bill by Chekiang First Bank, Ltd. According to
respondents, since there was no protest made upon dishonor of the export bill, all of them, as indorsers were discharged under
Section 152 of the Negotiable Instruments Law.
Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied on by respondents, is not pertinent to this case.
There are well-defined distinctions between the contract of an indorser and that of a guarantor/surety of a commercial paper,
which is what is involved in this case. The contract of indorsement is primarily that of transfer, while the contract of guaranty is that
of personal security.
14
The liability of a guarantor/surety is broader than that of an indorser. Unless the bill is promptly presented
for payment at maturity and due notice of dishonor given to the indorser within a reasonable time, he will be discharged from
liability thereon.
15
On the other hand, except where required by the provisions of the contract of suretyship, a demand or notice of
default is not required to fix the surety's liability.
16
He cannot complain that the creditor has not notified him in the absence of a
special agreement to that effect in the contract of suretyship.
17
Therefore, no protest on the export bill is necessary to charge all
the respondents jointly and severally liable with G.G. Sportswear since the respondents held themselves liable upon demand in
case the instrument was dishonored and on the surety, they even waived notice of dishonor as stipulated in their Letters of
Guarantee.
As to respondent Alcron, it is bound by the Letter of Guaranty executed by its representative Hans-Joachim Schloer. As to the
other respondents, not to be overlooked is the fact that, the "Suretyship Agreement" they executed, expressly contemplated a
solidary obligation, providing as it did that " the sureties hereby guaranteejointly and severally the punctual payment of any and
all such credit accommodations, instruments, loans, which is/are now or may hereafter become due or owing by the
borrower".
18
It is a cardinal rule that if the terms of a contract are clear and leave no doubt as to the intention of the contracting
parties, the literal meaning of its stipulation shall control.
19
In the present case, there can be no mistaking about respondents'
intent, as sureties, to be jointly and severally obligated with respondent G.G. Sportswear.
Respondents also aver that, (1) they only signed said documents in blank; (2) they were never made aware that said documents
will cover the payment of the export bill; and (3) laches have set in.
Respondents' stance lacks merit. Under Section 3 (d), Rule 131 of the Rules of Court, it is presumed that a person takes ordinary
care of his concerns. Hence, the natural presumption is that one does not sign a document without first informing himself of its
contents and consequences. Said presumption acquires greater force in the case at bar where not only one document but several
documents were executed at different times and at different places by the herein respondent guarantors and sureties.
20

In this case, having affixed their consenting signatures in several documents executed at different times, it is safe to presume that
they had full knowledge of its terms and conditions, hence, they are precluded from asserting ignorance of the legal effects of the
undertaking they assumed thereunder. It is also presumed that private transactions have been fair and regular
21
and that he who
alleges has the burden of proving his allegation with the requisite quantum of evidence.
22
But here the records of this case do not
support their claims.

26

Last, we find the defense of laches unavailing. The question of laches is addressed to the sound discretion of the court and since
laches is an equitable doctrine, its application is controlled by equitable considerations.
23
Respondents, however, failed to show
that the collection suit against them as sureties was inequitable. Remedies in equity address only situations tainted with inequity,
not those expressly governed by statutes.
24

After considering the facts of this case vis--vis the pertinent laws, we are constrained to rule for the petitioner.
WHEREFORE, the instant petition is GRANTED.The assailed Decision of the Court of Appeals is herebyMODIFIED, and we hold
that respondent Alcron International Ltd. is subsidiarily liable, while respondents Nari Gidwani, and Spouses Leon and Leticia de
Villa are jointly and severally liable together with G.G. Sportswear, to pay petitioner Bank the sum of P151,474.52 with interest at
the legal rate from the filing of the complaint, and the costs.
SO ORDERED.

Tolentino vs. Court of Appeals
The issue in this petition for review on certiorari is whether or not a woman who has been legally divorced from her husband may
be enjoined by the latter's present wife from using the surname of her former husband.
A complaint was filed by petitioner Constancia C. Tolentino with the then Court of First Instance of Quezon City against Consuelo
David for the purpose of stopping and enjoining her by injunction from using the surname Tolentino. The complaint also contained
a claim for damages which the petitioner, however, waived. An application for a writ of preliminary injunction was filed as well.
On January 13, 1972 respondent Consuelo David filed her answer admitting she has been using and continues to use the
surname Tolentino.
The application for the writ was heard with both parties presenting evidence in support of their respective claims.
On January 18, 1972, the trial court issued an order granting the petitioner's action for a writ of preliminary injunction with the
actual writ being issued on January 20, 1972. The order granting said writ reads:
NOW, THEREFORE, it is hereby ordered by the undersigned Judge of the Court of First Instance of Rizal, Branch XVI, Quezon
City, that, until further orders, you CONSUELO DAVID, your agents and/or representatives and/or persons acting under your
control, direction, instruction and/or supervision, ARE ENJOINED from using, employing and/or applying, in any manner, form or
means whatsoever, the surname TOLENTINO. (p. 17, Original Record On Appeal)
On February 2, 1972, respondent Consuelo filed a motion for leave to file a third party complaint against her former husband. The
motion was granted on March 18,1972. Thereafter, third party defendant Arturo Tolentino filed his answer on April 19,1972.
After the hearings, the trial court rendered a decision in favor of the petitioner. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered confirming the preliminary injunction and making the same
permanent and perpetual-restraining and enjoining defendant, her agents and/or representatives and/or persons acting under her
control, direction, instruction and/or supervision, from using, employing and/or applying, in any manner, form or means
whatsoever, the surname" TOLENTINO."
No pronouncement as to costs, the same having been waived by the plaintiff.
The third-party complaint is hereby dismissed, without pronouncement as to costs. (p. 93, Original Record on Appeal)
The private respondent appealed the decision to the Court of Appeals raising several issues, among them, the prescription of the
plaintiff's cause of action and the absence of a monopolistic proprietary right of the plaintiff over the use of the surname Tolentino.
On June 25, 1975, the Court of Appeals reversed the decision of the trial court.
The dispositive portion of the decision reads as follows:

27

IN VIEW WHEREOF, sustaining Error 1, this Court is constrained to reverse, as it now reverses, judgment appealed from,
complaint is dismissed, with costs. (p. 76, Petitioner's Brief)
The petitioner filed a motion for reconsideration but the same was denied in a resolution dated August 29,1975.
Hence, this appeal by the petitioner.
The uncontroverted facts of the case are:
The petitioner is the present legal wife of Arturo Tolentino, their marriage having been celebrated on April 21, 1945 in Manila. The
union produced three children.
Respondent Consuelo David was legally married to Arturo Tolentino on February 8, 1931. Their marriage likewise produced
children. The marriage was dissolved and terminated pursuant to the law during the Japanese occupation on September 15, 1943
by a decree of absolute divorce granted by the Court of First Instance of Manila in Divorce Case No. R-619 entitled "Arturo
Tolentino v. Consuelo David" on the ground of desertion and abandonment by the wife. The trial court granted the divorce on its
finding that Arturo Tolentino was abandoned by Consuelo David for at least three (3) continuous years.
Thereafter, Arturo Tolentino married a certain Pilar Adorable, who however, died soon after their marriage. Tolentino subsequently
married Constancia on April 21, 1945.
Consuelo David, on the other hand, continued using the surname Tolentino after the divorce and up to the time of the filing of this
complaint.
The third party defendant, in his answer, admitted that the use of the surname Tolentino by the private respondent was with his
and his family's (brothers and sisters) consent.
The petition mainly revolves around two issues:
1. Whether or not the petitioner's cause of action has already prescribed, and
2. Whether or not the petitioner can exclude by injunction Consuelo David from using the surname of her former husband from
whom she was divorced.
The petitioner's contention that her cause of action is imprescriptible is without merit. In fact, it is contradictory to her own claim.
The petitioner insists that the use by respondent Consuelo David of the surname Tolentino is a continuing actionable wrong and
states that every use of the surname constitutes a new crime. The contention cannot be countenanced because the use of a
surname by a divorced wife for a purpose not criminal in nature is certainly not a crime. The rule on prescription in civil cases such
as the case at bar is different. Art. 1150 of the Civil Code provides: "The time for prescription for all kinds of actions, when there is
no special provision which ordains otherwise, shall be counted from the day they may be brought."
All actions, unless an exception is provided, have a prescriptive period. Unless the law makes an action imprescriptible, it is
subject to bar by prescription and the period of prescription is five (5) years from the time the right of action accrues when no other
period is prescribed by law (Civil Code, Art. 1149). The Civil Code provides for some rights which are not extinguished by
prescription but an action as in the case before us is not among them. Neither is there a special law providing for imprescriptibility.
Moreover, the mere fact that the supposed violation of the petitioner's right may be a continuous one does not change the
principle that the moment the breach of right or duty occurs, the right of action accrues and the action from that moment can be
legally instituted (Soriano v. Sternberg, 41 Phil. 210).
The respondent Court of Appeals, on the other hand, is of the opinion that the period of prescription should be four (4) years,
since it appears to be an action based on quasi-delict. hatever the period, it cannot be denied that the action has long
prescribed whether the cause accrued on April 21, 1945 when the petitioner and Arturo Tolentino got married, or on August 30,
1950, when the present Civil Code took effect, or in 1951 when Constancia Tolentino came to know of the fact that Consuelo
David was still using the surname Tolentino. It is the legal possibility of bringing the action which detemines the starting point for
the computation of the period of prescription (Espanol v. Phil. Veterans Administration, 137 SCRA 314).

28

The petitioner should have brought legal action immediately against the private respondent after she gained knowledge of the use
by the private respondent of the surname of her former husband. As it is, action was brought only on November 23, 1971 with only
verbal demands in between and an action to reconstitute the divorce case. The petitioner should have filed her complaint at once
when it became evident that the private respondent would not accede to her demands instead of waiting for twenty (20) years.
As aptly stated by the Court of Appeals, "where the plaintiff fails to go to the Court within the prescriptive period, he loses his
cause, but not because the defendant had acquired ownership by adverse possession over his name but because the plaintiffs
cause of action had lapsed thru the statute of limitations." (p. 37, Rollo)
On the principal issue of whether or not a divorced woman may continue using the surname of her former husband, Philippine law
is understandably silent. We have no provisions for divorce in our laws and consequently, the use of surnames by a divorced wife
is not provided for.
There is no merit in the petitioner's claim that to sustain the private respondent's stand is to contradict Articles 370 and 371 of the
Civil Code.
It is significant to note that Senator Tolentino himself in his commentary on Art. 370 of the Civil Code states that "the wife cannot
claim an exclusive right to use the husband's surname. She cannot be prevented from using it; but neither can she restrain others
from using it." (Tolentino, Civil Code, 1974 ed., P. 681).
Art. 371 is not applicable to the case at bar because Art. 371 speaks of annulment while the case before us refers to absolute
divorce where there is a severance of valid marriage ties. The effect of divorce is more akin to the death of the spouse where the
deceased woman continues to be referred to as the Mrs. of her husband even if the latter has remarried rather than to annulment
since in the latter case, it is as if there had been no marriage at all.
The private respondent has established that to grant the injunction to the petitioner would be an act of serious dislocation to her.
She has given proof that she entered into contracts with third persons, acquired properties and entered into other legal relations
using the surname Tolentino. The petitioner, on the other hand, has failed to show that she would suffer any legal injury or
deprivation of legal rights inasmuch as she can use her husband's surname and be fully protected in case the respondent uses
the surname Tolentino for illegal purposes.
There is no usurpation of the petitioner's name and surname in this case so that the mere use of the surname Tolentino by the
Private respondent cannot be said to have injured the petitioner's rights. "The usurpation of name implies some injury to the
interests of the owner of the name. It consists in the possibility of confusion of Identity ... between the owner and the usurper. It
exists when a person designates himself by another name ... The following are the elements of usurpation of a name: 1) there is
an actual use of another's name by the defendant; 2) the use is unauthorized; and 3) the use of another's name is to designate
personality or Identify a person" (Tolentino, supra, p. 685). None of these elements exists in the case at bar and neither is there a
claim by the petitioner that the private respondent impersonated her. In fact, it is of public knowledge that Constancia Tolentino is
the legal wife of Arturo Tolentino so that all invitations for Senator and Mrs. Tolentino are sent to Constancia. Consuelo never
represented herself after the divorce as Mrs. Arturo Tolentino but simply as Mrs. Consuelo David-Tolentino. The private
respondent has legitimate children who have every right to use the surname Tolentino. She could not possibly be compelled to
use the prefix "Miss" or use the name Mrs. David, different from the surnames of her children. The records do not show that she
has legally remarried.
In Silva, et al. v. Peralta (110 Phil. 57) cited by the petitioner, it was not the mere use of the surname that was enjoined but the
defendant's representation that she was the wife of Saturnino Silva. There was, therefore, a usurpation of the wife's status which
is absent in the case at bar.
We rule that the use of the surname Tolentino does not impinge on the rights of the petitioner.
Considering the circumstances of this petition, the age of the respondent who may be seriously prejudiced at this stage of her life,
having to resort to further legal procedures in reconstituting documents and altering legal transactions where she used the
surname Tolentino, and the effects on the private respondent who, while still not remarried, will have to use a surname different
from the surnames of her own children, we find it just and equitable to leave things as they are, there being no actual legal injury
to the petitioner save a deep hurt to her feelings which is not a basis for injunctive relief.
WHEREFORE, the petition is hereby DISMISSED for lack of merit. The decision of the Court of Appeals is AFFIRMED. The writs
of preliminary and mandatory injunction issued by the trial court are SET ASIDE.

29

SO ORDERED.
Provident Savings Bank vs. Court of Appeals
The error, if error it be, of respondent Court of Appeals which petitioner seeks to rectify via the petitioner forcertiorari before us
refers to respondent court's major conclusion arrived at in CA-G.R. CV No. 21312 (Javellana (P), Kalalo, Dayrit, JJ) barring
petitioner from foreclosing the subject realty on account of prescription. Petitioner begs to differ, insisting that the period during
which it was placed under receivership by the Central Bank is akin to a caso fortuito and should not thus be reckoned against it.
Both petitioner and private respondent accepted the synthesized factual backdrop formulated by respondent court, to wit:
This an appeal by both plaintiff and defendant from the decision of the Regional Trial Court of the National Capital Judicial 29
September 1988, in Civil Case No. 977-NW, which directed plaintiff-appellant to pay defendant-appellant the personal obligation
of the spouses Guarin to defendant-appellant in the amount of P62,500.00, together with the interest, penalties, and bank charges
due thereon, and ordering defendant-appellant thereafter to: (1) release the real estate mortgage executed by the spouses
Lorenzo K. Guarin and Liwayway J. Guarin in favor of defendant bank on 16 February 1967; (2) return to surrender to plaintiff -
appellant, as successor-in-interest of the spouses Guarin, the latter's Owner's Duplicate of Title No. 177014; (3) pay plaintiff-
appellant P20,000.00 as and for attorney's fees; and, (4) pay the costs of suit.
The established fact are:
On 16 February 1967, the spouses Lorenzo K. Guarin and Liwayway J. Guarin (Guarins) obtained a loan from defendant-
appellant in the amount of P62,500.00 payable on or before 20 June 1967. As security for the loan, they executed a real estate
mortgage in favor of defendant-appellant over a parcel of land covered by TCT No. 177014. (Exhs. C and D).
In September, 1972, defendant-appellant was placed under receivership by the Central Bank of the Philippines until 27 July 1981
when the receivership was set aside by the Honorable Supreme Court.
On 11 December 1984, Lorenzo K. Guarin, in reply to the letter of latter's counsel informing that the mortgaged property would be
sold at public auction on 27 December 1984, assured he and his wife had every intention of paying their obligation and requesting
for a recomputation of their account and a postponement of the foreclosure sale. (Exh. 1).
On 10 February 1986, the Guarins received a Statement of Account from defendant-appellant showing two outstanding accounts
as of 15 February 1986. One was account of Lorenzo K. Guarin in the amount of P591,088.80, and the other was the account of
L.K. Guarin Manufacturing Co., Inc. in the amount of P6,287,380.27 (Attachment to Exh. 2)
On 26 February 1986, Lorenzo K. Guarin wrote defendant-appellant stating that he was ready and willing to pay his obligation in
the total amount of P591,088.80 as recomputed by defendant-appellant whenever defendant-appellant was already to receive the
payment and inquiring as to when his mortgaged title would be available for him to pick up. (Exh. 2)
Defendant-appellant replied on 27 February 1986 that Lorenzo K. Guarin may make payment at its office in Makati, Metro Manila,
but that the mortgaged title could not be released to him even after the payment of the obligation of P591,088.80 as it also served
as security for the indebtedness of L.Y. Guarin Manufacturing Co., Inc., to defendant-appellant which was undertaken by Lorenzo
K. Guarin in his personal capacity and as president of the corporation. (Exh. 3)
On 20 May 1986, plaintiff-appellant wrote defendant-appellant saying that the mortgaged property of the Guarins had been offered
to him as payment of the judgment he obtained against the Guarins in Civil Case No. Q-47465 entitled, "Wilson Chua vs. Lorenzo
K. Guarin", and requesting for defendant-appellant's conformity to the assignment and expressing his willingness to pay for the
obligation of Mr. Guarin so that the title could be released by defendant-appellant. (Exh. 4)
On 10 July 1986, the Guarins and plaintiff-appellant executed a Deed of Absolute Sale With Assumption of Mortgaged whereby
the Guarins sold the mortgaged property to Guarins sold the appellant for the sum of P250,000.00 and plaintiff-appellant
undertook to assume the mortgaged obligation of the Guarins with defendant-appellant which as of 15 February 1985 amounted
to P591,088.80.(Exh. B).
On 5 August 1986, plaintiff-appellant informed defendant-appellant that as a result of the judgment in Civil Case No. Q-47645, the
mortgaged property had been sold to him by the Guarins, as evidenced by the Deed of Sale enclosed for guidance and
information of defendant-appellant. He requested that he be allowed to pay the loan secured by the mortgaged, otherwise, he

30

would be constrained to bring the matter to court. (Exh. 5) In reply, defendant-appellant, on 11 August 1986, informed plaintiff-
appellant that his request could be granted if he would settle the obligation of L.K. Guarin Manufacturing Co., Inc., as well and
defendant-appellant's letter to Mr. Guarin dated 27 February 1986. (Exh. 6)
On 3 August 1987, counsel for plaintiff-appellant addressed a letter to defendant-appellant informing that plaintiff-appellant had
purchased the mortgaged property from the Guarin's and requesting that the owner's copy of TCT No. 177014 in the possession
of defendant-appellant be released to him so that he can register the sale and have the title to the property transferred in his
name. He likewise, informed defendant-appellant that it had lost whatever right or action had against the Guarins because of
prescription. (Exh. E) Defendant-appellant replied on 10 August 1987 stating the reasons why they could not comply with plaintiff-
appellant's demands. (Exh. F)
On 21 August 1986, plaintiff-appellant filed a complaint against defendant-appellant to compel the latter to: (1) release the real
estate mortgaged executed by the Guarins in favor of defendant-appellant on 16 February 1967; (2) return or surrender to plaintiff-
appellant, as successor-in-interest of the Guarins, the latter's owner's duplicate of TCT No. 177014; and (3) pay plaintiff-appellant
P2,750,000.00 as actual and/or consequential damages, moral damages as may be proved during the trial, exemplary damages
as may be reasonably assessed by the court, and attorney's fees of P50,00.00. Defendant-appellant answered the complaint
thereof and setting up special and affirmative defenses. After trial, judgment was rendered as stated in the opening paragraph
hereof from which both parties appealed . . . . (pp. 35-37, Rollo.)
Concerning the challenge posed by Provident Saving Bank against the personality of Wilson Chua to initiate the action to compel
the release of the real estate mortgage and the delivery of the owner's duplicate copy of the certificate of title, respondent court
noted that Wilson Chua can be considered a real-property-in-interest because he is the successor-in-interest of the Guarins who
is naturally entitled to the realty as against the so-called right of Provident Savings Bank, as mortgagee, to foreclose the mortgage
which had become stale through sheer lapse of time. The matter of novation in the form of substitution of the debtor without
corresponding acquiesence of the mortgagee was viewed by respondent court to be legally inconsequential due to the demeanor
of the mortgagee-bank in requiring Wilson Chua to pay the indebtedness of Lorenzo Guarin, posterior to the change of obligors,
which act was construed as equivalent to consent.
To the question of whether petitioner can still foreclose the subject realty, respondent court gave a negative response on account
of the absence of proof to indicate that the bank was precluded from collecting indebtedness while it was under receivership from
September, 1972 until July 20,1981. Thus, there was no legal interruption of the pres-criptive period to speak of, said respondent
court, which intervened between June 20, 1967, the date the mortgage matured, and June 20, 1977 the last day within which
petitioner could have foreclosed the mortgage.
Respondent court did not also heed the suggestion of the petitioner bank to interpret Wilson Chua's assumption of the mortgage
on July 10, 1986 as tantamount to an explicit acknowledgement that the obligation was outstanding and had not yet prescribed.
As a result of these observations, respondent court reversed the decision of the trial court insofar as it ordered Wilson Chua to pay
the sum of P591,088.80 to the bank and affirmed the other dispositions made the court of origin (p. 42, Rollo).
Following the unfavorable judgment, the bank filed a motion for reconsideration and a motion for new trial premised on newly
discovered evidence relative to a statement of account unearthed by the bank's liaison officer from the loose folders on October
18, 1990 which it believed to be of legal significance to the case. But respondent court was unperturbed, observing that the vital
piece of document could have been located in the course of trial had the slightest degree of prudence been exercised, considering
that the statement of account sprouted the same day the liaison officer was advised to take an inventory of the records ( p.
45, Rollo).
Hence, the petitioner at bar.
Consistent with its theory premised on fuerza major, petitioner insists that it can not be blamed for not lifting a finger, so speak,
during the period when it was enjoined by the Central Bank on September 15, 1972 from transacting business until this Court
affirmed on July 27,1981 the decision of the Court of Appeals annulling the proscription against petitioner in Central Bank vs.
Court of Appeals (106 SCRA 143 [1981]. We are not unaware of the rule laid down in Teal Motor Co. vs. Court of First Instance of
Manila (51 Phil. 549 [1928]; Martin, Commentaries and Jurisprudence on the Philippine Commercial Laws, 1986 Revised ed.,
p.125) that the appointment of a receiver does not dissolve the corporation nor does it interfere with the exercise of its corporate
rights. But this principles is, of course, applicable to a situation where there is no restraint imposed on the corporation, unlike in
the case at bar where petitioner Provident Savings Bank was specifically forbidden and immobilized from doing business in the
Philippines on September 15, 1972 through Monetary Board Resolution No. 1766 until 1981 when the decision in Central Bank vs.
Court of Appeals (supra, at p. 150) was rendered. The question which immediately crops up is whether a foreclose proceeding

31

falls within the purview of the phrase "doing business". In Mentholatum Co., Inc., et al. vs. Mangaliman, et al. (72 Phil. 524
[1941]; Moreno, Philippine Law Dictionary, Second ed., 1972, p. 186), the term was construed by Justice Laurel to refer to:
. . . a continuity of commercial dealings and arrangements, and contemplates to that extent, the exercise of some of the words or
the normally incident to, and in progressive prosecution of, the purpose ands object of its organizations. (p. 528; emphasis
supplied.)
Withal, we believe that a foreclose is deemed embraced by the phrase "doing business" as a preparatory measure to acquiring or
holding property for petitioner as a saving bank under Section 34 of the General Banking Act. Like any other banking institution,
petitioner is vested with the usual attributes and powers of a corporation under Section 36 of the Corporation Code (Vitug,
Pandect of Commercial Law and Jurisprudence, 1990 ed., p. 475). The prerogative of a bank to foreclose is implicit from and i s
even necessary to enforce collection of secured debts under Section 36(11) and 45 of the Corporation Code, in conjunction with
Section 29 of the General Banking Act (6 Fletcher, 206; Agbayani, Commentaries and Jurisprudence on the Commercial Laws of
the Philippines, 1990 ed., p. 325).
When a bank is prohibited to do business by the Central Bank and a receiver is appointed for such bank, that bank would not be
able to do new business, i.e., to grant new loans or to accept new deposits. However, the receiver of the bank is obliged to collect
debts owing to the bank, which debts form part of the assets of the bank. The receiver must assemble the assets and pay the
obligation of the bank under receivership, and take steps to prevent dissipation of such assets. Accordingly, the the receiver of the
bank is obliged to collect pre-existing debts due to the bank, and in connection therewith, to foreclose mortgages securing debts.
This is not to ignore The Philippine Trust Co. vs. HSBC (67 Phil. 204 [1939], for in that case, the Court simply rejected the
objections of certain creditors to the report of a receiver, that is, objections that the receiver did not report the collection made
before the beginning of his receivership. It would follow that the bank is bound by the acts, or failure to act, of the receiver. At the
same time, the receiver is liable to the bank for culpable or negligent failure to collect the assets of such bank and to safeguard
said assets.
Having arrived at the conclusion that the foreclosure is part of bank's business activity which could not have been pursued by the
receiver then because of the circumstances discussed in the Central Bank case, we are thus convinced that the prescriptive
period was legally interrupted by fuerza mayor in 1972 on account on the prohibition imposed by the Monetary Board against
petitioner from transacting business, until the directive of the board was nullified in 1981. Indeed, the period during which the
obligee was prevented by a caso fortuito from enforcing his right is not reckoned against him (Article 1154, New Civil Code). When
prescription is interrupted, all the benefits acquired so far from the possession cease and when prescription starts anew, it will be
entirely a new one. This concept should not be equated with suspension where the past period is included in the computation
being added to the period after prescription is resumed (4 Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines, 1991 ed., pp. 18-19). Consequently, when the closure of was set aside in 1981, the period of ten years within which to
foreclose under Article 1142 of the New Civil Code began to run again and, therefore, the action filed on August 21, 1986 to
compel petitioner to release the mortgage carried with it the mistaken notion that petitioner's own suit foreclosure had prescribed.
What exacerbates the situation is the letter of private respondent requesting petitioner on August 6, 1986 that private respondent
be allowed to pay the loan secured by the mortgage as the result of the Deed of Sale executed by the Guarins in his favor on July
10, 1986 (pp. 36-37, Rollo). In point of law, this written communication is synonymous to an express acknowledgment of the
obligation and had the effect of interrupting the prescription for the second time (Article 1155, New Civil Code; Osmea vs. Rama,
14 Phil. 99 [1909]; 4 Tolentino, supra at p. 50). And this piece of document necessarily estops private respondent from setting up
prescription vis-a-vis his unfounded supposition that acknowledgment of the debt is of no moment because the right of the
petitioner to foreclose had long prescribed in 1977 (p. 13, Petition; p. 7, Comment; pp. 19 and 58, Rollo).
Contrary to respondent court's prescription of the existence of novation, the evidence at hand does not buttress a finding along
this line from the mere fact that petitioner supposedly did not question the substitution when the bank reacted to private
respondent's offer to pay the loan (p. 39, Rollo). What seems to have escaped respondent court's attention was the condition
imposed by the petitioner that it will grant private respondent's request if the latter will also shoulder the obligation incurred by
Lorenzo Guarin in his capacity as president of the corporation (p.37, Rollo). The consent of the petitioner to the substitution, as
creditor, was thus erroneously appreciated.
With the conclusions reached, we need not discuss the other issues raised in the petition.
WHEREFORE, the petition is hereby GRANTED. The decision dated August 31, 1990, including the resolution dated February 6,
1991 of respondent court are hereby set aside and another one entered dismissing Wilson Chua's complaint. No special
pronouncement is made to costs.
Ledesma vs. Court of Appeals

32

Petitioner has filed a motion for reconsideration of the Court's resolution of March 24, 1993 which denied his petition for review
on certiorari for failure to sufficiently show that respondent Court of Appeals had committed any reversible error in its questioned
judgment.
On August 21, 1980, private respondent Rizal Commercial Banking Corporation filed Case No. 38287 in the then Court of First
Instance of Rizal against petitioner to enforce the terms of Trust Receipt Agreement No. 7389 executed by them on April 1, 1974
but which petitioner had failed to comply with. As summons could not be served on the latter, said case was dismissed without
prejudice on March 3, 1981. On December 2, 1988, private respondent bank instituted Civil Case No. 88-2572 in the Regional
Trial Court of Makati, Metro Manila, Branch 133, against petitioner on the same cause of action and subject matter.
Petitioner's motion to dismiss on the ground of prescription was denied and judgment was rendered in favor of private respondent
by the court a quo ordering petitioner to pay private respondent P168,00.00 with interest thereon of 12% per annum from
December 2, 1988 until full payment of the obligation, P16,800.00 as attorney's fees, and costs of suit. Said judgment was
affirmed by respondent Court in CA-G.R. CV No. 29406 in its decision promulgated on January 7, 1992,
1
and petitioner's motion
for reconsideration thereof was denied in a resolution dated August 6, 1992.
2

Petitioner's petition for review on certiorari of the said judgment was denied in our aforesaid resolution, hence its present motion
for reconsideration, dated May 5, 1993. Contending that the second action filed by private respondent bank had already
prescribed, petitioner invokes the rulings in Vda. de Nator, et al. vs. Court of Industrial Relations, et al.
3
and Fulton Insurance Co.
vs. Manila Railroad Co., et al.
4
and invites us "to give a second look at the apparently conflicting or divergent jurisprudence."
Article 1155 of the Civil. Code provides that the prescription of an action, involving in the present case the 10-year prescriptive
period for filing an action on a written contract under Article 1144(1) of the Code, is interrupted by (a) the filing of an action, (b) a
written extrajudicial demand by the creditor, and (c) a written acknowledgment of the debt by the debtor. The effects of the last two
instances have already been decided by this Court, the rationale wherein should necessarily apply to the first.
The matter of the interruption of the prescriptive period by reason of a written extrajudicial demand by the creditor was decided
in Overseas Bank of Manila vs. Geraldez, et al.
5
in this wise:
. . . The interruption of the prescriptive period by written extrajudicial demand means that the said period would commence anew
from the receipt of the demand. That is the correct meaning of interruption as distinguished from mere suspension or tolling of the
prescriptive period.
xxx xxx xxx
A written extrajudicial demand wipes out the period that has already elapsed and starts anew the prescriptive period. . . .
xxx xxx xxx
That same view as to the meaning of interruption was adopted in Florendo vs. Organo, 90 Phil 483, 488, where it was ruled that
the interruption of the ten-year prescriptive period through a judicial demand means that "the full period of prescription
commenced to run anew upon the cessation of the suspension." When prescription is interrupted by a judicial demand, the full
time for the prescription must be reckoned from the cessation of the interruption. . . .
The interruption of the prescriptive period by reason of a written acknowledgment of the debt by the debtor was dealt with
in Philippine National Railways vs. National Labor Relations Commission, et al.,
6
thus:
Article 1155 of the Civil Code provides that the "prescription of actions is interrupted" inter alia, "when there is any written
acknowledgment of the debt by the debtor." This simply means that the period of prescription, when interrupted by such a written
acknowledgment, begins to run anew; and whatever time of limitation might have already elapsed from the accrual of the cause of
action is thereby negated and rendered inefficacious. . . .
xxx xxx xxx
. . . The effect of the interruption spoken of in Article 1155 is to renew the obligation, to make prescription run again from the date
of the interruption . . .

33

Based on the aforecited cases, Article 1155 has twice been interpreted to mean that upon the cessation of the suspension of the
prescriptive period, the full period of prescription commences to run anew. Petitioner, on the other hand, insists that in case of the
filing of an action, the prescriptive period is merely tolled and continues to run again, with only the balance of the remaining period
available for the filing of another action. This postulation of petitioner, if we are to adopt it, would result in an absurdity wherein
Article 1155 would be interpreted in two different ways, i.e., the prescriptive period is interrupted in case of an extrajudicial
demand and a written acknowledgment of a debt, but it is merely tolled where an action is filed in court.
In Vda. de Nator, it was held that:
. . . The filing of the case with the CFI arrested the period of prescription (Art. 1155 NCC), and the interruption of said period lasted
until the time that the dismissal for lack of jurisdiction became final. "When prescription is interrupted by a judicial demand, the full
time for the prescription must be reckoned from the cessation of the interruption". . . . The whole period during which the case had
been pending cannot be counted for arriving at the prescriptive period. In other words, the running of the period of prescription in
this particular case was interrupted on August 6, 1953, when the case in the CFI was filed and began to run again on August 30,
1958, when the same Court had dismissed the case. As the complaint was filed with the CIR on December 5, 1958, the action has
not yet prescribed.
This case obviously appears to have made conflicting statements since it proceeds upon a certain premise but arrives at a
different conclusion. Hence, we cannot agree that the statements therein sufficiently support the thesis of petitioner.
The case of Fulton Insurance Company is not clear either on the matter of the interruption of the prescriptive period where an
action is filed in court. It was there held that:
There are two school(s) of thought as to the legal effect of the cessation of the interruption by an intervening action upon the
period of prescription. There is the view expressed and perhaps, not without reasons, that the full period of prescription should
start to run anew, reckoned from the date of the cessation of the interruption. The contrary view is, that the cessation of the
interruption merely tolls the running of the remaining period of prescription, deducting from the full period thereof the time that has
already elapsed prior to the filing of the intervening action. Nevertheless, all discussion on this point is academic; considered in
the light of either view, We find that the second action is not barred.
In the aforesaid case, the defendant therein moved for the dismissal of the second case alleging that the filing of the first case
neither tolled nor interrupted the running of the prescriptive period. This Court ruled that the filing of the first action interrupted the
running of the period, and then declared that at any rate, the second action was filed within the balance of the period remai ning. It
concluded that the issue of whether the filing of the action merely tolled or it actually interrupted the running of the prescriptive
period was moot and academic because, in either case, the second action was still filed within the prescriptive period.
Consequently, the Fulton case cannotalso sustain the thesis of petitioner.
On the foregoing considerations, we are convinced and so hold that the correct interpretations of Article 1155 of the Civil Code are
reflected in and furnished by the doctrinal pronouncements in Overseas Bank of Manila andPhilippine National Railways
Company, not only because they are later in point of time but because the issue is squarely resolved in a decisive and logical
manner therein. Petitioner's submission would result in a bifurcated interpretation of Article 1155, aside from the irrational
conclusion that a judicial action itself cannot produce the same result on the prescriptive period as a mere extrajudicial demand or
an acknowledgment of the debt.
Accordingly, petitioner having failed to adduce any cogent reason or substantial argument to warrant a reconsideration of our
resolution of March 24, 1993, the present motion is hereby DENIED with FINALITY.
SO ORDERED.
Cabrera v. Tiano
Ciriaco Potestas and Gregoria Blanco, were parents of five children, Isabelo, Lourdes, Clemente, Josefina, and
Cresencia. Gregoria died before the second world war, together with Clemente, single. During their lifetime, the
spouses acquired properties, among which was a parcel of agricultural land, of about seven (7) hectares, located
at barrio Manga, municipality of Tangub, Misamis Occidental, planted to coconuts and fruit-bearing trees. On July
2, 1947, Ciriaco, the surviving husband and three (3) children (Isabelo, Lourdes and Cresencia), purportedly sold
the above mentioned parcel to herein defendant Mariano T. Tiano, for P3,500.00. At the time of the sale,
Cresencia was a minor, and the other child, Josefina, did not sign the deed of sale, and did not know about the
transaction.

34

Under date of June 20, 1957, in action for "Partition and Recovery of Real Estate, with Damages" was filed by
Josefina and Cresencia against Tiano. In the complaint, it was alleged that they were entitled to a portion of the
land, since Josefina did not sign the sale and Crescencia was a minor; that defendant Tiano had usurped the
portions belonging to them, to their damage and prejudice in the amount of P7,000.00, which consisted of their
share in the produce of the property, during the period of defendant's possession.
In answer, defendant claimed that the plaintiffs herein knew of the sale and that he was not aware of any defect in
the title of his vendors. As a Special Defense, defendant alleged that he was the absolute owner of the land by
acquisitive prescription of ten (10) years, from the date of purchase. Before the trial, the parties agreed to a
stipulation of facts, parts of which recite
x x x x x x x x x
3. That at the time of the sale, appearing in Doc. No. 54, Page 81, Book No. 7, S. 1947, in the book of Notary
Public Basilio Binaoro of Tangub, Mis. Occ., Cresencia was a minor being only 16 years old, while Josefina who
was long married and of legal age did not know about the sale and/or did not give her consent to the same;
4. That the plaintiffs commenced this case against the defendant on June 20, 1957 and the judicial summons was
issued by the Clerk of Court on June 21, 1957, but defendant received the same on July 2, 1957.
After the hearing, the court a quo rendered the following judgment
WHEREFORE, premises considered, the court hereby renders judgment declaring that the plaintiffs are entitled
each to 1/8 of the property in question and therefore Judgment is hereby ordered declaring them entitled to
partition the property in question in proportion of 1/8 each of them, plus damages for both of them in the amount
of P1,000.00 and attorney's fees in the amount of P200.00.
The trial court in the same decision, commissioned the Deputy Provincial Sheriff, to partition the property in
question and render a report within 30 days. Defendant moved for a reconsideration of the decision, contending
that prescription had already set in, and his (defendant's) title, had become irrevocable, and that the award of
damages had no factual and legal basis. The motion for reconsideration was denied on March 5, 1960. The
Commissioner's report, partitioning the property was submitted on April 11, 1960. Defendant perfected his appeal
on May 9, 1960, and on May 14, 1960, the same was given due course and elevated to this Court.
In claiming that prescription had taken place, appellant insists that the period should be counted from the date the
summons was served on him, which was on July 2, 1957. It was agreed, however, that the complaint for the
recovery of the land in question was presented on June 20, 1957, and the summons was sent out the following
day. The Civil Code, provides that
The prescription of actions is interrupted when they are filed before the court, when there is a written extra-judicial
demand by the creditors, and when there is any written acknowledgment of the debt of the debtor. (Art. 1155)
Since the sale of the property took place on July 2, 1947, the ten (10) year period within which to file the action
had not yet elapsed on June 20, 1957, when the complaint was presented. While it is true that the sale in question
had taken place before the effectivity of the new Civil Code and the law then on matter of prescription was Act No.
190, said law, however, contained no specific provision on the interruption of the prescriptive period; and the
established rule then, as it is the rule now, is that the commencement of the suit prior to the expiration of the
applicable limitation period, interrupts the running of the statute, as to all parties to the action (34 Am. Jur., Sec.
247, pp. 202-203; Peralta, et al. v. Alipio, G. R. No. L-8273, Oct. 24, 1955). The fact that summons was only
served on defendant on July 2, 1957, which incidentally and/or coincidentally was the end of the ten (10) year
period, is of no moment, since civil actions are deemed commenced from date of the filing and docketing of the
complaint with the Clerk of Court, without taking into account the issuance and service of summons (Sotelo v.
Dizon, et al., 67 Phil. 573). The contention that the period was not interrupted, until after defendant received the
summons is, therefore, without legal basis.
Defendant-appellant claims that he had already acquired full ownership of the property in question because the
judicial summons, which could civilly interrupt his possession (Art. 1123, N.C.C.), was received by him only on
July 2, 1957. Conceding, for the purposes of argument, that the article cited is applicable, still appellant cannot
avail himself of acquisitive prescription, for the simple reason that no finding was made by the trial court that his
possession from the time of the sale (July 2, 1947), was with just title, in good faith, in the concept of an owner,

35

public, peaceful, adverse and uninterrupted (Arts. 1117 & 1118, N.C.C.). Good faith is a question of fact which
must be proved (Art. 1127, N.C.C.). For the purposes of acquisitive prescription, just title must also be proved, it is
never presumed (Art. 1131, N.C.C.). The factual requisite of adverse possession do not appear in the stipulation
of facts and the trial court did not make findings to this effect. These circumstances could and/or should have
been ventilated, had the appeal been taken to the Court of Appeals. Defendant, however, having chosen to
appeal the decision directly to this Court, he is deemed to have waived questions of fact and raised only
questions of law. There being no factual finding by the lower court of the presence of the requisites of acquisitive
prescription this Court has to reject, as did the trial court, said defense. Moreover, on Jul y 2, 1957, when the
summons was received, the ten (10) years necessary for acquisitive prescription had not yet elapsed. In fact, said
period terminated on that very day.
As to the award of damages, We find Ourselves devoid of ample authority to review the same, since it involves
appreciation of facts. It cannot be denied, as found by the lower court, that plaintiffs herein are entitled to a share
in the land. Verily, they should also share in the produce, which, admittedly, was enjoyed by the defendant-
appellant herein.
WHEREFORE, the decision appealed from should be, as it is hereby affirmed. Costs against appellant in both
instances.
Ramos vs. Condez
On appeal from an order dismissing the case for the reason that the cause of action has prescribed.
On 22 May 1963, Alfonso Bun Ramos and his wife filed an action in the Court of First Instance of Sta. Cruz,
Laguna, which was docketed as Civil Case No. SC-429, against Emiliano Condez and his wife.
That on 25 June 1952, the defendants sold to the plaintiffs a parcel of land, with an area of two (2) hectares,
situated in the municipality of Mabitac, Laguna, under Tax Declaration No. 552-A, as evidenced by a notarial
document, annex A of the complaint; that in the early part of 1956, the plaintiffs "decided to cultivate the parcel of
land sold by the herein defendants, but much to plaintiffs' surprise, they discovered for the first time that the land
sold by the said defendants to the herein plaintiffs, belonged to another person other than the defendants, and
consequently, plaintiffs were not able to occupy and cultivate the parcel of land sold by herein defendants, to the
great damage and prejudice of the plaintiffs"; that the plaintiffs had informed the defendants of "such situation and
requested that the defendants deliver to them the two (2) hectares of land which the said defendants sold to the
herein plaintiffs"; "that defendant Emiliano Condez upon being informed of the said situation, wrote a letter to
plaintiff Alfonso Bun Ramos on or about 10 November 1956, promising to deliver the two hectares of land sold by
him to the plaintiffs, a true copy of said letter is hereto attached as annex B of this complaint"; that notwithstanding
repeated demands made by the plaintiffs on the defendants to deliver the land, the latter failed and refused to do
so. The prayer is: "1. Ordering the defendants to jointly and severally deliver to the plaintiffs the two hectares of
land adjoining the parcel of land described in paragraph 2 hereto or the actual market value thereof in the sum of
P12,000.00"; and "2. To sentence the defendants to pay attorney's fees equivalent to 25% of P12,000.00, plus
expenses of litigation and costs.
The defendants filed a motion to dismiss on two grounds: (1) That the action has prescribed; and (2) That the
complaint states no cause of action. On the first ground the defendants argue that as the deed of sale was
executed on 25 June 1952, and the action was filed on 22 May 1963, more than ten years had elapsed since the
accrual of the cause of action, hence, the action has prescribed. On the second ground, the contention is
anchored. on the following: "While the allegations of the complaint speak of a sale of a definite parcel of land,
which the defendants allegedly failed to deliver to the plaintiffs, the later in their prayer ask this Honorable Court to
order the defendants to jointly and severally deliver to the plaintiffs two hectares of land adjoining the parcel of
land described in paragraph 1 thereof, or the actual market value thereof in the sum of P12,000.00", thereby
evincing plaintiffs' "desire either to rescind the deed of sale or to demand for specific performance of the
contract of sale."
In their reply, the plaintiffs contended that, admitting that the cause of action had accrued on 25 June 1952,
however, in view of defendants' written acknowledgment of the validity of the deed of absolute sale and promise
to deliver the land which they have sold to the plaintiffs, as expressed in defendants' letter of 10 November 1956,
the running of the prescriptive period for the commencement of the action was tolled on that date; and, as an
action based upon written contracts prescribes in ten years, hence, the instant action which was filed on 22 May
1963, was commenced within the period of the statute of limitation.

36

Resolving the motion to dismiss, on 1 July 1963, the lower court dismissed the case reasoning thus:
The plaintiffs' action is evidently not for reconveyance as stated in the caption of the complaint, but one for relief
on the ground of fraud which prescribes in four years from the date of the discovery of the fraud, pursuant to
Article 1146, par. (1) of the new Civil Code. Since the complaint was filed only on May 22, 1963, more than four
years from November 10, 1956, the defendants' first ground, to the mind of the Court, is well taken.
In line with the foregoing, which renders unnecessary the consideration of the other ground, the court hereby
dismisses the case, with costs against the plaintiffs.
The question, then, is: What is the nature of the cause of action stated in the complaint?
In the opinion of the lower court, the action is "not for reconveyance" of real property "as stated in the caption of
the complaint", but one "for relief on the ground of fraud." To the mind of the lower court, the fraud consisted of
the act of the defendants in selling a piece of land which did not belong to them. In other words, by means of that
tortious act, the defendants received, and the plaintiffs parted with, a valuable consideration, which is the price of
the land. Indeed, that was the fraud committed by the defendants. But the question is: What, then, is the relief
sought by the plaintiffs in the complaint? The order states that the action is "not for reconveyance," without
specifying however, whether it is one for specific performance or rescission of the contract of sale, with damages.
Fortunately, the appellees have supplied the answer. In the motion to dismiss, the defendants said: "A perusal of
the body of the complaint will instantly reveal that either the plaintiffs desire to rescind the deed of sale or is
seeking a specific performance of the contract of sale." Truly, that is the cause of action alleged in the complaint.
The defendants' failure and refusal to deliver the land which they have sold to the plaintiffs, is the delict or wrong
done by the defendants giving rise to remedial right in favor of the plaintiffs who are now seeking to enforce that
right and to obtain redress for the wrong perpetrated by the defendants.
The test of the sufficiency of the facts alleged in the complaint, to constitute a cause of action, is whether or not,
admitting the facts alleged, a valid judgment can be rendered thereon. Examining the allegations of the complaint,
which are deemed admitted by the defendants for the purpose of the motion to dismiss, We find that the cause of
action is for a judicial declaration of plaintiffs', right to the land and recovery of the possession thereof, and failing
in this respect, they ask for damages.
It has not escaped our attention upon reading the complaint, that it suffers ambiguity and vagueness in its
allegations. Thus, as pointed out by the appellees while the averments clearly indicate that the cause of action is
either for specific performance or rescission of the contract of sale, however, in the first paragraph of the prayer a
relief is asked which is not responsive to the allegations in the body of the complaint. Under the circumstances,
the remedy of the defendants is to file a motion for a bill of particulars, but not a motion to dismiss. Thus, in the
case of Abe vs. Foster Wheeler Corp., L-14785, Nov. 29, 1960, it was held that a complaint must contain ultimate
facts constituting plaintiff's cause of action. A complaint would be sufficient if it contains sufficient notice of the
cause of action even though the allegations may be vague or indefinite, in which event, the proper recourse would
be, not a motion to dismiss, but a motion for a bill of particulars.
Under Article 1144 of the Civil Code (new), an action upon a written contract ". . . must be brought within ten
years from the time the cause of action accrues." There is no denying that, in the instant case, the plaintiffs' cause
of action, under the deed of absolute sale, annex A, has accrued on June 25, 1952, but, in view of the defendants'
letter, dated November 10, 1956, acknowledging the validity of the deed of absolute sale and promising to comply
with their commitments as embodied in the deed of sale that they will deliver the land which they have sold to the
plaintiffs, the running of the period of limitation of action was interrupted on that date, November 10, 1956.
Considering that the action was filed on May 22, 1963, evidently, the cause of action has not prescribed, because
it was filed within the period of limitation of actions. (Article 1155, New Civil Code.)
Upon the foregoing considerations, the order appealed from is set aside and revoked, and the case is remanded
to the lower court for further proceedings. Costs against the defendants.

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Obligations and Contracts 1139-1155

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