#1

[G.R. No. L-10605. June 30, 1958.]

PRECILLANO NECESITO, ETC., Plaintiff-Appellant, v. NATIVIDAD PARAS, ET AL.,

Defendants-Appellees.

[G.R. No. L-10606. June 30, 1958.]

GERMAN NECESITO, ET AL., Plaintiffs-Appellants, v. NATIVIDAD PARAS, ET AL.,

Defendants-Appellees.

Tomas Besa and Federico Agrava for Appellants.

Jose W. Diokno for Appellees.

SYLLABUS

1. CARRIERS; LIABILITY FOR DAMAGES CAUSED BY MECHANICAL DEFECTS. —

While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held
to answer for the laws its equipment if such flaws were at all discoverable. In this connection, the
manufacturer of the defective appliance is considered in law the agent of the carrier, and the
good repute of the manufacturer will not relieve the carrier from liability. The rationale of the
carrier’s liability is the fact that the passenger has no privity with the manufacturer of the
defective equipment; hence, he has no remedy against him, while the carrier usually has.

2. DAMAGES; MORAL DAMAGES FOR BREACH OF CONTRACT, WHEN

RECOVERABLE. — Under Article 2220 of the new Civil Code, in case to suits for breach of
contract, moral damages are recoverable only where the defendant acted fraudulently or in bad
faith, and there is none in the case at bar. (But see Resolution on the Motion to Reconsider.)

3. CARRIERS; MECHANICAL DEFECTS. — A carrier is liable to its passengers for damages

caused by mechanical defects of the conveyance.

4. ID.; ID.; WHERE INJURY IS PATENT, INDEMNITY CANNOT BE DENIED. — Where

the injury is patent and not denied, the court is empowered to calculate moderate damages,
although there is no definite proof of the pecuniary loss suffered by the injured party.

5. ID.; ID.; RIGHT OF HEIRS OF DECEASED PASSENGER TO RECOVER MORAL

DAMAGES. — In case of accident due to a carrier’s negligence, the heirs of a deceased
passenger may recover moral damages, even though a passenger who is injured, but manages to
survive, is not entitled to them. This special rule (Arts. 1264 and 2206, No. 3) in case of death
controls the general rule of Article 2220.

6. ATTORNEY’S FEES; LITIGANT CANNOT BE DEPRIVED OF FEE IF HE IS ENTITLED

TO RECOVERY. — A litigant who improvidently stipulates higher counsel fees than those to
which he is entitled, does not for that reason earn the right to a larger indemnity; but, by parity of
reasoning, he should not be deprived of counsel fees if by law he is entitled to recover them.

DECISION

REYES, J.B.L., J.:

These cases involve actions ex contractu against the owners and operators of the common carrier
known as Philippine Rabbit Bus Lines, filed by one passenger, and the heirs of another, who
were injured as a result of the fall into a river of the vehicle in which they were riding.

In the morning of January 28, 1954, Severina Garces and her one- year old son, Precillano
Necesito, carrying vegetables, boarded passenger auto truck or bus No. 199 of the Philippine
Rabbit Bus Lines at Agno, Pangasinan. The passenger truck, driven by Francisco Bandonell,
then proceeded on its regular run from Agno to Manila. After passing Mangatarem, Pangasinan,
truck No. 199 entered a wooden bridge, but the front wheels swerved to the right; the driver lost
control, and after wrecking the bridge’s wooden rails, the truck fell on its right side into a creek
where water was breast deep. The mother, Severina Garces, was drowned; the son, Precillano
Necesito, was injured, suffering abrasions and fracture of the left femur. He was brought to the
Provincial Hospital at Dagupan, where the fracture was set but with fragments one centimeter
out of line. The money, wrist watch and cargo of vegetables were lost.

Two actions for damages and attorney’s fees totalling over P85,000 having been filed in the
Court of First Instance of Tarlac (Cases Nos. 908 and 909) against the carrier, the latter pleaded
that the accident was due to "engine or mechanical trouble" independent or beyond the control of
the defendants or of the driver Bandonell.

After joint trial, the Court of First Instance found that the bus was proceeding slowly due to the
bad condition of the road; that the accident was caused by the fracture of the right steering
knuckle, which was defective in that its center or core was not compact but "bubbled and
cellulous", a condition that could not be known or ascertained by the carrier despite the fact that
regular thirty-day inspections were made of the steering knuckle, since the steel exterior was
smooth and shiny to the depth of 3/16 of an inch all around; that the knuckles are designed and
manufactured for heavy duty and may last up to ten years; that the knuckle of bus No. 199 that
broke on January 28, 1954, was last inspected on January 5, 1954, and was due to be inspected
again on February 5th. Hence, the trial court, holding that the accident was exclusively due to
fortuitous event, dismissed both actions. Plaintiffs appealed directly to this Court in view of the
amount in controversy.

We are inclined to agree with the trial court that it is not likely that bus No. 199 of the Philippine
Rabbit Lines was driven over the deeply rutted road leading to the bridge at a speed of 50 miles
per hour, as testified for the plaintiffs. Such conduct on the part of the driver would have
provoked instant and vehement protest on the part of the passengers because of the attendant
discomfort, and there is no trace of any such complaint in the records. We are thus forced to
assume that the proximate cause of the accident was the reduced strength of the steering knuckle
of the vehicle caused by defects in casting it. While appellants hint that the broken knuckle
exhibited in court was not the real fitting attached to the truck at the time of the accident, the
records show that they registered no objection on that ground at the trial below.

The issue is thus reduced to the question whether or not the carrier is liable for the manufacturing
defect of the steering knuckle, and whether the evidence discloses that in regard thereto the
carrier exercised the diligence required by law (Art. 1755, new Civil Code).

"ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for
all the circumstances."cralaw virtua1aw library

It is clear that the carrier is not an insurer of the passengers’ safety. His liability rests upon
negligence, his failure to exercise the "utmost" degree of diligence that the law requires, and by
Art. 1756, in case of a passenger’s death or injury the carrier bears the burden of satisfying the
court that he has duly discharged the duty of prudence required. In the American law, where the
carrier is held to the same degree of diligence as under the new Civil Code, the rule on the
liability of carriers for defects of equipment is thus expressed: "The preponderance of authority
is in favor of the doctrine that a passenger is entitled to recover damages from a carrier for an
injury resulting from a defect in an appliance purchased from a manufacturer, whenever it
appears that the defect would have been discovered by the carrier if it had exercised the degree
of care which under the circumstances was incumbent upon it, with regard to inspection and
application of the necessary tests. For the purposes of this doctrine, the manufacturer is
considered as being in law the agent or servant of the carrier, as far as regards the work of
constructing the appliance. According to this theory, the good repute of the manufacturer will not
relieve the carrier from liability" (10 Am. Jur. 205, s, 1324; see a]so Pennsylvania R. Co. v. Roy,
102 U. S. 451; 20 L. Ed. 141; Southern R. Co. v. Hussey, 74 ALR 1172; 42 Fed. 2d 70; and Ed
Note, 29 ALR 788; Ann Cas. 1916E 929).

The rationale of the carrier’s liability is the fact that the passenger has neither choice nor control
over the carrier in the selection and use of the equipment and appliances in use by the carrier.
Having, no privity whatever with the manufacturer or vendor of the defective equipment, the
passenger has no remedy against him, while the carrier usually has. It is but logical, therefore,
that the carrier, while not an insurer of the safety of his passengers, should nevertheless be held
to answer for the flaws of his equipment if such flaws were at all discoverable. Thus Hannen, J.,
in Francis v. Cockrell, LR 5 Q. P. 184, said:jgc:chanrobles.com.ph

"In the ordinary course of things, the passenger does not know whether the carrier has himself
manufactured the means of carriage, or contracted with someone else for its manufacture. If the
carrier has contracted with someone else the passenger does not usually know who that person is,
and in no case has he any share in the selection. The liability of the manufacturer must depend on
the terms of the contract between him and the carrier, of which the passenger has no knowledge,
and over which he can have no control, while the carrier can introduce what stipulations and take
what securities he may think proper. For injury resulting to the carrier himself by the
manufacturer’s want of care, the carrier has a remedy against the manufacturer; but the passenger
has no remedy against the manufacturer for damage arising from a mere breach of contract with
the carrier . . . Unless, therefore, the presumed intention of the parties be that the passenger
should, in the event of his being injured by the breach of the manufacturer’s contract, of which
he has no knowledge, be without remedy, the only way in which effect can be given to a
different intention is by supposing that the carrier is to be responsible to the passenger, and to
look for his indemnity to the person whom he selected and whose breach of contract has caused
the mischief." (29 ALR 789)

And in the leading case of Morgan v. Chesapeake & O. R. Co. 15 LRA (NS) 790, 16 Ann. Cas.
608, the Court, in holding the carrier responsible for damages caused by the fracture of a car
axle, due to a "sand hole" in the course of moulding the axle, made the following observations.

"The carrier, in consideration of certain well-known and highly valuable rights granted to it by
the public, undertakes certain duties toward the public, among them being to provide itself with
suitable and safe cars and vehicles in which to carry the traveling public. There is no such duty
on the manufacturer of the cars. There is no reciprocal legal relation between him and the public
in this respect. When the carrier elects to have another build its cars, it ought not to be absolved
by that fact from its duty to the public to furnish safe care. The carrier cannot lessen its
responsibility by shifting its undertaking to another’s shoulders. Its duty to furnish safe care is
side by side with its duty to furnish safe track, and to operate them in a safe manner. None of its
duties in these respects can be sublet so as to relieve it from the full measure primarily exacted of
it by law. The carrier selecta the manufacturer of its cars, if it does not itself construct them,
precisely as it does those who grade its road, and lay its tracks, and operate its trains. That it does
not exercise control over the former is because it elects to place that matter in the hands of the
manufacturer, instead of retaining the supervising control itself. The manufacturer should be
deemed the agent of the carrier as respects its duty to select the material out of which its cars and
locomotive are built, as well as in inspecting each step of their construction. If there be tests
known to the crafts of ear builders, or iron moulders, by which such defects might be discovered
before the part was incorporated into the car, then the failure of the manufacturer to make the test
will be deemed a failure by the carrier to make it. This is not a vicarious responsibility. It
extends, as the necessity of this business demands, the rule of respondent superior to a situation
which falls clearly within its scope and spirit. Where an injury is inflicted upon a passenger by
the breaking or wrecking of a part of the train on which he is riding, it is presumably the result of
negligence at some point by the carrier. As stated by Judge Story, in Story on Bailments, sec.
601a: ‘When the injury or damage happens to the passenger by the breaking down or overturning
of the coach, or by any other accident occurring on the ground, the presumption prima facie is
that it occurred by the negligence of the coachmen, and onus probandi is on the proprietors of the
coach to establish that there has been no negligence whatever, and that the damage or injury has
been occasioned by inevitable casualty, or by some cause which human care and foresight could
not prevent; for the law will, in tenderness to human life and limb, hold the proprietors liable for
the slightest negligence, and will compel them to repel by satisfactory proofs every imputation
thereof.’ When the passenger has proved his injury as the result of a breakage in the car or the
wrecking of the train on which he was being carried, whether the defect was in the particular car
in which he was riding or not, the burden is then cast upon the carrier to show that it was due to a
cause or causes which the exercise of the utmost human skill and foresight could not prevent.
And the carrier in this connection must show, if the accident was due to a latent defect in the
material or construction of the car, that not only could it not have discovered the defect by the
exercise of such care, but that the builders could not by the exercise of the same care have
discovered the defect or foreseen the result. This rule applies the same whether the defective car
belonged to the carrier or not."cralaw virtua1aw library

In the case now before us, the record is to the effect that the only test applied to the steering
knuckle in question was a purely visual inspection every thirty days, to see if any cracks
developed. It nowhere appears that either the manufacturer or the carrier at any time tested the
steering knuckle to ascertain whether its strength was up to standard, or that it had no hidden
flaws that would impair that strength. And yet the carrier must have been aware of the critical
importance of the knuckle’s resistance; that its failure or breakage would result in loss of balance
and steering control of the bus, with disastrous effects upon the passengers. No argument is
required to establish that a visual inspection could not directly determine whether the resistance
of this critically important part was not impaired. Nor has it been shown that the weakening of
the knuckle was impossible to detect by any known test; on the contrary, there is testimony that it
could be detected. We are satisfied that the periodical visual inspection of the steering knuckle as
practiced by the carrier’s agents did not measure up to the required legal standard of "utmost
diligence of very cautious persons" — "as far as human care and foresight can provide", and
therefore that the knuckle’s failure can not be considered a fortuitous event that exempts the
carrier from responsibility (Lasam v. Smith, 45 Phil, 607; Son v. Cebu Autobus Co., 94 Phil.,
892.

It may be impracticable, as appellee argues, to require of carriers to test the strength of each and
every part of its vehicles before each trip; but we are of the opinion that a due regard for the
carrier’s obligations toward the traveling public demands adequate periodical tests to determine
the condition and strength of those vehicle portions the failure of which may endanger the safety
of the passengers.

As to the damages suffered by the plaintiffs, we agree with appellee that no allowance may be
made for moral damages, since under Article 2220 of the new Civil Code, in case of suits for
breach of contract, moral damages are recoverable only where the defendant acted fraudulently
or in bad faith, and there is none in the case before us. As to exemp]ary damages, the carrier has
not acted in a "wanton, fraudulent, reckless, oppressive or malevolent manner" to warrant their
award. Hence, we believe that for the minor Precillano Necesito (G. R No. L-10605), an
indemnity of P5,000 would be adequate for the abrasions and fracture of the femur, including
medical and hospitalization expenses, there being no evidence that there would be any permanent
impairment of his faculties or bodily functions, beyond the lack of anatomical symmetry. As for
the death of Severina Garces (G. R. No. L-10606) who was 33 years old, with seven minor
children when she died, her heirs are obviously entitled to indemnity not only for the incidental
loses of property (cash, wrist watch and merchandise) worth P394 that she carried at the time of
the accident and for the burial expenses of P490, but also for the loss of her earnings (shown to
average P120 a month) and for the deprivation of her protection, guidance and company. In our
judgment, an award of P15,000 would be adequate (cf Alcantara v. Surro, 49 Off. Gaz. 2769; 93
Phil., 472).
The low income of the plaintiffs-appellants makes an award for attorney’s fees just and equitable
(Civil Code, Art. 2208, par. 11). Considering that the two cases filed were tried jointly, a fee of
P3,500 would be reasonable.

In view of the foregoing, the decision appealed from is reversed, and the defendants-appellees
are sentenced to indemnify the plaintiffs-appellants in the following amounts: P5,000 to
Precillano Necesito, and P15,000 to the heirs of the deceased Severina Garces, plus P3,500 by
way of attorney’s fees and litigation expenses. Costs against defendants-appellees. So ordered.

Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Concepcion and Endencia, JJ., concur.

Felix, J., concurs in the result.

RESOLUTION

September 11, 1958 - REYES, J.B.L., J.:

Defendants-appellees have submitted a motion asking this Court to reconsider its decision of
June 30, 1958, and that the same be modified with respect to (1) its holding the carrier liable for
the breakage of the steering knuckle that caused the autobus No. 199 to overturn, whereby the
passengers riding in it were injured; (2) the damages awarded, that appellees argue to be
excessive; and (3) the award of attorneys’ fees.

(1) The rule prevailing in this jurisdiction as established in previous decisions of this Court, cited
in our main opinion, is that a carrier is liable to its passengers for damages caused by mechanical
defects of the conveyance. As early as 1924, in Lasam v. Smith, 45 Phil. 659 this Court
ruled:jgc:chanrobles.com.ph

"As far as the record shows, the accident was caused either by defects in the automobile or else
through the negligence of its driver. That is not caso fortuito."cralaw virtua1aw library

And in Son v. Cebu Autobus Company, 94 Phil., 892, this Court held a common carrier liable in
damages to a passenger for injuries caused by an accident due to the breakage of a faulty drag-
link spring.

It can be seen that while the courts of the United States are at variance on the question of a
carrier’s liability for latent mechanical defects, the rule in this jurisdiction has been consistent in
holding the carrier responsible. This Court has quoted from American and English decisions, not
because it felt bound to follow the same, but merely in approval of the rationale of the rule as
expressed therein, since the previous Philippine cases did not enlarge on the ideas underlying the
doctrine established thereby.

The new evidence sought to be introduced do not warrant the grant of a new trial, since the
proposed proof was available when the original trial was held. Said evidence is not newly
discovered.

(2) With regard to the indemnity awarded to the child Precilliano Necesito, the injuries suffered
by him are incapable of accurate pecuniary estimation, particularly because the full effect of the
injury is not ascertainable immediately. This uncertainty, however, does not preclude the right to
an indemnity, since the injury is patent and not denied (Civil Code, Art. 2224). The reasons
behind this award are expounded by the Code Commission in its report:jgc:chanrobles.com.ph

"There are cases where from the nature of the case, definite proof of pecuniary loss cannot be
offered, although the court is convinced that there has been such loss. For instance, injury to
one’s commercial credit or to the goodwill of a business firm is often hard to show with certainty
in terms of money. Should damages be denied for that reason? The judge should be empowered
to calculate moderate damages in such cases, rather than that the plaintiff should suffer, without
redress, from the defendant’s wrongful act." (Report of the Code Commission, p. 75)

In awarding to the heirs of the deceased Severina Garces an indemnity for the loss of her
"guidance, protection and company," although it is but moral damage, the Court took into
account that the case of a passenger who dies in the course of an accident, due to the carrier’s
negligence constitutes an exception to the general rule. While, as pointed out in the main
decision, under Article 2220 of the new Civil Code there can be no recovery of moral damages
for a breach of contract in the absence of fraud malice) or bad faith, the case of a violation of the
contract of carriage leading to a passenger’s death escapes this general rule, in view of Article
1764 in connection with Article 2206, No. 3 of the new Civil Code.

"ART. 1764. Damages in cases comprised in this Section shall be awarded in accordance with
Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a
passenger caused by the breach of contract by a common carrier."cralaw virtua1aw library

"ART. 2206. . . .

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased."cralaw
virtua1aw library

Being a special rule limited to cases of fatal injuries, these articles prevail over the general rule
of Art. 2220. Special provisions control general ones (Lichauco & Co. v. Apóstol, 44 Phil. 138;
Sancio v. Lizarraga, 55 Phil. 601).

It thus appears that under the new Civil Code, in case of accident due to a carrier’s negligence,
the heirs of a deceased passenger may recover moral damages, even though a passenger who is
injured, but manages to survive, is not entitled to them. There is, therefore, no conflict between
our main decision in the instant case and that of Cachero v. Manila Yellow Taxi Cab Co., 101
Phil., 523, where the passenger suffered injuries, but did not lose his life.

(3) In the Cachero case this Court disallowed attorneys’ fees to the injured plaintiff because the
litigation arose out of his exaggerated and unreasonable demands for an indemnity that was out
of proportion with the compensatory damages to which he was solely entitled. Put in the present
case, plaintiffs’ original claims can not be deemed a priori wholly unreasonable, since they had a
right to indemnity for moral damages besides compensatory ones, and moral damages are not
determined by set and invariable bounds.

Neither does the fact that the contract between the passengers and their counsel was on a
contingent basis affect the former’s right to counsel fees. As pointed out for appellants, the
Court’s award is an indemnity to the party and not to counsel. A litigant who improvidently
stipulates higher counsel fees than those to which he is lawfully entitled, does not for that reason
earn the right to a larger indemnity; but, by parity of reasoning, he should not be deprived of
counsel fees if by law he is entitled to recover them.

We find no reason to alter the main decision heretofore rendered. Ultimately, the position taken
by this Court is that a common carrier’s contract is not to be regarded as a game of chance
wherein the passenger stakes his limb and life against the carrier’s property and profits.

Wherefore, the motion for reconsideration is hereby denied. So ordered.

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Concepcion, Endencia
and Felix, JJ., concur.

#2
Agcaoili vs. GSIS, 165 SCRA 1
digested by LLB 1-4 College of Law, Polytechnic University of the Philippines

Facts: In this case, appellant GSIS approved an application of the appellee Agcaoli for the
purchase of a house and lot in the GSIS Housing Project at Nangka, Marikina, subject to the
condition that the latter should forthwith occupy the house, a condition that Agcaoli tried to
fulfill but could not because the house was absolutely uninhabitable. However, Agcaoli ask a
homeless friend, a certain Villanueva, to stay in the premises as some sort of watchman, pending
completion of the construction of the house.
Agcaoli after paying the first installment and other fees, having thereafter refused to make
further payment of other stipulated installments until GSIS had made the house habitable; and
appellant having refused to do so, opting instead to cancel the award and demanded the vacation
by Agcaoli of the premises; and the latter having sued the GSIS in the Court of First Instance of
Manila for specific performance with damages and having obtained a favorable judgment, the
cases was appealed by the GSIS.
Issue: Whether or not Agcaoli is entitled for specific performance with damages.
Held: Appeal of GSIS must fail.
There was then a perfected contract of sale between the parties; there had been a meeting of
minds upon the purchase by Agcaoli of a determinate house and lot from GSIS at a definite price
which is payable in amortizations and from that moment the parties acquired the right to
reciprocally demand performance. It was, to be sure, the duty of the GSIS, as seller, to deliver
the thing soled in acondition suitable for its enjoyment by the buyer, in other words to deliver the
house subject of the contract in a reasonably livable state. This it failed to do.
Since GSIS failed to fulfill its obligation, and was not willing to put the house in a habitable
state, it cannot invoke Agcaoli’s suspension of payment as cause to cancel the contract between
them. In recipient obligation, neither party incur in delay of the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. Nor may the GSIS
succeed in justifying its cancellation of the award by the claim tha Agcaoli had not complied
with the condition of occupying the house within three (3) days. The record shows that Agcaoli
did try to fulfill the condition.
Finally appellant having caused the ambiguity as the exact prestation of the agreement, the
question of interpretation arising therefrom, should be resolved against it.

#3
Facts: The private respondent entered into a contract of lease with petitioner for a period of three (3)
years, that is, from 1976 to 1979. After the expiration of the contract, the lessor wishes the lessee to
evacuate the premises but the latter refuses. Hence the lessor filed an action of ejectment in the
CTC of Manila. The case was terminated by a judicially approved compromise agreement of the
parties in which it provides " that the lease shall be renewed every three years … as long as the
lessee needed the premises and can pay the said increases. The lessee shall give notice of his
intent to renew sixty (60) days before the expiration of the term. " On August 1985, lessee informed
his lessor in writing of his intention to renew the contract of lease for another term, but the lessor did
not agree to renew the contract. On January 1986, because of lessee's refusal to vacate the
premises, lessor filed another ejectment suit in the Metropolitan Trial Court of Manila. In its decision
on September 1987, the said court dismissed the complaint on the grounds that according to the
compromise agreement, it allows the lessee to stay on the premises as long as he needs it and can
pay rents. The petitioner appealed in the RTC and CA, both affirmed the decision of the MeTC.

Issue: Whether or not a compromise agreement, which allows the lessee to stay on the premises as
long as he can pay the rent, is valid?

Held: The Supreme Court ruled that the compromise agreement is invalid. Art. 1182 of the Civil
Code provides, that when the fulfillment of the conditions depends upon the sole will of the debtor
(lessee), the conditional obligation is void. The conditional obligation in the case is the disputed
stipulation in which " it allows the defendant to stay on the premises as long as he can pay the rent ".
According to the SC, it is a purely potestative condition because it leaves the effectivity and
enjoyment of leasehold rights to the sole and exclusive will of the lessee to pay the rent. In the case
of Encarnacion vs Baldomar, the SC ruled that contract of lease, which authorized the lessee to
continue occupying the premises as long as they paid the rents, is invalid. Because the lessor would
never be able to discontinue the said lease even if he wanted to do so. Thus the stipulation should
be construed that the contract of lessee is for definite period of 3 years, and the renewal of the
contract will only take effect if both of the parties decided to renew the lease. Therefore the SC
reversed the decision of the CA, and ordered the private respondent to immediately vacate the
leased premises.

Civil Law 2- ObliCon- Francisco Lao Lim vs Court of Appeals and Benito Villavicencio Dy
Case of Francisco Lao Lim vs Court of Appeals and Benito Villavicencio Dy
G.R.No. 87047 31October1990

This case is with regard to Art 1182 of the NCC- Potestative Condition- Stipulation dependent
upon the sole will of the debtor

FACTS OF THE CASE:

Records show that Francisco Lim, entered into a contract of lease with Benito Dy for a period of
3 years, from 1976 to 1979. After the stipulated term expired the respondent refused to leave the
premises, so Francisco Lim filed an ejectment suit against Benito Dy. This case was then taken
over by a judicially approved compromise agreement which provides an automatic increase in
rent of 20% every 3 years. On 1985 Dy, informed Lim of his intention to renew the lease up to
1988, Lim did not agree to the renewal.
In 1987 another ejectment suit was filed by Lim after the failure of Dy to vacate the premises. It
was dismissed by the RTC and later affirmed by the CA for the following reasons: (1) the
stipulation in the compromise agreement which allows the lessee (Benito Dy) to stay on the
premises as long as he needs it and can pay rents is valid, being a resolutory condition, and
therefore beyond the ambit of art 1308 of the NCC; and (2) the compromise agreement has the
effect of res judicata.

ISSUES OF THE CASE:

Was the stipulation in the compromise agreement which allows the lessee to stay on the premises
as long as he needs it and can pay rents is valid?

- No, since the stipulation “for as long as the defendant needed the premises and can meet and
pay said increases” is a purely potestative condition because it leaves the effectivity and
enjoyment of leasehold rights to the sole and exclusive will of the lessee.
- The continuance, effectivity, and fulfillment of a contract of lease cannot be made to depend
exclusively upon the free and uncontrolled choice of the lessee between continuing payment of
the rentals or not, completely depriving the owner of any say in the matter. Mutuality does not
obtain in such a contract of lease and no equality exists between the lessor and the lessee.
HELD:

The decision of the Court of Appeals is REVERSED AND SET ASIDE. Benito Dy is ordered to
immediately vacate and return the possession of the premises and pay the monthly rentals due
thereon in accordance with the compromise agreement until he shall have actually vacated the
same. This Judgment is immediately executory.

Obligations and Contracts Terms:

• Potestative Condition- This can be found in Art 1182 of the NCC. A potestative condition
speaks of fulfillment of an obligation rests solely upon the will of the debtor. An obligation
which is subject to a suspensive potestative condition is non- demandable, hence it is void. If it
is the debtor himself who determines the fulfillment of the condition, such an agreement
produces no juridical effect that can be enforced, and thus null

I hope this helps.

Jeff David

#4
Ang vs. CA, 170 SCRA 286
FACTS:
 Ernesto and Rosalinda Ang, brother and sister, are the owners of 3 parcels of land
located at Quezon City with an aggregate area of 2,096 sq. m which they purchased
at a price of P680,000.00
 Negotiations were undertaken for the sale of the properties between the Ang as
sellers and Lee Chuy Realty Corporation, through its president Henry Lee Chuy as
buyer.
 Lee Chuy issued in favor of Ang a check in the amount of P50,000.00 together with a
receipt embodying the terms and conditions of their agreement indicating the agreed
total price of P1,600,000.
 The accompanying receipt was not returned by Ang and instead another receipt
prepared and signed by Ang which did not state the agreed price and forwarded to
Lee Chuy.
 Ang demanded to Lee Chuy to pay the balance of the purchase price and failure to do
so will result in the cancellation of their agreement.
 Lee Chuy replied that they had been ready since December to perform its part of the
agreement while Ang had not yet complied with their undertaking to clear the subject
properties of the obstructions thereon
 Ang demanded the refund of the P 50,000.00 down payment on account of the failure
of Ang to comply with their undertaking and their subsequent withdrawal from the sale.
 Upon the failure of the Ang to return the down payment, Lee Chuy filed a complaint for
the collection of a sum of money with damages before RTC.
 The trial court rendered its decision in favor of Ang.
 CA reversed the RTC decision and held that Ang were the ones who breached the
agreement.
ISSUE:
1. What is the agreed price for the sale of the properties
2. Whether or not Ang breach the agreement
RULING:
1. There is no doubt that there was a perfected contract for the sale as evidenced by
the down payment of P50,000.00.
 If the price was really P2,340,000, they could have easily written the amount in the
receipt. Ang were the ones who clearly caused the obscurity when they omitted the
purchase price in the receipt they prepared and signed. Hence, such obscurity must
be construed against them.
 If the true price was P2,340,000, it would be unusual for Ang to enter into such an
agreement with Chua at a lesser purchase price. The only logical conclusion is that
Ang had intentionally omitted the price of P1,600,000 in the receipt they signed
either to compel Lee Chuy to agree to a price increase or to enable them to back out
of their agreement notwithstanding their plan to reduce their capital gains tax liability.
* The claim of Ang is that they could no longer accept the offers from Dolora Chua
because of their previous commitment with Lee Chuy. - This pretension is not supported
by the evidence. The records show that Ang had entered into an "Agreement of
Purchase or Sale" with Dolora 1 day before the date of the receipt of down payment.
* Ang also argue that the document is an agreement and not a mere offer.- We find no
cogent basis to view the same as a mere offer. It is clearly stated in the agreement that
petitioners received P20,000 from Chua as down payment with the balance of the
purchase price of P2,160,000.00 to be paid in full at the time the land shall have been
cleared and that Ang bind themselves to deliver to Chua the deed of sale upon full
payment.
2. Yes, Ang is liable to refund the P 50, 000 downpayment of Lee Chuy.
 CA found that Ang breached the agreement when they failed to undertake fulfillment
of the 2 conditions; (1) that Ang will remove and clear the subject property of all
 occupants and obstructions and (2) that when the property is cleared of all
occupants and obstructions, Ang shall deliver a deed of absolute sale in favor of Lee
Chuy with all pertinent papers necessary.
 However, such breach does not warrant a resolution of the contract. While it is true
that in reciprocal obligations, such as the contract of purchase and sale, the power
to rescind is implied and any of the contracting parties may, upon non-fulfillment by
the other party of his part of the obligation, resolve the contract, rescission wig not
be permitted for a slight or casual breach of the contract. Rescission may be had
only for such breaches that are so substantial and fundamental as to defeat the
object of the parties in making the agreement.
 The two conditions that were breached by petitioners are not essential for the
fulfillment of the obligations to but merely an incidental undertaking. The rescission
of the contract may not be allowed on this ground alone.
 Lee Chuy at first did not seek to rescind the contract on the basis of the non-
fulfillment of these conditions. Lee in fact sought definite advice from Ang as to when
they can comply with the conditions. Indeed, it was the failure of the Ang to comply
with the conditions of the agreement that caused the delay in the payment by Lee.
 When Ang refused to proceed with the sale unless Lee agreed to pay the higher
price, Ang thereby committed a serious breach of the agreement. There was a
perfected contract of sale and the purchase price was set at P1,600,000. Ang cannot
increase the purchase price agreed upon without the consent of private respondent.
Lee had the right to rescind the agreement.
 Since Ang had already sold the properties to Chua, they can no longer perform to
deliver the property to Lee. This is another breach of their agreement. CA aptly
characterized the actuations of Ang to be "double-dealing."

#5
Angeles vs Calasanz 135 SCRA 323 (1985)
FACTS
1. On December 19, 1957, defendants-appellants Ursula Torres Calasanz and Tomas Calasanz and plaintiffs -
appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in
Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum.
2. The plaintiffs-appellees made a downpayment of P392.00 upon the execution of the contract. They
promised to pay the balance in monthly installments of P41.20 until fully paid, the installments being due
and payable on the 19th day of each month.
3. The plaintiffs appellees paid the monthly installments until July 1966, when their aggregate payment already
amounted to P4,533.38. On numerous occasions, the defendants-appellants accepted and received
delayed installment payments from the plaintiffs-appellees.
4. On December 7, 1966, the defendants- appellants wrote the plaintiffs-appellees a letter requesting the
remittance of past due accounts. On January 28, 1967, the defendants-appellants cancelled the said
 contract because the plaintiffs -appellees failed to meet subsequent payments. The plaintiffs' letter with their
plea for reconsideration, of the said cancellation was denied by the defendants-appellants.
5. The plaintiffs-appellees filed Civil Case No. 8943 with the Court of First Instance of Rizal, Seventh Judicial
District Branch X to compel the defendants-appellants to execute in their favor the final deed of sale alleging
inter alia that after computing all subsequent payments for the land in question, they found out that they
have already paid the total amount of P4,533.38 including interests, realty taxes and incidental expenses for
the registration and transfer of the land. CFI rendered a ruling favor of the plaintiffs-appellees prompting
Calasanz spouses to appeal.
ISSUES
1. WON the contract to sell has been automatically and validly cancelled by the defendants-appellants Calasanz
spouses
2. WON the contract partakes of a contract of adhesion and therefore must be strictly construed against the one who
drafted it (defendants-appellants)
HELD
1. NO. "The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for
such substantial and fundamental breach as would defeat the very object of the parties in making the agreement.
(Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil. 821, 827) The question of whether a breach of a contract is
substantial depends upon the attendant circumstances.
- The breach of the contract adverted to by the defendants-appellants is so slight and casual when we consider that
apart from the initial downpayment of P392.00 the plaintiffs -appellees had already paid the monthly installments for a
period of almost nine (9) years. In other words, in only a short time, the entire obligation would have been paid.
Furthermore, although the principal obligation was only P3,920.00 excluding the 7 percent interests, the plaintiffs-
appellees had already paid an aggregate amount of P4,533.38. To sanction the rescission made by the defendants-
appellants will work injustice to the plaintiffs-appellees. (See J.M. Tuazon and Co., Inc. v. Javier, 31 SCRA 829) It
would unjustly enrich the defendants-appellants.

- Article 1234 of the Civil Code which provides that:

“If the obligation has been substantially performed in good faith, the obligor may recovers though there had been a
strict and complete fulfillment, less damages
suffered by the obligee."
- Also militates against the unilateral act of the defendants-appellants in cancelling the contract. We agree with the
observation of the lower court to the effect that: "Although the primary object of selling subdivided lots is business,
yet, it cannot be denied that this subdivision is likewise purposely done to afford those landless, low income group
people of realizing their dream of a little parcel of land which they can really call their own."
- The defendants-appellants argue that paragraph nine of the contract clearly allows the seller to waive the
observance of paragraph 6 not merely once, but for as many times as he wishes. The defendants-appellants'
contention is without merit. We agree with the plaintiffs-appellees that when the defendants- appellants, instead of
availing of their alleged right to rescind, have accepted and received delayed payments of installments, though the
plaintiffs - appellees have been in arrears beyond the grace period mentioned in paragraph 6 of the contract, the
defendants-appellants have waived and are now estopped from exercising their alleged right of rescission.

2. YES. We agree with the plaintiffs-appellees. The contract to sell entered into by the parties has some
characteristics of a contract of adhesion. The defendants-appellants drafted and prepared the contract. The plaintiffs-
appellees, eager to acquire a lot upon which they could build a home, affixed their signatures and assented to the
terms and conditions of the contract. They had no opportunity to question nor change any of the terms of the
agreement. It was offered to them on a "take it or leave it" basis. "x x x (W)hile generally, stipulations in a contract
come about after deliberate drafting by the parties thereto, . . . there are certain contracts almost all the provisions of
which have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion,
because the only participation of the party is the signing of his signature or his 'adhesion' thereto. Insurance
contracts, bills of lading, contracts of sale of lots on the installment plan fall into this category. '(Paras, Civil Code of
the Philippines, Seventh ed., Vol. 1, p. 80.)" (Italics supplied)
- While it is true that paragraph 2 of the contract obligated the plaintiffs-appellees to pay the defendants -appellants
the sum of P3,920.00 plus 7% interest per annum, it is likewise true that under paragraph 12 the seller is obligated to
transfer the title to the buyer upon payment of the P3,920.00 price sale. The contract to sell, being a contract of
adhesion, must be construed against the party causing it. We agree with the observation of the plaintiffs- appellees to
the effect that "the terms of a contract must be interpreted against the party who drafted the same, especially where
such interpretation will help effect justice to buyers who, after having invested a big amount of money, are now
sought to be deprived of the same thru the prayed application of a contract clever in its phraseology, condemnable in
its lopsidedness and injurious in its effect which, in essence, and in its entirety is most unfair to the buyers."

Disposition Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs -appellees
have already paid an aggregate amount of P4,533.38, the courts should only order the payment of the few remaining
installments but not uphold the cancellation of the contract. Upon payment of the balance of P671.67 without any
interests thereon, the defendants- appellants must immediately execute the final deed of sale in favor of the plaintiffs-
appellees and execute the necessary transfer documents as provided in paragraph 12 of the contract. The attorney's
fees are justified.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision appealed from is AFFIRMED with the
modification that the plaintiffs -appellees should pay the balance of SIX HUNDRED SEVENTY-ONE PESOS AND
SIXTY-SEVEN CENTAVOS (P671.67) without any interests.

Angeles v. Calasanz

G.R. No. L-42283, March 18, 1985, 135 SCRA 323

FACTS:

Ursula and Tomas Calasanz sold a piece of land to Buenaventura Angeles and Teofila Juani
covered by a contract to sell. Angeles paid a down payment upon the execution of the contract
and started paying the balance in monthly installments for nine years with only a few remaining
installments left to pay. Although Calasanz accepted late payments before, Angeles was now five
months late. Calasanz demanded payment of past due accounts, but did not receive any.
Eventually, Calansanz canceled the said contract and Angeles asked for reconsideration, but was
denied.

A provision in the contract to sell gave Calasanz the right to cancel the contract and consider the
amounts paid as rent for the property. However, the lower court ruled that the contract was not
validly canceled and ordered Calasanz to execute a final Deed of Sale in favor of Angeles.

ISSUE:
Was the contract to sell validly canceled?

RULING:

No. The act of a party in treating a contract as canceled or resolved on account of infractions by
the other must be made known to the other and is always provisional, being ever subject to
scrutiny and review by the proper court. If the other party denies that rescission is justified, it is
free to bring the matter to court. Then, should the court decide that the resolution of the contract
was not warranted, the responsible party will be sentenced to damages; in the contrary case, the
resolution will be affirmed and indemnity awarded to the party prejudiced.

The right to rescind the contract for non-performance of one of its stipulations is not absolute.
The general rule is that rescission of a contract will not be permitted for a slight or casual breach,
but only for such substantial and fundamental breach as would defeat the very object of the
parties in making the agreement. The question of whether a breach of a contract is substantial
depends upon the attendant circumstances.

The breach of the contract alleged by Calasanz is so slight considering that Angeles had already
paid monthly installments for almost nine years. In only a short time, the entire obligation would
have been paid.

To mitigate the unilateral act of Calasanz in cancelling the contract, Article 1234 of the Civil
Code provides that: If the obligation has been substantially performed in good faith, the obligor
may recover as though there had been a strict and complete fulfillment, less damages suffered by
the obligee.

* Case digest by Immanuel Granada, LLB-1, Andres Bonifacio Law School, SY 2017-2018

Facts:
On December 19, 1957, defendants-appellants Ursula Torres Calasanz and Tomas Calasanz and
plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a
piece of land located in Cainta, Rizal for the amount of P3,920.00 plus 7% interest per... annum.
he plaintiffs-appellees made a downpayment of P392.00 upon the execution of the contract.
They promised to pay the balance in monthly installments of P41.20 until fully paid, the
installments being due and payable on the 19th day of each month.
The... plaintiffs-appellees paid the monthly installments until July 1966, when their aggregate
payment already amounted to P4,533.38. On numerous occasions, the defendants-appellants
accepted and received delayed installment payments from the plaintiffs-appellees.
On December 7, 1966, the defendants-appellants wrote the plaintiffs-appellees a letter requesting
the remittance of past due accounts.
On January 28, 1967, the defendants-appellants cancelled the said contract because the plaintiffs-
appellees failed to meet subsequent payments. The plaintiffs' letter with their plea for
reconsideration of the said cancellation was denied by the... defendants
The plaintiffs-appellees filed Civil Case No. 8943 with the Court of First Instance of Rizal,
Seventh Judicial District, Branch X to compel the defendants-appellants to execute in their favor
the final deed of sale alleging inter alia that after computing all subsequent... payments for the
land in question, they found out that they have already paid the total amount of P4,533.38
including interests, realty taxes and incidental expenses for the registration and transfer of the
land.
The defendants-appellants alleged in their answer that the complaint states no cause of action and
that the plaintiffs-appellees violated paragraph six (6) of the contract to sell when they failed and
refused to pay and/or offer to pay the monthly installments corresponding to... the month of
August, 1966 for more than five (5) months, thereby constraining the defendants-appellants to
cancel the said contract.
The lower court rendered judgment in favor of the plaintiffs-appellees.
the Court hereby renders judgment in favor of the plaintiffs and against the defendants declaring
that the contract subject matter of the instant case was NOT VALIDLY cancelled by the
defendants.
A motion for reconsideration filed by the defendants-appellants was denied.
The defendants-appellants submit that the contract was validly cancelled pursuant to paragraph
six of the contract
In case the party of the SECOND PART fails to satisfy any monthly installments, or any other
payments herein agreed upon, he is granted a month of grace within which to make the retarded
payment, together with the one corresponding to the said month of grace; it is... understood,
however, that should the month of grace herein granted to the party of the SECOND PART
expired; without the payments corresponding to both months having been satisfied, an interest of
10% per annum will be charged on the amounts he should have paid; it is... understood further,
that should a period of 90 days elapse, to begin from the expiration of the month of grace herein
mentioned, and the party of SECOND PART has not paid all the amounts he should have paid
with the corresponding interest up to that date, the party of the FIRST
PART has the right to declare this contract cancelled and of no effect,... The defendants-
appellants argue that the plaintiffs-appellees failed to pay the August, 1966 installment despite
demands for more than four (4) months.
The defendants-appellants point to Jocson v. Capitol Subdivision... the right of the subdivision
owner to automatically cancel a contract to sell on the strength of a provision or stipulation
similar to paragraph 6 of the contract in this case
The defendants-appellants also argue that even in the absence of the aforequoted... provision,
they had the right to cancel the contract to sell under Article 1191 of the Civil Code
The plaintiffs-appellees on the other hand contend that the Jocson ruling does not apply. They
state that paragraph 6 of the contract to sell is contrary to law insofar as it provides that in case of
specified breaches of its terms, the sellers have the right to declare... the contract cancelled and
of no effect, because it granted the sellers an absolute and automatic right of rescission.
Issues:
The main issue to be resolved is whether or not the contract to sell has been automatically and
validly cancelled by the defendants-appellants.
Ruling:
The right to rescind the contract for non-performance of one of its stipulations, therefore, is not
absolute.
"The general rule is that rescission of a contract will not be permitted for a slight or casual
breach, but only for such substantial and fundamental breach as would defeat the very object of
the parties in making the agreement.
The question of whether a breach of a contract is substantial depends upon the attendant
circumstances.
The defendants-appellants state that the plaintiffs-appellees violated Section two of the contract
"SECOND. - That in consideration of the agreement of sale of the above described property, the
party of the SECOND PART obligates himself to pay to the party of the FIRST PART the Sum
of
(P3,920.00),... plus... interest at the rate of 7% per annum, as follows:
"(a) The amount of THREE HUNDRED NINETY TWO only (P392.00) when this contract is
signed
(b) The sum of
(P41.20) on or before the 19th day of each month, from this date until the total payment of the
price above stipulated, including interest.
because they failed to pay the August installment, despite demand, for more than four (4)
months.
The breach of the contract adverted to by the defendants-appellants is so slight and casual when
we consider that apart from the initial down payment of P392.00 the plaintiffs-appellees had
already paid the monthly installments for a period of almost nine (9) years.
In... other words, in only a short time, the entire obligation would have been paid. Furthermore,
although the principal obligation was only P3,920.00 excluding the 7 percent interests, the
plaintiffs-appellees had already paid an aggregate amount of P4,533.38. To sanction... the
rescission made by the defendants-appellants will work injustice to the plaintiffs-appellees.
The defendants-appellants cannot rely on paragraph 9 of the contract which provides:
"NINTH. - That whatever consideration of the party of the FIRST PART may concede to the
party of the SECOND PART, as not exacting a strict compliance with the conditions of
paragraph 6 of this contract, as well as any other condonation that the party of the FIRST
PART may give to the party of the SECOND PART with regards to the obligations of the latter,
should not be interpreted as a renunciation on the part of the party of the FIRST PART of any
right granted it by this contract, in case of default or non-compliance by the party of the
SECOND PART."
The defendants-appellants argue that paragraph nine clearly allows the seller to waive the
observance of paragraph 6 not merely once, but for as many times as he wishes.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision appealed from is
AFFIRMED with the modification that the plaintiffs-appellees should pay the balance of SIX
HUNDRED SEVENTY ONE PESOS AND SIXTY-SEVEN CENTAVOS (P671.67)
Principles:
Article 1191 of the Civil Code on the rescission of reciprocal obligations provides:
"The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
"The injured party may choose between the fulfillment and the rescision of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfullment, if the latter should become impossible."
Article 1234 of the Civil Code which provides that:
"If the obligation has been substantially performed in good faith, the obligor may recover as
though there had been a strict and complete fulfillment, less damages suffered by the obligee."

#6

Ayson-Simon v. Adamos

G.R. No. L-39378, August 28, 1984, 131 SCRA 439

FACTS:

On December 13, 1943, Nicolas Adamos and Vicente Feria, defendants-appellants herein,
purchased two lots forming part of the Piedad Estate in Quezon City. The successors-in-interest
of the latter filed Civil Case No. 174 in the then Court of First Instance of Quezon City for
annulment of the sale and the cancellation of Transfer Certificate of Title, which had been issued
to defendants-appellants by virtue of the disputed sale. On December 18, 1963, the Court
rendered a Decision annulling the sale, cancelling TCT 69475, and authorizing the issuance of a
new title in favor of Porciuncula’s successors-in-interest. The said judgment was affirmed by the
Appellate Court and had attained finality.
In the meantime during the pendency of the above mentioned case, defendants-appellants sold to
Generosa Ayson Simon the lots in question. Due to the failure of defendants appellants to
comply with their commitment to have the subdivision plan of the lots approved and to deliver to
deliver the titles and possession to Generosa, the latter filed suit for specific performance. As a
result of the sale of the lot to said defendants appellants being null and void, there is impossibity
that they can comply with their commitment to Generosa, the latter then seek the rescission of
the contract plus damages.
The defendants-appellants contend that Generosa’s action had prescribed, considering that she
had only four years from May 29, 1946 to rescind the transaction.

ISSUE:

Whether or not the action to rescind the obligation has prescribed.

RULING:

The Supreme Court ruled that according to Article 1191 of the Civil Code provides that an
injured party may also seek rescission if the fulfillment should have become impossible. The
cause of action to claim rescission arises when the fulfillment of the obligation became
impossible when the court declared that the sale was null and void. The Generosa cannot be
assailed on the ground that she slept on her rights.

* Case digest by Jason Olasiman, LLB-1, Andres Bonifacio Law School, SY 2017-2018

AYSON-SIMON VS. ADAMOS 131 SCRA 439

FACTS:

On December 13, 1943, Nicolas Adamos and Vicente Feria defendants-appellants herein
purchased two lots from Juan Porciuncula. Porciuncula’s successor in interest sought for the
annulment and cancellation of the sale which the court a quo favorably ruled.

In the meantime during the pendency of the above mentioned case, defendants-appellants sold to
Generosa Ayson Simon the lots in question. Due to the failure of defendants appellants to
comply with their commitment to have the subdivision plan of the lots approved and to deliver
to deliver the titles and possession to Generosa, the latter filed suit for specific performance. As
a result of the sale of the lot to said defendants sppellants being null and void, there is
impossibity that they can comply with their commitment to Generosa, the latter then seek the
rescission of the contract plus damages.

The defendants-appellants contend that Generosa’s action had prescribed, considering that she
had only four years from May 29, 1946 to rescind the transaction.
ISSUE:

Whether or not the action to rescind the obligation has prescribed.

HELD:

Article 1191 of the Civil Code provides that an injured party may also seek rescission if the
fulfillment should have become impossible. The cause of action to claim rescission arises when
the fulfillment of the obligation became imppossible when the court declared that the sale was
null and void. The Generosa cannot be assailed on the ground that she slept on her rights.

216 Phil. 410

MELENCIO-HERRERA, J.:
Originally, this was an appeal by defendants from the Decision of the then Court of First
Instance of Manila, Branch XX, in Civil Case No. 73942, to the Court of Appeals (now
Intermediate Appellate Court), which Tribunal, certified the case to us because the issue is a pure
question of law.
On December 13, 1943, Nicolas Adamos and Vicente Feria, defendants-appellants herein,
purchased two lots forming part of the Piedad Estate in Quezon City, with an area of
approximately 56,395 square meters, from Juan Porciuncula. Sometime thereafter, the
successors-in-interest of the latter filed Civil Case No. 174 in the then Court of First Instance of
Quezon City for annulment of the sale and the cancellation of transfer Certificate of Title No.
69475, which had been issued to defendants-appellants by virtue of the disputed sale. On
December 18, 1963, the Court rendered a Decision annulling the sale, cancelling TCT 69475,
and authorizing the issuance of a new title in favor of Porciuncula's successors-in-interest. The
said judgment was affirmed by the Appellate Court and had attained finality.
In the meantime, on May 29, 1946, during the pendency of the above-mentioned case,
defendants-appellants sold to GENEROSA Ayson Simon, plaintiff-appellee herein, the two lots
in question for P3,800.00 each, plus an additional P800.00 paid subsequently for the purpose of
facilitating the issuance of new titles in GENEROSA's name. Due to the failure of defendants-
appellants to comply with their commitment to have the subdivision plan of the lots approved
and to deliver the titles and possession to GENEROSA, the latter filed suit for specific
performance before the Court of First Instance of Quezon City on September 4, 1963 (Civil Case
No. Q-7275). On January 20, 1964, said Court ordered:
"WHEREFORE, the plaintiff is declared entitled to a summary judgment and the defendants are
hereby ordered to have the subdivision of Lot No. 6, Block No. 2, and Lot No. 11, Block No. 3,
relocated and resurveyed and the subdivision plan approved and, if not possible for one reason or
another, and in case of the absence or loss of said subdivision, to cause and effect the subdivision
of the said lots and deliver the titles and possession thereof to the plaintiff. As to the claim and
counterclaim for damages, let the hearing thereon be deferred until further move by the
parties."[1]
However, since execution of the foregoing Order was rendered impossible because of the
judgment in Civil Case No. 174, which earlier declared the sale of the lots in question by Juan
Porciuncula to defendants-appellants to be null and void, GENEROSA filed, on August 16,
1968, another suit in the Court of First Instance of Manila (Civil Case No. 73942) for rescission
of the sale with damages. On June 7, 1969, the Court rendered judgment, the dispositive portion
of which reads:
"WHEREFORE, judgment is rendered in favor of the plaintiff and against defendants, ordering
the latter, jointly and severally, to pay the former the sum of P7,600.00, the total amount
received by them from her as purchase price of the two lots, with legal rate of interest from May
29, 1946 until fully paid; another sum of P800.00, with legal rate of interest from August 1, 1966
until fully paid; the sum of P1,000.00 for attorney's fees; and the costs of this suit."[2]
Hence, the appeal before the Appellate Court on the ground that GENEROSA's action had
prescribed, considering that she had only four years from May 29, 1946, the date of sale, within
which to rescind said transaction, and that her complaint for specific performance may be
deemed as a waiver of her right to rescission since the fulfillment and rescission of an obligation
are alternative and not cumulative remedies.
The appeal is without merit. The Trial Court presided by then Judge, later Court of Appeals
Associate Justice Luis B. Reyes, correctly resolved the issues, reiterated in the assignments of
error on appeal, as follows:
"Defendants contend (1) that the fulfillment and the rescission of the obligation in reciprocal
ones are alternative remedies, and plaintiff having chosen fulfillment in Civil Case No. Q-7525,
she cannot now seek rescission; and (2) that even if plaintiff could seek rescission the action to
rescind the obligation has prescribed."
"The first contention is without merit. The rule that the injured party can only choose between
fulfillment and rescission of the obligation, and cannot have both, applies when the obligation is
possible of fulfillment. If, as in this case, the fulfillment has become impossible, Article 1191 [3]
allows the injured party to seek rescission even after he has chosen fulfillment.
"True it is that in Civil Case No. 7275 the Court already rendered a Decision in favor of plaintiff,
but since defendants cannot fulfill their obligation to deliver the titles to and possession of the
lots to plaintiff, the portion of the decision requiring them to fulfill their obligations is without
force and effect. Only that portion relative to the payment of damages remains in the dispositive
part of the decision, since in either case (fulfillment or rescission) defendants may be required to
pay damages.
"The next question to determine is whether the action to rescind the obligation has prescribed.
"Article 1191 of the Civil Code provides that the injured party may also seek rescission, if the
fulfillment should become impossible. The cause of action to claim rescission arises when the
fulfillment of the obligation became impossible when the Court of First Instance of Quezon City
in Civil Case No. 174 declared the sale of the land to defendants by Juan Porciuncula a complete
nullity and ordered the cancellation of Transfer Certificate of Title No. 69475 issued to them.
Since the two lots sold to plaintiff by defendants form part of the land involved in Civil Case No.
174, it became impossible for defendants to secure and deliver the titles to and the possession of
the lots to plaintiff. But plaintiff had to wait for the finality of the decision in Civil Case No. 174.
According to the certification of the clerk of the Court of First Instance of Quezon City (Exhibit
'E-2'), the decision in Civil Case No. 174 became final and executory 'as per entry of Judgment
dated May 3, 1967 of the Court of Appeals.' The action for rescission must be commenced
within four years from that date, May 3, 1967. Since the complaint for rescission was filed on
August 16, 1968, the four year period within which the action must be commenced had not
expired.
"Defendants have the obligation to return to plaintiff the amount of P7,600.00 representing the
purchase price of the two lots, and the amount of P800.00 which they received from plaintiff to
expedite the issuance of titles but which they could not secure by reason of the decision in Civil
Case No. 174. Defendant has to pay interest at the legal rate on the amount of P7,600.00 from
May 29, 1946, when they received the amount upon the execution of the deeds of sale, and legal
interest on the P800.00 from August 1, 1966, when they received the same from plaintiff."[4]
WHEREFORE, the appealed judgment of the former Court of First Instance of Manila, Branch
XX, in Civil Case No. 73942, dated June 7, 1969, is hereby affirmed in toto. Costs against
defendants-appellants. SO ORDERED.

#7

Borromeo vs Court of Appeals (47 SCRA 65)

NATURE
PETITION for review by certiorari of a decision of the Court of Appeals

FACTS
Before 1933, defendant [Jose A. Villamor] was a distributor of lumber belonging to Mr. Miller
who was the agent of the Insular Lumber Company in Cebu City. Defendant being a friend
and former classmate of plaintiff [Canuto O. Borromeo] used to borrow from the latter certain
amounts from time to time. On one occasion, defendant borrowed from plaintiff a large sum of
money for which he mortgaged his land and house in Cebu City to pay some pressing obligation
with Mr. Miller. Mr. Miller filed a civil action against the defendant and attached his properties
including those mortgaged to plaintiff, inasmuch as the deed of mortgage in favor of plaintiff
could not be registered because not properly drawn up. Plaintiff then pressed the defendant for
settlement of his obligation, but defendant instead offered to execute a document promising to
pay his indebtedness even after the lapse of ten years. Liquidation was made and defendant was
found to be indebted to plaintiff in the sum of P7,220.00, for which defendant signed a
promissory note therefor on November 29, 1933 with interest at the rate of 12% per annum,
agreeing to pay as soon as I have money'. The note further stipulate that defendant
'hereby relinquish, renounce, or otherwise waive my rights to the prescriptions established by
our Code of Civil Procedure for the collection or recovery of the above sum of P7,220.00. * * *
at any time even after the lapse of ten years from the date of this instrument'.
After the execution of the document, plaintiff limited himself to verbally requesting defendant to
settle his indebtedness from time to time. Plaintiff did not file any complaint against the
defendant within ten years from the execution of the document as there was no property
registered in defendant's name, who furthermore assured him that he could collect even after the
lapse of ten years. After the last war, plaintiff made various oral demands, but defendants failed
to settle his account. CFI: Villamor ordered to pay Borromeo (represented by his heirs) the
sum of P7,220.00 within ninety days from the date of the receipt of such decision with interest at
the rate of 12% per annum from the xpiration of such ninety-day period. CA: reversed CFI ruling

ISSUE
Whether or not the CA erred in reversing the ruling of the CFI in finding the lack of validity of
the stipulation amounting to a waiver in line with the principle "that a person cannot renounce
future prescription"

HELD
YES! Between two possible interpretations, that which saves rather than destroys is to be
preferred.
It is a fundamental principle in the interpretation of contracts that while ordinarily the literal
sense of the words employed is to be followed, such is not the case where they "appear to be
contrary to the evident intention of the contracting parties," which “intention shall prevail” (Art.
1370). The terms, clauses and conditions contrary to law, morals and public order (in this case
the contested stipulation) should be separated from the valid and legal contract when such
separation can be made because they are independent of the valid contract which expresses the
will of the contracting parties.

Reasoning
There is nothing implausible in the view that such language renouncing the debtor's right to the
prescription established by the Code of Civil Procedure should be given the meaning, as noted in
the preceding sentence of the decision of respondent Court, that the debtor could be trusted to
pay even after the termination of the ten-year prescriptive period. (so CA should have interpreted
the stipulation based on the context of the friendship between the two parties)-'Where an
agreement founded on a legal consideration contains several promises, or a promise to do several
things, and a part only of the things to be done are illegal, the promises which, can be separated,
or the promise, so far as it can be separated, from the illegality, may be valid. The rule is that a
lawful promise made for a lawful consideration is not invalid merely because an unlawful
promise was made at the same time and for the same consideration, and this rule applies,
although the invalidity is due to violation of a statutory provision, unless the statute expressly or
by necessary implication declares the entire contract void. The first ten years after November 29,
1933 should not be counted in determining when the action of creditor, now represented by
petitioners, could be filed. From the joint record on appeal, it is undoubted that the complaint
was filed on January 7, 1953. If the first ten-year period was to be excluded, the creditor had
until November 29, 1953 to start judicial proceedings. After deducting the first ten year period
which expired on November 29, 1943, there was the additional period of still another ten
years.29 Nor could there be any legal objection to the complaint by the creditor Borromeo of
January 7, 1953 embodying not merely the fixing of the period within which the debtor Villamor
was to pay but likewise the collection of the amount that until then was not paid.

Disposition
Wherefore, the decision of respondent Court of Appeals of March 7, 1964 is reversed, thus
giving full force and effect to the decision of the lower court of November 15, 1956. With costs
against private respondents.

JOSE CUENCO BORROMEO, PETRA BORROMEO and VITALIANA

BORROMEO, petitioners,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. FRANCISCO P. BURGOS,
RICARDO V. REYES, DOMINGO ANTIGUA and NUMERIANO G.
ESTENZO, respondents.

DECISION
PANGANIBAN, J.:

What constitutes forum-shopping under the Interim Rules of Court? This is

the question presented in this petition for review on certiorari of the
Decision[1] in AC-G.R. SP No. 03409 of the then Intermediate Appellate
Court[2] dismissing petitioners appeal from an order of the then Court of First
Instance of Cebu regarding an incident in Special Proceedings No. 916-R for
the settlement of the estate of the deceased Vito Borromeo.
By resolution dated November 13, 1995, the First Division of this Court
transferred this case, along with several others, to the Third. After due
deliberation and consultation on the petition and other submissions of the
parties, the Court assigned the writing of this Decision to the
undersigned ponente.

The Facts

On August 15, 1969, the Court of First Instance of Cebu, then presided by
Judge Alfredo G. Laya, issued an order approving the project of partition and
the distribution of the estate of Vito Borromeo to his heirs.
 While Judge Alfredo G. Laya was implementing the order of
August 15, 1969, herein private respondent Numeriano G. Estenzo, in his
capacity as counsel for the oppositors, filed before this Court a petition (L-
32876) praying, among other things, that the probate court be restrained from
implementing the order of August 15, 1969 and from distributing the estate
among the heirs.
On March 15, 1971, this Court resolved the petition in a Resolution which
reads in pertinent part:

1. The Court thus refused to restrain respondent Judge from making a

distribution of the estate, for the following reasons: (a) The heirs themselves do
not object to a distribution; indeed, they have already submitted a project of
partition; (b) Sp. Proc. No. 916-R has been pending for eighteen (18) years,
during which nine (9) heirs have been waiting to receive their respective shares;
(c) Of the eleven (11) lawyers who have rendered professional services in the
case, only petitioner has registered any objection, the ten (10) others must be
now anxious to have their fees adjudicated; (d) The case has passed through
the hands of five (5) other Judges prior to respondent Judge Laya, and the
records thereof have piled up to almost forty (40) volumes, hence if the case is
assigned to another Judge, he will have to study the same for the first time.
x x x.

Accordingly, Jesus Gaboya, then administrator of the estate, continued

with the implementation of the order of August 15, 1969. Consequently, in
1970 and 1971, transfer certificates of title were issued in the names of the
heirs by the Register of Deeds of the City and the Province of Cebu.
On January 12, 1979, the probate court, then presided by respondent
Judge Francisco P. Burgos, issued two orders: (1) evaluating the estate at
P15,000,000.00 and segregating 40% thereof or P6,000,000.00 for the payment
of the claims for attorneys fees; and (2) directing the Register of Deeds to
annotate the claims for attorneys fees in an amount corresponding to 40% of
the market value of the estate.
On September 13, 1978, Atty. Domingo L. Antigua filed a motion praying
for the surrender of the certificates of title in the names of the heirs
or distributees in order that prospective buyers of the whole estate could
inspect them. The probate court, through Judge Burgos, granted the
motion. One of the administrators of the estate, Ricardo V. Reyes, filed a
motion for the reconsideration of said order, claiming that he could not
surrender the titles without the consent of the heirs in whose names the titles
sought to be surrendered had been issued by the Register of Deeds of the City
and Province of Cebu.
However, four years later or on August 31, 1982, Reyes made a turnaround
and himself filed a motion for the surrender of the certificates of title involved
in the proceedings for the reversion back to the estate of the distributed
lands. This motion was followed by another one jointly filed by Reyes, Atty.
Antigua (as counsel for the heirs of Fortunato Borromeo) and Atty. Estenzo as
lawyer-claimant and counsel for one of the administrators.
Before these two motions could be resolved by the probate court, herein
petitioners, who are among the nine (9) heirs of Vito Borromeo, filed a motion
for the disqualification of Judge Burgos on the grounds of bias and
partiality. Petitioners claimed that the sister of Atty. Antigua was married to a
brother of Judge Burgos. Respondent Judge denied the motion for
inhibition.Hence, petitioners appealed the denial to the then Intermediate
Appellate Court which, in its Decision dated March 1, 1983, reversed the
probate court and disqualified Judge Burgos from taking cognizance of Special
Proceedings No. 916-R. Said decision was appealed to this Court in G.R. No.
63818, with Judge Burgos joining the petitioners.
Notwithstanding his disqualification by the appellate court, Judge Burgos
continued to take cognizance of Special Proceedings No. 916-R. Petitioners
thus manifested their refusal to recognize any further acts of Judge Burgos and
subsequently filed before this Court a petition (G.R. No. 65995) to stop Judge
Burgos from further hearing the case.
On February 23, 1984, Judge Burgos issued an order cancelling the
certificates of title involved and reverting the parcels of land to the estate.
Petitioners sought the reconsideration of this order to no avail. Hence, they
filed a petition before the Intermediate Appellate Court (AC-G.R. SP No. 03409)
raising the following issues for resolution: (a) the validity of the order of
February 23, 1984 which was issued after Judge Burgos had been disqualified
from hearing the case; (b) the jurisdiction of the probate court to order the
cancellation of certificates of title which had been issued ten years earlier and
the reversion of the property back to the estate; and (c) the validity of a
collateral attack on titles to property in an intestate proceedings.
On September 23, 1985, the appellate court dismissed the petition on the
ground that its filing violated Section 17 of the Interim Rules of Court which
prescribes forum-shopping.

The Issue

It should be noted that there were three (3) cases which the respondent
Court considered in declaring the petitioners guilty of forum-shopping, viz.:

1) G.R. No. 63818 - where the petitioners asked the Supreme Court to affirm
the IACs decision disqualifying respondent Judge from taking cognizance of the
probate proceedings (916-R);
2) G.R. No. 65995 - where petitioners sought to restrain and to
invalidate all acts of respondent Judge after he was disqualified by the IAC;

3) AC-G.R. SP No. 03409 - the origin of the instant petition in this Court, in
which petitioners prayed that the respondent Court enjoin respondent Judge
from further taking cognizance of the probate proceedings (916-R).

The issue therefore may be re-stated thus: By their filing of the third case,
did petitioners engage in forum-shopping as defined by Section 17 of the
Interim Rules?

The Courts Ruling

We concur with the respondent Courts affirmative ruling on said question,

which is quoted verbatim, as follows:

Since G.R. No. L-65995 (Petra Borromeo, et al. vs. Hon. Francisco P. Burgos,
etc., et al.), seeks to invalidate any and all proceedings and acts taken by the
respondent Court subsequent to March 1, 1983, it clearly covers and includes
the surrender to, and the cancellation by, the respondent Court, of the above
enumerated certificates of title, which is an act by the respondent
judge subsequent to March 1, 1983. The order (was) issued February 23, 1984.

Specifically, the questioned order of February 23, 1984, listed among the
incidents pending at the time the said Supreme Court petition was filed, in
December, 1983, the following:

10. Motion for the surrender and subsequent cancellation of all the titles
transferred in the names of the heirs at the instance of Jose Borromeo. (p.
25, rollo; italics supplied)

Should the Supreme Court act affirmatively on G.R. No. L-65995, its judgment
would nullify the respondent Judges order of February 23, 1984 precisely
because it is covered by the aforesaid petition in G.R. No. L-65995.
Incidentally, when this petition was filed, the petitioners (that, included the
present petitioner, Jose Cuenco Borromeo) asked the Court to issue a
restraining order, which the Supreme Court however, did not grant. This
enabled the respondent judge to act on the pending motion to require the
surrender and the cancellation of the subject certificates of title (which were
allegedly illegally transferred in the names of the heirs, at the instance of
Jose Cuenco Borromeo, Petra Borromeo and Vitaliana Borromeo). The order of
February 23, 1984 thus granted the motion for surrender and cancellation of
titles pending when the petition in G.R. No. L-65995 was filed.
The conclusion is, therefore, inevitable, that this petition is not only similar to,
but is truly, and actually covered by the petition in G.R. No. L-65995, Section
17 of the Interim Rules of Court reads, as follows:

17. Petitions for writs of certiorari, etc. -No petition for certiorari, mandamus,
prohibition, habeas corpus or quo warranto may be filed in the Intermediate
Appellate Court if another similar petition has been filed or is still pending in
the Supreme Court. Nor may such petition be filed in the Supreme Court if a
similar petition has been filed or is still pending in the Intermediate Appellate
Court, unless it be to review the action taken by the Intermediate Appellate
Court on the petition filed with it. A violation of this rule shall constitute
contempt of court and shall be a cause for the summary dismissal of both
petitions. Without prejudice to the taking of appropriate action against the
counsel or party concerned.

Since this petition is not only similar to, but clearly an integral part of the
pending petition in G.R. No. L-65995, Section 17 of the Interim Rules of Court
has been violated.

The penalty for violating the said Section 17 of the said Interim Rules, is
summary dismissal. It violates the rule against multiplicity of suits. The
petitioners should have waited the termination of his petition in G.R. No. L-
65995 by the Supreme Court; or, he could have submitted a supplemental
pleading therein alleging the matters in the instant petition.[3]

The appellate court also noted that the issues raised by petitioners are
clearly premature for if the disqualification of Judge Burgos be affirmed in G.R.
No. 63818, then it would certainly follow that all the acts taken by the said
judge shall be invalidated for lack of legal authority.
Petitioners claim that Section 17 of the Interim Rules prohibits and
penalizes only the filing of a special action in the Supreme Court when there is
pending a special civil action for the same cause of action in the Court of
Appeals. They argue that what they filed in the Supreme Court was a special
civil action while the case they brought before the Court of Appeals was an
ordinary appeal from an order of the probate court in a special proceedings
where multiple appeals are allowed.[4] This argument is flawed. What
petitioners filed before the Court of Appeals in AC-G.R. SP No. 03409 was not
an appeal under Rule 41 of the Revised Rules of Court but a special civil action
for certiorari under Rule 65 of the Revised Rules of Court and docketed as such
action. The petition prayed as follows:

WHEREFORE, it is most respectfully prayed this Petition be given due course

and a restraining order be immediately issued commanding the respondents to
cease and desist from implementing the questioned orders (Annexes C and D)
and from taking further cognizance of Sp. Proc. No. 916-R pending termination
of this case and, after due deliberation a decision be rendered

a) declaring the said two orders null and void and without force and effect.

b) ordering the respondent Judge to cease and desist from further taking
cognizance of Sp. Proc. No. 916-R, and

c) directing the respondents to respect the Rule of law.

Petitioners further pray for such other relief and remedy consistent in the
premises.[5]

Acting on the petition in G.R. No. 63818, this Court considered the issue of
the disqualification of Judge Burgos as having been rendered moot and
academic by the retirement of Judge Burgos from the judiciary in
1986. However, in G.R. No. 65995, the Court granted the petition which sought
to restrain the respondents from further acting on any and all incidents in
Special Proceedings No. 916-R during the pendency of G.R. No. 63818 and G.R.
No. 65995; and, which (petition) also prayed that all acts of the respondents
related to the said special proceedings after March 1, 1983 when the
respondent Judge was disqualified by the appellate court be declared null and
void and without force and effect whatsoever.
Consequently, petitioners goal of invalidating the probate courts order of
February 23, 1984 had been attained, since necessarily, all acts of the probate
court subsequent to March 1, 1983 (the date when the then Intermediate
Appellate Court disqualified Judge Burgos from taking cognizance of the case),
have been rendered null and void by such disqualification. Thus, by filing a
petition before the appellate court even after they had filed G.R. No. 65995,
petitioners engaged in forum-shopping as they deliberately split appeals, in the
hope that even as one case in which a particular remedy is sought is
dismissed, another case (offering a similar remedy) would still be open thereby
needlessly clogging the already heavily burdened dockets of the courts. In this
regard, the Court unequivocally said in a similar case[6]:

Section 17 of the Interim Rules and Guidelines issued by the Court on 11

January 1983, relative to the implementation of Section 9 of B.P. 129, granting
the intermediate Appellate Court (now the Court of Appeals) equal original
jurisdiction to issue the extraordinary writs of certiorari, prohibition, etc.,
whether or not in aid of its appellate jurisdiction, provides that if such a
petition is filed before the Court of Appeals and is still pending therein, a
similar petition cannot be filed in the Supreme Court. A violation of this rule
has also been considered a clear case of forum shopping, an act of malpractice
proscribed as trifling with the courts and abusing their processes. The Rule
itself provides that a violation thereof constitutes: (1) cause for the summary
dismissal of both petitions; and (2) contempt of court for which the party or
counsel concerned may be held accountable. (citing Resolution of July 31,
1986, in G.R. No. 75197, E. Razon, Inc., et al. vs. Philippine Ports Authority, et
al.; reiterated in Buan vs. Lopez, Jr., 145 SCRA 34, 38-39 [October 13, 1986],
and in Alonto, Jr. vs. Memoracion [En Banc], 185 SCRA 73, 78-79 [May 7,
1990], and likewise in Benguet Electric Cooperative, Inc. vs. National
Electrification Administration, 193 SCRA 250, 255-256 [January 23, 1991].)

Forum shopping as the filing of repetitious suits in different courts has

been condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister
of Natural Resources, et al. vs. Heirs of Orval Hughes, et al., as a reprehensible
manipulation of court processes and proceedings x x x.[7] Indeed, forum
shopping is reprehensible; it unduly burdens courts as it needlessly delays
proceedings. In condemning it, the Court said in a recent case[8]:

Ultimately, what is truly important to consider in determining whether forum-

shopping exists or not is the vexation caused the courts and parties-litigant by
a party who asks different courts to rule on the same or related causes and/or
to grant the same or substantially the same reliefs, in the process creating the
possibility of conflicting decisions being rendered by the different fora upon the
same issue.

WHEREFORE, the instant petition for review on certiorari is DENIED and

the questioned decision of the Intermediate Appellate Court is
AFFIRMED. Counsel for petitioners, Basilio E. Duaban of Jose S. Amadora and
Associates, is ADMONISHED and WARNED that similar acts of forum shopping
shall be dealt with more severely. A copy of this Decision shall be attached to
the records of Atty. Duaban in the Office of the Bar Confidant.
SO ORDERED.

LIAS BORROMEO, defendant-appellant.

G.R. No. L-61873 October 3l, 1984

FACTS:

This is an appeal from the decision of the court finding accused Elias Borromeo guilty
beyond reasonable doubt of the crime of parricide and sentencing him to suffer the penalty of
reclusion perpetua. Accused-appellant contends that the trial court erred in holding that he and
Susana Taborada (the deceased) were legally and validly married because there was no marriage
contact executed in their wedding, hence he could be liable only for homicide, not parricide.
Other than the stand of appellants counsel against the existence of marriage in order to lessen or
mitigate the penalty imposable upon his client, accused Elias Borromeo himself admitted that the
deceased-victim was his legitimate wife.

ISSUE:

Was there a valid marriage between the accused-appellant and the deceased-victim?

RULING:

There is no better proof of marriage than the admission of the accused of the existence of such
marriage. (Tolentino vs. Paras).

Persons living together in apparent matrimony are presumed, in the absence of any
counter presumption or evidence special to the case, to be in fact married. The reason is that such
is the common order of the society, and if the parties were not what they thus hold themselves
out as being, they would be living in constant violation of decency and law.

The presumption in favor of the matrimony is one of the strongest known in law. The reason for
this presumption is well settled in Perido vs. Perido, thus:

The basis of human society throughout the civilized world is that of marriage. Marriage is not
only a civil contract, but it is a new relation, an institution in the maintenance of which the public
is deeply interested. Consequently, every intendment of the law leans toward legalizing
matrimony.

G.R. No. L-82273 June 1, 1990

JOAQUIN T. BORROMEO, petitioner,

vs.
COURT OF APPEALS and SAMSON LAO, respondents.

RESOLUTION

PER CURIAM:

In a complaint for damages filed with the Regional Trial Court of Cebu, Branch 8 docketed as
Civil Case No. CEB-8679, petitioner Joaquin T. Borromeo charges Attys. Julieta Y. Carreon and
Alfredo P. Marasigan, Division Clerk of Court and Asst. Division Clerk of Court, respectively,
of the Third Division, and Atty. Jose I. Ilustre, Chief of the Judicial Records Office of this Court,
with usurpation of judicial functions, for allegedly "maliciously and deviously issuing biased,
fake, baseless and unconstitutional 'Resolution' and 'Entry of Judgment' in G.R. No. 82273.
Summons were issued by the lower court requiring the respondents to answer the complaint
within fifteen (15) days from receipt thereof. Since the summons arose from a complaint against
a resolution of the Third Division and the complaint is against personnel of the Third Division
acting in their official capacity upon orders issued to them by the Third Division, the summons
were initially referred, to the Third Division. In a resolution dated April 25, 1990, the summons
were referred by the Third Division to the Court En Banc.

This is not the first time that Mr. Borromeo has filed charges/complaints against officials of the
Court. In several letter-complaints filed with the courts and the Ombudsman 1 Borromeo had
repeatedly alleged that he "suffered injustices," because of the disposition of the four (4) cases he
separately appealed to this Court which were resolved by minute resolutions, allegedly in
violation of Sections 4 (3),13 and 14 of Article VIII of the 1987 Constitution .2 His invariable
complaint is that the resolutions which disposed of his cases do not bear the signatures of the
Justices who participated in the deliberations and resolutions and do not show that they voted
therein. He likewise complained that the resolutions bear no certification of the Chief Justice and
that they did not state the facts and the law on which they were based and were signed only by
the Clerks of Court and therefore "unconstitutional, null and void."

In the present case for-damages filed with the Regional Trial Court of Cebu, Mr. Borromeo
charges that Attys. Carreon, Marasigan and Ilustre usurped judicial functions by issuing a
"supposed" resolution of the Third Division of the Court in G.R. No. 82273, and further alleges
that, "the wanton, malicious and deceitful acts of defendants in impeding, obstructing, and
defeating the-proper administration of justice by depriving plaintiff of due process, equal
protection of the laws, and his cardinal primary rights through said illegal, unjust and fake
'resolutions' and 'Entry of Judgment,' has caused plaintiff grave moral shock, mental anguish,
sleepless nights, severe embarrassment and endless worry, for which the former must be
condemned to pay MORAL DAMAGES in the amount of not less than P50,000.00."

The September 13, 1989 resolution of the Supreme Court through its Third Division which
disposed of Borromeo's petition is a four-page resolution which more than adequately complies
with the constitutional requirements governing resolutions refusing to give due course to
petitions for review. The petition and its incidents were discussed and deliberated upon by the
Justices of the Third Division during the April 13, 1988 session; the September 28,1988 session;
the November 28,1988 session; the January 25, 1989 session; and the April 12, 1989 session
before the issuance of the September 13, 1989 resolution. On November 27, 1989, a motion for
reconsideration, which was received by the Court more than a month after a copy of the
September 13, 1989 resolution denying the petition was served on the petitioner, was noted
without action as the Court found that the motion merely reiterated the same arguments earlier
raised in the petition and already passed upon by the Court and was, therefore without merit.

The Court reminds all lower courts, lawyers, and litigants that it disposes of the bulk of its cases
by minute resolutions and decrees them as final and executory, as where a case is patently
without merits where the issues raised are factual in nature, where the decision appealed from is
supported by: substantial evidence and, is in accord with the facts of the case and the applicable
laws, where it is clear from the records that the petition is filed merely to forestall the early
execution of judgment and for non-compliance with the rules. The resolution denying due course
or dismissing the petition always gives the legal basis. As emphasized in In Re: Wenceslao
Laureta (148 SCRA 382,417 [1987], "[T]he Court is not 'duty bound' to render signed Decisions
all the time. It has ample discretion to formulate Decisions and/or Minute Resolutions, provided
a legal basis is given, depending on its evaluation of a case" (Italics supplied). This is the only
way whereby it can act on all cases filed before it and, accordingly, discharge its constitutional
functions. The Court ordinarily acts on the incidents or basic merits of three hundred (300) to
four hundred (400) cases through its Divisions every Monday and Wednesday when the
Divisions meet and on one hundred (100) to one hundred twenty (120) cases every Tuesday and
Thursday that it meets en banc or around one thousand (1,000) cases a week. It is only on
Fridays; and week-ends that the members of the Court work in their separate chambers or at
home because the Court does not meet in session--either in Divisions or En Banc.

For a prompt dispatch of actions of the Court, minute resolutions are promulgated by the Court
through the Clerk of Court, who takes charge of sending copies thereof to the parties concerned
by quoting verbatim the resolution issued on a particular case. It is the Clerk of Court's duty to
inform the parties of the action taken on their cases by quoting the resolution adopted by the
court. The Clerk of Court never participates in the deliberations of case. All decisions and
resolutions are actions of the Court. The Clerk of Court merely transmits the Court's action. This
was explained in the case—G.R. No. 56280, "Rhine Marketing Corp. v. Felix Gravante, et al.",
where, in a resolution dated July 6, 1981, the Court said—"[M]inute resolutions of this Court
denying or dismissing unmeritorious petitions like the petition in the case at bar, are the result of
a thorough deliberation among the members of this Court, which does not and cannot delegate
the exercise of its judicial functions to its Clerk of Court or any of its subalterns, which should be
known to counsel. When a petition is denied or dismissed by this Court, this Court sustains the
challenged decision or order together with its findings of facts and legal conclusions."

In G.R. No. 76355, Macario Tayamura, et al. v. Intermediate Appellate Court, et al. (May 21,
1987), the Court clarified the constitutional requirement that a decision must express clearly and
distinctly the facts and law on which it is based as referring only to decisions. Resolutions
disposing of petitions fall under the constitutional provision which states that, "No petition for
review ... shall be refused due course ...without stating the legal basis therefor" (Section 14,
Article VIII, Constitution). When the Court, after deliberating on a petition and any subsequent
pleadings, manifestations, comments, or motions decides to deny due course to the petition and
states that the questions raised are factual or no reversible error in the respondent court's decision
is shown or for some other legal basis stated in the resolution, there is sufficient compliancewith
the constitutional requirement.

Minute resolutions need not be signed by the members of the Court who took part in the
deliberations of a case nor do they require the certification of the Chief Justice. For to require
members of the court to sign all resolutions issued would not only unduly delay the issuance of
its resolutions but a great amount of their time would be spent on functions more properly
performed by the Clerk of court and which time could be more profitably used in the analysis of
cases and the formulation of decisions and orders of important nature and character. Even with
the use of this procedure, the Court is still struggling to wipe out the backlogs accumulated over
the years and meet the ever increasing number of cases coming to it. Remedial-legislation to
meet this problem is also pending in Congress.
In discharging its constitutional duties, the Court needs the fun time and attention of its Clerks of
Court and other key officials. Its officers do not have the time to answer frivolous complaints
filed by disgruntled litigants questioning decisions and resolutions of the Court and involving
cases deliberated upon and resolved by the Court itself. As earlier stated, all resolutions and
decisions are actions of the Court, not its subordinate personnel. The Court assumes full
responsibility: for all its acts. Its personnel cannot answer and should not be made to answer for
acts of the Court.

IN VIEW OF THE FOREGOING, all private law practitioners, government, lawyers,

government prosecutors, and Judges of trial courts are ORDERED to themselves with the above
procedures and to refrain from filing, taking cognizance of, and otherwise taking part in
harassment suits against officers of the Supreme Court insofar as the latter are sought to be held
liable for decisions, resolutions, and other actions of the Supreme Court and/or its Justices.
Instead, all such complaints against resolutions, decisions, and other actions of the Supreme
Court must be forwarded to the Court itself for remedial or other appropriate action. Any
violation of this order by a member of the Bar or the judiciary shows gross ignorance of the law
and shall constitute a ground for appropriate proceedings. In this particular case, Judge Rafael R.
Ybañez, Presiding Judge of the Regional Trial Court of Cebu, Branch 18, is hereby ORDERED
to QUASH the summons issued and to DISMISS Civil Case No. CEB-8679. He is further
DIRECTED not to issue summons or otherwise entertain cases of similar nature which may in
the future be filed in his court.

SO ORDERED.

Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Padilla,
Bidin, Sarmiento, Medialdea and Regalado, JJ, concur.

Feliciano, Cortes and Griño-Aquino, JJ., is on leave

#8
G.R. No. L-21780 June 30, 1967

MAKATI DEVELOPMENT CORPORATION, plaintiff-appellant,

vs.
EMPIRE INSURANCE CO., defendant-appellee.
RODOLFO P. ANDAL, third-party defendant-appellee.

Salvador J. Lorayes for plaintiff-appellant Makati Development Corporation.

Tomacruz and Ferrer for defendant-appellee Empire Insurance Company, Inc.
Crispin D. Baizas and Associates for defendant-appellee Rodolfo Andal.

CASTRO, J.:
On March 31, 1959, the Makati Development Corporation sold to Rodolfo P. Andal a lot, with
an area of 1,589 square meters, in the Urdaneta Village, Makati, Rizal, for P55,615.1äwphï1.ñët

A so-called "special condition" contained in the deed of sale provides that "[T]he VENDEE/S
shall commence the construction and complete at least 50% of his/her/their/its residence on the
property within two (2) years from March 31, 1959 to the satisfaction of the VENDOR and, in
the event of his/her/their/its failure to do so, the bond which the VENDEE/S has delivered to the
VENDOR in the sum of P11,123.00 and evidenced by a cash bond receipt dated April 10, 1959
will be forfeited in favor of the VENDOR by the mere fact of failure of the VENDEE/S to
comply with this special condition." To insure faithful compliance with this "condition," Andal
gave a surety bond on April 10, 1959 wherein he, as principal, and the Empire Insurance
Company, as surety, jointly and severally, undertook to pay the Makati Development
Corporation the sum of P12,000 in case Andal failed to comply with his obligation under the
deed of sale.

Andal did not build his house; instead he sold the lot to Juan Carlos on January 18, 1960. As
neither Andal nor Juan Carlos built a house on the lot within the stipulated period, the Makati
Development Corporation, on April 3, 1961, that is, three days after the lapse of the two-year
period, sent a notice of claim to the Empire Insurance Co. advising it of Andal's failure to
comply with his undertaking. Demand for the payment of P12,000 was refused, whereupon the
Makati Development Corporation filed a complaint in the Court of First Instance of Rizal on
May 22, 1961 against the Empire Insurance Co. to recover on the bond in the full amount, plus
attorney's fees. In due time, the Empire Insurance Co. filed its answer with a third-party
complaint against Andal. It asked that the complaint be dismissed or, in the event of a judgment
in favor of the Makati Development Corporation, that judgment be rendered ordering Andal to
pay the Empire Insurance Co. whatever amount it maybe ordered to pay the Makati
Development Corporation, plus interest at 12%, from the date of the filing of the complaint until
said amount was fully reimbursed, and attorney's fees.

In his answer, Andal admitted the execution of the bond but alleged that the "special condition"
in the deed of sale was contrary to law, morals and public policy. He averred that, at any rate,
Juan Carlos had started construction of a house on the lot.

Hearing was held and, on March 28, 1963, the lower court rendered judgment, sentencing the
Empire Insurance Co. to pay the Makati Development Corporation the amount of P1,500, with
interest at the rate of 12% from the time of the filing of the complaint until the amount was fully
paid, and to pay attorney's fees in the amount of P500, and the proportionate part of the costs.
The court directed that in case the amount of the judgment was paid by the Empire Insurance
Co., Andal should in turn pay the former the sum of P1,500 with interest at 12% from the time of
the filing of the complaint to the time of payment and to pay attorney's fees in the sum of P500
and proportionate part of the costs. The Makati Development Corporation appealed directly to
this Court.

In reducing Andal's liability for breach of his undertaking from P12,000, as stipulated in the
bond to P1,500, the court noted that
 While no building has actually been constructed before the target date which is March 31,
1961, it is also a fact that even before that date the entire area was already fenced with a
stone wall and building materials were also stocked in the premises which are clear
indicia of the owner's desire to construct his house with the least possible delay. As a
matter of fact the incontrovertible testimony of Juan Carlos is to the effect that by the end
of April 1961, he had finished very much more than the required 50% stipulated in the
contract of sale. In short there was only really a little delay.

But the appellant argues that Andal became liable for the full amount of his bond upon his failure
to build a house within the two-year period which expired on March 31, 1961 and that the trial
court was without authority to reduce Andal's liability on the basis of Carlos' construction of a
house a month after the stipulated period because there was no privity of contract between Carlos
and the Makati Development Corporation.

To begin with, the so-called "special condition" in the deed of sale is in reality an obligation 1 —
to build a house at least 50 per cent of which must be finished within two years. It was to secure
the performance of this obligation that a penal clause was inserted.

While it is true that in obligations with a penal sanction the penalty takes the place of "damages
and the payment of interest in case of non-compliance"2 and that the obligee is entitled to recover
upon the breach of the obligation without the need of proving damages,3 it is nonetheless true
that in certain instances a mitigation of the obligor's liability is allowed. Thus article 1229 of the
Civil Code states:

The judge shall equitably reduce the penalty when the principal obligation has been
partly or irregularly complied with by the debtor. Even if there has been no performance,
the penalty may also be reduced by the courts if it is iniquitous or unconscionable.

Here the trial court found that Juan Carlos had finished more than 50 per cent of his house by
April, 1961, or barely a month after the expiration on March 31, 1961 of the stipulated period.
There was therefore a partial performance of the obligation within the meaning and intendment
of article 1229.4 The case of General Ins. & Surety Corp. vs. Republic, G.R. L-13873, Jan. 31,
19635 cannot be invoked as authority for the forfeiture of the full amount of the bond because
unlike this case there was in that case no performance at all of any part of the obligation to
secure the payment of salaries to teachers. Indeed, it has been held that where there has been
partial or irregular compliance with the provisions in a contract for special indemnification in the
event of failure to comply with its terms, courts will rigidly apply the doctrine of strict
construction against the enforcement in its entirety of the indemnification, where it is clear from
the contract that the amount or character of the indemnity is fixed without regard to the probable
damages which might be anticipated as a result of a breach of the terms of the contract, or, in
other words, where the indemnity provided for is essentially a mere penalty having for its object
the enforcement of compliance with the contract.6 The penal clause in this case was inserted not
to indemnify the Makati Development Corporation for any damage it might suffer as a result of a
breach of the contract but rather to compel performance of the so-called "special condition" and
thus encourage home building among lot owners in the Urdaneta Village.
 Considering that a house had been built shortly after the period stipulated, the substantial, if
tardy, performance of the obligation, having in view the purpose of the penal clause, fully
justified the trial court in reducing the penalty.

Still it is insisted that Carlos' construction of a house on the lot sold cannot be considered a
partial performance of Andal's obligation because Carlos bears no contractual relation to the
Makati Development Corporation. This case is in many respects analogous to Insular Gov't. vs.
Amechazurra, 10 Phil. 637 (1908) where a similar claim was made by a party and rejected by
this Court. There the defendant gave a bond for $800 to guarantee the return to the plaintiff of
four firearms issued to him "on demand" of the Government. Three of the firearms were stolen
from the defendant so that on demand of the Government he was able to produce only one.
Subsequently the constabulary recovered two of the missing guns and the question was whether
defendant was entitled to a mitigation of liability even if recovery of the firearms was made
possible through the efforts of third parties (the Constabulary) This Court gave an affirmative
answer.

Indeed the stipulation in this case to commence the construction and complete at least 50 per cent
of the vendee's house within two years cannot be construed as imposing a strictly personal
obligation on Andal. To adopt such a construction would be to limit Andal's right to dispose of
the lot. There is nothing in the deed of sale restricting Andal's right to sell the lot at least within
the two-year period and we think it plain that a reading of such a limitation on one of the rights
of ownership must rest on more explicit language in the contract. It cannot be left to mere
inference.

Accordingly, the decision appealed from is affirmed, at appellant's cost.

Makati Developmental Corp vs. Empire Insurance Corp

GR No. L-21780

FACTS:
1. MAKATI SOLD TO Rodolfo P. Andal a lot
1. SPECIAL CONDITION:
i. VENDEE/S shall commence the construction and complete at least 50% of
his/her/their/its residence on the property within two (2) years from March 31, 1959 to the
satisfaction of the VENDOR
ii. Failure to do so, the bond which the VENDEE/S has delivered to the VENDOR in the
sum of P11,123.00 and evidenced by a cash bond receipt dated April 10, 1959 will be forfeited in
favor of the VENDOR by the mere fact of failure of the VENDEE/S to comply with this special
condition."
2. ANDAL GAVE A SURETY BOND, he as principal, and the Empire Insurance Company, as
surety, jointly and severally, undertook to pay the Makati Development Corporation the sum of
P12,000 in case Andal failed to comply with his obligation under the deed of sale.
 i. Did not build his house; instead he sold the lot to Juan Carlos
ii. Neither built a house on the lot within the stipulated period
iii. MAKATI sent a notice of claim to the Empire Insurance Co. advising it of Andal's
failure to comply with his undertaking.
iv. Demand for the payment of P12,000 was refused
2. MAKATI FILED COMPLAINT against the Empire.
1. EMPIRE filed answer with a third-party complaint against Andal.
i. To order Andal to pay the Empire Insurance Co. whatever amount it maybe ordered to
pay the Makati Development Corporation, plus interest at 12%, from the date of the filing of the
complaint until said amount was fully reimbursed, and attorney's fees.
ii. Andal admitted the execution of the bond but alleged that the "special condition" in
the deed of sale was contrary to law, morals and public policy.
1. He averred that Juan Carlos had started construction of a house on the lot.
3. LOWER COURT SENTENCED Empire to pay MAKATI P1,500, with interest at the rate of
12% from the time of the filing of the complaint until the amount was fully paid, and to pay
attorney's fees in the amount of P500, and the proportionate part of the costs.
1. Andal should in turn pay EMPIRE P1,500 with interest at 12% from the time of the filing of the
complaint to the time of payment and to pay attorney's fees in the sum of P500 and proportionate
part of the costs.
2. MAKATI APPEALED.
4. COURT REDUSED ANDAL’S LIABILITY BECAUSE THERE WAS ONLY REALLY A
LITTLE DELAY.
1. There was indication of owner's desire to construct his house with the least possible delay.
2. MAKATI argues that Andal became liable for the full amount of his bond upon his failure to
build a house within the two-year period which expired on March 31, 1961
3. Trial court has no authority to reduce Andal's liability on the basis of Carlos' construction of a
house a month after the stipulated period because there was no contract between Carlos and the
Makati Development Corporation.

ISSUE:
WON court erred in mitigating the obligor’s liability considering obligor failed to commit
obligation within stipulated time.
WON 3rd party’s commencement of stipulated condition can be counted in commitment of the
contract.

HELD:
Accordingly, the decision appealed from is affirmed, at appellant's cost.

1. SPECIAL CONDITION = OBLIGATION

2. MITIGATION OF OBLIGOR’S LIABILITY IS ALLOWED:
1. ART 1229 of the Civil Code states:
i. The judge shall equitably reduce the penalty when the principal obligation has been
partly or irregularly complied with by the debtor. Even if there has been no performance, the
penalty may also be reduced by the courts if it is iniquitous or unconscionable.
3. JUAN CARLOS FINISHED 50% OF HOUSE ONE MONTH AFTER EXPIRATION OF
STIPULATED PERIOD.
1. The penal clause in this case was inserted not to indemnify for any damage but rather to compel
performance of the so-called "special condition" and encourage home building among lot owners
in the Urdaneta Village.
4. ON CARLOS NO CONTRACTUAL RELATION WITH MAKATI:
1. Indeed the stipulation in this case to commence the construction and complete at least 50 per cent
of the vendee's house within two years cannot be construed as imposing a strictly personal
obligation on Andal –BECAUSE IT WOULD ANDAL’S RIGHT TO DISPOSE THE LOT.
2. There is nothing in the deed of sale restricting Andal's right to sell the lot at least within the two-
year period.
3. Such limitation should be expressed if ever and not left to mere inference.

#9

G.R. No. 125862 April 15, 2004

FRANCISCO CULABA and DEMETRIA CULABA, doing business under the name and
style "Culaba Store", petitioners,
vs.
COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review under Rule 45 of the Revised Rules of Civil Procedure of the
Decision1 of the Court of Appeals in CA-G.R. CV No. 19836 affirming in toto the Decision2 of
the Regional Trial Court of Makati, Branch 138, in Civil Case No. 1033 for collection of sum of
money, and the Resolution3 denying the motion for reconsideration of the said decision.

The Undisputed Facts

The spouses Francisco and Demetria Culaba were the owners and proprietors of the Culaba Store
and were engaged in the sale and distribution of San Miguel Corporation’s (SMC) beer products.
SMC sold beer products on credit to the Culaba spouses in the amount of P28,650.00, as
evidenced by Temporary Credit Invoice No. 42943.4 Thereafter, the Culaba spouses made a
partial payment of P3,740.00, leaving an unpaid balance of P24,910.00. As they failed to pay
despite repeated demands, SMC filed an action for collection of a sum of money against them
before the RTC of Makati, Branch 138.
The defendant-spouses denied any liability, claiming that they had already paid the plaintiff in
full on four separate occasions. To substantiate this claim, the defendants presented four (4)
Temporary Charge Sales (TCS) Liquidation Receipts, as follows:

April 19, 1983 Receipt No. 27331 for P8,0005

April 22, 1983 Receipt No. 27318 for P9,0006

April 27, 1983 Receipt No. 27339 for P4,5007

April 30, 1983 Receipt No. 27346 for P3,4108

Defendant Francisco Culaba testified that he made the foregoing payments to an SMC supervisor
who came in an SMC van. He was then showed a list of customers’ accountabilities which
included his account. The defendant, in good faith, then paid to the said supervisor, and he was,
in turn, issued genuine SMC liquidation receipts.

For its part, SMC submitted a publisher’s affidavit9 to prove that the entire booklet of TCSL
Receipts bearing Nos. 27301-27350 were reported lost by it, and that it caused the publication of
the notice of loss in the July 9, 1983 issue of the Daily Express, as follows:

NOTICE OF LOSS

OUR CUSTOMERS ARE HEREBY INFORMED THAT TEMPORARY CHARGE

SALES LIQUIDATION RECEIPTS WITH SERIAL NOS. 27301-27350 HAVE BEEN
LOST.

ANY TRANSACTION, THEREFORE, ENTERED INTO WITH THE USE OF THE

ABOVE RECEIPTS WILL NOT BE HONORED.

SAN MIGUEL CORPORATION

BEER DIVISION
Makati Beer Region10

The Trial Court’s Ruling

After trial on the merits, the trial court rendered judgment in favor of SMC, and held the Culaba
spouses liable on the balance of its obligation, thus:

Wherefore, judgment is hereby rendered in favor of the plaintiff, as follows:

1. Ordering defendants to pay the amount of P24,910.00 plus legal interest of 6% per
annum from April 12, 1983 until the whole amount is fully paid;

2. Ordering defendants to pay 20% of the amount due to plaintiff as and for attorney’s
fees plus costs.
 SO ORDERED.11

According to the trial court, it was unusual that defendant Francisco Culaba forgot the name of
the collector to whom he made the payments and that he did not require the said collector to print
his name on the receipts. The court also noted that although they were part of a single booklet,
the TCS Liquidation Receipts submitted by the defendants did not appear to have been issued in
their natural sequence. Furthermore, they were part of the lost booklet receipts, which the public
was duly warned of through the Notice of Loss the plaintiff caused to be published in a daily
newspaper. This confirmed the plaintiff’s claim that the receipts presented by the defendants
were spurious ones.

The Case on Appeal

On appeal, the appellants interposed the following assignment of errors:

THE TRIAL COURT ERRED IN FINDING THAT THE RECEIPTS PRESENTED BY

DEFENDANTS EVIDENCING HIS PAYMENTS TO PLAINTIFF SAN MIGUEL
CORPORATION, ARE SPURIOUS.

II

THE TRIAL COURT ERRED IN CONCLUDING THAT PLAINTIFF-APPELLEE

HAS SUFFICIENTLY PROVED ITS CAUSE OF ACTION AGAINST THE
DEFENDANTS.

III

THE TRIAL COURT ERRED IN ORDERING DEFENDANTS TO PAY 20% OF THE

AMOUNT DUE TO PLAINTIFF AS ATTORNEY’S FEES.12

The appellants asserted that while the trial court’s observations were true, it was the usual
business practice in previous transactions between them and SMC. The SMC previously honored
receipts not bearing the salesman’s name. According to appellant Francisco Culaba, he even lost
some of the receipts, but did not encounter any problems.

According to appellant Francisco, he could not be faulted for paying the SMC collector who
came in a van and was in uniform, and that any regular customer would, without any
apprehension, transact with such an SMC employee. Furthermore, the respective receipts issued
to him at the time he paid on the four occasions mentioned had not yet then been declared lost.
Thus, the subsequent publication in a daily newspaper declaring the booklets lost did not affect
the validity and legality of the payments made. Accordingly, by its actuations, the SMC was
estopped from questioning the legality of the payments and had no cause of action against the
appellants.
Anent the issue of attorney’s fees, the order of the trial court for payment thereof is without
basis. According to the appellant, the provision for attorney’s fees is a contingent fee, already
provided for in the SMC’s contract with the law firm. To further order them to pay 20% of the
amount due as attorney’s fees is double payment, tantamount to undue enrichment and therefore
improper.13

The appellee, for its part, contended that the primary issue in the case at bar revolved around the
basic and fundamental principles of agency.14 It was incumbent upon the defendants-appellants
to exercise ordinary prudence and reasonable diligence to verify and identify the extent of the
alleged agent’s authority. It was their burden to establish the true identity of the assumed agent,
and this could not be established by mere representation, rumor or general reputation. As they
utterly failed in this regard, the appellants must suffer the consequences.

The Court of Appeals affirmed the decision of the trial court, thus:

In the face of the somewhat tenuous evidence presented by the appellants, we cannot
fault the lower court for giving more weight to appellee’s testimonial and documentary
evidence, all of which establish with some degree of preponderance the existence of the
account sued upon.

ALL CONSIDERED, we cannot find any justification to reject the factual findings of
the lower court to which we must accord respect, for which reason, the judgment
appealed from is hereby AFFIRMED in all respects.

SO ORDERED.15

Hence, the instant petition.

The petitioners pose the following issues for the Court’s resolution:

I. WHETHER OR NOT THE RESPONDENT HAD PROVEN BY PREPONDERANT

EVIDENCE THAT IT HAD PROPERLY AND TIMELY NOTIFIED PETITIONER OF
LOST BOOKLET OF RECEIPTS

II. WHETHER OR NOT RESPONDENT HAD PROVEN BY PREPONDERANT

EVIDENCE THAT PETITIONER WAS REMISS IN THE PAYMENT OF HIS
ACCOUNTS TO ITS AGENT.16

According to the petitioners, receiving receipts from the private respondent’s agents instead of its
salesmen was a usual occurrence, as they had been operating the store since 1979. Thus, on four
occasions in April 1983, when an agent of the respondent came to the store wearing an SMC
uniform and driving an SMC van, petitioner Francisco Culaba, without question, paid his
accounts. He received the receipts without fear, as they were similar to what he used to receive
before. Furthermore, the petitioners assert that, common experience will attest that unless the
attention of the customers is called for, they would not take note of the serial number of the
receipts.
The petitioners contend that the private respondent advertised its warning to the public only after
the damage was done, or on July 9, 1993. Its belated notice showed its glaring lack of interest or
concern for its customers’ welfare, and, in sum, its negligence.

Anent the second issue, petitioner Francisco Culaba avers that the agent to whom the accounts
were paid had all the physical and material attributes or indications of a representative of the
private respondent, leaving no doubt that he was duly authorized by the latter. Petitioner
Francisco Culaba’s testimony that "he does not necessarily check the contents of the receipts
issued to him except for the amount indicated if [the] same accurately reflects his actual
payment" is a common attitude of customers. He could, thus, not be faulted for paying the
private respondent’s agent on four occasions. Petitioner Francisco Culaba asserts that he made
the payment in good faith, to an agent who issued SMC receipts which appeared to be genuine.
Thus, according to the petitioners, they had duly paid their obligation in accordance with Articles
1240 and 1242 of the New Civil Code.

The private respondent, for its part, avers that the burden of proving payment is with the debtor,
in consonance with the express provision of Article 1233 of the New Civil Code. The petitioners
miserably failed to prove the self-serving allegation that they already paid their liability to the
private respondent. Furthermore, under normal circumstances, an obligor would not just pay a
substantial amount to someone whom he saw for the first time, without even asking for the
latter’s name.

The Ruling of the Court

The petition is dismissed.

The petitioners question the findings of the Court of Appeals as to whether the payment of the
petitioners’ obligation to the private respondent was properly made, thus, extinguishing the
same. This is clearly a factual issue, and beyond the purview of the Court to delve into. This is in
consonance with the well-settled rule that findings of fact of the trial court, especially when
affirmed by the Court of Appeals, are accorded the highest degree of respect, and generally will
not be disturbed on appeal. Such findings are binding and conclusive on the Court. 17
Furthermore, it is not the Court’s function under Rule 45 of the Rules of Court, as amended, to
review, examine and evaluate or weigh the probative value of the evidence presented.18

To reiterate, the issue being raised by the petitioners does not involve a question of law, but a
question of fact, not cognizable by this Court in a petition for review under Rule 45. The
jurisdiction of the Court in such a case is limited to reviewing only errors of law, unless the
factual findings being assailed are not supported by evidence on record or the impugned
judgment is based on a misapprehension of facts.19

A careful study of the records of the case reveal that the appellate court affirmed the trial court’s
factual findings as follows:

First. Receipts Nos. 27331, 27318, 27339 and 27346 were included in the private respondent’s
lost booklet, which loss was duly advertised in a newspaper of general circulation; thus, the
private respondent could not have officially issued them to the petitioners to cover the alleged
payments on the dates appearing thereon.

Second. There was something amiss in the way the receipts were issued to the petitioners, as one
receipt bearing a higher serial number was issued ahead of another receipt bearing a lower serial
number, supposedly covering a later payment. The petitioners failed to explain the apparent mix-
up in these receipts, and no attempt was made in this regard.

Third. The fact that the salesman’s name was invariably left blank in the four receipts and that
the petitioners could not even remember the name of the supposed impostor who received the
said payments strongly argue against the veracity of the petitioners’ claim.

We find no cogent reason to reverse the said findings.

The dismissal of the petition is inevitable even upon close perusal of the merits of the case.

Payment is a mode of extinguishing an obligation.20 Article 1240 of the Civil Code provides that
payment shall be made to the person in whose favor the obligation has been constituted, or his
successor-in-interest, or any person authorized to receive it.21 In this case, the payments were
purportedly made to a "supervisor" of the private respondent, who was clad in an SMC uniform
and drove an SMC van. He appeared to be authorized to accept payments as he showed a list of
customers’ accountabilities and even issued SMC liquidation receipts which looked genuine.
Unfortunately for petitioner Francisco Culaba, he did not ascertain the identity and authority of
the said supervisor, nor did he ask to be shown any identification to prove that the latter was,
indeed, an SMC supervisor. The petitioners relied solely on the man’s representation that he was
collecting payments for SMC. Thus, the payments the petitioners claimed they made were not
the payments that discharged their obligation to the private respondent.

The basis of agency is representation.22 A person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent.23 In the instant case, the petitioners’ loss
could have been avoided if they had simply exercised due diligence in ascertaining the identity
of the person to whom they allegedly made the payments. The fact that they were parting with
valuable consideration should have made them more circumspect in handling their business
transactions. Persons dealing with an assumed agent are bound at their peril to ascertain not only
the fact of agency but also the nature and extent of authority, and in case either is controverted,
the burden of proof is upon them to establish it.24 The petitioners in this case failed to discharge
this burden, considering that the private respondent vehemently denied that the payments were
accepted by it and were made to its authorized representative.

Negligence is the omission to do something which a reasonable man, guided by those

considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of
something, which a prudent and reasonable man would not do.25 In the case at bar, the most
prudent thing the petitioners should have done was to ascertain the identity and authority of the
person who collected their payments. Failing this, the petitioners cannot claim that they acted in
good faith when they made such payments. Their claim therefor is negated by their negligence,
and they are bound by its consequences. Being negligent in this regard, the petitioners cannot
seek relief on the basis of a supposed agency.26

WHEREFORE, the instant petition is hereby DENIED. The assailed Decision dated April 16,
1996, and the Resolution dated July 19, 1996 of the Court of Appeals are AFFIRMED. Costs
against the petitioners.

SO ORDERED.

#11

MONICO CONCEPCIÓN, PLAINTIFF AND APPELLANT, VS. PACIENCIA STA. ANA,

DEFENDANT AND APPELLEE.
FERIA, J.:
An action was instituted by Monico Concepción vs. Paciencia Sta. Ana to annul the sale made by
the late Perpetua Concepción, sister of the plaintiff, of three parcels of land with the
improvements thereon to the defendant. The complaint alleges, among others, that the plaintiff
is the only surviving legitimate brother of Perpetua Concepción, who died on or about January
28, 1948, without issue and without leaving any will; that in her life time or on or about June 29,
1945, said Perpetua Concepción, in connivance with the defendant and with intent to defraud the
plaintiff, sold and conveyed three parcels of land for a false and fictitious consideration to the
defendant, who secured transfer certificates of title of said lands issued under her name; and that
the defendant has been in possession of the properties sold since the death of Perpetua
Concepción, thereby causing damages to the plaintiff in the amount of not less than two hundred
(P200) pesos.

Defendant filed a motion to dismiss the complaint on the ground that it does not state a cause of
action, because the deceased being the owner of the properties sold had the right to enjoy and
dispose of them without further limitation than those established by law.

The Court of First Instance of Manila granted the motion to dismiss and dismissed the complaint
on the ground that "the plaintiff is not a party to the deed of sale executed by Perpetua
Concepción in favor of the defendant. Even in the assumption that the consideration of the
contract is fictitious, the plaintiff has no right of action against the defendant. Under article 1302
of the Civil Code, 'the action to annul a contract may be brought by any person principally or
subsidiarily bound thereby.' The plaintiff is not bound by the deed of sale executed by the
deceased in favor of the defendant. He has no obligation under the deed."

Plaintiff appealed from the order of the court dismissing his complaint, and now assigns as
erroneous the order appealed from on the following grounds: (1) that a simulated or fictitious
sale for a fictitious or false consideration is null and void per se or non-existence, hence it cannot
transfer ownership; and (2) that according to article 1302 of the same code "the action to annul a
contract may be brought by a person principally or subsidiarily bound thereby," and as under
article 1257 of the Civil Code "contracts shall be binding only upon the parties who make them
and their heirs," the plaintiff as heir of the deceased contracting party can bring action to annul
the contract of sale under consideration.

(1) The plaintiff's contention that a simulated or fictitious contract of sale with a false
consideration is null and void per se, or is a contrato inexistente, not merely a contrato nulo, is
not correct. Article 1276 of the Civil Code[1] expressly provides that "the statement of a false
consideration in contract shall be ground for annulment," and article 1301 of the same code
provided for the limitation of actions for annulment of a contract.

In support of his contention that the contract of sale under consideration being a fictitious
contract or contract with a false consideration is null per se or non-existent, plaintiff quotes
Manresa's comment on articles 1274 to 1277, Vol. 8, p. 623, which says: "Recognizing this
analogy, it was held by the Supreme Court of Spain that a fictitious contract, or contract entered
into with false consideration does not confer any right or produce any legal effect, citing the
judgments of the Supreme Court of Spain of October 31, 1865, of March 21, 1884, and of
November 23, 1877." Appellant's conclusion is not correct. By stating that contracts with false
consideration confer no right and produce no legal effect, Manresa does not mean to say that
they are null and void per se or non-existent as contradistinguished from annullable, for the
effects of both non-existent and annullable contracts that have been annulled are the same: they
confer no right and produce no legal effect. What Manresa says on page 700 of the same
volume, commenting on article 1301, is the following: "The expression of a false cause or
consideration in the contract does not make it non-existent, and it shall only be a ground for an
action for nullity as provided by article 1276 and confirmed by article 1301 of the Civil
Code. There are some who consider this somewhat confused under the Code; for us it is very
clear, for the code repeatedly provides that the effect of a false consideration is limited to making
the contract voidable, and we have already pointed out that in this particular, our Civil Code has
deviated deliberately from the French Code, which includes indistinctly in one and the same
provision contracts without consideration and contracts in which the consideration is illicit or
false."

In the case of De Belén vs. Collector of Customs and Sheriff of Manila (46 Phil. 241), this court,
through Mr. Justice Street, said that "The distinction between entire absence of contract
(inexistencia) and the situation requiring an action of rescission or nullity is fully expounded by
Manresa in his comment on article 1300 of the Civil Code (q.v.)."

(2) As to the appellant's second and last contention, under the law action to annul a contract
entered into with all the requisites mentioned in article 1261 whenever they are tainted with the
vice which invalidate them in accordance with law, may be brought, not only by any person
principally bound or who made them, but also by his heir to whom the right and obligation
arising from the contract are transmitted. Hence if no such rights, actions or obligations have
been transmitted to the heir, the latter can not bring an action to annul the contract in
representation of the contracting party who made it. In Wolfson vs. Estate of Martinez, 20 Phil.,
340, this Supreme Court quoted with approval; the judgment of the Supreme Court of Spain of
April 18, 1901, in which it was held that "he who is not a party to a contract, or an assignee
thereunder, or does not represent those who took part therein, has under articles 1257 and 1302
of the Civil Code no legal capacity to challenge the validity of such contract." And in Irlanda vs.
Pitargue (22 Phil. 383) we held that "the testamentary or legal heir continues in law as the
juridical personality of his predecessor in interest, who transmit to him from the moment of his
death such of his rights, actions and obligations as are not extinguished thereby."

The question to be resolved is, therefore, whether the deceased Perpetua Concepción has
transmitted to the plaintiff any right arising from the contract under consideration in order that he
can bring an action to annul the sale voluntarily made by her to the defendant with a false
consideration.

We are of the opinion and so hold, that the late Perpetua Concepción has not transmitted to the
plaintiff any right arising from the contract of conveyance or sale of her lands to the defendant,
and therefore the plaintiff cannot file an action to annul such contract as representative of the
deceased.

According to the complaint the deceased, in connivance with the defendant and with intent to
defraud the plaintiff, (that is, in order not to leave the properties above mentioned upon her death
to the plaintiff) sold and conveyed them to the latter, for a false and fictitious consideration. It is,
therefore obvious, that the conveyance or sale of said properties to the defendant was voluntarily
made by the deceased to said defendant. As the deceased had no forced heir, she was free to
dispose of all her properties as absolute owner thereof, without further limitation than those
established by law, and the right to dispose of a thing involves the right to give or convey, it to
another without any consideration. The only limitation established by law on her right to convey
said properties to the defendant without any consideration is, that she could not dispose of or
transfer her property to another in fraud of her creditors. And this court, in Solis vs. Chua Púa
Hermanos (50 Phil. 636), through Mr. Justice Street, held that "a voluntary conveyance, without
any consideration whatever, is prima facie good as between the parties, and such an instrument
can not be declared fraudulent as against creditors in the absence of proof, that there was at the
time of the execution of the conveyance a creditor who could be defrauded by the conveyance,
27 C. J., 470."

Even a forced heir of the deceased Perpetua Concepción would have no right to institute as
representative of the decedent, an action of nullity of a contract made by the decedent to defraud
his creditors, because such a contract being considered illicit under article 1306 of the Civil
Code, Perpetua Concepción herself had no right of action to annul it and recover the properties
she had conveyed to the defendant. But the forced heir could in such case bring an action to
rescind the contract under article 1291(3) of the Civil Code. Manresa in his comments on
articles 1305 and 1306 of the Civil Code (4th edition, volume 8, pp. 717, 718), says: "As to
heirs, it is interesting that the judgment of May 6, 1902, of the Supreme Court of Spain which
denied a forced heir the right to institute an action to annul contracts considered as illicit, for
having been entered into by his predecessor in interest for the purpose of depriving the forced
heir of his legitime. The judgment purported to hold that the proper action would have been an
action to rescind in conformity with what we indicated in commenting on article 1291, and
declared that 'even forced heirs who accept an inheritance under the benefit of inventory are
within the rule 2 of article 1806, that denies to the guilty party the right to recover anything he
may have given, or to enforce the performance of any undertaking in his favor, when the other
party has nothing to do with the illicit consideration; a doctrine laid down in the judgment of July
4, 1896.' "

The reason why a forced heir has the right to institute an action of rescission is that the right to
the legitime is similar to a credit of a creditor. As the same Spanish author correctly states in
commenting on article 1291 of the Civil Code: "The rights of a forced heir to the legitime are
undoubtedly similar to a credit of a creditor in so far as the rights to the legitime may be defeated
by fraudulent contracts, and are superior to the will of those bound to respect them. In its
judgment of October 28, 1897, the Supreme Court of Spain held that the forced heirs instituted as
such by their father to the latter's testament have the undeniable right to institute an action to
annul contracts entered into by the father to their prejudice. As it is seen the action is called
action of nullity, but it is rather an action of rescission taking into account the purpose for which
it is instituted and the confusion of ideas that has prevailed in this matter. The doctrine we shall
expound in commenting on articles 1302 and 1306 will confirm what we have just stated."
(Manresa Código Civil, 4th edition, Vol. 8, pp. 667 and 668.)

Therefore, as the plaintiff in the present case, not being a forced heir of the late Perpetua
Concepción, can not institute an action to annul under article 1300 or to rescind under article
1291(3) of the Civil Code the contract under consideration entered into by the deceased with the
defendant.
G.R. No. L-2277 December 29, 1950

MONICO CONCEPCION, plaintiff-appellant,

vs.
PACIENCIA STA. ANA, defendant-appellee.

Yap and Garcia for appellant.

Tomas Yumol for appellee.

FERIA, J.:

FACTS

An action was instituted by Monico Concepcion vs. Paciencia Sta. Ana to annul the sale made by
the late Perpetua Concepcion, sister of the plaintiff, of three parcels of land with the
improvements thereon to the defendant. The complaint alleges that Perpetua Concepcion, in
connivance with the defendant and with intent to defraud the plaintiff, sold and conveyed three
parcels of land for a false and fictitious consideration to the defendant, who secured transfer
certificates of title of said lands issued under her name; and that the defendant has been in
possession of the properties sold since the death of Perpetua Concepcion, thereby causing
damages to the plaintiff in the amount of not less than two hundred (P200) pesos.
ISSUE

Whether or not Perpetua Concepcion has transmitted to the plaintiff any right arising from the
contract under consideration in order that he can bring an action to annul the sale voluntarily
made by her to the defendant with a false consideration.

HELD

In support of his contention that the contract of sale under consideration being a fictitious
contract or contract with a false consideration is null per se or non-existent, plaintiff quotes
Manresa’s comment on article 1274 to 1277, Vol. 8, p. 623, which says: “Recognizing this
analogy, it was held by the Supreme Court of Spain that a fictitious contract, or contract entered
into with false consideration does not confer any right or produce any legal effect, citing the
judgments of the Supreme Court of Spain of October 31, 1865, of March 21, 1884, and of
November 23, 1877.” Appellant’s conclusion is not correct. By stating that contracts with false
consideration confer no right and produce no legal effect, Manresa does not mean to say that
they are null and void per se or non-existent as contradistinguished from annullable, for the
effects of both non-existent and annullable contracts that have been annulled are the same: they
confer no right and produce no legal effect. What Manresa says on page 700 of the same volume,
commenting on article 1301, is the following: “The expression of a false cause or consideration
in the contract does not make it non-existent, and it shall only be a ground for an action for
nullity as provided by article 1276 and confirmed by article 1301 of the Civil Code. There are
some who consider this somewhat confused under the Code; for us it is very clear, for the code
repeatedly provides that the effect of a false consideration is limited to making the contract
voidable, and we have already pointed out that in this particular, our Civil Code has deviated
deliberately from the French Code, which includes indistinctly in one and the same provision
contracts without consideration and contracts in which the consideration is illicit or false.”

We are of the opinion and so hold, that the late Perpetua Concepcion has not transmitted to the
plaintiff any right arising from the contract of conveyance or sale of her lands to the defendant,
and therefore the plaintiff cannot file an action to annul such contract as representative of the
deceased.

Therefore, as the plaintiff in the present case, not being a forced heir of the late Perpetua
Concepcion, can not institute an action to annul under article 1300 or to rescind under article
1291 (3) of the Civil Code the contract under consideration entered into by the deceased with the
defendant.

In view of the foregoing, the judgment of the lower court is affirmed with costs against the
appellant. So ordered.