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ARTICLE 1305
G.R. No. L-1299 November 16, 1903 VICENTE PEREZ, plaintiff-appellee, vs. EUGENIO POMAR, A e!" o# "$e Com%&'(& Ge!er&) *e T&b&+o,, defendant-appellant. Francisco Dominguez for appellant. Ledesma, Sumulong and Quintos for appellee.

TORRE-, J.: In a decision dated February 9, 1903, the judge of the Si th !udicial "istrict, deciding a case brought by the plaintiff against the defendant for the recovery of #ages due and unpaid, gave judg$ent against the latter for the su$ of %&00 and the costs of suit, less the su$ of %'0, (e ican. )n *ugust +,, 190+, "on -icente .ere/ filed in the 0ourt of First Instance of 1aguna a co$plaint, #hich #as a$ended on the 1,th of !anuary of this year, as2ing that the court deter$ine the a$ount due the plaintiff, at the custo$ary rate of co$pensation for interpreting in these Islands, for services rendered in the 3abacalera 0o$pany, and that, in vie# of the circu$stances of the case, judg$ent be rendered in his favor for such su$. 3he co$plaint also as2ed that the defendant be conde$ned to the pay$ent of da$ages in the su$ of %3,+00, gold, together #ith the costs of suit. In this co$plaint it #as alleged that "on 4ugenio .o$ar, as general agent of the 0o$pa5ia 6eneral de 3abacos in the said province, verbally re7uested the plaintiff on the 8th of "ece$ber, 1901, to act as interpreter bet#een hi$self and the $ilitary authorities9 that after the date $entioned the plaintiff continued to render such services up to and including (ay 31, 190+9 that he had acco$panied the defendant, .o$ar, during that ti$e at conferences bet#een the latter and the colonel co$$anding the local garrison, and #ith various officers and doctors residing in the capital, and at conferences #ith 0aptain 1e$en in the to#n of .ilar, and #ith the $ajor in co$$and at

the to#n of .agsanjan, concerning the ship$ent of goods fro$ (anila, and #ith respect to .agsanjan to this city9 that the plaintiff during this period held hi$self in readiness to render services #henever re7uired9 that on this account his private business, and especially a soap factory established in the capital, #as entirely abandoned9 that to the end that such services $ight be punctually rendered, the agent, .o$ar, assured hi$ that the 3abacalera 0o$pany al#ays generously repaid services rendered it, and that he therefore did not trouble hi$self about his inability to devote the necessary a$ount of ti$e to his business, the defendant going so far as to $a2e hi$ flattering pro$ises of e$ploy$ent #ith the co$pany, #hich he did not accept9 that these state$ents #ere $ade in the absence of #itnesses and that therefore his only proof as to the sa$e #as (r. .o$ar:s #ord as a gentle$an9 that the e$ployees of the co$pany did not understand 4nglish, and by reason of the plaintiff:s $ediation bet#een the agent, and the $ilitary authorities large profits #ere obtained, as #ould appear fro$ the account and letterpress boo2s of the agency corresponding to those dates. In the a$ended co$plaint it #as added that the defendant, on behalf of the co$pany, offered to renu$erate the plaintiff for the services rendered in the $ost advantageous $anner in #hich such services are co$pensated, in vie# of the circu$stances under #hich they #ere re7uested9 and that the plaintiff, by rendering the co$pany such services, #as obliged to abandon his o#n business, the $anufacture of soap, and thereby suffered da$ages in the su$ of %3,+00, ;nited States currency. 3he defendant, on the +'th of Septe$ber, 190+, filed an ans#er as2ing for the dis$issal of the co$plaint, #ith costs to the plaintiff. In his ans#er the defendant denied the allegation in the first paragraph of the co$plaint, stating that it #as #holly untrue that the co$pany, and the defendant as its agent, had solicited the services of the plaintiff as interpreter before the $ilitary authorities for the period stated, or for any other period, or that the plaintiff had acco$panied .o$ar at the conferences $entioned, concerning ship$ents fro$ (anila and e ports fro$ so$e of the to#ns of the province to this capital. <e stated that he especially denied paragraphs + of the co$plaint, as it #as absolutely untrue that the plaintiff had been at the disposal of the defendant for the purpose of

rendering such services9 that he therefore had not been obliged to abandon his occupation or his soap factory, and that the state$ent that an offer of e$ploy$ent #ith the co$pany had been $ade to hi$ #as false. 3he defendant also denied that through the $ediation of the plaintiff the co$pany and hi$self had obtained large profits. 3he state$ents in paragraphs &, ,, 8, and 9 of the co$plaint #ere also denied. 3he defendant stated that, on account of the friendly relations #hich sprang up bet#een the plaintiff and hi$self, the for$er borro#ed fro$ hi$ fro$ ti$e to ti$e $oney a$ounting to %1,' for the purposes of his business, and that he had also delivered to the plaintiff 3& arrobas of oil #orth %10&, and three pac2ages of resin for use in coloring his soap9 that the plaintiff acco$panied the defendant to .agsanjan, .ilar, and other to#ns #hen the latter $ade business trips to the$ for the purpose of e tending his business and $ercantile relations therein9 that on these e cursions, as #ell as on private and official visits #hich he had to $a2e, the plaintiff occasionally acco$panied hi$ through $otives of friendship, and especially because of the free transportation given hi$, and not on behalf of the co$pany of #hich he #as never interpreter and for #hich he rendered no services9 that the plaintiff in these conferences acted as interpreter of his o#n free #ill, #ithout being re7uested to do so by the defendant and #ithout any offer of pay$ent or co$pensation9 that therefore there e isted no legal relation #hatever bet#een the co$pany and the plaintiff, and that the defendant, #hen accepting the spontaneous, voluntary and officious services of the plaintiff, did so in his private capacity and not as agent of the co$pany, and that it #as for this reason that he refused to enter into negotiations #ith the plaintiff, he being in no #ay indebted to the latter. 3he defendant concluded by saying that he ans#ered in his individual capacity. * co$plaint having been filed against the 0o$pa5ia 6eneral de 3abacos and "on 4ugenio .o$ar, its agent in the .rovince of 1aguna, the latter, having been duly su$$oned, replied to the co$plaint, #hich #as subse7uently a$ended, and stated that he $ade such reply in his individual capacity and not as agent of the co$pany, #ith #hich the plaintiff had had no legal relations. 3he suit #as instituted bet#een the plaintiff and .o$ar, #ho, as such, accepted the issue and

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entered into the controversy #ithout objection, opposed the clai$ of the plaintiff, and concluded by as2ing that the co$plaint be dis$issed, #ith the costs to the plaintiff. ;nder these circu$stances and construing the statutes liberally, #e thin2 it proper to decide the case pending bet#een both parties in accordance #ith la# and the strict principles of justice. Fro$ the oral testi$ony introduced at the trial, it appears that the plaintiff, .ere/, did on various occasions render "on 4ugenio .o$ar services as interpreter of 4nglish9 and that he obtained passes and acco$panied the defendant upon his journeys to so$e of the to#ns in the .rovince of 1aguna. It does not appear fro$ the evidence, ho#ever, that the plaintiff #as constantly at the disposal of the defendant during the period of si $onths, or that he rendered services as such interpreter continuously and daily during that period of ti$e. It does not appear that any #ritten contract #as entered into bet#een the parties for the e$ploy$ent of the plaintiff as interpreter, or that any other inno$inate contract #as entered into9 but #hether the plaintiff:s services #ere solicited or #hether they #ere offered to the defendant for his assistance, inas$uch as these services #ere accepted and $ade use of by the latter, #e $ust consider that there #as a tacit and $utual consent as to the rendition of the services. 3his gives rise to the obligation upon the person benefited by the services to $a2e co$pensation therefor, since the bilateral obligation to render services as interpreter, on the one hand, and on the other to pay for the services rendered, is thereby incurred. =*rts. 1088, 1089, and 1+&+ of the 0ivil 0ode>. 3he supre$e court of Spain in its decision of February 1+, 1889, holds, a$ong other things, ?that not only is there an e press and tacit consent #hich produces real contract but there is also a presu$ptive consent #hich is the basis of 7uasi contracts, this giving rise to the $ultiple juridical relations #hich result in obligations for the delivery of a thing or the rendition of a service.? @ot#ithstanding the denial of that defendant, it is un7uestionable that it #as #ith his consent that the plaintiff rendered hi$ services as interpreter, thus aiding hi$ at a ti$e #hen, o#ing to the e istence of an insurrection in the province, the $ost disturbed conditions prevailed. It follo#s, hence, that there #as consent on the part of both in the rendition of such services as interpreter. Such service not being contrary to la# or to good custo$, it #as a perfectly licit object of contract, and such a contract $ust necessarily have e isted bet#een the parties, as alleged by the plaintiff. =*rt. 1+,1, 0ivil 0ode.> 3he consideration for the contract is also evident, it being clear that a $utual benefit #as derived in conse7uence of the service rendered. It is to be supposed that the defendant accepted these services and that the plaintiff in turn rendered the$ #ith the e pectation that the benefit #ould be reciprocal. 3his sho#s the concurrence of the three ele$ents necessary under article 1+&1 of the 0ivil 0ode to constitute a contract of lease of service, or other inno$inate contract, fro$ #hich an obligation has arisen and #hose fulfill$ent is no# de$anded. *rticle 1+'A of the 0ivil 0ode provides that a contract e ists the $o$ent that one or $ore persons consent to be bound, #ith respect to another or others, to deliver so$e thing or to render so$e service. *rticle 1+'' provides that the contracting parties $ay establish such covenants, ter$s, and conditions as they dee$ convenient, provided they are not contrary to la#, $orals or public policy. Bhether the service #as solicited or offered, the fact re$ains that .ere/ rendered to .o$ar services as interpreter. *s it does not appear that he did this gratuitously, the duty is i$posed upon the defendant, having accepted the benefit of the service, to pay a just co$pensation therefor, by virtue of the inno$inate contract of facio ut des i$plicitly established. 3he obligations arising fro$ this contract are reciprocal, and, apart fro$ the general provisions #ith respect to contracts and obligations, the special provisions concerning contracts for lease of services are applicable by analogy. In this special contract, as deter$ined by article 1'AA of the 0ivil 0ode, one of the parties underta2es to render the other a service for a price certain. 3he tacit agree$ent and consent of both parties #ith respect to the service rendered by the plaintiff, and the reciprocal benefits accruing to each, are the best evidence of the fact that there #as an i$plied contract sufficient to create a legal bond, fro$ #hich arose enforceable rights and obligations of a bilateral character.lawphi1.net In contracts the #ill of the contracting parties is la#, this being a legal doctrine based upon the provisions of articles 1+'A, 1+'8, 1+&+, 1+,8, 1+81, 1+8+, and 1+89 of the 0ivil 0ode. If it is a fact sufficiently proven that the defendant, .o$ar, on various occasions consented to accept an interpreter:s services, rendered in his behalf and not gratuitously, it is but just that he should pay a reasonable re$uneration therefor, because it is a #ell-2no#n principle of la# that no one should be per$itted to enrich hi$self to the da$age of another. Bith respect to the value of the services rendered on different occasions, the $ost i$portant of #hich #as the first, as it does not appear that any salary #as fi ed upon by the parties at the ti$e the services #ere accepted, it devolves upon the court to deter$ine, upon the evidence presented, the value of such services, ta2ing into consideration the fe# occasions on #hich they #ere rendered. 3he fact that no fi ed or deter$ined consideration for the rendition of the services #as agreed upon does not necessarily involve a violation of the provisions of article 1'AA of the 0ivil 0ode, because at the ti$e of the agree$ent this consideration #as capable of being $ade certain. 3he discretionary po#er of the court, conferred upon it by the la#, is also supported by the decisions of the supre$e court of Spain, a$ong #hich $ay be cited that of )ctober 18, 1899, #hich holds as follo#sC ?3hat as stated in the article of the 0ode cited, #hich follo#s the provisions of la# 1, title 8, of the fifth partida, the contract for lease of services is one in #hich one of the parties underta2es to $a2e so$e thing or to render so$e service to the other for a certain price, the e istence of such a price being understood, as this court has held not only #hen the price has been e pressly agreed upon but also #hen it $ay be deter$ined by the custo$ and fre7uent use of the place in #hich such services #ere rendered.?

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@o e ception #as ta2en to the judg$ent belo# by the plaintiff on account of the rejection of his clai$ for da$ages. 3he decision upon this point is, further$ore, correct. ;pon the supposition that the recovery of the plaintiff should not e ceed +00 (e ican pesos, o#ing to the inconsiderable nu$ber of ti$es he acted as interpreter, it is evident that the contract thus i$plicitly entered into #as not re7uired to be in #riting and that therefore it does not fall #ithin article 1+80 of the 0ivil 0ode9 nor is it included #ithin the provisions of section 33' of the 0ode of 0ivil .rocedure, as this inno$inate contract is not covered by that section. 3he contract of lease of services is not included in any of the cases e pressly designated by that section of the procedural la#, as affir$ed by the appellant. 3he interpretation of the other articles of the 0ode alleged to have been infringed has also been stated fully in this opinion. For the reasons stated, #e are of the opinion that judg$ent should be rendered against "on 4ugenio .o$ar for the pay$ent to the plaintiff of the su$ of +00 (e ican pesos, fro$ #hich #ill be deducted the su$ of '0 pesos is $ade as to the costs of this instance. 3he judg$ent belo# is accordingly affir$ed in so far as it agrees #ith this opinion, and reversed in so far as it $ay be in conflict there#ith. !udg$ent #ill be entered accordingly t#enty days after this decision is filed. Arellano, C.J., illard, and !apa, JJ., concur. !anuary 31, 198A, reversing the decision of the 0ourt of First Instance of 1aguna and San .ablo 0ity, 8th !udicial "istrict, Dranch III, and of the resolution dated *ugust +8, 198A denying the $otion for reconsideration filed thereof. 3he undisputed facts of this case as found by the 3rial 0ourt and the Inter$ediate *ppellate 0ourt are as follo#sC )n "ece$ber +,19,1, the spouses .aulino -ivas and 4ngracia 1i/ards, as o#ners of a parcel of land situated in Do. San Francisco, -ictoria, 1aguna, co$prising $ore or less 10',,10 s7uare $eters, sold for .30,000.00 said property in favor of spouses (elencio (agca$it and @ena 0osico, and *$elita (agca$it =herein private respondents> as evidenced by ?Easulatan @g Dilihang (abiling (uli.? 3his sale #ith right to repurchase #as recorded in the )ffice of the Fegister of "eeds of 1aguna on "ece$ber &,19,1 under *ct @o. 33AA. )n !anuary 31,19,+ the sale #as $ade absolute by the spouses -ivas and 1i/ardo in favor of the private respondents for the su$ of .90,000.009 .'0,000.00 of #hich #as paid upon the e ecution of the instru$ent, entitled ?Easulatan @g Dilihan 3uluyan,? after being credited #ith the .30,000.00 consideration of the ?Easulatan @g (abibiling (uli,? and the balance of .A0,000.00 #as to be paid the $o$ent that the certificate of title is issued. Fro$ the e ecution of said Easulatan, private respondent have re$ained in peaceful, adverse and open possession of subject property. )n February +&, 19,', an )riginal 0ertificate of 3itle @o. 31,+8 covering the property in 7uestion #as issued to and in the na$e of the spouses -ivas and 1i/ardo #ithout the 2no#ledge of the private respondents and on *pril 30, 19,', said Spouses e ecuted a Special .o#er of *ttorney in favor of Irenea Fa$ire/ authori/ing the latter to $ortgage the property #ith the petitioner, @ational 6rains *uthority. )n (ay +, 19,A, the counsel for the petitioner #rote the .rovincial Sheriff in Sta. 0ru/, 1aguna, re7uesting for the e trajudicial foreclosure of the $ortgage e ecuted by Irenea Fa$ire/ on (ay 18, 19,', covering, a$ong others, the property involved in this case covered by )03 @o. 3-1,+8, for unpaid indebtedness in the a$ount of .&3,9A8.80 in favor of the petitioner. )n (ay 31, 19,A, the .rovincial Sheriff caused the issuance of the notice of sale of the property in 7uestion, scheduling the public auction sale on !une +8, 19,A. 3he petitioner #as the highest and successful bidder so that a 0ertificate of Sale #as issued in its favor on the sa$e date by the .rovincial Sheriff. )n !uly 10, 19,A, the petitioner in its capacity as attorney-infact of the $ortgagor sold the subject real property in favor of itself. Dy virtue of the deed of absolute sale, 303 @o. 3,'1,1 of the Fegister of "eeds for the .rovince of 1aguna #as issued in the na$e of the petitioner on !uly 1&, 19,A. It #as only in !uly 19,A, that private respondents learned that a title in the na$e of the -ivas spouses had been issued covering the property in 7uestion and that the sa$e property had been $ortgaged in favor of the petitioner. .rivate respondent @ena (agca$it offered to pay the petitioner @6* the a$ount of .A0,000.00 #hich is the balance of the a$ount due the -ivas spouses under the ter$s of the absolute deed of sale but the petitioner refused to accept the pay$ent. )n !uly 31, 19,A, counsel for private respondents $ade a for$al de$and on the spouses -ivas and 1i/ardo to co$ply #ith their obligation under the ter$s of the absolute deed of sale9 and soon after reiterated to the @6*, the offer to pay the balance of .A0,000.00 due under the absolute deed of sale. )n *ugust 13, 19,A petitioner in its reply infor$ed counsel of private respondents that petitioner is no# the o#ner of the property in 7uestion and has no intention of disposing of the sa$e. 3he private respondents, #ho as previously stated, are in possession of subject property #ere as2ed by petitioner to vacate it but the for$er refused. .etitioner filed a suit for eject$ent against private respondents in the (unicipal 0ourt of -ictoria, 1aguna, but the case #as dis$issed. )n !une A, 19,', private respondents filed a co$plaint before the then 0ourt of First Instance of 1aguna and San .ablo 0ity, Dranch III, San .ablo 0ity, against the petitioner and the

G.R. No. L-6./01 1&!2&r3 2., 19.. NATIONAL GRAIN- AUT4ORIT5, plaintiff-appellee, vs. INTERME6IATE APPELLATE COURT, MELECIO MAGCAMIT, NENA CO-ICO &!* EMELITA MAGCAMIT, defendants-appellants. PARA-, J.: 3his is a petition for revie# of the decision of the then Inter$ediate *ppellate 0ourt 7 =no# 0ourt of *ppeals> dated

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spouses -ivas and 1i/ardo, praying, a$ong others, that they be declared the o#ners of the property in 7uestion and entitled to continue in possession of the sa$e, and if the petitioner is declared the o#ner of the said property, then, to order it to reconvey or transfer the o#nership to the$ under such ter$s and conditions as the court $ay find just, fair and e7uitable under the pre$ises. =Fecord on *ppeal, pp. +-11>. In its ans#er to the co$plaint, the petitioner =defendant therein> $aintained that it #as never a privy to any transaction bet#een the private respondents =plaintiffs therein> and the spouses .aulino -ivas and 4ngracia 1i/ardo that it is a purchaser in good faith and for value of the property for$erly covered by )03 @o. 1,+89 and that the title is no# indefeasible, hence, private respondents: cause of action has: already prescribed. =Fecord on *ppeal, pp. 1&++>. *fter due hearing, the trial court 77 rendered its decision on (arch 1,, 1981, in favor of the petitioner, the dispositive portion of said judg$ent reading as follo#sC B<4F4F)F4, judg$ent is hereby rendered as follo#sC =1> declaring defendant @ational 6rains *uthority the la#ful o#ner of the property in 7uestion by virtue of its indefeasible title to the sa$e9 =+> ordering plaintiffs to turn over possession of the land to defendant @ational 6rains *uthority9 =3> ordering defendants-spouses .aulino -ivas and 4ngracia 1i/ardo to pay plaintiffs the su$ of .'&,000.00 representing the a$ount paid pursuant to the Easulatan @g Dilihang 3uluyan $ar2ed 4 hibit ?3?, #ith legal interest thereon fro$ !anuary 31, 19,+ until the a$ount is paid, to pay an additional a$ount of .',000.00 for and as attorney:s fees, an additional a$ount of .l0,000.00 as $oral da$ages, another a$ount of .',000.00 by #ay of e e$plary da$ages and to pay the costs of this suit. =Follo, .. 3'>. 3he private respondents interposed an appeal fro$ the decision of the trial court to the Inter$ediate *ppellate 0ourt. *fter proper proceedings, the appellate court rendered its decision on !anuary 31, 198A, reversing and setting aside the decision of the trial court as follo#sC B<4F4F)F4, the decision of the lo#er court is hereby reversed and set aside and another one is rendered ordering the @ational 6rains *uthority to e ecute a deed of reconveyance sufficient in la# for purposes of registration and cancellation of transfer 0ertificate of 3itle @o. 3-,'1,1 and the issuance of another title in the na$es of plaintiff-appellants, and ordering defendantsappellees .aulino -ivas and 4ngracia 1i/ardo to pay the @ational 6rains *uthority the su$ of .,8,3,'.00 =4 h. 3> #ithin thirty =30> days fro$ the receipts of the #rit of e ecution. @o da$ages and costs. =Follo, p. 19>. 3he petitioner filed a $otion for reconsideration of the said decision but the sa$e #as denied. =Follo, p. +&>. <ence, this petition. In the resolution of (ay +0, 198', the petition #as given due course and the parties #ere re7uired to sub$it si$ultaneous $e$oranda =Follo, p. 1+8>. 3he $e$orandu$ for the petitioner #as filed on !uly 3, 198' =Follo, p. 1+9> #hile the $e$orandu$ for the private respondents #as filed on *ugust +&, 198' 1 Follo p. 19+>. 3he $ain issue in this case is #hether or not violation of the ter$s of the agree$ent bet#een the spouses -ivas and 1i/ardo, the sellers, and private respondents, the buyers, to deliver the certificate of title to the latter, upon its issuance, constitutes a breach of trust sufficient to defeat the title and right ac7uired by petitioner @6*, an innocent purchaser for value. It is undisputed thatC =1> there are t#o deeds of sale of the sa$e land in favor of private respondents, na$elyC =a> the conditional sale #ith right to repurchase or the :Easulatan @g Dilihang (abibiling (uli? #hich #as registered under *ct 33AA and =b> the deed of absolute sale or ?Easulatan ng Dilihang 3uluyan? #hich #as not registered9 =+> the condition that the 0ertificate of 3itle #ill be delivered to the buyers upon its issuance and upon pay$ent of the balance of .A0,000.00 is contained in the deed of absolute sale9 and =3> the land in 7uestion at the ti$e of the e ecution of both sales #as not yet covered by the 3orrens Syste$ of registration. It is a io$atic, that #hile the registration of the conditional sale #ith right of repurchase $ay be binding on third persons, it is by provision of la# ?understood to be #ithout prejudice to third party #ho has better right? =Section 19A of the *d$inistrative 0ode, as a$ended by *ct @o. 33AA>. In this case, it #ill be noted that the third party @6*, is a registered o#ner under the 3orrens Syste$ and has obviously a better right than private respondents and that the deed of absolute sale #ith the suspensive condition is not registered and is necessarily binding only on the spouses -ivas and 1i/ardo and private respondents. In their co$plaint at the Fegional 3rial 0ourt, private respondents prayed a$ong others, for t#o alternative reliefs, such asC =a> to be declared the o#ners of the property in 7uestion or =b> to order the declared o#ner to reconvey or transfer the o#nership of the property in their favor. .rivate respondents clai$ a better right to the property in 7uestion by virtue of the 0onditional Sale, later changed to a deed of *bsolute Sale #hich although unregistered under the 3orrens Syste$ allegedly transferred to the$ the o#nership

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and the possession of the property in 7uestion. In fact, they argue that they have been and are still in possession of the sa$e openly, continuously, publicly under a clai$ of o#nership adverse to all other clai$s since the purchase on "ece$ber +, 19,1 =Follo, p. 1&'>. It is stressed that not until the $onth of !uly, 19,A did the plaintiff learn that a title had been issued covering the property in 7uestion =Follo, p. 1'>. 3i$e and ti$e again, this 0ourt has ruled that the proceedings for the registration of title to land under the 3orrens Syste$ is an action in rem not in personam, hence, personal notice to all clai$ants of the res is not necessary in order that the court $ay have jurisdiction to deal #ith and dispose of the res. @either $ay lac2 of such personal notice vitiate or invalidate the decree or title issued in a registration proceeding, for the State, as sovereign over the land situated #ithin it, $ay provide for the adjudication of title in a proceeding in rem or one in the nature of or a2in a to proceeding in rem #hich shall be binding upon all persons, 2no#n or un2no#n =(oscoso vs. 0ourt of appeals, 1+8 S0F* ,19 G198AH, citingC 0ity of (anila vs. 1ac2, et al., 19 .hil. 3+A, 33,9 Fo as vs. 4nri7ue/, +9 .hil. 319 "irector of 1ands vs. Fo$an 0atholic *rchbishop of (anila, A1 .hil. 1+09 *guilar vs. 0aogdan, 10' .hil. &&1>. It is thus evident that respondents: right over the property #as barred by res "udicata #hen the decree of registration #as issued to spouses -ivas and 1i/ards. It does not $atter that they $ay have had so$e right even the right of o#nership, D4F)F4 the grant of the 3orrens 3itle. 3hus, under Section AA of ..". 1'+9, every registered o#ner receiving a certificate of title in pursuance of a decree of registration, and every subse7uent purchaser of registered land ta2ing a certificate of title for value and in good faith, shall hold the sa$e free fro$ all encu$brances e cept those noted on the certificate and any of the encu$brances #hich $ay be subsisting, and enu$erated in the la#. ;nder said provision, clai$s and liens of #hatever character, e cept those $entioned by la# as e isting, against the land prior to the issuance of certificate of title, are cut off by such certificate if not noted thereon, and the certificate so issued binds the #hole #orld, including the govern$ent =*ldecoa and 0o. vs. Barner Darns I 0o., 30 .hil. +09 G191'H9 Snyder vs. Fiscal of 0ebu and *vila, A+ .hil. ,&& G19++H>. ;nder said ruling, if the purchaser is the only party #ho appears in the deeds and the registration of titles in the property registry, no one e cept such purchaser $ay be dee$ed by la# to be the o#ner of the properties in 7uestion =#$id>. (oreover, no title to registered land in derogation to that of the registered o#ner shall be ac7uired by prescription or adverse possession =;$bay vs. *lecha, 13' S0F* A+, G198'H>. It does not appear that private respondents: clai$ falls under any of the e ceptions provided for under Section AA of ..". 1'+9 #hich can be enforced against petitioner herein. 3hus, it has been invariably restated by this 0ourt, that ?3he real purpose of the 3orrens Syste$ is to 7uiet title to land and to stop forever any 7uestion as to its legality. ?)nce a title is registered, the o#ner $ay rest secure, #ithout the necessity of #aiting in the portals of the court, or sitting on the ?$irador su casato,? avoid the possibility of losing his land.? ?*n indirect or collateral attac2 on a 3orrens 3itle is not allo#ed ="o$inga vs. Santos, '' .hil. 3&19 Singian vs. (anila Failroad, &+ .hil. A&,>.? 3he only e ception to this rule is #here a person obtains a certificate of title to a land belonging to another and he has full 2no#ledge of the rights of the true o#ner. <e is then considered as guilty of fraud and he $ay be co$pelled to transfer the land to the defrauded o#ner so long as the property has not passed to the hands of an innocent purchaser for %alue =*ngeles vs. Sania, && .hil. AAA G1938H, e$phasis supplied>. It #ill be noted that the spouses -ivas and 1i/ardo never co$$itted any fraud in procuring the registration of the property in 7uestion. )n the contrary, their application for registration #hich resulted in the issuance of )03 @o. 1,+8 #as #ith co$plete 2no#ledge and i$plied authority of private respondents #ho retained a portion of the consideration until the issuance to said spouses of a certificate of title applied for under the 3orrens *ct and the corresponding delivery of said title to the$. 3he 7uestion therefore, is not about the validity of )03 @o. 1,+8 but in the breach of contract bet#een private respondents and the -ivas spouses. .etitioner @6* #as never a privy to this transaction. @either #as it sho#n that it had any 2no#ledge at the ti$e of the e ecution of the $ortgage, of the e istence of the suspensive condition in the deed of absolute sale $uch less of its violation. @othing appeared to e cite suspicion. 3he Special .o#er of *ttorney #as regular on its face9 the )03 #as in the na$e of the $ortgagor and the @6* #as the highest bidder in the public auction. ;n7uestionably, therefore, the @6* is an innocent purchaser for value, first as an innocent $ortgagee under Section 3+ of ..". 1'+9 and later as innocent purchaser for value in the public auction sale. .rivate respondents clai$ that @6* did not even field any representative to the land #hich #as not even in the possession of the supposed $ortgagors, nor present any #itness to prove its allegations in the *@SB4F nor sub$it its "44" )F ()F36*64 to sho# its being a $ortgages in good faith and for value =Follo, p. 110>. Such contention is, ho#ever, untenable. Bell settled is the rule that all persons dealing #ith property covered by a torrens certificate of title are not re7uired to go beyond #hat appears on the face of the title. Bhen there is nothing on the certificate of title to indicate any cloud or vice in the o#nership of the property, or any encu$brance thereon, the purchaser is not re7uired to e plore further than #hat the torrens title upon its face indicates in 7uest for any hidden defect or inchoate right that $ay subse7uently defeat his right thereto =0enteno vs. 0ourt of *ppeals, 139 S0F* 'A' G198'H>. (ore specifically, the 0ourt has ruled that a ban2 is not re7uired before accepting a $ortgage to $a2e an investigation of the title of the property being given as security =.hil. @ational 0ooperative Dan2 vs. 0arandang -illalon, 139 S0F* ',0 G198'H>, and #here innocent third persons li2e $ortgagee relying on the certificate of title ac7uire rights over the property, their rights cannot be disregarded ="uran vs. I*0, 138 S0F* A89 G198'H>.

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;nder the circu$stances, the Fegional 3rial 0ourt could not have erred in ruling that plaintiffs =private respondents herein> co$plaint insofar as it prays that they be declared o#ners of the land in 7uestion can not prosper in vie# of the doctrine of indefeasibility of title under the 3orrens Syste$, because it is an established principle that a petition for revie# of the decree of registration #ill not prosper even if filed #ithin one year fro$ the entry of the decree if the title has passed into the hands of an innocent purchaser for value =.res. "ecree @o. 1'+9, Sec. 3+>. 3he setting aside of the decree of registration issued in land registration proceedings is operative only bet#een the parties to the fraud and the parties defrauded and their privies, but not against ac7uirers in good faith and for value and the successors in interest of the latter9 as to the$ the decree shall re$ain in full force and effect forever ="o$ingo vs. 3he (ayon Fealty 0orp. et al., 10+ .hil. 3+ G19',1>. *ssu$ing, therefore, that there #as fraud co$$itted by the sellers against the buyers in the instant case, petitioner @6* #ho #as not privy therein cannot be $ade to suffer the conse7uences thereof *s correctly declared by the trial court, the @ational 6rains *uthority is the la#ful o#ner of the property in 7uestion by virtue of its indefeasible title. *s to private respondents: alternative prayer that the declared o#ner be ordered to reconvey or transfer the o#nership of the property in their favor, it is clear that there is absolutely no reason #hy petitioner, an innocent purchaser for value, should reconvey the land to the private respondents. .F4(IS4S 0)@SI"4F4", the decision of the 0ourt of *ppeals is F4-4FS4" and S43 *SI"4, and the decision of the 0ourt of First Instance of 1aguna and San .ablo 0ity, no# Fegional 3rial 0ourt, is F4I@S3*34". S) )F"4F4". ;LORENCIA T. 4UI<ON4OA, Petitioner, vs. COURT O; APPEAL-, -%o2,e, R2#(!& G. L(m &!* ANT4ON5 LIM, LORETA GO1OCCO C4UA &!* -%o2,e, -EVERINO &!* PRI-CILLA GO1OCCO, Respondents. 8G.R. No. 102600. 6e+ember 10, 1999: -EVERINO GO1OCCO &!* LORETA GO1OCCO C4UA, petitioners, vs. COURT O; APPEAL-, 4ON. 4ERMOGENE- R. LI=AG, &, 12* e o# "$e RTC o# M&!()& <r&!+$ 99 &!* ;LORENCIA 4UI<ON4OA, Respondents. 6ECI-ION PURI-IMA, J.: 3hese t#o petitions for revie# on certiorari under Fule A' of the Fules of 0ourt see2 the reversal of the "ecisions of the 0ourt of *ppeals in 0*-6.F. 0- @o. 1&',' and 0*-6.F. S. @o. +A&'A #hich affir$ed, respectively, the decision of Dranch 1A8 of the Fegional 3rial 0ourt of (a2ati 0ity, dis$issing the co$plaint for refor$ation of contract, and the decision of Dranch '' of the Fegional 3rial 0ourt of (anila, reversing that of Dranch 13 of the (etropolitan 3rial 0ourt of (anila, #hich favorably acted in the eject$ent case. Doth petitions involve the sa$e parties. 0ulled fro$ the records on hand, the facts giving rise to the t#o cases are as follo#sC )n !une 8, 1983, Florencia 3. <uibonhoa entered into a $e$orandu$ of agree$ent #ith siblings Fufina 6ojocco 1i$, Severino 6ojocco and 1oreta 6ojocco 0hua stipulating that Florencia 3. <uibonhoa #ould lease fro$ the$ =6ojoccos> three =3> adjacent co$$ercial lots at Ilaya Street, Dinondo, (anila, described as lot nos. +&-*, +&-D and +&-0, covered by 3ransfer 0ertificates of 3itle @os. ,&098, 80,+8 and 1''A'0, all in their =6ojoccos> na$es. )n !une 30, 1983, pursuant to the said $e$orandu$ of agree$ent, the parties in2ed a contract of lease of the sa$e three lots for a period of fifteen =1'> years co$$encing on !uly 1, 1983 and rene#able upon agree$ent of the parties. Subject contract #as to enable the lessee, Florencia 3. <uibonhoa, to construct a four-storey reinforced concrete building #ith concrete roof dec2, according to plans and specifications approved by the 0ity 4ngineers )ffice. 3he parties agreed that the lessee could letJsublease the building andJor its spaces to interested parties under such ter$s and conditions as the lessee #ould deter$ine and that all a$ounts collected as rents or inco$e fro$ the property #ould belong e clusively to the lessee. 3he lessee undertoo2 to co$plete construction of the building #ithin eight =8> $onths fro$ the date of the e ecution of the contract of lease. 3he contract further provided as follo#sC '. 6ood #ill (oney and Fate of (onthly FentalC ;pon the signing of this 0ontract of 1ease, 14SS44 shall pay to each of the 14SS)F the su$ of .300,000.00 each or a total su$ of .900,000.00, as good#ill $oney. 14SS44 shall pay to each of the 14SS)F the su$ of .1',000.00 each or a total a$ount of .A',000.00 as $onthly rental for the leased pre$ises, #ithin the first five ='> days of each calendar $onth, at the office of the 14SS)F or their authori/ed agent9 .rovided, ho#ever, that 14SS44s obligation to pay the rental shall start only upon co$pletion of the building, but if it is not co$pleted #ithin eight =8> $onths fro$ date hereof as provided for in par. A above, the $onthly rental shall already accrue and shall be paid by 14SS44 to 14SS)F. In other #ords, during the period of construction, no $onthly rental shall be collected fro$ 14SS449 .rovided, Finally, that the $onthly rental shall be adjustedJincreased upon the corresponding increase in the rental of sub-leasees =sic> using the percentage increase in the totality of rentals of the sub-leasees =sic> as basis for the percentage increase of $onthly rental that 14SS44 #ill pay to 14SS)F. 3he parties also agreed that upon the ter$ination of the lease, the o#nership and title to the building thus constructed on the said lots #ould auto$atically transfer to the lessor, even #ithout any i$ple$enting docu$ent therefor. Feal estate ta es on the land #ould be borne by the lessor #hile that on the building, by the lessee, but the latter #as authori/ed to advance the $oney needed to $eet the lessors obligations such as the pay$ent of real estate ta es on their lots. 3he lessors #ould deduct fro$ the $onthly rental due all such advances $ade by the lessee.

T4IR6 6IVI-ION 8G.R. No. 99.9/. 6e+ember 10, 1999:

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*fter the e ecution of the contract, the 6ojoccos e ecuted a po#er of attorney granting <uibonhoa the authority to obtain credit facilities in order that the three lots could be $ortgaged for a li$ited one-year period fro$ !uly 1983.G1 <ence, on Septe$ber 1+, 1983, <uibonhoa obtained fro$ 0hina Dan2ing 0orporation credit facilities not e ceeding )ne (illion =.1,000.000.00> .esos. Si$ultaneously, she $ortgaged the three lots to the creditor ban2.G+ Fifteen days later or on Septe$ber +,, 1983, to be precise, <uibonhoa signed a contract a$ending the real estate $ortgage in favor of 0hina Dan2ing 0orporation #hereby the credit facilities #ere increased to the principal su$ of 3hree (illion =.3,000,000.00> .esos.G3 "uring the construction of the building #hich later beca$e 2no#n as .oule (erchandise 0enter,GA for$er Senator Denigno *7uino, !r. #as assassinated. 3he incident $ust have affected the countrys political and econo$ic stability. 3he conse7uent hoarding of construction $aterials and increase in interest rates allegedly affected adversely the construction of the building such that <uibonhoa failed to co$plete the sa$e #ithin the stipulated eight-$onth period fro$ !uly 1, 1983. .rojected to be finished on February +9, 198A, the construction #as co$pleted only in Septe$ber 198A or seven =,> $onths later. ;nder the contract, <uibonhoa #as supposed to start paying rental in (arch 198A but she failed to do so. 0onse7uently, the 6ojoccos $ade several verbal de$ands upon <uibonhoa for the pay$ent of rental arrearages and, for her to vacate the leased pre$ises. )n "ece$ber 19, 198A, lessors sent lessee a final letter of de$and to pay the rental arrearages and to vacate the leased pre$ises. 3he for$er also notified the latter of their intention to ter$inate the contract of lease.G' <o#ever, on !anuary 3, 198', <uibonhoa brought an action for refor$ation of contract before Dranch 1A8 of the Fegional 3rial 0ourt in (a2ati. "oc2eted as 0ivil 0ase @o. 9A0+, the 0o$plaint alleged that although there #as a $eeting of the $inds bet#een the parties on the lease contract, their true intention as to #hen the $onthly rental #ould accrue #as not therein e pressed due to $ista2e or accident. She =lessee> alleged that the 6ojoccos had erroneously considered the first accrual date of the rents to be (arch 198A #hen their true intention #as that during the entire period of actual construction of the building, no rents #ould accrue. 3hus, according to <uibonhoa, the first rent #ould have been due only in )ctober 198A. (oreover, the assassination of for$er Senator Denigno *7uino, !r., an unforeseen event, caused the countrys econo$y to turn fro$ bad to #orse and as a result, the prices of co$$odities li2e construction $aterials so increased that the building #orth Si (illion pesos escalated to ?so$ething li2e 11 to 1+ $illion pesos. <o#ever, she averred that by reason of $ista2e or accident, the lease contract failed to provide that should an unforeseen event dra$atically increase the cost of construction, the $onthly rental #ould be reduced and the ter$ of the lease #ould be e tended for such duration as $ay be fair and e7uitable to both the lessors and the lessee. <uibonhoa then prayed that the contract of lease be refor$ed so as to reflect the true intention of the parties9 that its ter$s be novated so that the accrual of rents should be co$puted fro$ )ctober 198A9 that the $onthly rent of .A',000.00 be e7uitably reduced to .30,000.00, and the ter$ of the lease be e tended by five ='> years.G& 4leven days later or on !anuary 1A, 198', to be e act, the 6ojoccos filed 0ivil 0ase @o. 10&09, against <uibonhoa for cancellation of lease, eject$ent and collection #ith the (etropolitan 3rial 0ourt of (anila. 3hey theori/ed that despite the e piration of the 8-$onth construction period, <uibonhoa failed to pay the rents that had accrued since (arch 1, 198A, their verbal de$ands therefor not#ithstanding9 that, in their letter of "ece$ber 19, 198A, they had notified <uibonhoa of their intention to ter$inate and cancel the lease for violation of its ter$s and that they de$anded fro$ her the restitution of the land in 7uestion and the pay$ent of all rentals due thereunder9 that <uibonhoa refused to pay the rentals in bad faith because she had sublet the stalls, bodegas and offices to nu$erous tenants andJor stallholders fro$ #ho$ she had collected good#ill $oney and e orbitant rentals even prior to the co$pletion of the building or as of (arch 198A9 that she #as about to sublease the vacant spaces in the building9 that she #as able to finish construction of the building #ithout utili/ing her o#n capital or invest$ent on account of the $ortgages of their land in the a$ount of .3,,00,000 =sic>9 that because the $ortgage indebtedness #ith 0hina Dan2ing 0orporation had re$ained outstanding and unpaid, they had revo2ed the po#er of attorney in <uibonhoas favor on "ece$ber +1, 198A, and that, because <uibonhoa #as about to depart fro$ the .hilippines, the rentals due and o#ing fro$ the leased pre$ises should be held to ans#er for their clai$ by virtue of a #rit of attach$ent. 3he 6ojoccos prayed that <uibonhoa and all persons clai$ing rights under her be ordered to vacate the leased pre$ises, to surrender to the$ actual and physical possession thereof and to pay the rents due and unpaid at the agreed rate of .A',000.00 a $onth fro$ (arch 198A to !anuary 198', #ith legal interest thereon. 3hey also prayed that <uibonhua be ordered to pay the fair rental value of .&0,000.00 a $onth beginning February ', 198' and every 'th of the $onth until the pre$ises shall be actually vacated and restored to the$ and that, considering the nature of the action, the Fules on Su$$ary .rocedure be applied to prevent further losses, da$ages and e penses on their part. G, (ean#hile, in 0ivil 0ase @o. 9A0+, the 6ojoccos sub$itted an ans#er to the co$plaint for refor$ation of contract9 asserting that the true intention of the parties #as to obligate <uibonhoa to pay rents i$$ediately upon the e piration of the $a i$u$ period of eight =8> $onths fro$ the e ecution of the lease contract, #hich intention #as $eant to avoid a situation #herein <uibonhoa #ould deliberately delay the co$pletion of the building #ithin the 8-$onth period to elude pay$ent of rental starting (arch 198A. 3hey also clai$ed that <uibonhoa instituted the case in anticipation of the eject$ent suit they #ould file against her9 that she #as estopped fro$ 7uestioning the enforceability of the lease contract after having received $onetary benefits as a result of her utili/ation of the pre$ises to her sole profit and advantage9 that the financial reverses she suffered after the assassination of Senator Denigno *7uino, !r. could not be considered a fortuitous event that #ould justify the reduction of the $onthly rental and e tension of the contract of lease

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for five years9 and that the principle of contract of adhesion in interpreting the lease contract should be strictly applied to <uibonhoa because it #as her counsel #ho prepared it.G8 3he 6ojoccos prayed that <uibonhoa be ordered to pay the$ the su$ of .A9',000.00 representing unpaid rents fro$ (arch 1, 198A to !anuary 31, 198' and the $onthly rent of .&0,000.00 fro$ February 1, 198' until <uibonhoa shall have surrendered the pre$ises to the$, and that she be ordered to pay attorneys fees, $oral and e e$plary da$ages and the costs of suit. )n !anuary 31, 198', Fufina 6ojocco 1i$ entered into an agree$entG9 #ith <uibonhoa #hereby, to put an end to 0ivil 0ase @o. 9A0+, the for$er agreed to e tend the ter$ of the lease by three =3> $ore years or for eighteen =18> years fro$ !uly 1, 1983. 3he agree$ent e pressly provided that no rents #ould be collected unless and until the construction #or2 #as already co$pleted or that during the construction, no $onthly rental should be collected. It also provided that in case so$e unforeseen event should dra$atically increase the cost of the building, then the a$ount of $onthly rent shall be reduced to such su$ and the ter$ of the lease e tended for such duration as $ay be fair and e7uitable, bearing in $ind the actual construction cost of the building. 3he agree$ent recogni/ed the fact that the *7uino assassination that resulted in the hoarding of construction $aterials and the s2yroc2eting of the interest rates on <uibonhoas loans, resulted in the increase in actual cost of the construction fro$ .&,000,000.00 to bet#een .11,000,000.00 and .1+,000,000.00. 3here is no record that Fufina 6ojocco 1i$ #as dropped as a defendant in 0ivil 0ase @o. 9A0+ but only 1oretta 6ojocco 0hua and the Spouses Severino and .riscilla 6ojocco filed the $e$orandu$ for the defendants in that case.G10 )n (arch 9, 198,, the (a2ati F30G11 rendered a decision holding that <uibonhoa had not presented clear and convincing evidence to justify the refor$ation of the lease contract. It considered as $isplaced her contention that the *7uino assassination #as an accident #ithin the purvie# of *rt. 13'9 of the 0ivil 0ode. It held that the act of Fufina 6. 1i$ in entering into an agree$ent #ith <uibonhoa that, in effect, refor$ed the lease contract, #as not binding upon Severino and 1oretta 6ojocco considering that they #ere separate and independent o#ners of the lots subject of the lease. )n this point, the trial court cited Sec. +', Fule 130 of the Fules of 0ourt #hich provides that the rights of a party cannot be prejudiced by the act, declaration or o$ission of another. It thus decided 0ivil 0ase @o. 9A0+ as follo#sC B<4F4F)F4, judg$ent is hereby renderedC a> "is$issing the plaintiffs co$plaint and defendant Fufina 1i$s counterclai$, #ith costs against the$9 b> )rdering the plaintiff to pay to defendant 1oretta 6ojocco 0hua the a$ount of .3&0,000.00, representing rentals due fro$ (arch 1, 198A to February +8, 198,, #ith interests thereon at the legal rate fro$ date of the filing of the co$plaint until full pay$ent thereof, plus the su$ of .1',000.00 per $onth beginning (arch, 198, and for as long as the plaintiff is in possession of the leased pre$ises9 c> )rdering the plaintiff to pay to defendant Severino 6ojocco 0hua the a$ount of .3&0,000.00, representing rentals due fro$ (arch 1, 198A to February +8, 198,, #ith interests thereon at the legal rate fro$ date of the filing of the co$plaint until full pay$ent thereof, plus the su$ of .1',000.00 per $onth beginning (arch, 198, and for as long as the plaintiff is in possession of the leased pre$ises9 d> )rdering the plaintiff to pay attorneys fees in favor of the above-na$ed defendants in the su$ of .3&,000.00, aside fro$ costs of suit. -O OR6ERE6. ;pon $otion of the 6ojocco, the trial court a$ended the dispositive portion of its aforesaid decision in that <uibonhua #as ordered to pay each of 1oretta 6ojocco 0hua and Severino 6ojocco the a$ount of .'A0,000.00 instead of .3&0,000.00 and that attorneys fees of .'A,000.00, instead of .3&,000.00, be paid by <uibonhoa. )n the other hand, in 0ivil 0ase @o. 10+&0A, the (etropolitan 3rial 0ourt of (anila granted <uibonhoas prayer that the case be e cluded fro$ the operation of the Fule on Su$$ary .rocedure for the reason that the unpaid rents sued upon a$ounted to .A9',000.00.G1+ 3hereafter, <uibonhoa presented a $otion to dis$iss or, in the alternative, to suspend proceedings in the case, contending that the pendency of the action for refor$ation of contract constituted a ground of lis pendens or at the very least, posed a prejudicial 7uestion to the eject$ent case. 3he 6ojoccos opposed such $otion, pointing out that #hile there #as identity of parties bet#een the t#o cases, the causes of action, subject $atter and reliefs sought for therein #ere different. )n (ay 10, 198', after <uibonhoa had sent in her reply to the said opposition, Fufina 6. 1i$, through counsel, prayed that she be dropped as plaintiff in the case, and counsel begged leave to #ithdra# as the la#yer of the latter in the case. Subse7uently, Severino 6ojocco and 1oretta 6ojocco 0hua filed a $otion praying for an order re7uiring <uibonhoa to deposit the rents. )n (arch +', 198&, the court belo# issued an )$nibus )rder denying <uibonhoas $otion to dis$iss, re7uiring her to pay $onthly rental of .30,000.00 starting (arch 198A and every $onth thereafter, and denying Fufina 6. 1i$s $otion that she be dropped as plaintiff in the case.G13 <uibonhoa $oved for reconsideration of said order but the plaintiffs, apparently including Fufina, opposed the $otion. )n !uly +1, 198&, Severino 6ojocco and <uibonhoa entered into an agree$ent that altered certain ter$s of the lease contract in the sa$e #ay that the agree$ent bet#een <uibonhoa and Fufina 6. 1i$ novated the contract.G1A )n (arch +A, 198,, the (etropolitan 3rial 0ourt of (anila issued an )rder denying <uibonhoas $otion for reconsideration and the 6ojoccos $otion for issuance of a #rit of preli$inary attach$ent, and allo#ing <uibonhoa a period of fifteen =1'> days #ithin #hich to deposit .30,000.00

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a $onth starting (arch 198A and every $onth thereafter.G1' <uibonhoa interposed a second $otion for reconsideration of the (arch +', 198& order on the ground that she had a$icably settled the case #ith Severino 6ojocco and Fufina 6. 1i$. She therein alleged that only .1',000.00 #as due 1oretta 6. 0hua. She infor$ed the court of the decision of the (a2ati Fegional 3rial 0ourt in 0ivil 0ase @o. 9A0+ and argued that since that court had a#arded the 6ojoccos rental arrearages, it #ould be unjust should she be $ade to pay rental arrearages, once again. )n !une 30, 198,, the (etropolitan 3rial 0ourt of (anila issued an )rder reiterating its decision to assu$e jurisdiction over 0ivil 0ase @o. 10&09, and $odified its (arch +A, 198, )rder by deleting the portion thereof #hich re7uired <uibonhua to deposit $onthly rents. It also re7uired <uibonhoa to file her ans#er #ithin fifteen =1'> days fro$ receipt of the copy of the courts order. *ccordingly, on !uly +1, 198,, <uibonhoa sent in her ans#er alleging that the lease contract had been novated by the agree$ents she had signed on !anuary 31, 198' and !uly +1, 198&, #ith Fufina 6. 1i$ and Severino 6ojocco, respectively. <uibonhoa added that she had paid Severino 6ojocco the a$ount of .++8,000.00 through an *llied Dan2 $anagers chec2.G1& )n *ugust +,, 198,, the (etropolitan 3rial 0ourt of (anila issued a .re-trial )rder li$iting the issues in 0ivil 0ase @o. 10&09, toC =a> #hether or not plaintiffs had the right to eject the defendant on the ground of violation of the conditions of the lease contract and =b> #hether or not Severino 6ojocco had the right to pursue the eject$ent case in vie# of the agree$ent he had entered into #ith <uibonhoa on !uly +1, 198&. )n !uly 30, 1990, the (etropolitan 3rial 0ourt of (anilaG1, ca$e out #ith a decision in favor of plaintiffs Severino 6ojocco and 1oreta 6ojocco 0hua and against Florencia 3. <uibonhoa. It ordered <uibonhoa to vacate the lots o#ned by Severino 6ojocco and 1oreta 6ojocco 0hua and to pay each of the$ the a$ounts .',000.00 as attorneys fees and .1,000.00 as appearance fee. *ll three =3> party-litigants appealed to the Fegional 3rial 0ourt of (anila. )n February 1A, 1991, the Fegional 3rial 0ourt of (anila, Dranch '',G18 reversed the decision of the (etropolitan 3rial 0ourt and ordered the dis$issal of the co$plaint in 0ivil 0ase @o. 10&09,. 3he reversal of the inferior courts decision #as based pri$arily on its finding thatC 1. 3he suit belo# is intrinsically and inherently an action for cancellation of lease or rescission of contract. In fact, the plaintiffs the$selves recogni/ed this intrinsic nature of the action by categori/ing the sa$e action as one for cancellation of lease, eject$ent and collection. 3he suit cannot properly be reduced to one of si$ple eject$ent as rights of the parties to the still e isting contracts have yet to be deter$ined and resolved. @ecessarily, to put an end to the parties relation, the contract bet#een the$ has got to be abrogated, rescinded or resolved. 3he action for the purpose is ho#ever cogni/able by the Fegional 3rial 0ourt as its subject-$atter is incapable of pecuniary esti$ation =See Sec. 19=1>, D... 1+9>. <ence, 0ivil 0ase @os. 9A0+ and 10&09, =that #as doc2eted before the F30 of (anila as 0ivil 0ase @o. 90-'A'',> #ere both elevated to the 0ourt of *ppeals. In 0*-6.F. 0- @o. 1&',', the 0ourt of *ppeals rendered a "ecisionG19 on (ay 31, 1990, affir$ing the decision of the (a2ati Fegional 3rial 0ourt in 0ivil 0ase @o. 9A0+. <uibonhoa filed a $otion for the reconsideration of such "ecision and on )ctober 18, 1990, the 0ourt of *ppeals $odified the sa$e accordingly, by ordering that the a$ount of .+,0,8+'.00 paid by <uibonhoa to Severino and .riscilla 6ojocco be deducted fro$ the total a$ount of unpaid rentals due the said spouses. In 0*-6.F. S. @o. +A&'A, the 0ourt of *ppeals also affir$ed the decision of the Fegional 3rial 0ourt of (anila in 0ivil 0ase @o. 10&09, by its "ecisionG+0 pro$ulgated on )ctober +9, 1991. 0onsidering the allegations of the co$plaint for cancellation of lease, eject$ent and collection, the 0ourt of *ppeals ratiocinated and concludedC 3hese allegations, #hich are denied by private respondent, raised issues #hich go beyond the si$ple issue of unla#ful possession in eject$ent cases. Bhile the co$plaint does not see2 the rescission of the lease contract, ejecting the lessee #ould, in effect, deprive the lessee of the inco$e and other beneficial fruits of the building of #hich she is the o#ner until the end of the ter$ of the lease. 0ertainly this cannot be decreed in a su$$ary action for eject$ent. 3he decision of the (30, it is true, only ordered the eject$ent of the private respondent fro$ the leased pre$ises. Dut #hat about the building #hich, according to petitioners the$selves, cost the private respondent .3,,00,000.00 to constructK Bill it be de$olished or #ill its o#nership vest, even before the end of the 1'-year ter$, in the petitioners as o#ners of the landK Indeed, ine tricably lin2ed to the 7uestion of physical possession is the o#nership of the building #hich the lessee #as per$itted to put up on the land. 3o evict the lessee fro$ the land #ould be to bar her not only fro$ entering the building #hich she o#ns but also fro$ collecting the rents fro$ its tenants. Bith respect to the contention of the 6ojoccos that since <uibonhoa had sub$itted to the jurisdiction of the (etropolitan 3rial 0ourt, the jurisdictional issue had been foreclosed, the 0ourt of *ppeals opinedC .etitioners point out that private respondent can no longer raise the 7uestion of jurisdiction because she filed a $otion to dis$iss in the (30 but she did not raise this 7uestion =Fule 1', sec. 8>. Dut the )$nibus $otion rule does not cover t#o grounds #hich, although not raised in a $otion to dis$iss, are not #aived. 3hese are =1> failure to state a cause of action and =+> lac2 of jurisdiction over the subject $atter. =Fule 9, sec. +>. 3hese grounds can be invo2ed any ti$e. (oreover, in this case it #as not really private respondent #ho 7uestioned the jurisdiction over the (etropolitan 3rial 0ourt. It #as the Fegional 3rial 0ourt #hich did so $otu propio. )n February 19, 199+, G+1 the 0ourt resolved that these t#o petitions for revie# on certiorari be consolidated. *lthough they sprang fro$ the sa$e factual $ilieu, the petitions are to be discussed separately, ho#ever, because the issues raised are cognate yet independent fro$ each other.
In 6.F. @o. 9'89,

.etitioner <uibonhoa contends thatC 1. 3<4 F4S.)@"4@3 0);F3 )F *..4*1S 0)((I334" * 6F*-4 *@" S4FI);S 4FF)F, 0)@S3I3;3I@6 *D;S4 )F "IS0F43I)@, I@ FI@"I@6 3<4 *6F44(4@3 D43B44@ .43I3I)@4F *@" .FI-*34 F4S.)@"4@3 S4-4FI@) 6)!)00) =*@@4L 4> B)F3<14SS *@" ;S414SS *13<);6< I3 <*S F40)6@IM4" 3<4 .*N(4@3S B<I0< F4S.)@"4@3 S4-4FI@) 6)!)00) <*S F404I-4" FF)( 3<4 .43I3I)@4F B<I0<

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*03;*11N 0)@S3I3;34" *@ *03 )F F*3IFI0*3I)@9 +. 3<4 F4S.)@"4@3 0);F3 F*I14" 3) 0)@SI"4F 3<4 3F*6I0 *SS*SSI@*3I)@ )F F)F(4F S4@*3)F D4@I6@) *O;I@) *S * F)F3;I3);S 4-4@3 )F F&'C( !AJ()'( B<I0< !;S3IFI4S 3<4 *"!;S3(4@3 )F 3<4 34F(S )F 3<4 0)@3F*03 )F 14*S4.G++ *rticle 130' of the 0ivil 0ode defines a contract as a $eeting of the $inds bet#een t#o persons #hereby one binds hi$self, #ith respect to the other, to give so$ething or to render so$e service. )nce the $inds of the contacting parties $eet, a valid contract e ists, #hether it is reduced to #riting or not. Bhen the ter$s of an agree$ent have been reduced to #riting, it is considered as containing all the ter$s agreed upon. *s such, there can be, bet#een the parties and their successors in interest, no evidence of such ter$s other than the contents of the #ritten agree$ent, e cept #hen it fails to e press the true intent and agree$ent of the parties. G+3 In such an e ception, one of the parties $ay bring an action for the refor$ation of the instru$ent to the end that their true intention $ay be e pressed.G+A Fefor$ation is that re$edy in e7uity by $eans of #hich a #ritten instru$ent is $ade or construed so as to e press or confor$ to the real intention of the parties.G+' *s to its nature, in 3oyota (otor .hilippines 0orporation v. 0ourt of *ppeals, G+& the 0ourt saidC *n action for refor$ation is in persona$, not in re$, even #hen real estate is involved. It is $erely an e7uitable relief granted to the parties #here through $ista2e or fraud, the instru$ent failed to e press the real agree$ent or intention of the parties. Bhile it is a recogni/ed re$edy afforded by courts of e7uity it $ay not be applied if it is contrary to #ell-settled principles or rules. It is a long-standing principle that e7uity follo#s the la#. It is applied in the absence of and never against statutory la#. 0ourts are bound by rules of la# and have no arbitrary discretion to disregard the$. 0ourts of e7uity $ust proceed #ith out$ost caution especially #hen rights of third parties $ay intervene. . *rticle 13'9 of the 0ivil 0ode provides that =#>hen, there having been a $eeting of the $inds of the parties to a contract, their true intention is not e pressed in the instru$ent purporting to e$body the agree$ent, by reason of $ista2e, fraud, ine7uitable conduct or accident, one of the parties $ay as2 for the refor$ation of the instru$ent to the end that such intention $ay be e pressed. . *n action for refor$ation of instru$ent under this provision of la# $ay prosper only upon the concurrence of the follo#ing re7uisitesC =1> there $ust have been a $eeting of the $inds of the parties to the contact9 =+> the instru$ent does not e press the true intention of the parties9 and =3> the failure of the instru$ent to e press the true intention of the parties is due to $ista2e, fraud, ine7uitable conduct or accident.G+, 3he $eeting of the $inds bet#een <uibonhoa, on the one hand, and the 6ojoccos, on the other, is $anifest in the #ritten lease contract duly e ecuted by the$. 3he success of the action for refor$ation of the contract of lease at bar should therefore, depend on the presence of the t#o other re7uisites afore$entioned. 3o prove that the lease contract does not evince the true intention of the parties, specifically as regards the ti$e #hen <uibonhoa should start paying rents, she presented as a #itness one of the lessors, Fufina 6. 1i$, #ho testified that prior to the e ecution of the lease contract on !une 30, 1983, the parties had entered into a (e$orandu$ of *gree$ent on !une 8, 19839 that on "ece$ber +1, 198A, the lessors revo2ed the special po#er of attorney in favor of <uibonhoa9 that on !anuary 31, 198', she entered into an agree$ent #ith <uibonhoa #hereby the a$ount of the rent #as reduced to .10,000 a $onth and the ter$ of the lease #as e tended by three =3> years, and that <uibonhoa started paying rental in Septe$ber 198A.G+8 3here is no state$ent in such testi$ony that categorically points to the fact that the contract of lease has failed to e press the true intention of the parties. Bhile it is true that paragraph A of the (e$orandu$ of *gree$entG+9 states that the .1',000 $onthly rental due each of the three lessors shall be collected in advance #ithin the first five ='> days of each $onth upon co$pletion of the building, the sa$e $e$orandu$ of agree$ent also provides as follo#sC 8. 3his (e$orandu$ of *gree$ent shall bind the S40)@" .*F3N only after the signing of the 0ontact of 1ease by both parties #hich shall not be later than !une 30, 1983, provided, ho#ever, that should the S40)@" .*F3N decide not to proceed #ith the signing on the deadline aforestated, the FIFS3 .*F3N shall not hold her liable therefor. In vie# thereof, reliance on the provisions of the (e$orandu$ of *gree$ent is $isplaced considering that its provisions #ould bind the parties only upon the signing of the lease contract. <o#ever, the lease contract that #as later entered into by the parties 7ualified the ti$e #hen the lessee should start paying the $onthly rentals. .aragraph ' of the lease contract states that the 14SS44s obligation to pay the rental shall start only upon the co$pletion of the building, but if it is not co$pleted #ithin eight =8> $onths fro$ date hereof as provided for in par. ' =sic> above, the $onthly rental shall already accrue and shall be paid by 14SS44 to 14SS)F. 3hat 7ualification applies even though the ne t sentence states that =I>n other #ords, during the period of construction, no $onthly rentals shall be collected fro$ 14SS44. )ther#ise, there #as no reason for the insertion of that 7ualification on the period of construction of the building the ter$ination of #hich #ould signal the accrual of the $onthly rentals. @on-inclusion of that 7ualification #ould also give the lessee the unbridled discretion as to the period of construction of the building to the detri$ent of the lessors right to e ercise o#nership thereover upon the e piration of the 1'-year lease period. In actions for refor$ation of contact, the onus pro$andi is upon the party #ho insists that the contract should be refor$ed.G30 <uibonhoa having failed to discharge that burden of proving that the true intention of the parties has not been accurately e pressed in the lease contract sought to be refor$ed, the trial court correctly held that no clear and convincing proof #arrants the refor$ation thereof. In the co$plaint, <uibonhoa allegedC '.9 Dy reason of $ista2e or accident, the contract =*nne *> fails to state the true intention and real agree$ent of the parties to the effect that in case so$e unforeseen event should dra$atically increase the cost of the building, then the a$ount of $onthly rent shall be reduced to such su$ and the ter$ of the lease e tended for such duration as $ay be fair and e7uitable to both parties, bearing in $ind the actual construction cost of the building. '.10. *s a direct result of the tragic *7uino assassination on +1 *ugust 1983, #hich the parties did not foresee and co$ing as it did barely t#o =+> $onths after the contract

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=*nne *> had been signed, the countrys econo$y dra$atically turned fro$ bad to #orse, and the resulting ill effects thereof specifically the hoarding of construction $aterials adversely affected the plaintiff resulting, a$ong others, in delaying the construction #or2 and the s2yroc2eting of the interest rates on plaintiffs loans, such that instead of roughly .& (illion as originally budgeted the building in 7uestion no# actually cost the plaintiff so$ething li2e 11 to 1+ $illion pesos, $ore or less. In the present petition, <uibonhoa asserts thatC by reason of oversight or $ista2e, the true intention of the parties that should so$e unforeseen event dra$atically increase the cost of the building, then the a$ount of $onthly rent shall be reduced to such su$ and the ter$ of the lease e tended to such period as #ould be fair and e7uitable to both sides, bearing in $ind al#ays that petitioner #as ordinary 14SS44 but #as an investor-developer. She insists that =i>n truth, the contract, #hile that of lease, really a$ounted to a co$$on business venture of the parties.G31 )n account of her failure to prove #hat costly $ista2e allegedly suppressed the true intention of the parties, <uibonhoa honestly ad$itted that there #as an oversight in the drafting of the contract by her o#n counsel. Dy such ad$ission, oversight $ay not be attributed to all the parties to the contract and therefore, it cannot be considered a valid reason for the refor$ation of the sa$e contract. In fact, because it #as <uibonhoas counsel hi$self #ho drafted the contract, any obscurity therein should be construed against her.G3+ ;nable to substantiate her stance that the true intention of the parties is not e pressed in the lease contract in 7uestion, <uibonhoa nonetheless contends that paragraph ' thereof should be interpreted in such a #ay that she should only begin paying $onthly rent in )ctober 198A and not in (arch 198A.G33 Such contention betrays <uibonhoas confusion on the distinction bet#een interpretation and refor$ation of contracts. In @ational Irrigation *d$inistration %. 6a$it,G3A the 0ourt distinguished the t#o concepts as follo#sC Interpretation is the act of $a2ing intelligible #hat #as before not understood, a$biguous, or not obvious. It is a $ethod by #hich the $eaning of language is ascertained. 3he interpretation of a contract is the deter$ination of the $eaning attached to the #ords #ritten or spo2en #hich $a2e the contract. )n the other hand, refor$ation is that re$edy in e7uity by $eans of #hich a #ritten instru$ent is $ade or construed so as to e press or confor$ to the real intention of the parties. In granting refor$ation, therefore, e7uity is not really $a2ing a ne# contract for the parties, but is confir$ing and perpetuating the real contract bet#een the parties #hich, under the technical rules of la#, could not be enforced but for such refor$ation. *s aptly observed by the 0ode 0o$$ission, the rationale of the doctrine is that it #ould be unjust and ine7uitable to allo# the enforce$ent of a #ritten instru$ent #hich does not reflect or disclose the real $eeting of the $inds of the parties. Dy bringing an action for the refor$ation of subject lease contract, <uibonhoa chose to refor$ the instru$ent and not the contract itself.G3' She is thus precluded fro$ inserting stipulations that are not e tant in the lease contract itself lest the very agree$ent e$bodied in the instru$ent is altered. @either does the 0ourt find $erit in her sub$ission that the assassination of the late Senator Denigno *7uino, !r. #as a fortuitous event that justified a $odification of the ter$s of the lease contract. * fortuitous event is that #hich could not be foreseen, or #hich even if foreseen, #as inevitable. 3o e e$pt the obligor fro$ liability for a breach of an obligation due to an act of 6od, the follo#ing re7uisites $ust concurC =a> the cause of the breach of the obligation $ust be independent of the #ill of the debtor9 =b> the event $ust be either unforeseeable or unavoidable9 =c> the event $ust be such as to render it i$possible for the debtor to fulfill his obligation in a nor$al $anner9 and =d> the debtor $ust be free fro$ any participation in, or aggravation of the injury to the creditor.G3& In the case under scrutiny, the assassination of Senator *7uino $ay indeed be considered a fortuitous event. <o#ever, the said incident per se could not have caused the delay in the construction of the building. Bhat $ight have caused the delay #as the resulting escalation of prices of co$$odities including construction $aterials. De that as it $ay, there is no $erit in <uibonhoas argu$ent that the inflation borne by the Filipinos in 1983 justified the delayed accrual of $onthly rental, the reduction of its a$ount and the e tension of the lease by three =3> years. Inflation is the sharp increase of $oney or credit or both #ithout a corresponding increase in business transaction.G3, 3here is inflation #hen there is an increase in the volu$e of $oney and credit relative to available goods resulting in a substantial and continuing rise in the general price level.G38 Bhile it is of judicial notice that there has been a decline in the purchasing po#er of the .hilippine peso, this do#n#ard fall of the currency cannot be considered unforeseeable considering that since the 19,0s #e have been e periencing inflation. It is si$ply a universal trend that has not spared our country.G39 0onfor$ably, this 0ourt upheld the petitioners vie# in )ccea %. !absonGA0 that even a #orld#ide increase in prices does not constitute a sufficient cause of action for $odification of an instru$ent. It is only #hen an e traordinary inflation supervenes that the la# affords the parties a relief in contractual obligations.GA1 In Filipino .ipe and Foundry 0orporation %. @*B*S*,GA+ the 0ourt e plained e traordinary inflation thusC 4 traordinary inflation e ists #hen there is a decrease or increase in the purchasing po#er of the .hilippine currency #hich is unusual or beyond the co$$on fluctuation in the value of said currency, and such decrease or increase could not have been reasonably foreseen or #as $anifestly beyond the conte$plation of the parties at the ti$e of the establish$ent of the obligation. =3olentino, 0o$$entaries and !urisprudence on the 0ivil 0ode, -ol. I-, p. +8A.> *n e a$ple of e traordinary inflation is the follo#ing description of #hat happened to the "eutsch$ar2 in 19+0C (ore recently, in the 19+0s 6er$any e perienced a case of hyperinflation. In early 19+1, the value of the 6er$an $ar2 #as A.+ to the ;.S. dollar. Dy (ay of the sa$e year, it had stu$bled to &+ to the ;.S. dollar. *nd as prices #ent up rapidly, so that by )ctober 19+3, it had reached A.+ trillion to the ;.S. dollarP =Dernardo (. -illegas I -ictor F. *bola, 4cono$ics, *n Introduction G3hird 4ditionH>. *s reported, prices #ere going up every #ee2, then every day, then every hour. Bo$en #ere paid several ti$es a days so that they could rush out and e change their $oney for so$ething of value before #hat little purchasing po#er #as left dissolved in their hands. So$e #or2ers tried to beat the constantly rising prices by thro#ing their $oney out of the #indo#s to their #aiting #ives, #ho #ould rush to unload the nearly #orthless paper. * postage sta$p cost $illions of $ar2s and a loaf of bread, billions. =Sidney Futberg, 3he (oney Dalloon @e# Nor2C Si$on and Schuster, 19,', p. 19,

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cited in 4cono$ics, *n Introduction by -illegas I *bola, 3rd 4d.> @o decrease in the peso value of such $agnitude having occurred, <uibonhoa has no valid ground to as2 this 0ourt to intervene and $odify the lease agree$ent to suit her purpose. *s it is, <uibonhoa even failed to prove by evidence, docu$entary or testi$onial, that there #as an e traordinary inflation fro$ !uly 1983 to February 198A. *lthough she repeatedly alleged that the cost of constructing the building doubled fro$ .& $illion to .1+ $illion, she failed to sho# by ho# $uch, for instance, the price inde of goods and services had risen during that intervening period. *n e traordinary inflation cannot be assu$ed.GA3 <ence, for <uibonhoa to clai$ e e$ption fro$ liability by reason of fortuitous event under *rt. 11,A of the 0ivil 0ode, she $ust prove that inflation #as the sole and pro i$ate cause of the loss or destruction of the contractGAAor, in this case, of the delay in the construction of the building. <aving failed to do so, <uibonhoas contention is untenable. .athetically, if indeed a fortuitous event deterred the ti$ely fulfill$ent of <uibonhoas obligation under the lease contract, she chose the #rong re$edy in filing the case for refor$ation of the contract. Instead, she should have availed of the re$edy of recission of contract in order that the court could release her fro$ perfor$ing her obligation under *rts. 1+&&GA' and 1+&,GA& of the 0ivil 0ode, so that the parties could be restored to their status prior to the e ecution of the lease contract. *s regards <uibonhoas assertion that the lease contract #as novated by Fufina 6. 1i$ and Severino 6ojocco #ho entered into an agree$ent #ith her on !anuary 31, 198' and !uly +1, 198&, respectively, it bears stressing that the lease contract they had entered into is not a si$ple one. It is uni7ue in that #hile there is only one lessee, <uibonhoa, and the contract refers to a 14SS)F, there are actually three lessors #ith separate certificates of title over the three lots on #hich <uibonhoa constructed the A-storey building. *s <uibonhoa herself ironically asserts, the lease contract is an indivisible one because the lessors interests cannot be separated even if they o#ned the lands separately under different certificates of title.GA, <ence, the acts of Fufina 6. 1i$ and Severino 6ojocco in entering into the ne# agree$ent #ith <uibonhoa could have affected only their individual rights as lessors because no ne# agree$ent #as forged bet#een <uibonhoa and all the lessors, including 1oreta 6ojocco. 0onse7uently, because the three lot o#ners si$ultaneously entered into the lease contract #ith <uibonhoa, novation of the contract could only be effected by their si$ultaneous act of abrogating the original contract and at the sa$e ti$e forging a ne# one in #riting. *lthough as a rule no for$ of #ords or #riting is necessary to give effect to a novation,GA8 a #ritten agree$ent signed by all the parties to the lease contract is re7uired in this case. )rdinary diligence on the part of the parties de$anded that they e ecute a #ritten agree$ent if indeed they #anted to enter into a ne# one because of the 1'-year life span of the lease affecting real property and the fact that third persons #ould be affected thereby on account of the e press agree$ent allo#ing the lessee to lease the building to third parties.GA9 ;nder the la#, novation is never presu$ed. 3he parties to a contract $ust e pressly agree that they are abrogating their old contract in favor of a ne# one.G'0 *ccordingly, it #as held that no novation of a contract had occurred #hen the ne# agree$ent entered into bet#een the parties #as intended to give life to the old one.G'1 6iving life to the contract #as the very purpose for #hich Fufina 6. 1i$ signed the agree$ent on !anuary 31, 198& #ith <uibonhoa. It #as intended to graft into the lease contract provisions that #ould facilitate fulfill$ent of <uibonhoas obligation therein.G'+ 3hat the ne# agree$ent #as $eant to strengthen the enforceability of the lease is further evidenced by the fact, although its stipulations as to the period of the lease and as to the a$ount of rental #ere altered, the agree$ent #ith Fufina 6. 1i$ does not even hint that the lease itself #ould be abrogated. *s such, even <uibonhoas agree$ent #ith Fufina 6. 1i$ cannot be considered a novation of the original lease contract. Bhere the parties to the ne# obligation e pressly recogni/e the continuing e istence and validity of the old one, #here, in other #ords, the parties e pressly negated the lapsing of the old obligation, there can be no novation.G'3 *s regards the ne# agree$ent #ith Severino 6ojocco, it should be noted that he only disclai$ed its e istence #hen the chec2 issued by <uibonhoa to hi$, allegedly in accordance #ith the ne# agree$ent, #as dishonored. 3hat unfortunate fact $ight have led Severino 6ojocco to refuse acceptance of rents paid by <uibonhoa subse7uent to the dishonor of the chec2. <o#ever, the non-e istence of the ne# agree$ent #ith Severino 6ojocco is a 7uestion of fact that the courts belo# had properly deter$ined. 3he 0ourt of *ppeals has affir$ed the trial courts finding that not only #as 6ojoccos consent vitiated by fraud and false representation there li2e#ise #as failure of consideration in the e ecution of 4 hibit 0, =and therefore> the said agree$ent is legally inefficacious.G'A In the Fesolution of )ctober 18, 1990, the 0ourt of *ppeals considered the a$ount of .+,0,8+'.00 represented by the chec2 handed by <uibonhoa to Severino 6ojocco as partial settle$ent or partial pay$entG'' clearly under the ter$s of the original lease contract. 3here is no reason to depart fro$ the findings and conclusions of the appellate court on this $atter. @evertheless, because Severino 6ojocco repudiates the ne# agree$ent even before this 0ourt as his consent thereto had allegedly been vitiated by fraud and false representation,G'& <uibonhoa $ay not escape co$plete fulfill$ent of her obligation under the original lease contract as far as Severino 6ojocco is concerned. She is thus contractually bound to pay hi$ the unpaid rents. *side fro$ the $onthly rental that should be paid by <uibonhoa starting (arch 198A, 1oreto 6ojocco 0hua is also entitled to interest at the rate of &Q per annu$ fro$ the accrual of the rent in accordance #ith *rticle ++09G', of the 0ivil 0ode until it is fully paid because the $onetary a#ard does not parta2e of a loan or forbearance in $oney. <o#ever, the interi$ period fro$ the finality of this judg$ent until the $onetary a#ard is fully satisfied, is e7uivalent to a forbearance of credit and therefore, during that interi$ period, the applicable rate of legal interest shall be 1+Q.G'8 *s regards Severino 6ojocco, he shall be entitled to such interests only fro$ the ti$e that <uibonhoa defaulted paying her $onthly rentals to hi$ considering that he had already received fro$ her the a$ount of .+,0,8+'.00 as rentals. 3he a$ount of $onthly rentals upon #hich interest shall be charged shall be that stipulated in paragraph ' of the lease contract or .1',000.00 to each lessor. 3hat a$ount, ho#ever, shall be subject to the provision therein that the a$ount of rentals shall be adjustedJincreased upon the corresponding increase in the rental of subleases using the percentage increase in the totality of rentals of the sublessees as basis for the percentage increase of $onthly

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rental that 14SS44 #ill pay to 14SS)F. ;pon re$and of this case therefore, the trial court shall deter$ine the total $onetary a#ard in favor of 1oreta 6ojocco 0hua and of Severino 6ojocco. Fro$ the facts of the case, it is clear that #hat <uibonhoa ai$ed for in filing the action for refor$ation of the lease contract, is to absolve herself fro$ her delay in the pay$ent of $onthly rentals and to e tend the ter$ of the lease, #hich under the original lease contract, e pired in 1988. 3he ostensible reasons behind the institution of the case she alleged #ere the unfavorable repercussions resulting fro$ the econo$ic and political upheaval on the heels of the *7uino assassination. <o#ever, a contract duly e ecuted is the la# bet#een the parties #ho are obliged to co$ply #ith its ter$s. 4vents occurring subse7uent to the signing of an agree$ent $ay suffice to alter its ter$s only if, upon failure of the parties to arrive at a valid co$pro$ise, the court dee$s the sa$e to be sufficient reasons in la# for altering the ter$s of the contract. 3his court once saidC It is a long established doctrine that the la# does not relieve a party fro$ the effects of an un#ise, foolish, or disastrous contract, entered into #ith all the re7uired for$alities and #ith full a#areness of #hat he #as doing. 0ourts have no po#er to relieve parties fro$ obligations voluntarily assu$ed, si$ply because their contracts turned out to be disastrous deals or un#ise invest$ents.G'9
In 6.F. @o. 10+&0A

.etitioners Severino 6ojocco and 1oreta 6. 0hua assail the "ecision of the 0ourt of *ppeals on the follo#ing grounds9 a> F4S.)@"4@3 0);F3 <*S "40I"4" O;4S3I)@S )F S;DS3*@04 @)3 <4F43)F)F4 "434F(I@4" DN 3<IS <)@)F*D14 0);F3 )F <*S "40I"4" 3<4( I@ * B*N 014*F1N 0)@3F*FN 3) 1*B )F 3<4 *..1I0*D14 "40ISI)@S )F 3<IS <)@)F*D14 0);F39 b> F4S.)@"4@3 0);F3 <*S S) F*F "4.*F34" FF)( 3<4 *004.34" *@" ;S;*1 0);FS4 )F !;"I0I*1 .F)044"I@6S *S 3) 0*11 F)F *@ 4L4F0IS4 )F 3<4 .)B4FS )F S;.4F-ISI)@ DN 3<4 <)@)F*D14 0);F3.G&0 3he contentions of petitioners relate to the basic issue raised in the petition - #hether or not the 0ourt of *ppeals erred in affir$ing the decision of the Fegional 3rial 0ourt that

dis$issed for lac2 of jurisdiction the co$plaint for eject$ent brought by petitioners before the (etropolitan 3rial 0ourt of (anila. In other #ords, the issue for deter$ination here isC #hether or not the (etropolitan 3rial 0ourt had jurisdiction over the co$plaint for cancellation of lease, eject$ent and collection in 0ivil 0ase @o. 90-'A'',. 3he governing la# on jurisdiction #hen the co$plaint #as filed on !anuary 1A, 198' #as Sec. 33 =+> of Datas .a$bansa Dlg. 1+9 vesting $unicipal courts #ithC 4 clusive original jurisdiction over cases of forcible entry and unla#ful detainer. .rovided, 3hat #hen, in such cases, the defendant raises the 7uestion of o#nership in his pleadings and the 7uestion of possession cannot be resolved #ithout deciding the issue of o#nership, the issue of o#nership should be resolved only to deter$ine the issue of possession. 3hereunder, #hen the issue of o#nership is indispensable to the resolution of the issue of possession, the (etropolitan 3rial 0ourt is e$po#ered to decide it as #ell.G&1 4 plaining this jurisdictional $atter, in "i/on v. 0ourt of *ppeals,G&+ the 0ourt saidC . Bell-settled is the rule that in an eject$ent suit, the only issue is possession de facto or physical or $aterial possession and not possession de "ure. So that, even if the 7uestion of o#nership is raised in the pleadings, as in this case, the court $ay pass upon such issue but only to deter$ine the 7uestion of possession especially if the for$er is inseparably lin2ed #ith the latter. It cannot dispose #ith finality the issue of o#nership-such issue being inutile in an eject$ent suit e cept to thro# light on the 7uestion of possession. 3his is #hy the issue of o#nership or title is generally i$$aterial and foreign to an eject$ent suit. "etainer, being a $ere 7uieting process, 7uestions raised on real property are incidentally discussed. In fact, any evidence of o#nership is e pressly banned by Sec. A, Fule ,0 e cept to resolve the 7uestion of possession. 3hus, all that the court $ay do, is to $a2e an initial deter$ination of #ho is the o#ner of the property so that it can resolve #ho is entitled to its possession absent other evidence to resolve the latter. Dut such deter$ination of o#nership is not clothed #ith finality. @either #ill it affect o#nership of the property nor constitute a binding and conclusive adjudication on the $erits #ith respect to the issue of o#nership. .

3he 0ourt has consistently held that in forcible entry and unla#ful detainer cases, jurisdiction is deter$ined by the nature of the action as pleaded in the co$plaint.G&3 3he test of the sufficiency of the facts alleged in the co$plaint is #hether or not ad$itting the facts alleged therein, the court could render a valid judg$ent upon the sa$e in accordance #ith the prayer of the plaintiff.G&A In an eject$ent case, or specifically in an action for unla#ful detainer li2e the present case, it suffices to allege that the defendant is unla#fully #ithholding possession of the property in 7uestion.G&' * co$plaint for unla#ful detainer is therefore sufficient if it alleges that the #ithholding of possession or the refusal to vacate is unla#ful #ithout necessarily e$ploying the ter$inology of the la#.G&& It is therefore in order to $a2e an in7uiry into the aver$ents of the co$plaint in 0ivil 0ase @o. 90-'A'',.G&, 3he co$plaint, that #as called one for cancellation of lease, eject$ent and collection, alleged the follo#ing factsC 1. 3he parties are residents of different barangays and therefore the provisions of ..". @o. 1'08 =the la# on the 2atarungang pa$barangay> are inapplicable9 +. 3he plaintiffs, Fufina 6. 1i$, Severino 6ojocco and 1oreta 6ojocco 0hua are the registered o#ners of three parcels of co$$ercial land in Ilaya Street, Dinondo, (anila. 3. )n !une 30, 1983, they entered into a lease contract #ith defendant <uibonhoa #hereby the latter #ould construct a Astorey building on the three lots that, after the e piration of the 1'-year period of the lease, #ould be o#ned by the lessors, and that, upon co$pletion of construction of the building #ithin eight =8> $onths fro$ signing of the lease contract, the lessee #ould start paying $onthly rentals9 A. *fter the e piration of the 8-$onths period or in (arch 198A, the rentals of .A',000.00 a $onth accrued. '. "espite verbal de$ands, $eetings and conferences by #hich the plaintiffs de$anded fro$ defendant pay$ent of the total a$ount due on account of the lease contract, defendant failed to pay9 &. )n "ece$ber 19, 198A, the plaintiffs, through counsel, #rote defendant letter infor$ing her of their intention to ter$inate and cancel the lease for violation of its ter$s by the defendant at the sa$e ti$e de$anding restitution of the lots in 7uestion and pay$ent of all rentals due9

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,. "espite such verbal and #ritten de$ands, the defendant refused to co$ply there#ith to the da$age and prejudice of the plaintiffs considering that defendant #as subleasing the stalls, bodegas and offices to tenants #ho had paid her good#ill $oney and e orbitant rentals since (arch 198A or prior to the co$pletion of the building until the filing of the co$plaint in a$ounts totaling $illions of pesos9 8. "efendant continued to sublease vacant spaces #hile depriving plaintiffs of reasonable co$pensation for the use and occupation of the pre$ises9 9. "efendant did not utili/e her o#n capital in the construction of the building as she #as able to $ortgage the lots to the 0hina Dan2ing 0orporation in the total a$ount of .3,,00,000.00 as #ell as collect good#ill $oney fro$ tenants9 10. .laintiffs revo2ed the authority given to defendant to encu$ber the property because of her failure of pay and li7uidate the real estate loan #ithin the one-year period #hich e pired on Septe$ber 30, 198A9 11. 3hat plaintiffs #ere forced to file the action by reason of defendants bad faith and un#arranted refusal to satisfy their clai$s9 and 1+. 3he rentals should be $ade to ans#er for plaintiffs $onetary clai$s on account of defendants i$pending departure fro$ the .hilippines. *fter praying for the issuance of a preli$inary #rit of attach$ent, the plaintiffs prayed as follo#sC B<4F4F)F4, pre$ises considered, it is $ost respectfully prayed that judg$ent be rendered in favor of plaintiffs and against the defendant as follo#sC 1. )rdering defendant and all persons clai$ing rights under her to forth#ith vacate the leased pre$ises described in this 0o$plaint and to surrender actual and physical possession to herein plaintiffs andJor their duly authori/ed representatives9 +. )rdering defendant to pay plaintiff all rentals due and unpaid at the agreed rate of .A',000.00 per $onth fro$ (arch, 198A to !anuary, 198' or for a period of 11 $onths #ith legal interests thereon until fully paid9 3. )rdering the defendant to deposit past and future rentals #ith this <onorable 0ourt, or in a ban2 acceptable to both parties, the .assboo2 to be turned over and sub$itted to this <onorable 0ourt for further disposition9 A. Sentencing defendant to pay the fair rental value of, andJor reasonable co$pensation for, the use and occupancy of the leased pre$ises at the rate of .&0,000 per $onth beginning February ', 198' and every 'th of the succeeding $onth thereafter until the pre$ises is actually vacated and restored to herein plaintiffs9 '. 3o pay plaintiffs a su$ e7uivalent to +0Q of the total a$ount clai$ed in this action for and as attorneys fees e clusive of appearance fees and costs of this action9 &. 3hat pending hearing of this case, a #rit of preli$inary attach$ent be issued against the credits due defendant fro$ the tenants or sublessees of the pre$ises in 7uestion to serve as security for the satisfaction of any judg$ent that $ay be recovered in this case9 ,. For such other and further relief as this <onorable 0ourt $ay dee$ proper, just and e7uitable9 8. .laintiffs further respectfully pray that for e pediency, considering the nature of this action and to protect plaintiffs fro$ incurring further losses, da$ages and e penses conco$ittant to the deprivation or loss of their possession, that not#ithstanding the a$ount of clai$ involved, they hereby respectfully invo2e the applicability of the rules on Su$$ary .rocedure in the interest of justice. ;ndoubtedly, the co$plaint avers ulti$ate facts re7uired for a cause of action in an unla#ful detainer case. It alleges possession of the properties by the lessee, verbal and #ritten de$ands to pay rental arrearages and to vacate the leased pre$ises, continued refusal of the lessees to surrender possession of the pre$ises, and the fact that the action #as filed #ithin one year fro$ de$and to vacate. * reading of the allegations of the co$plaint and the reliefs prayed for indeed reveals facts that appear to be e traneous to the pri$ary ai$ of recovering possession of property in an action for unla#ful detainer although these facts do not involve issue of o#nership of the pre$ises. 3hus, consonant #ith the allegation that defendant #as leasing the spaces in the building to the tune of $illions of peso, plaintiffs pray for an increase in $onthly rentals to .&0,000.00 a $onth starting February ', 198' or after construction of the building had been co$pleted. 3he prayer li2e#ise spea2s of past and future rentals that should be deposited #ith the court or in an acceptable ban2. In other #ords, the co$plaint see2s relief that are not li$ited to pay$ent of the rent arrearages and the eviction of defendant fro$ the leased pre$ises. *lthough for reasons of their o#n the 6ojoccos opted not to e press in the co$plaint their intention to ter$inate the lease, such intention could be gleaned fro$ their prayer that the court should sentence <uibonhoa to pay the higher rent of .&0,000.00 a $onth. 3hat e plains #hy the co$plaint is captioned as one for cancellation of the lease aside fro$ its being one for eject$ent and collection. In praying that the court directs the defendant to pay the increased rental of .&0,000.00 a $onth, plaintiffs, in effect, #ould #ant the e isting contract ter$inated in order that the court could substitute it #ith another providing for an increased $onthly rental. <o#ever, forging contracts for parties in a case is beyond the jurisdiction of courts. )ther#ise, it #ould result in the courts substitution of its o#n volition in a contract that should e press only the parties #ill. @ecessarily, the (etropolitan 3rial 0ourt could not favorably act on the prayer for cancellation of the contract #ith another containing ter$s suggested by the plaintiffs as the allegations and prayer therefor are no $ore than superfluities that do not affect the $ain cause of action averred in the co$plaint. 3he court therefore granted only the $ain relief sought by the plaintiffsthe eviction of the defendant. 3he Fegional 3rial 0ourt incorrectly held that the co$plaint #as also for rescission of contract, a case that is certainly not #ithin the jurisdiction of the (etropolitan 3rial 0ourt. Dy the allegations of the co$plaint, the 6ojoccos ai$ #as to cancel or ter$inate the contract because they sought its partial enforce$ent in praying for rental arrearages. 3here is a distinction in la# bet#een cancellation of a contract and its rescission. 3o rescind is to declare a contract void in its inception and to put an end to it as though it never #ere. It is not $erely to ter$inate it and release parties fro$ further obligations to each other but to abrogate it fro$ the beginning and restore the parties to relative positions #hich they #ould have occupied had no contract ever been $ade.G&8 3er$ination of a contract is congruent #ith an action for unla#ful detainer. 3he ter$ination or cancellation of a contract #ould necessarily entail enforce$ent of its ter$s prior to the declaration of its cancellation in the sa$e #ay that before a lessee is ejected under a lease contract, he has to

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fulfill his obligations thereunder that had accrued prior to his eject$ent. <o#ever, ter$ination of a contract need not undergo judicial intervention. 3he parties the$selves $ay e ercise such option. )nly upon disagree$ent bet#een the parties as to ho# it should be underta2en $ay the parties resort to courts. <ence, not#ithstanding the allegations in the co$plaint that are e traneous or not essential in an action for unla#ful detainer, the (etropolitan 3rial 0ourt correctly assu$ed jurisdiction over 0ivil 0ase @o. 90-'A'',. 3he 0ourt finds sustainable basis for the observation of the 0ourt of *ppeals that e ecution of the judg$ent ejecting <uibonhoa #ould cause co$plications that are anathe$a to a peaceful resolution of the controversy bet#een the parties. 3hus, #hile <uibonhoa #ould be ejected fro$ the lots o#ned by Severino 6ojocco and 1oreta 6ojocco 0hua, she #ould be bound by her agree$ent #ith Fufina 6. 1i$ to continue #ith the lease. 3he result #ould be disadvantageous to both <uibonhoa and Severino 6ojocco and 1oreta 6. 0hua. 3he said o#ners #ould be unable to e ercise rights of o#nership over their lots upon #hich the building #as constructed unless they re$ove or buy t#o-thirds of the building. <o#ever, an action for unla#ful detainer does not preclude the lessee or ejected party fro$ availing of other re$edies provided by la#. 3he prevailing doctrine is that suits or actions for the annul$ent of sale, title or docu$ent do not abate any eject$ent action respecting the sa$e property.G&9 In fact, in this case, the lessee, as it #as, ju$ped the gun over the lessors in filing the action for refor$ation of the lease contract. 3hat it proved unfavorable to her does not detract fro$ the fact that the controversy bet#een her and the lessors has been resolved in accordance #ith la# albeit not in consonance #ith the #ishes of all the parties. De that as it $ay, the proble$ of ejecting <uibonhoa has been rendered $oot and acade$ic by the e piration of the lease contract litigated upon in !une 1998. 3he parties $ight have availed of the provision of paragraph 1 of the lease contract #hereby the parties agreed to rene# it for a si$ilar or shorter period upon ter$s and conditions $utually agreeable to the$. If they opted to brush aside that provision, #ith $ore reason, <uibonhoas eviction should ensue as a $atter of enforce$ent of the lease contract. B<4F4F)F4, judg$ent is hereby rendered as follo#sC a.> In 6.F. @o. 9'89,, the decision of the 0ourt of *ppeals in 0*-6.F. 0- @o. 1&',', dis$issing petitioners co$plaint for refor$ation of contract, is *FFIF(4" #ith the $odifications thatC 1H .rivate respondent 1oreta 6ojocco 0hua is adjudged entitled to legal interest of &Q per annu$ fro$ (arch, 198A, the ti$e the rents beca$e due9 +H .rivate respondent Severino 6ojocco shall receive &Q legal interest only fro$ the ti$e Florencia 3. <uibonhoa defaulted in the pay$ent of her $onthly rents9 and 3H 1egal interest of 1+Q per annu$ shall accrue fro$ the finality of this decision until the a$ount due is fully paid. b> In 6.F. @o. 10+&0A, the decision of the 0ourt of *ppeals in 0*-6.F. S. @o. +A&'A, affir$ing the decision of the Fegional 3rial 0ourt of origin #hich dis$issed the eject$ent case instituted by the petitioners against the private respondent is S43 *SI"49 the order of eject$ent issued by the (etropolitan 3rial 0ourt a 7uo on !uly 30, 1980 is ;.<41"9 and the private respondent and all persons clai$ing authority under her are ordered to vacate the land and portion of the building corresponding to 1ot @o. +&-D covered by 303 @o. 80,+8 of petitioner Severino 6ojocco, and the portion corresponding to 1ot @o. +&-0 covered by 303 @o. 1''A'0 of petitioner 1oreta 0hua. @o pronounce$ent as to costs. -O OR6ERE6. T4IR6 6IVI-ION 8G.R.No.10/069.1&!2&r330,2002: METROPOLITAN MANILA 6EVELOPMENT AUT4ORIT5,Petitioner,vs.1ANCOMENVIRONMENTAL CORPORATION &!*1ANCOMINTERNATIONAL 6EVELOPMENT PRO1ECT- PT5. LIMITE6 O; AU-TRALIA, Respondents. 6ECI-ION MELO,J.>chanroblesvirtualla#library Defore the 0ourt is a petition for revie# oncertiorariunder Fule A' of the Fules of 0ivil .rocedure filed by petitioner (etropolitan (anila "evelop$ent *uthority =MM6A>, see2ing to reverse and set aside the @ove$ber 13, +000 decision of the 0ourt of *ppeals declaring valid and perfected the #aste $anage$ent contract entered into by the Fepublic of the .hilippines, represented by the Secretary of @ational Fesources and the 4 ecutive 0o$$ittee to oversee the build-operate-transfer i$ple$entation of solid #aste $anage$ent projects, and1ANCOM4nviron$ental 0orporation.chanroblesvirtualla#library and1ANCOM4nviron$ental 0orporation.chanroblesvirtualla#library 3he pertinent facts are as follo#sCchanroblesvirtualla#library In 199A, then .resident Fidel -. Fa$os issued .residential (e$orandu$ )rderNo. +0+ creating the 4 ecutive 0o$$ittee =4L40)(> to oversee the D)3 i$ple$entation of solid #aste $anage$ent projects, headed by the 0hair$an of theMM6Aand the 0abinet )fficer for Fegional "evelop$ent-@ational 0apital Fegion =0)F"-@0F>. 3he 4L40)( #as to oversee and develop #aste-to-energy projects for the #aste disposal sites inSan (ateo, Fi/al and 0ar$ona,0aviteunder the build-operate-transfer =D)3> sche$e. 3he ter$s of reference for the #aste-to-energy projects provided that its proponents should have the capability to establish $unicipal solid #aste ther$al plants using incineration technology. 3his type of technology #as selected because of its alleged advantages of greatly reduced #aste volu$e, prolongation of the service life of the disposal site, and generation of electricity.chanroblesvirtualla#library Bhile eleven =11> proponents sub$itted their pre-7ualification docu$ents, $ost failed to co$ply #ith the re7uire$ents under Section '.A of the I$ple$enting Fules and Fegulations =IFF> of Fepublic *ctNo. &9',, other#ise 2no#n as the Duild)perate-3ransfer 1a#.)n!uly +1, 199', the .re-7ualification, Dids and *#ards 0o$$ittee =.D*0> reco$$ended the pre7ualification of three proponents, na$elyC i>1ANCOMInternational .ty. 1td.9 ii> First .hilippine International B-4 (anagers9 and iii> .*0340< "evelop$ent 0orporation.)n!uly +&, 199',the 4L40)( approved the reco$$endation of the .D*0.)n!uly +,, 199',MM6Afor#arded to the Invest$ent 0oordinating 0o$$ittee =I00> Secretariat the pre-feasibility study on the privati/ation of the 0ar$ona andSan (ateolandfill sites.3he

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project #as later presented to the I00-3echnical Doard =I003D> and then endorsed to the I00-0abinet 0o$$ittee =I0000> )n(ay +, 199&, the .D*0 conducted a pre-bid conference #here it re7uired the three pre-7ualified bidders to sub$it, #ithin ninety =90> days, their bid proposals.)n*ugust +, 199&,1ANCOMand First .hilippines re7uested for an e tension of ti$e to sub$it their bids..*0340<, on the other hand, #ithdre# fro$ the bidding.chanroblesvirtualla#library Subse7uently,1ANCOMentered into a partnership #ith *sea Dro#n Doveri =*DD> to for$1ANCOM4nviron$ental 0orporation #hile First .hilippines for$ed a partnership #ith)6"4@."ue to the change in the co$position of the proponents, particularly in their technology partners and contractors, the .D*0 conducted a post pre-7ualification evaluation.chanroblesvirtualla#library "uring the second bid conference, the bid proposals of First .hilippines for the 0ar$ona site and1ANCOMfor theSan (ateosite #ere found to be co$plete and responsive.0onse7uently, onFebruary 1+, 199,,1ANCOMand First .hilippines #ere declared the #inning bidders, respectively, for theSan (ateoand the 0ar$ona projects.chanroblesvirtualla#library In a letter dated February +,, 199,, thenMM6A0hair$an .rospero I. )reta infor$ed !*@0)(s 0hief 4 ecutive )fficer !ay *lparslan that the 4L40)( had approved the .D*0 reco$$endation to a#ard to1ANCOMthe San (ateo Basteto-4nergy .roject on the basis of the final 4valuation Feport declaring1ANCOMInternational 1td., .ty., together #ith *sea Dro#n Doveri =*DD>, as the sole co$plying =#inning> bidder for the San (ateo Baste "isposal site, subject to negotiation and $utual approval of the ter$s and conditions of the contract of a#ard.3he letter also notified *lparslan that the 4L40)( had created a negotiating tea$ co$posed of Secretary 6eneral *ntonio <idalgo of the <ousing and ;rban "evelop$ent 0oordinating 0ouncil, "irector Fonald 6. Fonta$illas, 6eneral (anager Foberto @acianceno ofMM6A, and *tty. 4duardo 3orres of the host local govern$ent unit to #or2 out and finali/e the contract a#ard.0hair$an. )reta re7uested1ANCOMto sub$it to the 4L40)( the co$position of its o#n negotiating tea$.chanroblesvirtualla#library 3hereafter, after a series of $eetings and consultations bet#een the negotiating tea$s of 4L40)( and1ANCOM, a draft D)3 contract #as prepared and presented to the .residential 3as2 Force on Solid Baste (anage$ent.chanroblesvirtualla#library )n"ece$ber 19, 199,, the D)3 0ontract for the #aste-toenergy project #as signed bet#een1ANCOMand the .hilippine 6overn$ent, represented by the .residential 3as2 Force on Solid Baste (anage$ent through "4@F Secretary -ictor Fa$os, 0)F"-@0F 0hair$an "ionisio dela Serna, andMM6A0hair$an .rospero )reta.chanroblesvirtualla#library )n(arch ',1998, the D)3 contract #as sub$itted to .resident Fa$os for approval but this #as too close to the end of his ter$ #hich e pired #ithout hi$ signing the contract..resident Fa$os, ho#ever, endorsed the contract to inco$ing .resident !oseph 4. 4strada.chanroblesvirtualla#library Bith the change of ad$inistration, the co$position of the 4L40)( also changed. (e$orandu$ )rderNo. 19 appointed the 0hair$an of the .residential 0o$$ittee on Flagship .rogra$s and .roject to be the 4L40)( chair$an.3oo, Fepublic *ctNo. 8,A9, other#ise 2no#n as the 0lean *ir *ct of 1999, #as passed by 0ongress.*nd due to the cla$or of residents of Fi/al province, .resident 4strada had, in the interi$, also ordered the closure of theSan (ateolandfill."ue to these circu$stances, the 6reater (anila Solid Baste (anage$ent 0o$$ittee adopted a resolution not to pursue the D)3 contract #ith1ANCOM.Subse7uently, in a letter dated @ove$ber A, 1999, Foberto *ventajado, 0hair$an of the .residential 0o$$ittee on Flagship .rogra$s and .roject infor$ed (r. !ay *lparslan, 0hair$an of1ANCOM, that due to changes in policy and econo$ic environ$ent =0lean *ir *ct and nonavailability of the San (ateo landfill>, the i$ple$entation of the D)3 contract e ecuted and signed bet#een1ANCOMand the .hilippine 6overn$ent #ould!olonger be pursued.3he letter stated that other alternative i$ple$entation arrange$ents for solid #aste $anage$ent for (etro (anila #ould be considered instead. 1ANCOMappealed to .resident !oseph 4strada the position ta2en by the 4L40)( not to pursue the D)3 0ontract e ecuted and signed bet#een1ANCOMand the .hilippine 6overn$ent, refuting the cited reasons for non-i$ple$entation."espite the pendency of the appeal,MM6A, onFebruary ++, +000, caused the publication in a ne#spaper of an invitation to pre7ualify and to sub$it proposals for solid #aste $anage$ent projects for (etro (anila.1ANCOMthus filed #ith the Fegional 3rial 0ourt of .asig a petition forcertiorarito declare i> the resolution of the 6reater (etropolitan (anila Solid Baste (anage$ent 0o$$ittee disregarding the D)3 0ontract and ii> the acts ofMM6Acalling for bids and authori/ing a ne# contract for (etro (anila #aste $anage$ent, as illegal, unconstitutional, and void9 and for prohibition to enjoin the 6reater (etropolitan (anila Solid Baste (anage$ent 0o$$ittee andMM6Afro$ i$ple$enting the assailed resolution and disregarding the *#ard to, and the D)3 contract #ith,1ANCOM, and fro$ $a2ing another a#ard in its place.)n(ay +9, +000, the trial court rendered a decision, the dispositive portion of #hich readsCchanroblesvirtualla#library B<4F4F)F4, in vie# of the foregoing, the 0ourt hereby renders judg$ent in favor of petitioners1ANCOM4@-IF)@(4@3*1 0)F.)F*3I)@, and1ANCOMI@34F@*3I)@*1 "4-41).(4@3 .F)!403S .3N., 1I(I34" )F *;S3F*1I*, and against respondent 6F4*34F (43F).)1I3*@ (*@I1* S)1I" B*S34 (*@*64(4@3 0)((., and <)@. F)D4F3) @. *-4@3*!*"), in his 0apacity as 0hair$an of the said 0o$$ittee, (43F) (*@I1* "4-41).(4@3 *;3<)FI3N and <)@. !4!)(*F 0. DI@*N, in his capacity as 0hair$an of said *uthority, declaring the Fesolution of respondent 6reater (etropolitan (anila Solid Baste (anage$ent 0o$$ittee disregarding petitioners D)3 *#ard 0ontract and (anage$ent 0o$$ittee disregarding petitioners D)3 *#ard 0ontract and calling for bids for and authori/ing a ne# contract for the (etro (anila #aste $anage$ent I1146*1 and -)I".chanroblesvirtualla#library (oreover, respondents and their agents are hereby .F)<IDI34" and 4@!)I@4" fro$ i$ple$enting the aforesaid Fesolution and disregarding petitioners D)3 *#ard 0ontract and fro$ $a2ing another a#ard in its place.chanroblesvirtualla#library

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1et it be e$phasi/ed that this 0ourt is not preventing or stopping the govern$ent fro$ i$ple$enting infrastructure projects as it is a#are of the proscription under ." 1818. )n the contrary, the 0ourt is paving the #ay for the necessary and $odern solution to the perennial garbage proble$ that has been the $ajor headache of the govern$ent and in the process #ould serve to attract $ore investors in the country.chanroblesvirtualla#library =Follo,p. 1'9.>chanroblesvirtualla#library Instead of appealing the decision,MM6Afiled a special civil action forcertiorari#ith prayer for a te$porary restraining order #ith the 0ourt of *ppeals #hich #as later doc2eted therein as 0*-G.R. S.No. '90+1. 3he appellate court not only re7uired1ANCOMto co$$ent on the petition, it also granted (("*s prayer for a te$porary restraining order. "uring the pendency of the petition forcertiorari,1ANCOM$oved for the e ecution of the F30 decision, #hich #as opposed byMM6A. <o#ever, the F30 granted the $otion for e ecution on the ground that its decision had beco$e final sinceMM6Ahad not appealed the sa$e to the 0ourt of *ppeals.MM6A$oved to declare respondents and the F30 judge in conte$pt of court, alleging that the F30s grant of e ecution #as abuse of and interference #ith judicial rules and processes.chanroblesvirtualla#library )n@ove$ber 13, +001, the 0ourt of *ppeals dis$issed the petition in 0*-G.R. S.No. '90+1 and a co$panion case, 0*G.R. S.No. &0303.chanroblesvirtualla#library (("*s $otion for reconsideration of said decision having been denied,MM6Afiled the instant petition, alleging that the 0ourt of *ppeals gravely erred in finding thatCchanroblesvirtualla#library 1>3here is a valid and binding contract bet#een the Fepublic of the .hilippines and1ANCOMgiven thatC a> the contract does not bear the signature of the .resident of the .hilippines9 b> the conditions precedent specified in the contract #ere not co$plied #ith9 and c> there #as !ovalid notice of a#ard.chanroblesvirtualla#library +>3heMM6Ahad not seasonably appealed the "ecision of the lo#er court via a petition for certiorari. Defore ta2ing up the substantive issue in 7uestion, #e shall first dispose of the 7uestion as to #hether it is fatal to petitioners cause, that rather than appealing the trial courts decision to the 0ourt of *ppeals, it instead filed a petition forcertiorari.Bhile petitioner clai$s that the trial courts decision never beca$e final by virtue of its having appealed bycertiorarito the 0ourt of *ppeals, the trial court ruled that petitioners failure to file an appeal has $ade its decision final and e ecutory.*t botto$, the 7uestion involves a deter$ination of the propriety of petitioners choice of the re$edy ofcertiorariin 7uestioning the decision of the trial court.chanroblesvirtualla#library Section 1, Fule &' of the 199, Fules of 0ivil .rocedure providesCchanroblesvirtualla#library Section 1.*etition for certiorari.Bhen any tribunal, board or officer e ercising judicial or 7uasi-judicial functions has acted #ithout or in e cess of its or his jurisdiction, or #ith grave abuse of discretion a$ounting to lac2 or e cess of jurisdiction,&!* "$ere (,!o&%%e&),or any plain, speedy, and ade7uate re$edy in the ordinary course of la#, a person aggrieved thereby $ay file a verified petition in the proper court, alleging the facts #ith certainty and praying that judg$ent be rendered annulling or $odifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as la# and justice $ay re7uire.chanroblesvirtualla#library 3he petition shall be acco$panied by a certified true copy of the judg$ent, order, or resolution subject thereof, copies of all pleadings and docu$ents relevant and pertinent thereto, and a s#orn certification of non-foru$ shopping as provided in the third paragraph of section 3, Fule A&.chanroblesvirtualla#library .lain it is fro$ a reading of the above provision thatcertiorari#ill lie only #here a court has acted #ithout or in e cess of jurisdiction or #ith grave abuse of discretion.If the court has jurisdiction over the subject $atter and of the person, its rulings upon all 7uestions involved are #ithin its jurisdiction, ho#ever irregular or erroneous these $ay be, they cannot be corrected bycertiorari.0orrection $ay be obtained only by an appeal fro$ the final decision.chanroblesvirtualla#library -erily, Section 1, Fule A1 of the 199, Fules of 0ivil .rocedure providesCchanroblesvirtualla#library S40. 1.Su$"ect of appeal.*n appeal $ay be ta2en fro$ a judg$ent or final order that co$pletely disposes of the case or of a particular $atter therein #hen declared by these Fules to be appealable. chanroblesvirtualla#library In all the above instances #here the judg$ent or final order is not appealable, the aggrieved party $ay file an appropriate special civil action under Fule &'.chanroblesvirtualla#library 3here can be!odispute that the trial courts(ay +9, +000decision #as a final order or judg$ent #hichMM6Ashould have appealed, had it been so $inded.In its decision, the trial court disposed of the $ain controversy by declaring the Fesolution of respondent 6reater (etropolitan (anila Solid Baste (anage$ent 0o$$ittee disregarding petitioners D)3 *#ard 0ontract and calling for bids for and authori/ing a ne# contract for the (etro (anila #aste $anage$ent I1146*1 and -)I". 3his ruling co$pletely disposed of the controversy bet#eenMM6Aand1ANCOM.In+A Finance Corporationvs. CA=++9 S0F* '&&, G199AH>, #e held that a final order or judg$ent is one #hich disposes of the #hole subject $atter or ter$inates a particular proceeding or action, leaving nothing to be done but to enforce by e ecution #hat has been deter$ined. *n order or judg$ent is dee$ed final #hen it finally disposes of the pending action so that nothing $ore can be done #ith it in the trial court.In other #ords, a final order is that #hich gives an end to the litigation.* final order or judg$ent finally disposes of, adjudicates, or deter$ines the rights, or so$e right or rights of the parties, either on the entire controversy or on so$e definite and separate branch thereof, and concludes the$ until it is reversed or set aside.Bhere!oissue is left for future consideration, e cept the fact of co$pliance or non-co$pliance #ith the ter$s of the judg$ent or doer, such judg$ent or order is final and appealable,#n%estments, #nc.vs. Court of Appeals,1A, S0F* 33A G198,H>.chanroblesvirtualla#library <o#ever, instead of appealing the decision,MM6Aresorted to the e traordinary re$edy ofcertiorari,as a $ode of obtaining reversal of the judg$ent.3his cannot be done.3he judg$ent #as not in any sense null and void a$ initio,incapable of producing any legal effects #hatever, #hich could be resisted at any ti$e and in any court it #as atte$pted.It #as a judg$ent #hich could or $ay have suffered fro$ so$e substantial error in procedure or in findings of fact or of la#, and on that account, it could have been reversed or $odified on appeal.Dut since it #as not appealed, it beca$e final and has thus gone beyond the reach of any court to $odify in any

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substantive aspect.3he re$edy to obtain reversal or $odification of the judg$ent on the $erits is appeal.3his is true even if the error, or one of the errors, ascribed to the court rendering the judg$ent is its lac2 of jurisdiction over the subject $atter, or the e ercise of po#er in e cess thereof, or grave abuse of discretion in the findings of fact or of la# set out in the decision.3he e istence and availability of the right of appeal proscribes a resort tocertiorari,because one of the re7uire$ents for avail$ent of the latter re$edy is precisely that there should be!oappeal,!ercadovs. CA,1&+ S0F* ,' G1988H>.*s incisively observed by the 0ourt of *ppealsCchanroblesvirtualla#library 3he special civil action for certiorari is available only #hen there is!oappeal nor any plain, speedy and ade7uate re$edy in the ordinary course of la# =Sec. 1, rule &', id.>chanroblesvirtualla#library *d$ittedly, appeal could have been ta2en fro$ the assailed F30 decision. <o#ever, petitioners $aintain that appeal is not a speedy re$edy because the F30 decision prohibiting the$ fro$ conducting a bidding for a ne# #aste disposal project has adverse and serious effects on the citys garbage situation.chanroblesvirtualla#library @evertheless, the F30 decision is not i$$ediately e ecutory.)nly judg$ents in actions for injunction, receivership, accounting and support and such other judg$ents as are no# or $ay hereafter be declared to be i$$ediately e ecutory shall be enforced after their rendition and shall not be stayed by an appeal therefro$, unless other#ise ordered by the trial court =Sec. A, rule 39,id.>.chanroblesvirtualla#library Since the F30 decision is not i$$ediately e ecutory, appeal #ould have stayed its e ecution.0onse7uently, the adverse effects of said decision #ill not visit upon petitioners during the appeal.In other #ords, appeal is a plain, speedy and ade7uate re$edy in the ordinary course of the la#.chanroblesvirtualla#library Dut as!oappeal #as ta2en #ithin the regle$entary period, the F30 decision had beco$e final and e ecutory.Bellsettled is the rule that the special civil action for certiorari $ay not be invo2ed as a substitute for the re$edy of appeal =DF 0orporationv,. 0ourt of *ppeals, +88 S0F* +&,>.3herefore, the e traordinary re$edy of certiorari does not lie. (oreover, petitioners instituted the instant action #ithout filing a $otion for reconsideration of the F30 decision."octrinal is the rule that certiorari #ill not lie unless a $otion for reconsideration is first filed before the respondent tribunal to allo# it an opportunity to correct its errors =-apantavs. .L'C,+9+ S0F* '80>.chanroblesvirtualla#library =Follo, p. A,-A8.>chanroblesvirtualla#library *d$ittedly, there are instances #here the e traordinary re$edy ofcertiorari$ay be resorted to despite the availability of an appeal.In'uiz, Jr.vs. Court of Appeals=++0 S0F* A90 G1993H>, #e heldCchanroblesvirtualla#library 0onsidered e traordinary, GcertiorariH is $ade available only #hen there is!oappeal, nor any plain, speedy or ade7uate re$edy in the ordinary course of the la# =Fule &', Fules of 0ourt, Section 1>.3he long line of decisions denying the petition forcertiorari,either before appeal #as availed or specially in instances #here the appeal period has lapsed, far outnu$bers the instances #hen certiorari #as given due course./he few significant e0ceptions were1 when pu$lic welfare and the ad%ancement of pu$lic polic2 dictate3 or when the $roader interests of "ustice so re4uire, or when the writs issued are null . . . or when the 4uestioned order amounts to an oppressi%e e0ercise of "udicial authorit2.chanroblesvirtualla#library In the instant case, ho#ever,MM6Ahas not sufficiently established the e istence of any fact or reason to justify its resort to the e traordinary re$edy ofcertiorari.@either does the record sho# that the instant case, indeed, falls under any of the e ceptions afore$entioned.chanroblesvirtualla#library 3he 0ourt thus holds that the 0ourt of *ppeals did not err in declaring that the trial courts decision has beco$e final due to the failure ofMM6Ato perfect an appeal #ithin the regle$entary period. Bith the foregoing dis7uisition, it #ould appear unnecessarily to discuss and resolve the substantive issue posed before the 0ourt. <o#ever, the procedural fla# not#ithstanding, the 0ourt dee$s it judicious to ta2e cogni/ance of the substantive 7uestion, if only to put petitioners $ind to rest.chanroblesvirtualla#library In its second assign$ent of errors, petitionerMM6Acontends that there is!ovalid and binding contract bet#een the Fepublic of the .hilippines and respondents becauseC a> the D)3 contract does not bear the signature of the .resident of the .hilippines9 b> the conditions precedent specified in the contract #ere not co$plied #ith9 and that c> there #as !ovalid notice of a#ard.chanroblesvirtualla#library 3hese contentions hold!o#ater.chanroblesvirtualla#library ;nder *rticle 130' of the 0ivil 0ode, GaH contract is a $eeting of $inds bet#een t#o persons #hereby one binds hi$self, #ith respect to the other, to give so$ething or to render so$e service. * contract undergoes three distinct stages preparation or negotiation, its perfection, and finally, its consu$$ation..egotiationbegins fro$ the ti$e the prospective contracting parties $anifest their interest in the contract and ends at the $o$ent of agree$ent of the parties.3heperfectionor birth of the contract ta2es place #hen the parties agree upon the essential ele$ents of the contract.3he last stage is theconsummationof the contract #herein the parties fulfill or perfor$ the ter$s agreed upon in the contract, cul$inating in the e tinguish$ent thereof,+ugattivs. CA,3A3 S0F* 33' G+000H>.*rticle 131' of the 0ivil 0ode, provides that a contract is perfected by $ere consent.0onsent, on the other hand, is $anifested by the $eeting of the offer and the acceptance upon the thing and the cause #hich are to constitute the contract =See *rticle 1319, 0ivil 0ode>.In the case at bar, the signing and e ecution of the contract by the parties clearly sho# that, as bet#een the parties, there #as a concurrence of offer and acceptance #ith respect to the $aterial details of the contract, thereby giving rise to the perfection of the contract.3he e ecution and signing of the contract is not disputed by the parties.*s the 0ourt of *ppeals aptly heldG0Hontrary to petitioners insistence that there #as!operfected contract, the $eeting of the offer and acceptance upon the thing and the cause, #hich are to constitute the contract =*rts. 131' and 1319, @e# 0ivil 0ode>, is borne out by the records.chanroblesvirtualla#library *d$ittedly, #hen petitioners accepted private respondents bid proposal =offer>, there #as, in effect, a $eeting of the $inds upon the object =#aste $anage$ent project> and the cause =D)3 sche$e>.<ence, the perfection of the contract.InCit2 of Ce$uvs. 5eirs of Candido 'u$i=30& S0F* 108>, the Supre$e 0ourt held that the effect of an un7ualified acceptance of the offer or proposal of the bidder is to perfect a contract, upon notice of the a#ard to the bidder.chanroblesvirtualla#libraryC In fact, in asserting that there is!ovalid and binding contract bet#een the

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parties,MM6Acan only allege that there #as!ovalid notice of a#ard9 that the contract does not bear the signature of the .resident of the.hilippines9 and that the conditions precedent specified in the contract #ere not co$plied #ith.chanroblesvirtualla#library In asserting that the notice of a#ard to1ANCOMis not a proper notice of a#ard,MM6Apoints to the I$ple$enting Fules and Fegulations of Fepublic *ctNo. &9',,other#ise 2no#n as the D)3 1a#, #hich re7uire that i> prior to the notice of a#ard, an Invest$ent 0oordinating 0o$$ittee clearance $ust first be obtained9 and ii> the notice of a#ard indicate the ti$e #ithin #hich the a#ardee shall sub$it the prescribed perfor$ance security, proof of co$$it$ent of e7uity contributions and indications of financing resources.chanroblesvirtualla#library *d$ittedly, the notice of a#ard has not co$plied #ith these re7uire$ents.<o#ever, the defect #as cured by the subse7uent e ecution of the contract entered into and signed by authori/ed representatives of the parties9 hence, it $ay not be gainsaid that there is a perfected contract e isting bet#een the parties giving to the$ certain rights and obligations =conditions precedents> in accordance #ith the ter$s and conditions thereof.Be borro# the #ords of the 0ourt of *ppealsCchanroblesvirtualla#library .etitioners belabor the point that there #as!ovalid notice of a#ard as to constitute acceptance of private respondents offer.3hey $aintain that for$erMM6A0hair$an )retas letter to1ANCOM40 datedFebruary +,, 199,cannot be considered as a valid notice of a#ard as it does not co$ply #ith the rules i$ple$enting Fep. *ctNo. &9',, as a$ended.3he argu$ent is untenable.chanroblesvirtualla#library 3he fact that 0hair$an )retas letter infor$ed1ANCOM40 that it #as the sole co$plying =#inning> bidder for theSan (ateoproject leads to!oother conclusion than that the project #as being a#arded to it.Dut assu$ing that said notice of a#ard did not co$ply #ith the legal re7uire$ents,%r(v&"e re,%o!*e!", +&!!o" be #&2)"e* "$ere#ore &, (" ?&, "$e over!me!" re%re,e!"&"(ve, *2"3 "o (,,2e "$e %ro%er !o"(+e.chanroblesvirtualla#library In any event, petitioners, as successors of those #ho previously acted for the govern$ent =0hair$an )reta, et al>, are estopped fro$ assailing the validity of the notice of a#ard issued by the latter.*s private respondents correctly observed, in negotiating on the ter$s and conditions of the D)3 contract and eventually signing said contract, the govern$ent had led private respondents to believe that the notice of a#ard given to the$ satisfied all the re7uire$ent of the la# Bhile the govern$ent cannot be estopped by the erroneous acts of its agents, nevertheless, petitioners $ay not no# assail the validity of the subject notice of a#ard to the prejudice of private respondents.;ntil the institution of the original action before the F30, invalidity of the notice of a#ard #as never invo2ed as a ground for ter$ination of the D)3 contract.In fact, the reasons cited for ter$inating theSan (ateoproject, per 0hair$an *ventajados letter to1ANCOM40 dated@ove$ber A, 1999, #ere its purported non-i$ple$entability and non-viability on account of supervening events, e.g., passage of the 0lean *ir *ct, etc.chanroblesvirtualla#library =Follo, p. A9-'0.>chanroblesvirtualla#library MM6Aalso points to the absence of the .residents signature as proof that the sa$e has not yet been perfected.@ot only that, the authority of the signatories to bind the Fepublic has even been put to 7uestion.Firstly, it is pointed out that (e$orandu$ )rderNo. +0+ creating the 4 ecutive 0o$$ittee to oversee the D)3 i$ple$entation of solid #aste $anage$ent projects only charged the officials thereof #ith the duty of reco$$ending to the .resident the specific project to be i$ple$ented under the D)3 sche$e for bothSan (ateoand 0ar$ona sites.<ence, it is concluded that the signatories, 0)F"-@0F 0hair$an "ionisio dela Serna andMM6A0hair$an .rospero )reta, had!oauthority to enter into any #aste $anage$ent project for and in behalf of the 6overn$ent. Secondly, Section '9of 4 ecutive )rder No. +9+ is relied upon as authority for the proposition that presidential approval is necessary for the validity of the contract. 3he first argu$ent conveniently overloo2s the fact that then Secretary of 4nviron$ent and @atural Fesources -ictor Fa$os #as li2e#ise a signatory to the contract.Bhile dela Serna and )reta $ay not have had any authority to sign, the Secretary of 4nviron$ent and @atural Fesources has such an authority.In fact, the authority of the signatories to the contract #as not denied by the Solicitor 6eneral.(oreover, as observed by the 0ourt of *ppeals, GiHt #as not alleged, $uch less sho#n, that those #ho signed in behalf of the Fepublic had acted beyond the scope of their authority.chanroblesvirtualla#library In truth, the argu$ent raised byMM6Adoes not focus on the lac2 of authority of the signatories, but on the a$ount involved as placing the contract beyond the authority of the signatories to approve.Section '9of 4 ecutive )rderNo. +9+ readsCchanroblesvirtualla#library Section '9.Contracts for Appro%al $2 the *resident.0ontracts for infrastructure projects, including contracts for the supply of $aterials and e7uip$ent to be used in said projects, #hich involve a$ounts above the ceilings provided in the preceding section shall be approved by the .residentC*ro%ided,3hat the .resident $ay, #hen conditions so #arrant, and upon reco$$endation of the @ational 4cono$ic and "evelop$ent *uthority, revise the aforesaid ceilings of approving authority.chanroblesvirtualla#library <o#ever, the 0ourt of *ppeals trenchantly observed in this connectionCchanroblesvirtualla#library *s regards the .residents approval of infrastructure projects re7uired under Section '9of 4 ecutive )rderNo. +9+, said section does not apply to the D)3 contract in 7uestion.Sec. '9should be correlated #ith Sec. '8 of 4 ec. )rderNo. +9+.Said sections readCchanroblesvirtualla#library S403I)@ '8.0eiling for Infrastructure 0ontracts. 3he follo#ing shall be the ceilings for all civil #or2s, construction and other contracts for infrastructure projects, including supply contracts for said projects, a#arded through public bidding or through negotiation,which ma2 $e appro%ed $2 the Secretaries of *u$lic or6s and 5ighwa2s, /ransportation and Communications, Local 7o%ernment with respect to 'ural 'oad impro%ement *ro"ect and go%erning $oards of go%ernment8owned or controlled corporations1 chanroblesvirtualla#library Save as provided for above, the approval ceilings assigned to the depart$entsJagencies involved in national infrastructure and construction projects shall re$ain at the levels provided in e isting la#s, rules and regulations.chanroblesvirtualla#library 0ontrary to petitioners clai$ that all infrastructure contracts re7uire the .residents approval =.etition, p. 1&>, Sec. '9 provides that such approval is re7uired only in infrastructure

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contracts involving a$ounts e ceeding the ceilings set in Sec. '8.Significantly, the infrastructure contracts treated in Sec. '8 pertain only to those #hich $ay be approved by the Secretaries of .ublic Bor2s and <igh#ays, 3ransportation and 0o$$unications, 1ocal 6overn$ent =#ith respect to Fural Foad I$prove$ent .roject> and the governing boards of certain govern$ent-o#ned or controlled corporations. 0onse7uently, the D)3 contract in 7uestion, #hich #as approved by the "4@F Secretary and the 4L0)( 0hair$an and 0o-0hair$an, is not covered by 4 ec. )rder No. +9+.chanroblesvirtualla#library 3he provision pertinent to the authority of the Secretary of 4nviron$ent and @atural Fesources #ould actually be Section 1 of 4 ecutive )rder No. 380, Series of 1989 #hich provides that 3he Secretaries of all "epart$ents and 6overning Doards of govern$ent-o#ned or controlled corporations Ge cept the Secretaries of .ublic Bor2s and <igh#ays, 3ransportation and 0o$$unication, and 1ocal 6overn$ent #ith respect to Fural Foad I$prove$ent projectsH+&! e!"er (!"o %2b)(+)3 b(**e* +o!"r&+", re &r*)e,, o# &mo2!"=See also Section '1',6overn$ent *ccounting and *uditing (anual -olu$e I>. 0onse7uently,MM6A$ay not clai$ that the D)3 contract is not valid and binding due to the lac2 of presidential approval.chanroblesvirtualla#library Significantly, the contract itself provides that the signature of the .resident is necessary only for its effectivity =not perfection>, pursuant to *rticle 19 of the contract, #hich readsCchanroblesvirtualla#library 3his contract shall beco$e effective upon approval bythe .resident of the Fepublic of the.hilippinespursuant to e isting la#s subject to the condition, precedent in *rticle 18.3his contract shall re$ain in full force and effect for t#enty-five =+'>years subject to rene#al for another t#entyfive =+'> years fro$ the date of 4ffectivity.Such rene#al #ill be subject to $utual agree$ent of the parties and approval of the .resident of the Fepublic of the.hilippines.chanroblesvirtualla#library =Follo, p. 9A.>chanroblesvirtualla#library Stated differently, #hile the t#enty-five year effectivity period of the contract has not yet started to run because of the absence of the .residents signature, the contract has, nonetheless, already been perfected.chanroblesvirtualla#library *s to the contention that there is!operfected contract due to !*@0)(s failure to co$ply #ith several conditions precedent, the sa$e is, li2e#ise, un$eritorious.*rticle 18 of the D)3 contract readsCchanroblesvirtualla#library *F3I014 18chanroblesvirtualla#library 0)@"I3I)@S .F404"4@3 chanroblesvirtualla#library 18.+.1.3he D)3 0)(.*@N hereby underta2es to provide the follo#ingwithin 9 months from e0ecution of this Contract as an effecti%e document1chanroblesvirtualla#library a>sufficient proof of the actual e7uity contributions fro$ the proposed shareholders of the D)3 0)(.*@N in a total a$ount not less than .<.'00,000,000 in accordance #ith the D)3 1a# and the i$ple$enting rules and regulations9 18.+.3Completion of Documentar2 'e4uirements as per Schedule : $2 the +&/ Compan2chanroblesvirtualla#library *s clearly stated in *rticle 18,1ANCOMundertoo2 to co$ply #ith the stated conditionswithin 9 months from e0ecution of the Contract as an effecti%e document.Since the .resident of the.hilippineshas not yet affi ed his signature on the contract, the sa$e has not yet beco$e an effective docu$ent.3hus, the t#o-$onth period #ithin #hich1ANCOMshould co$ply #ith the conditions has not yet started to run.It cannot thus be said that1ANCOMhas already failed to co$ply #ith the conditions precedent $andated by the contract.Dy arguing that failure Gof 1ANCOMH to co$ply #ith the conditions results in the failure of a contract or prevents the judicial relation fro$ co$ing into e istence,MM6Areads into the contract so$ething #hich is not conte$plated by the parties.If the ter$s of a contract are clear and leave!odoubt upon the intention of the contracting parties, the literal $eaning of its stipulations shall control =*rt. 13,0, 0ivil 0ode>.chanroblesvirtualla#library Be, therefore, hold that the 0ourt of *ppeals did not err #hen it declared the e istence of a valid and perfected contract bet#een the Fepublic of the.hilippinesand1ANCOM.3here being a perfected contract,MM6Acannot revo2e or renounce the sa$e #ithout the consent of the other.Fro$ the $o$ent of perfection, the parties are bound not only to the fulfill$ent of #hat has been e pressly stipulated but also to all the conse7uences #hich, according to their nature, $ay be in 2eeping #ith good faith, usage, and la# =*rticle 131', 0ivil 0ode>.3he contract has the force of la# bet#een the parties and they are e pected to abide in good faith by their respective contractual co$$it$ents, not #easel out of the$.!ust as nobody can be forced to enter into a contract, in the sa$e $anner, once a contract is entered into, !oparty can renounce it unilaterally or #ithout the consent of the other.It is a general principle of la# that!oone $ay be per$itted to change his $ind or disavo# and go bac2 upon his o#n acts, or to proceed contrary thereto, to the prejudice of the other party.@onetheless, it has to be repeated that although the contract is a perfected one, it is still ineffective or uni$ple$entable until and unless it is approved by the .resident.chanroblesvirtualla#library (oreover, if after a perfected and binding contract has been e ecuted bet#een the parties, it occurs to one of the$ to allege so$e defect therein as reason for annulling it, the alleged defect $ust be conclusively proven, since the validity and the fulfill$ent of contracts cannot be left to the #ill of one of the contracting parties.In the case at bar, the reasons cited byMM6Afor not pushing through #ith the subject contract #ereC 1> the passage of the 0lean *ir *ct, #hich allegedly bans incineration9 +> the closure of theSan (ateolandfill site9 and 3> the costly tipping fee.3hese reasons are bereft of $eritchanroblesvirtualla#library )nce again, #e $a2e reference to the insightful declarations of the 0ourt of *ppealsCchanroblesvirtualla#library Sec. +0 of the 0lean *ir *ct pertinently readsCchanroblesvirtualla#library S403I)@+0.+an on #ncineration.Incineration, hereby defined as the burning of $unicipal, bio-che$ical and ha/ardous #astes,#hich process e$its poisonous and to ic fu$es, is hereby prohibitedC .chanroblesvirtualla#library Section +0 does not absolutely prohibit incineration as a $ode of #aste disposal9 rather only those burning processes #hich e$it poisonous and to ic fu$es are banned.chanroblesvirtualla#library *s regards the projected closure of theSan (ateolandfill vis-vis the i$ple$entability of the contract, *rt. +.3 thereof e pressly states that GiHnthe event the project Site is not delivered , the .residential tas2 Force on Solid Baste (anage$ent =.3FSB(> and the 0lient, shallprovide #ithin a reasonable period of ti$e, a suitable alternative acceptable to the D)3 0)(.*@N.chanroblesvirtualla#library Bith respect to the alleged financial non-viability of the project because theMM6Aand the local govern$ent units

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cannot afford the tipping fees under the contract, this circu$stance cannot, by itself, abrogate the entire agree$ent.chanroblesvirtualla#library "octrinal is the rule that neither the la# nor the courts #ill e tricate a party fro$ an un#ise or undesirable contract, or stipulation for that $atter, he or she entered into #ith full a#areness of its conse7uences =&pulenciavs. CA,+93 S0F* #R$IC%" &'() G.R. No. 3412 January 19, 1907 RAFAEL MOLINA Y AL!A"OR, Plaintiff-Appellee , vs. ANTONIO "E LA RI!A, ET AL., Defendants-Appellants. ARELLANO, C.J.: On the 18th of April, 1905, the Court of First Instance of the city of Manila rendered ud!"ent in favor of the plaintiff #afael Molina y $alvador and a!ainst the defendant Antonio de la #iva, in the su" of %%,&59.0% pesos, Me'ican currency, e(uivalent to )%0,05*.+0, )hilippine currency, ,ith interest thereon at the rate of 5 per cent per annu" fro" the *+th of -uly, 190%, and the costs of proceedin!s, ,hich ud!"ent ,as thereafter affir"ed .y this court, ,ith the "odification that the defendant should pay to the plaintiff the su" of )*8,0/9.19, )hilippine currency, ,ith the interest due and to .eco"e due at the rate of 5 per cent per annu" fro" the *+th of -uly, 190%, until fully paid, ,ithout any special provision as to the costs of this instance. On the *1st of April, 190&, the court .elo, ordered the e'ecution of the said ud!"ent, ,hich ,as returned unsatisfied, no property of the defendant su. ect to e'ecution havin! .een found. Counsel for plaintiff then as0ed the court to re(uire the sureties of the defendant, 1nri(ue F. $o"es and #o.erto $paldin!, to sho, cause ,hy e'ecution should not issue a!ainst the". 2he said sureties havin! appeared and .een heard, the court ordered that e'ecution issue a!ainst the said $o"es and $paldin! as such sureties. Fro" this order of the court the sureties appealed and have .rou!ht the case to this court .y .ill of e'ceptions. 2he case havin! .een duly ar!ued and su."itted to this court, ,e "a0e the follo,in! decision3 2he appellant sureties assi!n as error in the first place, that the order appealed fro" ,as issued a!ainst the", not ,ithstandin! the fact that they indicated certain property .elon!in! to the defendant, the principal de.tor, and in the second place that the court held that the property so indicated .y the" did not .elon! to Antonio de la #iva 38'>.Indeed, the ter$s and conditions of the subject contract #ere arrived at after due negotiations bet#een the parties thereto.chanroblesvirtualla#library =4ERE;ORE,pre$ises considered, the petition is hereby "IS(ISS4" for lac2 of $erit and the decision of the 0ourt of *ppeals in 0*-G.R. S.No. '90+1 dated@ove$ber 13, +001*FFIF(4".Nocosts.chanroblesvirtualla#library .ecause there ,as a lien upon it created .y la,, and the sa"e .ein! in the hands of a receiver could not .e used to satisfy the said ud!"ent. In support of the first assi!n"ent, they alle!ed that under their ter"s of the .ond the oint lia.ility stipulated therein only e'tends to the sureties, the defendant, Antonio de la #iva, continuin! to .e the principal de.tor. Appellants also rely upon the provisions of articles 18%0, 18%1, and 18%* of the Civil Code in order to sho, that the sureties can not .e co"pelled to pay the creditor until application has .een previously "ade of all the property of the de.tor. 4ut appellants5 conception as to the oint lia.ility stipulated, in the .ond is ,holly erroneous, as the said .ond reads as follo,s6 78no, all "en .y these presents that ,e, Antonio de la #iva, a resident of 4ato, Catanduanes, as principal, and #o.erto $paldin! and 1nri(ue $o"es, as sureties, do here.y ac0no,led!e ourselves 9all three: to .e ointly and severally .ond unto the said #afael Molina y $alvador in the su" of 1+,500 dollars, ;nited $tates currency for the pay"ent of ,hich ,e truly and faithfully .ind ourselves, ointly and severally, our heirs, assi!ns, and representatives.7 2herefore, it appearin! that the oint lia.ility ,as e(ually incurred .y the principal and his t,o sureties, the court .elo, did not co""it the first of the errors assi!ned. And, inas"uch as, accordin! to article 18%1, 7the application 9excursion: can not ta0e place ,hen the surety has ointly .ound hi"self ,ith the de.tor,7 and accordin! to para!raph *, article 18**, 7if the surety .inds hi"self ointly ,ith the principal de.tor, the provisions of section fourth, chapter third, title first of this .oo0,7 ,hich section fourth refers ointly and several o.li!ation, article 111/, ,hich provides that a creditor "ay sue any of the oint therein, it is not necessary to pass upon the second error assi!ned .y the appellant. virtual la, li.rary Moreover the nature of the .ond is very plain. Its headin! reads as follo,s6 7Appellant5s .ond to stay e'ecution of ud!"ent.7 2his .ond, therefore, a udicial .ond, and article 185& of the Civil Code provides that a udicial surety can not de"and a levy on the property of the principal de.tor. <e accordin!ly affir" the order of the court .elo, ,ith the costs of this instance. After the e'piration of ten days let -O OR6ERE6.chanroblesvirtualla#library Vitug, Panganiban, andSandoval-Gutierrez, JJ., concur.chanroblesvirtualla#library Carpio, J.,nopart. I was or!er counsel to a oreign partner o Janco!"nviron!ental Corporation

ud!"ent .e entered in accordance here,ith and the case .e re"anded to the court .elo, for e'ecution. $o ordered. G.R. No. L#5$71 Au%u&' 24, 1910 (ENITO "E LO REYE , plaintiff=appellant, vs. !ERONICA ALOJA"O, defendant=appellee. Ramon Diokno, for appellant. No appearance for appellee. TORRE , J.: On or a.out -anuary **, 1905, >eronica Alo ado received, as a loan, fro" 4enito de los #eyes that the su" )&+ .&0, for the purpose of payin! a de.t she o,ed to Oli"pia ?a.alla. It ,as a!reed .et,een Alo ado and #eyes that the de.tor should re"ain as a servant in the house and in the service of her creditor, ,ithout any renu"eration ,hatever, until she should find so"e one ,ho ,ould furnish her ,ith the said su" ,here ,ith to repeat the loan. 2he defendant, >eronica Alo ado, after,ards left the house of the plaintiff, on March 1*, 190&, ,ithout havin! paid hi" her de.t, nor did she do so at any su.se(uent date, not,ithstandin! his de"ands. 2he plaintiff, therefore, on the 15th of "arch, 190&, filed suit in the court of the ustice of the peace of $anta #osa, @a @a!una, a!ainst >eronica Alo ado to recover the said su" or, in a contrary case, to co"pel her to return to his service. 2he trial havin! .een had, the ustice of the peace, on April 1/, 190&, rendered ud!"ent ,here.y he sentenced the defendant to pay to the plaintiff the su" clai"ed and declared that, in case the de.tor should .e insolvent, she should .e o.li!ed to fulfill the a!ree"ent .et,een her and the plaintiff. 2he costs of the trial ,ere assessed a!ainst the defendant. 2he defendant appealed fro" the said ud!"ent to the Court of First Instance to ,hich the plaintiff, after the case had .een doc0eted .y the cler0 of court, "ade a "otion on May /, 190&, re(uestin! that the appeal interposed .y the defendant .e disallo,ed, ,ith the costs of .oth instances a!ainst her. 2he !rounds alle!ed in support of this "otion. ,ere that the appeal had .een filed on the si'th day follo,in! that ,hen ud!"ent ,as rendered in the trial, on April 1/th, and that

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it, therefore, did not co"e ,ithin the period of the five days prescri.ed .y section +& of the Code of Civil )rocedure, as proven .y the certificate issued .y the ustice of the peace of $anta #osa. 2he Court of First Instance, ho,ever, .y order of -uly 1&, 190&, overruled the "otion of the plaintiff=appellee, for the reasons therein stated, na"ely, that the defendant ,as not notified of the ud!"ent rendered in the case on April 1/th of that year until the 1&th of the sa"e "onth, and the appeal havin! .een filed four days later, on the *0th, it could havin! seen that the five days specified .y section +& of the Code of Civil )rocedure had not e'pired. 2he plaintiff ,as advised to reproduce his co"plaint ,ithin ten days, in order that due procedure "i!ht he had thereupon. 2he plaintiff too0 e'ception to the afore"entioned order and at the sa"e ti"e reproduced the co"plaint he had filed in the court of the ustice of the peace, in ,hich, after relatin! to the facts herein.efore stated, added that the defendant, .esides the su" a.ove="entioned, had also received fro" the plaintiff, under the sa"e conditions, various s"all a"ounts .et,een the dates of -anuary **, 1905, and March 10, 190&, a!!re!atin! alto!ether )11.9+, and that they had not .een repaid to hi". Ae therefore as0ed that ud!"ent .e rendered sentencin! the defendant to co"ply ,ith the said contract and to pay to the plaintiff the su"s referred to, a"ountin! in all to )+9.5+, and that until this a"ount should have .een in paid, the defendant should re"ain !ratuitously in the service of plaintiff5s household, and that she should pay the costs of the trial. 2he defendant, in her ,ritten ans,er of Au!ust 15, 190&, to the aforesaid co"plaint, denied the alle!ations contained in para!raphs 1 and * of the co"plaint and alle!ed that, althou!h she had left the plaintiff5s service, it ,as .ecause the latter had paid her no su" ,hatever for the services she had rendered in his house. 2he defendant li0e,ise denied the conditions e'pressed in para!raph / of the co"plaint, averrin! that the effects purchased, to the a"ount of )11.9+, ,ere in the possession of the plaintiff, ,ho refused to deliver the" to her. $he therefore as0ed that she .e a.solved fro" the co"plaint and that the plaintiff .e a.solved fro" the co"plaint the ,a!es due her for the services she had rendered. 2he case ca"e to trial on Octo.er 19, 190&, and, after the production of testi"ony .y .oth parties, the ud!e, on Bove".er *1st of the sa"e year, rendered ud!"ent a.solvin! the defendant fro" the co"plain, ,ith the costs a!ainst the plaintiff, and sentencin! the latter to pay to the for"er the su" of )*./%, the .alance found to e'ist .et,een the defendant5s de.t of )+9.5+ and the ,a!es due her .y the plaintiff, ,hich a"ounted to )8*. 2he plaintiff, on the &th of Cece".er, filed a ,ritten e'ception to the ud!"ent aforesaid throu!h the re!ular channels, and "oved for a ne, trial on the !round that the findin!s of fact set forth in the ud!"ent ,ere "anifestly contrary to the ,ei!ht of the evidence. 2his "otion ,as overruled on the 1+th of the sa"e "onth, to ,hich e'ception ,as ta0en .y the appellant, ,ho after,ards filed the proper .ill of e'ceptions, ,hich ,as approved, certified, and for,arded to the cler0 of this court. 2he present suit, initiated in a ustice of the peace court and appealed to the Court of First Instance of @a @a!una at a ti"e prior to the enact"ent of Act Bo. 1&*+, ,hich ,ent into effect on -uly 1, 190+, ,hich li"ited to t,o instances the procedure to .e o.served in ver.al actions, concerns the collection of certain su" received as a loan .y the defendant fro" the plaintiff, and of the ,a!es earned .y the for"er for services rendered as a servant in the said plaintiff5s house. Bot,ithstandin! the denial of the defendant, it is a fact clearly proven, as found in the ud!"ent appealed fro", that the plaintiff did deliver to Aer"ene!ildo de los $antos the su" of )&+.&0 to pay a de.t ,as paid .y Ce los $antos ,ith the 0no,led!e and in .ehalf of the said defendant ,ho, of her free ,ill, entered the service of the plaintiff and pro"ised to pay hi" as soon as she should find the "oney ,here,ith to do so. 2he duty to pay the said su", as ,ell as that of )11.9+ delivered to the defendant in s"all a"ounts durin! the ti"e that she ,as in the plaintiff5s house, is un(uestiona.le, inas"uch as it is a positive de.t de"anda.le of the defendant .y her creditor. 9Arts. 1+5/, 11+0, Civil Code.: Ao,ever, the reason alle!ed .y the plaintiff as a .asis for the loan is untena.le, to ,it, that the defendant ,as o.li!ed to render service in his house as a servant ,ithout re"uneration ,hatever and to re"ain therein so lon! as she had not paid her de.t, inas"uch as this condition is contrary to la, and "orality. 9Art. 1*55, Civil Code.: Co"estic services are al,ays to .e re"unerated, and no a!ree"ent "ay su.sist in la, in ,hich it is stipulated that any do"estic service shall .e a.solutely !ratuitous, unless it .e ad"itted that slavery "ay .e esta.lished in this country throu!h a covenant entered into .et,een the interested parties. Articles 158%, 158/, and 1585 of the Civil Code prescri.e rules !overnin! the hirin! of services of do"estics servants, the conditions of such hire, the ter" durin! ,hich the service "ay rendered and the ,a!es that accrue to the servant, also the duties of the latter and of the "aster. 2he first of the articles cited provides that a hirin! for life .y either of the contractin! parties is void, and, accordin! to the last of three articles ust "entioned, .esides ,hat is prescri.ed in the precedin! articles ,ith re!ard to "asters and servants, the provisions of special la,s and local ordinances shall .e o.served. Curin! the re!i"e of the for"er soverei!nty, the police re!ulations !overnin! do"estic service, of the date of $epte".er 9, 18/8, ,ere in force, article 19 of ,hich it is ordered that all usurious conduct to,ard the servants and e"ployees of every class is prohi.ited, and the "aster ,ho, under prete't of an advance of pay or of havin! paid the de.ts or the ta'es of his servant, shall have succeeded in retainin! the latter in his service at his house, shall .e co"pelled to pay to such servant all arrears due hi" and any da"a!es he "ay have occasioned hi", and the "aster shall also .e fined. 2he afore"entioned article 1585 of the Civil Code undou.tedly refers to the provisions of the re!ulations ust cited. <hen le!al re!ulations prohi.it even a usurious contract and all a.uses pre udicial to su.ordinates and servant, in connection ,ith their salaries and ,a!es, it ,ill .e understood at once that the co"pact ,here.y service rendered .y a do"estic servant in the house of any inha.itant of this country is to .e !ratuitous, is in all respects reprehensi.le and censura.le3 and conse(uently, the contention of the plaintiff, that until the defendant shall have paid hi" her de.t she "ust serve hi" in his house !ratuitously is a.solutely inad"issi.le. 2he trial record discloses no le!al reason for the re ection of the findin!s of fact and of la, contained in the ud!"ent appealed fro", nor for an allo,ance of the errors attri.uted appealed fro", nor for an allo,ance of the errors attri.uted thereto3 on the contrary, the reasons hereina.ove stated sho, the propriety of the said ud!"ent. For the fore!oin! reasons, and acceptin! those set forth in the ud!"ent appealed fro", it is proper, in our opinion, to affir" and ,e here.y affir" the said ud!"ent, ,ith the costs a!ainst the appellant. Arellano, C. J., Johnson, oreland and !rent, JJ., concur. G.R. No. L#1)103 Jun* ), 1922 +,ILI++INE NATIONAL (AN-, plaintiff=appellee, vs. MANILA OIL REFINING . (Y#+RO"/CT COM+ANY, INC., defendant=appellant. . MALCOLM, J.: 2he (uestion of first i"pression raised in this case concerns the validity in this urisdiction of a provision in a pro"issory note ,here.y in case the sa"e is not paid at "aturity, the "a0er authoriDes any attorney to appear and confess ud!"ent thereon for the principal a"ount, ,ith interest, costs, and attorney5s fees, and ,aives all errors, ri!hts to in(uisition, and appeal, and all property e'ceptions.

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On May 8, 19*0, the "ana!er and the treasurer of the Manila Oil #efinin! E 4y=)roducts Co"pany, Inc., e'ecuted and delivered to the )hilippine Bational 4an0, a ,ritten instru"ent readin! as follo,s6 #1B1<A@. )&1,000.00 MABI@A, ).I., ay ", #$%&. On de"and after date ,e pro"ise to pay to the order of the )hilippine Bational 4an0 si'ty=one thousand only pesos at )hilippine Bational 4an0, Manila, ).I. <ithout defalcation, value received3 and to here.y authoriDe any attorney in the )hilippine Islands, in case this note .e not paid at "aturity, to appear in "y na"e and confess ud!"ent for the a.ove su" ,ith interest, cost of suit and attorney5s fees of ten 910: per cent for collection, a release of all errors and ,aiver of all ri!hts to in(uisition and appeal, and to the .enefit of all la,s e'e"ptin! property, real or personal, fro" levy or sale. >alue received. Bo. FFFF Cue FFFF MABI@A OI@ #1FIBIBG E 4H=)#OC;C2$ CO., IBC., 9$!d.: >IC1B21 $O21@O, ana'er. MABI@A OI@ #1FIBIBG E 4H=)#OC;C2$ CO., IBC., 9$!d.: #AFA1@ @O)1?, !reasurer 2he Manila Oil #efinin! and 4y=)roducts Co"pany, Inc. failed to pay the pro"issory note on de"and. 2he )hilippine Bational 4an0 .rou!ht action in the Court of First Instance of Manila, to recover )&1,000, the a"ount of the note, to!ether ,ith interest and costs. Mr. 1lias B. #ector, an attorney associated ,ith the )hilippine Bational 4an0, entered his appearance in representation of the defendant, and filed a "otion confessin! ud!"ent. 2he defendant, ho,ever, in a s,orn declaration, o. ected stron!ly to the unsolicited representation of attorney #ecto. @ater, attorney Antonio GonDaleD appeared for the defendant and filed a de"urrer, and ,hen this ,as overruled, presented an ans,er. 2he trial ud!e rendered ud!"ent on the "otion of attorney #ecto in the ter"s of the co"plaint. 2he fore!oin! facts, and appellant5s three assi!n"ents of error, raise s(uarely the (uestion ,hich ,as su!!ested in the .e!innin! of this opinion. In vie, of the i"portance of the su. ect to the .usiness co""unity, the advice of pro"inent attorneys=at=la, ,ith .an0in! connections, ,as solicited. 2hese "e".ers of the .ar responded pro"ptly to the re(uest of the court, and their "e"oranda have proved hi!hly useful in the solution of the (uestion. It is to the credit of the .ar that althou!h the sanction of ud!e"ent notes in the )hilippines "i!ht prove of i""ediate value to clients, every one of the attorneys has loo0ed upon the "atter in a .i! ,ay, ,ith the result that out of their independent investi!ations has co"e a practically unani"ous protest a!ainst the reco!nition in this urisdiction of ud!"ent notes.1 Beither the Code of Civil )rocedure nor any other re"edial statute e'pressly or tacitly reco!niDes a confession of ud!"ent co""only called a ud!"ent note. On the contrary, the provisions of the Code of Civil )rocedure, in relation to constitutional safe!uards relatin! to the ri!ht to ta0e a "an5s property only after a day in court and after due process of la,, conte"plate that all defendants shall have an opportunity to .e heard. Further, the provisions of the Code of Civil )rocedure pertainin! to counter clai"s ar!ue a!ainst ud!"ent notes, especially as the Code provides that in case the defendant or his assi!nee o"its to set up a counterclai", he cannot after,ards "aintain an action a!ainst the plaintiff therefor. 9$ecs. 95, 9&, 9+.: At least one provision of the su.stantive la,, na"ely, that the validity and fulfill"ent of contracts cannot .e left to the ,ill of one of the contractin! parties 9Civil Code, art. 1%5&:, constitutes another indication of funda"ental le!al purposes. 2he attorney for the appellee contends that the Be!otia.le Instru"ents @a, 9Act Bo. *0%1: e'pressly reco!niDes ud!"ent notes, and that they are enforci.le under the re!ular procedure. 2he Be!otia.le Instru"ents @a,, in section 5, provides that 72he ne!otia.le character of an instru"ent other,ise ne!otia.le is not affected .y a provision ,hich 7. . . 9(: AuthoriDes a confession of ud!"ent if the instru"ent .e not paid at "aturity.7 <e do not .elieve, ho,ever, that this provision of la, can .e ta0en to sanction ud!"ents .y confession, .ecause it is a portion of a unifor" la, ,hich "erely provides that, in urisdiction ,here ud!"ent notes are reco!niDed, such clauses shall not affect the ne!otia.le character of the instru"ent. Moreover, the sa"e section of the Be!otia.le Instru"ents. @a, concludes ,ith these ,ords6 74ut nothin! in this section shall validate any provision or stipulation other,ise ille!al.7 2he court is thus put in the position of havin! to deter"ine the validity in the a.sence of statute of a provision in a note authoriDin! an attorney to appear and confess ud!"ent a!ainst the "a0er. 2his situation, in reality, has its advanta!es for it per"its us to reach that solution ,hich is .est !rounded in the solid principles of the la,, and ,hich ,ill .est advance the pu.lic interest. 2he practice of enterin! ud!"ents in de.t on ,arrants of attorney is of ancient ori!in. In the course of ti"e a ,arrant of attorney to confess ud!e"ent .eca"e a fa"iliar co""on la, security. At co""on la,, there ,ere t,o 0inds of ud!"ents .y confession3 the one a ud!"ent .y co'novit actionem, and the other .y confession relicta verificatione. A nu".er of urisdictions in the ;nited $tates have accepted the co""on la, vie, of ud!"ents .y confession, ,hile still other urisdictions have refused to sanction the". In so"e $tates, statutes have .een passed ,hich have either e'pressly authoriDed confession of ud!"ent on ,arrant of attorney, ,ithout antecedent process, or have for.idden ud!"ents of this character. In the a.sence of statute, there is a conflict of authority as to the validity of a ,arrant of attorney for the confession of ud!e"ent. 2he ,ei!ht of opinion is that, unless authoriDed .y statute, ,arrants of attorney to confess ud!"ent are void, as a!ainst pu.lic policy. )ossi.ly the leadin! case on the su. ect is First Bational 4an0 of 8ansas City vs. <hite 9I1909J, **0 Mo., +1+3 1& Ann. Cas., 8893 1*0 $. <., %&3 1%* A". $t. #ep., &1*:. 2he record in this case discloses that on Octo.er /, 1990, the defendant e'ecuted and delivered to the plaintiff an o.li!ation in ,hich the defendant authoriDed any attorney=at=la, to appear for hi" in an action on the note at any ti"e after the note .eca"e due in any court of record in the $tate of Missouri, or else,here, to ,aive the issuin! and service of process, and to confess ud!e"ent in favor of the First Bational 4an0 of 8ansas City for the a"ount that "i!ht then .e due thereon, ,ith interest at the rate therein "entioned and the costs of suit, to!ether ,ith an attorney5s fee of 10 per cent and also to ,aive and release all errors in said proceedin!s and ud!"ent, and all proceedin!s, appeals, or ,rits of error thereon. )laintiff filed a petition in the Circuit Court to ,hich ,as attached the a.ove="entioned instru"ent. An attorney na"ed Cenha" appeared pursuant to the authority !iven .y the note sued on, entered the appearance of the defendant, and consented that ud!e"ent .e rendered in favor of the plaintiff as prayed in the petition. After the Circuit Court had entered a ud!e"ent, the defendants, throu!h counsel, appeared specially and filed a "otion to set it aside. 2he $upre"e Court of Missouri, spea0in! throu!h Mr. -ustice Graves, in part said6 4ut !oin! .eyond the "ere technical (uestion in our precedin! para!raph discussed, ,e co"e to a (uestion ur!ed ,hich !oes to the very root of this case, and ,hilst ne, and novel in this state, ,e do not feel that the case should .e

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disposed of ,ithout discussin! and passin! upon that (uestion. ''' ''' ''' And if this instru"ent .e considered as security for a de.t, as it ,as .y the co""on la,, it has never so found reco!nition in this state. 2he policy of our la, has .een a!ainst such hidden securities for de.t. Our #ecorder5s Act is such that instru"ents intended as security for de.t should find a place in the pu.lic records, and if not, they have often .een vie,ed ,ith suspicion, and their .ona fides often (uestioned. Bor do ,e thin! that the policy of our la, is such as to thus place a de.tor in the a.solute po,er of his creditor. 2he field for fraud is too far enlar!ed .y such an instru"ent. Oppression and tyranny ,ould follo, the footsteps of such a diversion in the ,ay of security for de.t. $uch instru"ents procured .y duress could shortly .e placed in ud!"ent in a forei!n court and "uch distress result therefro". A!ain, under the la, the ri!ht to appeal to this court or so"e other appellate court is !ranted to all persons a!ainst ,ho" an adverse ud!"ent is rendered, and this statutory ri!ht is .y the instru"ent stric0en do,n. 2rue it is that such ri!ht is not clai"ed in this case, .ut it is a part of the .ond and ,e hardly 0no, ,hy this pound of flesh has not .een de"anded. Courts !uard ,ith ealous eye any contract innovations upon their urisdiction. 2he instru"ent .efore us, considered in the li!ht of a contract, actually reduces the courts to "ere cler0s to enter and record the ud!"ent called for therein. 4y our statute 9#ev. $t. 1899, sec. &/5: a party to a ,ritten instru"ent of this character has the ri!ht to sho, a failure of consideration, .ut this ri!ht is .rushed to the ,ind .y this instru"ent and the urisdiction of the court to hear that controversy is .y the ,hose o. ect is to oust the urisdiction of the courts are contrary to pu.lic policy and ,ill not .e enforced. 2hus it is held that any stipulation .et,een parties to a contract distin!uishin! .et,een the different courts of the country is contrary to pu.lic policy. 2he principle has also .een applied to a stipulation in a contract that a party ,ho .rea0s it "ay not .e sued, to an a!ree"ent desi!natin! a person to .e sued for its .reach ,ho is no,ise lia.le and prohi.itin! action a!ainst any .ut hi", to a provision in a lease that the landlord shall have the ri!ht to ta0e i""ediate ud!"ent a!ainst the tenant in case of a default on his part, ,ithout !ivin! the notice and de"and for possession and filin! the co"plaint re(uired .y statute, to a .y=la, of a .enefit association that the decisions of its officers on clai" shall .e final and conclusive, and to "any other a!ree"ents of a si"ilar tendency. In so"e courts, any a!ree"ent as to the ti"e for suin! different fro" ti"e allo,ed .y the statute of li"itations ,ithin ,hich suit shall .e .rou!ht or the ri!ht to sue .e .arred is held void. ''' ''' ''' <e shall not pursue this (uestion further. 2his contract, in so far as it !oes .eyond the usual provisions of a note, is void as a!ainst the pu.lic policy of the state, as such pu.lic policy is found e'pressed in our la,s and decisions. $uch a!ree"ents are ini(uitous to the utter"ost and should .e pro"ptly conde"ned .y the courts, until such ti"e as they "ay receive e'press statutory reco!nition, as they have in so"e states. ''' ''' ''' Fro" ,hat has .een said, it follo,s that the Circuit Court never had urisdiction of the defendant, and the ud!e"ent is reversed. 2he case of Far(uhar and Co. vs. Cehaven 9I191*J, +0 <. >a., +%83 /0 @.#.A. IB. $.J, 95&3 +5 $.1., &53 Ann. Cas. I191/=AJ, &/0:, is another ,ell=considered authority. 2he notes referred to in the record contained ,aiver of present"ent and protest, ho"estead and e'e"ption ri!hts real and personal, and other ri!hts, and also the follo,in! "aterial provision6 7And ,e do here.y e"po,er and authoriDe the said A. 4. Far(uhar Co. @i"ited, or a!ent, or any prothonotary or attorney of any Court of #ecord to appear for us and in our na"e to confess ud!e"ent a!ainst us and in favor of said A. 4. Far(uhar Co., @i"ited, for the a.ove na"ed su" ,ith costs of suit and release of all errors and ,ithout stay of e'ecution after the "aturity of this note.7 2he $upre"e Court of <est >ir!inia, on consideration of the validity of the ud!"ent note a.ove descri.ed, spea0in! throu!h Mr. -ustice Miller, in part said6 As .oth sides a!ree the (uestion presented is one of first i"pression in this $tate. <e have no statutes, as has )ennsylvania and "any other states, re!ulatin! the su. ect. In the decision ,e are called upon to render, ,e "ust have recourse to the rules and principles of the co""on la,, in force here, and to our statute la,, applica.le, and to such udicial decisions and practices in >ir!inia, in force at the ti"e of the separation, as are properly .indin! on us. It is pertinent to re"ar0 in this connection, that after nearly fifty years of udicial history this (uestion, stron! evidence, ,e thin0, that such notes, if at all, have never .een in very !eneral use in this co""on,ealth. And in "ost states ,here they are current the use of the" has !ro,n up under statutes authoriDin! the", and re!ulatin! the practice of e"ployin! the" in co""ercial transactions. ''' ''' ''' It is contended, ho,ever, that the old le!al "a'i", )ui facit per alium, facit per se, is as applica.le here as in other cases. <e do not thin0 so. $tron! reasons e'ist, as ,e have sho,n, for denyin! its application, ,hen holders of contracts of this character see0 the aid of the courts and of their e'ecution process to enforce the", defendant havin! had no day in court or opportunity to .e heard. <e need not say in this case that a de.tor "ay not, .y proper po,er of attorney duly e'ecuted, authoriDe another to appear in court, and .y proper endorse"ent upon the ,rit ,aive service of process, and confess ud!e"ent. 4ut ,e do not ,ish to .e understood as approvin! or intendin! to countenance the practice e"ployin! in this state co""ercial paper of the character here involved. $uch paper has heretofore had little if any currency here. If the practice is adopted into this state it ou!ht to .e, ,e thin0, .y act of the @e!islature, ,ith all proper safe!uards thro,n around it, to prevent fraud and i"position. 2he policy of our la, is, that no "an shall suffer ud!"ent at the hands of our courts ,ithout proper process and a day to .e heard. 2o !ive currency to such paper .y udicial pronounce"ent ,ould .e to open the door to fraud and i"position, and to su. ect the people to ,ron!s and in uries not heretofore conte"plated. 2his ,e are un,illin! to do. A case typical of those authorities ,hich lend support to ud!"ent notes is First Bational 4an0 of @as Cruces vs. 4a0er 9I1919J, 180 )ac., *91:. 2he $upre"e Court of Be, Me'ico, in a per curiam decision, in part, said6 In so"e of the states the ud!"ents upon ,arrants of attorney are conde"ned as .ein! a!ainst pu.lic policy. 9Far(uhar and Co. vs. Cahaven, +0 <. >a., +%83 +5 $.1., &53 /0 @.#.A. IB. $.J, 95&3 Ann. Cas. I191/ AJ. &/0, and First Bational 4an0 of 8ansas City vs. <hite, **0 Mo., +1+3 1*0 $. <., %&3 1%* A". $t. #ep., &1*3 1& Ann. Cas., 889, are e'a"ples of such holdin!.: 4y ust ,hat course of reasonin!

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it can .e said .y the courts that such ud!"ents are a!ainst pu.lic policy ,e are una.le to understand. It ,as a practice fro" ti"e i""e"orial at co""on la,, and the co""on la, co"es do,n to us sanctioned as ustified .y the reason and e'perience of 1n!lish=spea0in! peoples. If conditions have arisen in this country ,hich "a0e the application of the co""on la, undesira.le, it is for the @e!islature to so announce, and to prohi.it the ta0in! of ud!"ents can .e declared as a!ainst the pu.lic policy of the state. <e are a,are that the ar!u"ent a!ainst the" is that they ena.le the unconsciona.le creditor to ta0e advanta!e of the necessities of the poor de.tor and cut hi" off fro" his ordinary day in court. On the other hand, it "ay .e said in their favor that it fre(uently ena.les a de.tor to o.tain "oney ,hich he could .y no possi.ility other,ise o.tain. It stren!thens his credit, and "ay .e "ost hi!hly .eneficial to hi" at ti"es. In so"e of the states there ud!"ents have .een conde"ned .y statute and of course in that case are not allo,ed. Our conclusion in this case is that a ,arrant of attorney !iven as security to a creditor acco"panyin! a pro"issory note confers a valid po,er, and authoriDes a confession of ud!"ent in any court of co"petent urisdiction in an action to .e .rou!ht upon said note3 that our co!novit statute does not cover the sa"e field as that occupied .y the co""on= la, practice of ta0in! ud!"ents upon ,arrant of attorney, and does not i"pliedly or other,ise a.ro!ate such practice3 and that the practice of ta0in! ud!"ents upon ,arrants of attorney as it ,as pursued in this case is not a!ainst any pu.lic policy of the state, as declared .y its la,s. <ith reference to the conclusiveness of the decisions here "entioned, it "ay .e said that they are .ased on the practice of the 1n!lish= A"erican co""on la,, and that the doctrines of the co""on la, are .indin! upon )hilippine courts only in so far as they are founded on sound principles applica.le to local conditions. -ud!"ents .y confession as appeared at co""on la, ,ere considered an a"ica.le, easy, and cheap ,ay to settle and secure de.ts. 2hey are a (uic0 re"edy and serve to save the court5s ti"e. 2hey also save the ti"e and "oney of the liti!ants and the !overn"ent the e'penses that a lon! liti!ation entails. In one sense, instru"ents of this character "ay .e considered as special a!ree"ents, ,ith po,er to enter up ud!"ents on the", .indin! the parties to the result as they the"selves vie,ed it. On the other hand, are disadvanta!es to the co""ercial ,orld ,hich out,ei!h the considerations ust "entioned. $uch ,arrants of attorney are void as a!ainst pu.lic policy, .ecause they enlar!e the field for fraud, .ecause under these instru"ents the pro"issor .ar!ains a,ay his ri!ht to a day in court, and .ecause the effect of the instru"ent is to stri0e do,n the ri!ht of appeal accorded .y statute. 2he reco!nition of such a for" of o.li!ation ,ould .rin! a.out a co"plete reor!aniDation of co""ercial custo"s and practices, ,ith reference to short=ter" o.li!ations. It can readily .e seen that ud!e"ent notes, instead of resultin! to the advanta!e of co""ercial life in the )hilippines "i!ht .e the source of a.use and oppression, and "a0e the courts involuntary parties thereto. If the .an0 has a "eritorious case, the ud!e"ent is ulti"ately certain in the courts. <e are of the opinion that ,arrants of attorney to confess ud!"ent are not authoriDed nor conte"plated .y our la,. <e are further of the opinion that provisions in notes authoriDin! attorneys to appear and confess ud!"ents a!ainst "a0ers should not .e reco!niDed in this urisdiction .y i"plication and should only .e considered as valid ,hen !iven e'press le!islative sanction. 2he ud!"ent appealed fro" is set aside, and the case is re"anded to the lo,er court for further proceedin!s in accordance ,ith this decision. <ithout special findin! as to costs in this instance, it is &o or0*r*0. Araullo, C.J., Avance*a, +illamor, ,strand, Johns and Romualde-, JJ., concur. Foo'no'*& 1 M1MO#ABCA OF 7AMICI C;#IA17 Attorney 2hos. @. Aarti!an, of Aarti!an and <elch, states6 72hou!h ,e are attorneys for t,o of the lar!e .an0s here and 0eenly interested in the introduction of any i"prove"ents that ,ould "a0e for si"plication of procedure and rapidity of practice, ,e cannot favor the introduction of confessions of ud!"ent in the )hilippine islands. In our opinion, it ,ould open the doors to fraud to an e'tent that ,ould "ore than counter.alance any advanta!es of its use. 7<ith our lac0 of syste" in recordin! ud!"ents and ,ith the practice of 0eepin! "erchants5 .oo0s in various forei!n lan!ua!es, there ,ould .e a"ple opportunity for a de.tor to "a0e preferences .y confessions of ud!"ent ,hich could not .e discovered .y the creditors until too late and ,hich ,ould .e nearly i"possi.le to set aside even ,hen discovered in ti"e. 7Althou!h, as representatives of the .an0s, ,e are representin! the creditor class, ,e .elieve the introduction of confessions of ud!"ent ,ould ulti"ately cause "uch "ore loss than .enefit to that class.7 Attorney Clyde A. Ce<itt, of Fisher and Ce<itt, states6 72here is no statutory sanction in this urisdiction for such provisions in ne!otia.le instru"ents. $ection 5 9.: of the Be!otia.le Instru"ents @a, does not constitute such sanction .ecause 91: it "erely provides that such clauses ,ill not affect the ne!otia.le character of the instru"ent, and 9*: it concludes ,ith lan!ua!e sho,in! that the @e!islature did not intend there.y to validate any provision other,ise unla,ful. 2he lan!ua!e is6 54ut nothin! in this section shall validate any provision or stipulation other,ise ille!al.5 72he (uestion then is ,hether or not, in the a.sence of e'press le!islative sanction, such ,arrants of attorney are valid. 2here are not "any A"erican cases in ,hich this precise (uestion has .een considered, and in those cases in ,hich the (uestion has .een raised, the reasonin! of the courts has .een colored .y the fact that the co""ercial use of these ,arrants of attorney as security for de.t ,as sanctioned at co""on la,, and the procedural statutes are held to .e "erely cu"ulative and not in dero!ation of the co""on la, re"edies. <e, of course, have no such situation here. 72he cases are collected in a note to First Bational 4an0 vs. <hite 9**0 Mo., +1+:, found in 1& Ann. Cas., 89%, and it is there sho,n that in Missouri and 8ansas such provisions are held to .e void as a!ainst the pu.lic policy of the $tate as e'pressed in its la,s and the decisions of its courts, ,hile in Colorado and Illinois their validity ,as upheld as a fa"iliar co""on=la, security not affected .y the procedural statutes. Het it is there pointed out that

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in 8ahn vs. @esser 99+ <is., *1+, +* B.<., +%9:, the court, in referrin! to a ud!"ent .y confession under ,arrant of attorney in a pro"issory note, said6 752he ud!"ent in this case "ust stand, if at all, .y the authority of the statute. 2he proceedin! .y ,hich it ,as entered ,as outside and in dero!ation of the co""on= la, practice of courts3 and the statute, as ,ell as the proceedin!s under it, "ust .e strictly construed.57 7In Io,a, in an early case, McClish vs. Mannin! 9% Green, *%%:, the validity of these ,arrants of attorney ,as upheld, referrin! to a statute authoriDin! any person to confess a ud!"ent, .y hi"self or his attorney. In a later decision, Aa"ilton vs. $choen.er!er 9/+ Ilo,a, %85:, it ,as e'pressly held that such a provision, in a note could not .e enforced in the courts of that $tate, and ,as not authoriDed or conte"plated .y its la,s. And in 2ol"an vs. -ansen 910& Io,a, /55:, it ,as held that such a provision, .ein! void, ,ould not affect the ne!otia.ility of a note, even thou!h its effect ,ould .e to "a0e uncertain the ti"e of pay"ent. 72he reasonin! in First Bational 4an0 vs. <hite, supra, is persuasive. 2he court there held that these ,arrants of attorney are void as a!ainst the pu.lic policy of the state on the !round, first, that their effect is to enlar!e the field for fraud3 second, that under such an instru"ent the pro"issor .ar!ains a,ay his ri!ht to his day in court3 third, that the effect of the instru"ent is to stri0e do,n the ri!ht to appeal accorded .y statute, and, fourth, that there ,as no provision for the pu.lic recordin! of such an instru"ent if re!arded as a security for a de.t. ,hich could .e destroyed ,ithout ,arnin! .y the creditor e'ercisin! the ri!hts ,hich that for" of transaction ,ould !ive hi". 2his is ,ould act therefore as a deterrent to ne, enterprises and the develop"ent of industry throu!h individual initiative and ,ith private funds. 7It see"s to "e that on the precise !rounds stated in the <hite case, these ,arrants of attorney should .e held void as a!ainst pu.lic policy in this urisdiction. If !iven effect, they .ar!ain a,ay the urisdiction of the courts to try and deter"ine the lia.ility of the "a0er of the note on its "erits. 2o uphold the" ,ould .e to facilitate the operations of usurers, the collection of !a".lin! de.ts, and ,ould "a0e difficult, if not i"possi.le under our procedure, the settin! aside of ud!"ents entered in virtue thereof ,here the e'ecution of the instru"ent ,as o.tained .y fraud, duress, or ,here there had .een an entire failure of consideration. I can thin0 of no advanta!e ,hich ,ould result to the co""ercial ,orld fro" upholdin! these ,arrants of attorney ,hich ,ould out,ei!h the fore!oin! considerations.7 Attorney e. Arthur )er0ins, of )er0ins and 8incaid, states6 7@eavin! aside entirely the le!al considerations involved, I feel that there is only one ans,er to your in(uiry, and that is, that the .est interests of the co""ercial life of the )hilippines re(uire the non=reco!nition of such a for" of ud!"ent note. Feelin! that you ,ould ,ant to 0no, the reasons ,hich i"pell "e to adopt such a conclusion, I ,ill say .riefly that if the $upre"e Court should, .y a decision, reco!niDe such a ud!"ent note and there.y place the sta"p of approval upon transactions of such a nature, the entire .usiness population of the )hilippine Islands ,ould .e ustified in their future transactions ,ith de.tors in re(uirin!, in all instances, the e'ecution of notes of a si"ilar tenor, ,ith the conse(uence that the de.tor ,ould there.y .e deprived, to all intents and purposes, upon i!norant de.tors. It ,ill prove a 7@et us ta0e a very si"ple illustration of his. $uppose that you and I should for" a partnership, ,ith a capital of )50,000 to .uy he"p and , in connection ,ith our .usiness, ,e ,ent to so"e .an0in! institution for the purpose of securin! credit facilities, as is custo"ary, in the conduct of our .usiness. @et us then suppose that the .an0, serious dra,.ac0 to the ca"pai!n .ein! no, ,a!ed a!ainst usury. 72here is the further fear that the .an0s and "oney lenders havin! accounts no, outstandin! ,ill i""ediately re(uire every de.tor to e'ecute that for" of note and to refuse further e'tensions of credit unless sit is done, ,hich the de.tor under the stress of circu"stances ,ill .e co"pelled to accept, a"ountin! in effect to duress. 72he reco!nition of such a for" of o.li!ation ,ould .e so revolutionary in character as to .rin! a.out a co"plete reor!aniDation of co""ercial custo"s and practices ,ith reference to short=ter" o.li!ations. 7Aavin! in "ind that the )hilippine Bational 4an0 is practically the only institution ,hich can assist the far"ers and a!riculturists, the practice of re(uirin! a ud!"ent note ,ould place the latter ,holly at the "ercy of the .an0, and this is stated ,ithout any reflection on the .an0, .ut "erely to point out one of the conse(uent evils ,hich ,ill necessarily follo, if the practice should receive the hi!h udicial sanction ,hich a ud!"ent of the $upre"e Court ,ould necessarily !ive to it. 7Another feature ,hich occurs to "e is that ,here any ne, enterprise is .ein! launched, it is universally the custo" for such co"pany to arran!e ,ith so"e .an0in! institution for credit facilities, over and a.ove the capital ,ith ,hich it .rin!s .usiness. $hould it .eco"e the custo" here to re(uire the e'ecution of so=called ud!"ent notes, or!aniDers of corporations, partnerships and the li0e, ,ho have in "ind to secure additional ,or0in! capital or credit facilities fro" .an0s, ,ill .e very reluctant to put their funds into any enterprises ta0in! into consideration the capital ,hich ,e ourselves had furnished and our standin! in the co""unity, ,as ,illin! to allo, us a credit in the further su" of )50,000 upon our si!nin! a so=called ud!"ent note. <ould not you and I consider a lon! ti"e .efore ,e ,ould so far o.li!ate ourselves as to place it in the po,er of the .an0 to send their

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attorney over to court, upon the least provocation or at the first unfavora.le ru"or, and to confess ud!"ent in our na"es, ,hich ,ould per"it the sheriff to close us out ,ithout even an opportunity to .e heardK 72he su" and su.stance of the ,hole proposition is that such a practice is contrary to !ood "orals.7 Attorney Cavid C. -ohnson, of Gi..s, McConou!h and -ohnson, states6 7It see"s that under the co""on la, a confession of ud!"ent ,as only allo,a.le .y the defendant hi"self, either .efore or after appearance and ans,er. 2he confession of ud!"ent .y ,arrant of attorney is a statutory develop"ent 915 #.C.@., &5&, &5+3 1+ A". and 1n!. 1ncyc. of @a, I*d ed.J, +&53 )l. and )r., 9+%=9+53 Masson vs. <ard, 80 >t., *903 1%0 A. $. #., 98+,988:. 72he procedure conte"plated in the note (uoted in your letter is contrary to that conte"plated in our code of procedure, ,hich !ives to all defendants an opportunity at least to .e heard. An action on the note in (uestion could .e so presented that the defendant ,ould never .e su""oned or notified, since an appearance and confession of ud!"ent "i!ht .e filed si"ultaneously. <e .elieve that this procedure should not .e reco!niDed in this urisdiction .y i"plication, .ut should have le!islative sanction ,ith the ri!hts of the defendant a"ply safe!uarded. <e .elieve that section 5 of Act Bo. *0%1 does not of itself sanction any of the acts "entioned in that section, .ut is only a state"ent re!ardin! the ne!otia.le character of the instru"ent. $u.section A of section 5 states that the authority to sell collateral security does not affect ne!otia.ility. As ,e understand the decision of the $upre"e Court in the case of Mahoney vs. 2uason9%9 )hil., 95*:, the creditor in this urisdiction is not authoriDed .y la, to sell collateral security e'cept in the "anner provided in section 1/ of Act Bo. 1508. 2his ,ould see" to reinforce our opinion. 72here are so"e favora.le features of a ud!"ent note lands. <hen Cirilo died on Cece".er 10, 1959, the su. ect lands ,ere inherited .y his si' children, ,ho are a"on! the petitioners, and ,ho caused the consolidation and su.division of the properties a"on! the"selves.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 4et,een the years 19&0 and 19&5, the properties ,ere either "ort!a!ed or leased .y the petitioners=children of Cirilo @eal = to their co=petitioners.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary $o"eti"e .efore the a!ricultural year 19&&=19&+, >icente $antia!o approached the petitioners and offered re= repurchase the su. ect properties. )etitioners, ho,ever, refused the offer. Conse(uently, >icente $antia!o instituted a co"plaint for specific perfor"ance .efore the then Court of First Instance of LueDon City on Au!ust *, 19&+.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary All the trial, the court a )uo rendered its decision,=dis"issin! the co"plaint on the !round that the sa"e ,as still pre"ature considerin! that there ,as, as yet, no sale nor any alienation e(uivalent to a sale. Bot satisfied ,ith this decision, the private respondent appealed to the Court of Appeals and the latter, actin! throu!h the Fourth Civision and ,ith -ustice 1d!ardo )aras as ponente affir"ed the decision of the court a )uo.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2he petitioners seasona.ly filed a "otion to a"end the dispositive portion of the decision so as to include an order for the cancellation of the annotations at the .ac0 of the 2ransfer certificates of 2itle issued in their favor. 2he private respondent,=on the other hand, filed a= ti"ely "otion for reconsideration of the a.ove decision and an opposition to petitioners5 "otion to a"end. 2hese incidents ,ere not resolved until then Court of Appeals ,as a.olished and in lieu of ,hich the Inter"ideate Appellate Court ,as esta.lished In vie, of the said reor!aniDation, case ,as reassi!ned to the Fourth Civil in this cases Civision.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary #esolvin! the a.ovestated "otion for reconsideration, the respondent court, in a resolution penned .y -ustice $ison and pro"ul!ated on $epte".er *+, 198%, ruled, as follo,s6 <A1#1FO#1, Our decision of -une *8, 19+8 is here.y reversed and set aside and another one is rendered orderin!6 91: defendants= appellees surna"ed @eal to accept the su" of )5,&00.00 fro" plaintiff=appellant 9su.stituted .y $alud M. $antia!o: as repurchase price of the lots descri.ed in the 7Co"praventa7 of March *1, 19/1, and thereafter to e'ecute a deed of repurchase sufficient in la, to

G.R. No. L#$5425 No1*23*r 5, 19)7 IRENEO LEAL, JO E LEAL, CATALINA LEAL, (ERNA(ELA LEAL, !ICENTE LEAL E/IOGIA LEAL +ATERNO RAMO , MACARIO "EL RO ARIO, MARGARITA AL(ERTO, !ICTORIA TORRE , J/ TINA MAN/EL, J/LIAN MAN/EL, MELANIA ANTO , CLEMENTE AMARIO, MARI-INA !ALLEY, INC., MIG/ELA MEN"O4A, an0 REGI TER OF "EE" OF RI4AL, Petitioners, vs. T,E ,ONORA(LE INTERME"IATE A++ELLATE CO/RT 54'6 C7178 Ca&*& "717&7on9, an0 !ICENTE ANTIAGO 5 u3&'7'u'*0 3y AL/" M. ANTIAGO9, Respondents.chanro.les virtual la, li.rary ARMIENTO, J.: chanro.les virtual la, li.rary In its resolution dated $epte".er *+, 198%, the respondent Inter"ediate Appellate Court, 1 spea0in! throu!h -ustice )orfirio >, $ison, ordered, in part, the petitioners to accept the su" of )5,&00.00 fro" the private respondent as repurchase price of the lots descri.ed in the 7Co"praventa7 and, thereafter, to e'ecute a Ceed of #epurchase to effect transfer over o,nership over the sa"e properties to the private respondent.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2his rulin! ,as a co"plete reversal of the earlier decision, 2 dated -une *8, 1.9+8, penned .y -ustice )aras, of the Court of Appeals, in the sa"e case, affir"in! the trial court5s dis"issal of the private respondent5s co"plaint.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2he petitioners, feelin! a!!rieved and astonished .y the co"plete turnaround of the respondent court, co"e to ;s ,ith this petition for revie, .y certiorari.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2he antecedent facts are undisputed.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2his case .rin!s us .ac0 al"ost half a century a!o, on March *1, 19/1, ,hen a docu"ent entitled 7Co"praventa,7 ,ritten entirely in the $panish lan!ua!e, involvin! three parcels of land, ,as e'ecuted .y the private respondent5s predecessors=in=interest, >icente $antia!o and his .rother, @uis $antia!o, in favor of Cirilio @eal the deceased father of so"e of the petitioners, )ursuant to this 7Co"praventa,7 the title over the three parcels of land in the na"e of the vendors ,as cancelled and a ne, one ,as issued in the na"e of Cirilo @eal ,ho i""ediately too0 possession and e'ercised o,nership over the said

28 | P a g e
transfer o,nership of the properties to appellant $alud M. $antia!o, the sa"e to .e done ,ithin five 95: days fro" pay"ent3 9*: orderin! the sa"e defendants @eals and defendant Cle"ente $a"ario to inde"nify appellant in the su" of )%,08+.50 as rental for the year 19&+=19&8 and the sa"e a"ount every year thereafter3 9%: orderin! an the defendants ointly and severally to pay the su" of )l,500.00 as attorney5s fees and other e'penses of liti!ation3 and 9/: orderin! defendant #e!ister of Ceeds of #iDal to cancel 2ransfer Certificate of 2itle Bo. /*5%5 in the na"es of >icente $antia!o and @uis $antia!o upon presentation of the deed of sale herein ordered to .e e'ecuted .y the appellees in favor of $alud M. $antia!o and to issue thereof another 2ransfer Certificate of 2itle in the na"e alone of $alud M. $antia!o. Bo costs here and in the courts 9sic: .elo,.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary $O O#C1#1C. >erily, the ,ell=sprin! ,hence the present controversy arose is the a.ove"entioned 7Co"praventa,7 "ore particularly para!raph 9.: thereof, to ,it6 ''' ''' ''' chanro.les virtual la, li.rary 9.: 1n caso de venta, no podran vender a otros dichos tres lotes de terreno sino al a(ui vendedor >icente $antia!o, o los herederos o sucesores de este por el niis"o precio de CIBCO MI@ $1I$CI1B2O$ )1$O$ 9)5,&00.00: sie"pre y cuando estos ulti"os pueden hacer la co"pra. 3 ''' ''' ''' ,hich is no, the su. ect of varyin! and conflictin! interpretations. ''' ''' ''' It is ad"itted .y .oth parties that the phrase 7they shall not sell to others these three lots .ut only to the seller >icente $antia!o or to his heirs or successors7 is an e'press prohi.ition a!ainst the sale of the lots descri.ed in the 7Co"praventa7 to third persons or stran!ers to the contract. Ao,ever, ,hile private respondent naturally lauds the resolution of -ustice $ison, ,hich sustains the validity of this prohi.ition, the petitioners, on the other hand, endorse the decision penned .y -ustice )aras, ,hich states, in part6 ''' ''' ''' chanro.les virtual la, li.rary Finally, there is !rave dou.t re the validity of the ostensi.le resolutory condition here, na"ely, the prohi.ition to sell the lots to persons other than the vendor 9appellant:3 uncertainly, a prohi.ition to alienate should not e'ceed at "ost a period of t,enty years, other,ise there ,ould .e su.version of pu.lic policy, ,hich naturally fro,ns on un,arranted restrictions on the ri!ht of o,nership. 4 ''' ''' ''' <e a!ree ,ith the )aras ponencia. Contracts are !enerally .indin! .et,een the parties, their assi!ns and heirs3 ho,ever, under Art. 1*55 of the Civil Code of $pain, ,hich is applica.le in this instance, pacts, clauses, and conditions ,hich are contrary to pu.lic order are null and void, thus, ,ithout any .indin! effect.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary )arenthetically, the e(uivalent provision in the Civil Code of the )hilippines is that of Art. 1%0&, ,hich states6 72hat contractin! parties "ay esta.lish such stipulations, clauses, ter"s and conditions as they "ay dee" convenient, provided they are not contrary to la,, "orals, !ood custo"s, pu.lic order, or pu.lic policy. )u.lic order si!nifies the pu.lic ,eal = pu.lic policy. 5 1ssentially, therefore, pu.lic order and pu.lic policy "ean one and the sa"e thin!. )u.lic policy is si"ply the 1n!lish e(uivalent of 7order pu.lico7 in Art. 1*55 of the Civil Code of $pain. $ chanro.les virtual la, li.rary One such condition ,hich is contrary to pu.lic policy is the present prohi.ition to self to third parties, .ecause the sa"e virtually a"ounts to a perpetual restriction to the ri!ht of o,nership, specifically the o,ner5s ri!ht to freely dispose of his properties. 2his, ,e hold that any such prohi.ition, indefinite and stated as to ti"e, so "uch so that it shall continue to .e applica.le even .eyond the lifeti"e of the ori!inal parties to the contract, is, ,ithout dou.t, a nullity. In the li!ht of this pronounce"ent, ,e !rant the petitioners5 prayer for the cancellation of the annotations of this prohi.ition at the .ac0 of their 2ransfer Certificates 52itle.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary It ,ill .e noted, "oreover, that the petitioners have never sold, or even atte"pted to sell, the properties su. ect of the 7Co"praventa. 7 chanro.les virtual la, li.rary <e no, co"e to ,hat ,e .elieve is the very issue in this case ,hich is, ,hether or not under the afore(uoted para!raph 9.: of the 7Co"praventa7 a ri!ht of repurchase in favor of the private respondent e'ist.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2he rulin! of the Fourth Civision 9-ustice )aras: is that the said stipulation does not !rant a ri!ht to repurchase. Contrarily, the resolution of the Fourth Civil Cases Civision 9-ustice ). >. $ison: interpreted the sa"e provision as !rantin! the ri!ht to repurchase su. ect to a condition precedent.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2hus, the assailed #esolution, reversin! the earlier decision of the sa"e respondent court, ruled ''' ''' ''' chanro.les virtual la, li.rary 2he all=i"portartant phrase 7en caso de venta,7 "ust of necessity refer to the sale of the properties either .y Cirilo or his heirs to the $antia!o .rothers the"selves or to their heirs, includin! appellants >icente $antia!o includin! appellants >icente $antia!o and $alud M $antia!o, for the sa"e su" of )5,&00.00, 7sie"pre y cuando estos ulti"os pueden hacer la co"pra7 9,hen the latter shall .e a.le to .uy it:.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary ''' ''' ''' chanro.les virtual la, li.rary ... <e repeat, 2he ,ords envision the situation conte"plated .y the contractin! parties the"selves, the resale of the lots to their o,ners, and BO2 to a sale of the lots to third parties or stran!ers to the contracts. ... 7 ''' ''' ''' 2he la, provides that for conventional rede"ption to ta0e place, the vendor should reserve, in no uncertain ter"s, the ri!ht to repurchase the thin! sold. ) 2hus, the ri!ht to redee" "ust .e e'pressly stipulated in the contract of sale in order that it "ay have le!al e'istence.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary In the case .efore us, ,e cannot and any e'press or i"plied !rant of a ri!ht to repurchase, nor can ,e infer, fro" any ,ord or ,ords in the (uestioned para!raph, the e'istence of any such ri!ht. 2he interpretation in the resolution 9-ustice $ison: is rather strained. 2he phrase 7in case case7 of should .e construed to "ean 7should the .uyers ,ish to sell ,hich is the plain and si"ple i"port of the ,ords, and not 7the .uyers should sell,7 ,hich is clearly a contorted construction of the sa"e phrase. 2he resort to Article 1%+% of the Civil Code of the )hilippines is erroneous. 2he su. ect phrase is patent and una".i!uous, hence, it "ust not .e !iven another interpretation chanro.les virtual la, li.rary 4ut even assu"in! that such a ri!ht of repurchase is !ranted under the 7Co"praventa,7 the petitioner correctly asserts that the sa"e has already prescri.ed. ;nder Art. 1508 of the Civil Code of $pain 9Art,. 1&0& of the Civil Code of the )hilippines:, the ri!ht to redee" or repurchase, in the a.sence of an e'press a!ree"ent as to ti"e, shall last four years fro" the date of the contract. In this case then, the ri!ht to repurchase, if it ,as at four !uaranteed under in the 7Co"praventa,7 should have .een e'ercise ,ithin four years fro" March *1, 19/1 9indu.ita.ly the date of e'ecution of the contract:, or at the latest in 19/5.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary In the respondent court5s resolution, it is further ruled that the ri!ht to repurchase ,as !iven .irth .y the condition precedent provided for in the phrase 7sie"pre y cuando estos ulti"os pueden hacer la co"pra7

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9,hen the .uyer has "oney to .uy:. In other ,ords, it is the respondent court5s contention that the ri!ht "ay .e e'ercised only ,hen the .uyer has "oney to .uy. If this ,ere so, the second para!raph of Article 1508 ,ould apply = there is a!ree"ent as to the ti"e, althou!h it is indefinite, therefore, the ri!ht should .e e'ercised ,ithin ten years, .ecause the la, does not favor suspended o,nership. $ince the alle!ed ri!ht to repurchase ,as atte"pted to .e e'ercised .y >icente $antia!o only in 19&&, or *5 years fro" the date of the contract, the said ri!ht has undou.tedly e'pired.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary <A1#1FO#1, in vie, of the fore!oin!, the #esolution dated $epte".er *+, 198%, of the respondent court is $12 A$IC1 and the Cecision pro"ul!ated on -une *8, 19+8 is here.y #1IB$2A21C. 2he annotations of the prohi.ition to sell at the .ac0 of 2C2 Bos. 1%88%+, 1%88%8, 1%88%9, 1%88/0, 1%88/1, and 1%88/* are here.y ordered CABC1@@1C. Costs a!ainst the private respondent.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary $O O#C1#1C. ?*? of .etition> #as subject to certain ter$s and conditions and provided for the auto$atic reversion to the donor of the donated property in case of violation or non-co$pliance =pars. , and 10 of *nne ?*?, p. +0, 'ollo>. 3he foundation failed to co$ply #ith the conditions of the donation. )n *pril 9, 19,1, .rudencio de 1una ?revived? the said donation in favor of the foundation, in a docu$ent entitled ?Fevival of "onation Intervivos? =*nne ?D? of .etition> subject to ter$s and conditions #hich a$ong others, re7uiredC 3. 3hat the ")@44 shall construct at its o#n e pense a 0hapel, a @ursery and Eindergarten School, to be na$ed after St. -eronica, and other constructions and *ccessories shall be constructed on the land herein being donated strictly in accordance #ith the plans and specifications prepared by the ).F. Ouinto I *ssociates and $ade part of this donation9 provided that the flooring of the *ltar and parts of the 0hapel shall be of granoletic $arble. A. 3hat the construction of the 0hapel, @ursery and Eindergarten School shall start i$$ediately and $ust be at least S4-4@3N =,0> *(' C(./)! finished by the end of 3<F44 =3> N4*FS fro$ the date hereof, ho#ever, the #hole project as dra#n in the plans and specifications $ade parts of this donation $ust be co$pleted #ithin FI-4 ='> N4*FS fro$ the date hereon, unless e tensions are granted by the ")@)F in #riting9 . . . . =p. +3, 'ollo> *s in the original deed of donation, the ?Fevival of "onation Intenrivos? also provided for the auto$atic reversion to the donor of the donated area in case of violation of the conditions thereof, couched in the follo#ing ter$sC . 11. 3hat violation of any of the conditions herein provided shall cause the auto$atic reversion of the donated area to the donor, his heirs, assigns and representatives, #ithout the need of e ecuting any other docu$ent for that purpose and #ithout obligation #hatever on the part of the ")@)F. =p. +A, 'ollo>. 3he foundation, through its president, accepted the donation in the sa$e docu$ent, subject to all the ter$s and conditions stated in the donation =p. +A, 'ollo>. 3he donation #as registered and annotated on *pril 1', 19,1 in the $e$orandu$ of encu$brances as 4ntry @o. 1,939 of 3ransfer 0ertificate of 3itle @o. 3-',,' =p. 1', 'ollo>. )n *ugust 3, 19,1, .rudencio de 1una and the foundation e ecuted a :"eed of Segregation? =*nne ?0? of .etition> #hereby the area donated #hich is no# 2no#n as 1ot @o. 3,0,-D of Subdivision .lan .sd-A039+ #as adjudicated to the foundation. *s a result, transfer certificate of title @o. 3-1&1'+ #as issued in the na$e of the foundation. 3he re$aining portion 2no#n as 1ot @o. 3,0,-* #as retained by the donor. =p. 1&, 'ollo>. )n Septe$ber +3, 1980, herein petitioners, 4velyn, Fosalina, .rudencio, !r., Billard, *ntonio and !oselito, all surna$ed de 1una, #ho clai$ to be the children and only heirs of the late .rudencio de 1una #ho died on *ugust 18, 1980, filed a co$plaint =pp. 1A-1,, 'ollo> #ith the Fegional 3rial 0ourt of Oue/on alleging that the ter$s and conditions of the donation #ere not co$plied #ith by the foundation. *$ong others, it prayed for the cancellation of the donation and the reversion of the donated land to the heirs. 3he co$plaint #as doc2eted as 0ivil 0ase @o. 8&+A. In its ans#er =pp. +9-3&, 'ollo>, respondent foundation clai$ed that it had partially and substantially co$plied #ith the conditions of the donation and that the donor has granted the foundation an indefinite e tension of ti$e to co$plete the construction of the chapel. It also invo2ed the affir$ative defense of prescription of action and prayed for the dis$issal of the co$plaint. "uring the pre-trial of the case, the foundation $oved for a preli$inary hearing of its affir$ative defense of prescription of action #hich #as opposed by the plaintiffs. *fter the parties have filed their respective #ritten $otions, oppositions and $e$oranda, an )rder =pp., A0-A3, 'ollo> dated !uly ,, 1981 #as issued dis$issing the co$plaint. 3he dispositive portion of the )rder statesC In vie# of the foregoing considerations, this 0ourt finds the $otion to dis$iss dee$ed filed by the defendant on the ground of prescription

G.R. No. L-9/099 1&!2&r3 1., 1990

EVEL5N 6E LUNA, RO-ALINA 6E LUNA, PRU6ENCIO 6E LUNA, 1R., =ILLAR6 6E LUNA, ANTONIO 6E LUNA, &!* 1O-ELITO 6E LUNA, petitioners, vs. 4ON. -O;RONIO ;. A<RIGO, Pre,(*(! 12* e o# "$e Co2r" o# ;(r," I!,"&!+e o# @2eAo!, <r&!+$ IB, &!* LUZONIAN UNIVER-IT5 ;OUN6ATION, INC., respondents. !il$erto +. -ur$ano for petitioners. Joselito (. /ala$ong for pri%ate respondent. ME6IAL6EA, J.: 3his is a petition for revie# on certiorari of the )rder dated !uly ,, 1981 of respondent judge Sofronio F. *brigo of the 0ourt of First Instance of Oue/on, Dranch IL in 0ivil 0ase @o. 8&+A dis$issing the co$plaint of petitioners on the ground of prescription of action. 3he antecedent facts are as follo#sC )n !anuary +A, 19&', .rudencio de 1una donated a portion of ,,'00 s7uare $eters of 1ot @o. 3,0, of the 0adastral Survey of 1ucena covered by 3ransfer 0ertificate of 3itle @o. 1-',,' to the 1u/onian 0olleges, Inc., =no# 1u/onian ;niversity Foundation, Inc., herein referred to as the foundation>. 3he donation, e$bodied in a "eed of "onation Intervivos =*nne

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to be #ell-ta2en and the sa$e is hereby 6F*@34". B<4F4F)F4, the instant co$plaint is hereby ordered "IS(ISS4". @o pronounce$ent as to costs. S) )F"4F4". =pp. A+-A3, 'ollo> @o $otion for reconsideration #as filed by petitioners. )n !uly ++, 1981, petitioners brought the instant petition for revie# #ith the follo#ing assign$ents of errorC I. 3<4 1)B4F 0);F3 4FF4" I@ <)1"I@6 3<*3 3<4 ")@44:S 0)@S4@3 3) 3<4 F4-)0*3I)@ )F * ")@*3I)@ 3) D4 -*1I" (;S3 D4 6I-4@ S;DS4O;4@3 3) 3<4 4FF403I-I3N )F 3<4 ")@*3I)@ )F -I)1*3I)@ )F =3<4> *@N )F 3<4 0)@"I3I)@S I(.)S4" 3<4F4I@. II. 3<4 1)B4F 0);F3 4FF4" I@ 3F4*3I@6 3<4 0)(.1*I@3 *S )@4 F)F !;"I0I*1 "40F44 )F F4-)0*3I)@ )F 3<4 ")@*3I)@ I@ O;4S3I)@ *S 0)@34(.1*34" I@ *F3I014 ,&A )F 3<4 0I-I1 0)"4 )F 3<4 .<I1I..I@4S *@" B<I0< .F4S0FID4S I@ F);F =A> N4*FS *@" I@ @)3 0)@SI"4FI@6 I3 *S *@ *03I)@ 3) 4@F)F04 * BFI334@ 0)@3F*03 B<I0< .F4S0FID4S I@ 34@ =10> N4*FS *S .F)-I"4" I@ *F3I014 11AA, <4@04, 3<4 1)B4F 0);F3 4FF4" I@ "IS(ISSI@6 3<4 0)(.1*I@3. III. 3<4 1)B4F 0);F3 4FF4" I@ @)3 F4@"4FI@6 !;"6(4@3 )@ 3<4 (4FI3S DN B*N )F !;"6(4@3 )@ 3<4 .14*"I@6S. =pp. 1-+, .etitioner:s Drief> Be gave due course to the petition on *ugust 3, 1981 =p. A', 'ollo>. *fter the parties: sub$ission of their respective briefs, the 0ourt resolved to consider the petition sub$itted for decision on !anuary +,, 198+ =p. &+, 'ollo>. 3he assailed order of the trial court stated that revocation =of a donation> #ill be effective only either upon court judg$ent or upon consent of the donee as held in the case of *ar6s %. *ro%ince of /arlac, @o. +A190, !uly 13, 19+&, A9 .hil. 1A3. 3he trial court dis$issed the clai$ of petitioners that the stipulation in the donation providing for revocation in case of nonco$pliance of conditions in the donation is tanta$ount to the consent of the donee, opining that the consent conte$plated by la# should be such consent given by the donee su$se4uent to the effectivity of the donation or violation of the conditions i$posed therein. 3he trial court further held that, far fro$ consenting to the revocation, the donee clai$ed that it had already substantially co$plied #ith the conditions of the donation by introducing i$prove$ents in the property donated valued at $ore than the a$ount of the donated land. In vie# thereof, a judicial decree revo2ing the subject donation is necessary. *ccordingly, under *rticle ,&A of the @e# 0ivil 0ode, actions to revo2e a donation on the ground of nonco$pliance #ith any of the conditions of the donation shall prescribe in four years counted fro$ such non-co$pliance. In the instant case, the four-year period for filing the co$plaint for revocation co$$enced on *pril 9, 19,& and e pired on *pril 9, 1980. Since the co$plaint #as brought on Septe$ber +3, 1980 or $ore than five ='> $onths beyond the prescriptive period, it #as already barred by prescription. )n the other hand, petitioners argue that *rticle ,&A of the @e# 0ivil 0ode #as adopted to provide a judicial re$edy in case of non-fulfill$ent of conditions #hen revocation of the donation has not been agreed upon by the parties. Dy #ay of contrast, #hen there is a stipulation agreed upon by the parties providing for revocation in case of non-co$pliance, no judicial action is necessary. It is then petitioners: clai$ that the action filed before the 0ourt of First Instance of Oue/on is not one for revocation of the donation under *rticle ,&A of the @e# 0ivil 0ode #hich prescribes in four =A> years, but one to enforce a #ritten contract #hich prescribes in ten =10> years. 3he petition is i$pressed #ith $erit. Fro$ the vie#point of $otive, purpose or cause, donations $ay be 1> si$ple, +> re$uneratory or 3> onerous. * si$ple donation is one the cause of #hich is pure liberality =no strings attached>. * re$uneratory donation is one #here the donee gives so$ething to re#ard past or future services or because of future charges or burdens, #hen the value of said services, burdens or charges is less than the value of the donation. *n onerous donation is one #hich is subject to burdens, charges or future services e7ual =or $ore> in value than that of the thing donated =4dgardo 1. .aras, 0ivil 0ode of the .hilippines *nnotated, 11 ed., -ol. 11, p. ,+&>. It is the finding of the trial court, #hich is not disputed by the parties, that the donation subject of this case is one #ith an onerous cause. It #as $ade subject to the burden re7uiring the donee to construct a chapel, a nursery and a 2indergarten school in the donated property #ithin five years fro$ e ecution of the deed of donation. ;nder the old 0ivil 0ode, it is a settled rule that donations #ith an onerous cause are governed not by the la# on donations but by the rules on contracts, as held in the cases of Carlos %. 'amil, 1-&,3&, Septe$ber ', 1911, +0 .hil. 183, !analo %s. de !esa, 1-9AA9, February 1+, 191', +9 .hil. A9'. )n the $atter of prescription of actions for the revocation of onerous donation, it #as held that the general rules on prescription applies. =.ar2s v. .rovince of 3arlac, supra.>. 3he sa$e rules apply under the @e# 0ivil 0ode as provided in *rticle ,33 thereof #hich providesC *rt. ,33. "onations #ith an onerous cause shall be governed by the rules on contracts, and re$uneratory donations by the provisions of the present 3itle as regards that portion #hich e ceeds the value of the burden i$posed. It is true that under *rticle ,&A of the @e# 0ivil 0ode, actions for the revocation of a donation $ust be brought #ithin four =A> years fro$ the non-co$pliance of the conditions of the donation. <o#ever, it is )ur opinion that said article does not apply to onerous donations in vie# of the specific provision of *rticle ,33 providing that onerous donations are governed by the rules on contracts. In the light of the above, the rules on contracts and the general rules on prescription and not the rules on donations are applicable in the case at bar. ;nder *rticle 130& of the @e# 0ivil 0ode, the parties to a contract have the right ?to establish such stipulations, clauses, ter$s and conditions as they $ay dee$ convenient, provided they are not contrary to la#, $orals, good custo$s, public order or public policy.? .aragraph 11 of the ?Fevival of "onation Intervivos, has provided that ?violation of any of the conditions =herein> shall cause the automatic re%ersion of the donated area to the donor, his heirs, . . ., #ithout the need of e ecuting any other docu$ent for that purpose and #ithout obligation on the part of the ")@)F?. Said stipulation not being contrary to la#, $orals, good custo$s, public order or

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public policy, is valid and binding upon the foundation #ho voluntarily consented thereto. 3he validity of the stipulation in the contract providing for the auto$atic reversion of the donated property to the donor upon non-co$pliance cannot be doubted. It is in the nature of an agree$ent granting a party the right to rescind a contract unilaterally in case of breach, #ithout need of going to court. ;pon the happening of the resolutory condition of nonco$pliance #ith the conditions of the contract, the donation is auto$atically revo2ed #ithout need of a judicial declaration to that effect. In the case of )ni%ersit2 of the *hilippines %. de los Angeles, 1-+8&0+, Septe$ber +9, 19,0, 3' S0F* 10+-10,, it #as heldC . . . 3here is nothing in the la# that prohibits the parties fro$ entering into agree$ent that violation of the ter$s of the contract #ould cause cancellation thereof. even #ithout court intervention. In other #ords, it is not al#ays necessary for the injured party to resort to court for rescission of the contract =Froilan v. .an )riental Shipping 0o., et al., 1-1189,, 31 )ctober 19&A, 1+ S0F* +,&>. 3his #as reiterated in the case of Angeles %. Calasanz, 1A++83, (arch 18, 198'C Bell settled is, ho#ever, the rule that a judicial action for the rescission of a contract is not necessary #here the contract provides that it $ay be revo2ed and cancelled for violation of any of its ter$s and conditions =1ope/ v. 0o$$issioner of 0usto$s, 3, S0F* 3+,, 33A, and cases cited therein>. Fesort to judicial action for rescission is obviously not conte$plated. 3he validity of the stipulation can not be seriously disputed. It is in the nature of a facultative resolutory condition #hich in $any cases has been upheld, by this court. =.once 4nrile v. 0ourt of *ppeals, +9 S0F* '0A> <o#ever, in the )ni%ersit2 of the *hilippines %. Angeles case, =supra>, it #as held that in cases #here one of the parties contests or denies the rescission, ?only the final a#ard of the court of co$petent jurisdiction can conclusively settle #hether the resolution is proper or not.? It #as held, thusC . . . since in every case, #here the e trajudicial resolution is contested, only the final a#ard of the court of co$petent jurisdiction can conclusively settle whether the resolution was proper or not. It is in this sense that judicial action #ill be necessary as #ithout it, the e trajudicial resolution #ill re$ain contestable and subject to judicial invalidation, unless attac2 thereon should beco$e barred by ac7uiescence, estoppel or prescription. It is clear, ho#ever, that judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already dee$ed rescinded by virtue of an agree$ent providing for rescission even #ithout judicial intervention, but in order to deter$ine #hether or not the recession #as proper. 3he case of *ar6s %. *ro%ince of /arlac, supra, relied upon by the trial court, is not applicable in the case at bar. Bhile the donation involved therein #as also onerous, there #as no agree$ent in the donation providing for auto$atic rescission, thus, the need for a judicial declaration revo2ing said donation. 3he trial court #as therefore not correct in holding that the co$plaint in the case at bar is barred by prescription under *rticle ,&A of the @e# 0ivil 0ode because *rticle ,&A does not apply to onerous donations. *s provided in the donation e ecuted on *pril 9, 19,1, co$plaince #ith the ter$s and conditions of the contract of donation, shall be $ade #ithin five ='> years fro$ its e ecution. 3he co$plaint #hich #as filed on Septe$ber +3, 1980 #as then #ell #ithin the ten =10> year prescriptive period to enforce a #ritten contract =*rticle 11AAG1H, @e# 0ivil 0ode>, counted fro$ *pril 9, 19,&. Finally, considering that the allegations in the co$plaint on the $atter of the donee:s non-co$pliance #ith the conditions of the donation have been contested by private respondents #ho clai$ed that i$prove$ents $ore valuable than the donated property had been introduced, a judg$ent on the pleadings is not proper. (oreover, in the absence of a $otion for judg$ent on the pleadings, the court cannot motu proprio render such judg$ent. Section 1 of Fule 19 providesC ?Bhere an ans#er fails to tender an issue, or other#ise ad$its the $aterial allegations of the adverse party:s pleading, the court $ay, on motion of that part2, direct judg$ent on such pleading.? =4$phasis supplied> *00)F"I@61N, the petition is 6F*@34". 0ivil 0ase @o. 8&+A is hereby ordered reinstated. Fespondent judge is ordered to conduct a trial on the $erits to deter$ine the propriety of the revocation of the subject donation. S) )F"4F4". G.R. No. 61990 -e%"ember 2., 1990 PACI-TAN INTERNATIONAL AIRLINE- CORPORATION, petitioner, vs 4ON. <LA- ;. OPLE, (! $(, +&%&+("3 &, M(!(,"er o# L&borD 4ON. VICENTE LEOGAR6O, 1R., (! $(, +&%&+("3 &, 6e%2"3 M(!(,"erD ET4EL5NNE <. ;ARRALE- &!* MARIA MOON5EEN MAMA-IG, respondents. 'omulo, !a$anta, +uena%entura, Sa2oc ; De los Angeles for petitioner. Ledesma, Saludo ; Associates for pri%ate respondents. ;ELICIANO, J.: )n + "ece$ber 19,8, petitioner .a2istan International *irlines 0orporation =?.I*?>, a foreign corporation licensed to do business in the .hilippines, e ecuted in (anila t#o =+> separate contracts of e$ploy$ent, one #ith private respondent 4thelynne D. Farrales and the other #ith private respondent (a. (.0. (a$asig. 1 3he contracts, #hich beca$e effective on 9 !anuary 19,9, provided in pertinent portion as follo#sC '. D)'A/#&. &F (!*L&<!(./ A.D *(.AL/< 3his agree$ent is for a period of three =3> years, but can be e tended by the $utual consent of the parties. &. /('!#.A/#&. @ot#ithstanding anything to contrary as herein provided, .I* reserves the right to ter$inate this agree$ent at any ti$e by giving the 4(.1)N44 notice in #riting in advance one $onth before the intended ter$ination or in lieu thereof, by paying the 4(.1)N44 #ages e7uivalent to one $onth:s salary.

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10. *..1I0*D14 1*BC 3his agree$ent shall be construed and governed under and by the la#s of .a2istan, and only the 0ourts of Earachi, .a2istan shall have the jurisdiction to consider any $atter arising out of or under this agree$ent. Fespondents then co$$enced training in .a2istan. *fter their training period, they began discharging their job functions as flight attendants, #ith base station in (anila and flying assign$ents to different parts of the (iddle 4ast and 4urope. )n + *ugust 1980, roughly one =1> year and four =A> $onths prior to the e piration of the contracts of e$ploy$ent, .I* through (r. )scar Denares, counsel for and official of the local branch of .I*, sent separate letters both dated 1 *ugust 1980 to private respondents Farrales and (a$asig advising both that their services as flight ste#ardesses #ould be ter$inated ?effective 1 Septe$ber 1980, confor$ably to clause & =b> of the e$ploy$ent agree$ent Gthey had> e ecuted #ith G.I*H.? 2 )n 9 Septe$ber 1980, private respondents Farrales and (a$asig jointly instituted a co$plaint, doc2eted as @0F-S3F9'1'1-80, for illegal dis$issal and non-pay$ent of co$pany benefits and bonuses, against .I* #ith the then (inistry of 1abor and 4$ploy$ent =?()14?>. *fter several unfruitful atte$pts at conciliation, the ()14 hearing officer *tty. !ose (. .ascual ordered the parties to sub$it their position papers and evidence supporting their respective positions. 3he .I* sub$itted its position paper, 3 but no evidence, and there clai$ed that both private respondents #ere habitual absentees9 that both #ere in the habit of bringing in fro$ abroad si/eable 7uantities of ?personal effects?9 and that .I* personnel at the (anila International *irport had been discreetly #arned by custo$s officials to advise private respondents to discontinue that practice. .I* further clai$ed that the services of both private respondents #ere ter$inated pursuant to the provisions of the e$ploy$ent contract. In his )rder dated ++ !anuary 1981, Fegional "irector Francisco 1. 4strella ordered the reinstate$ent of private respondents #ith full bac2#ages or, in the alternative, the pay$ent to the$ of the a$ounts e7uivalent to their salaries for the re$ainder of the fi ed three-year period of their e$ploy$ent contracts9 the pay$ent to private respondent (a$asig of an a$ount e7uivalent to the value of a round trip tic2et (anila-;S* (anila9 and pay$ent of a bonus to each of the private respondents e7uivalent to their one-$onth salary. 0 3he )rder stated that private respondents had attained the status of regular e$ployees after they had rendered $ore than a year of continued service9 that the stipulation li$iting the period of the e$ploy$ent contract to three =3> years #as null and void as violative of the provisions of the 1abor 0ode and its i$ple$enting rules and regulations on regular and casual e$ploy$ent9 and that the dis$issal, having been carried out #ithout the re7uisite clearance fro$ the ()14, #as illegal and entitled private respondents to reinstate$ent #ith full bac2#ages. )n appeal, in an )rder dated 1+ *ugust 198+, <on. -icente 1eogardo, !r., "eputy (inister, ()14, adopted the findings of fact and conclusions of the Fegional "irector and affir$ed the latter:s a#ard save for the portion thereof giving .I* the option, in lieu of reinstate$ent, ?to pay each of the co$plainants Gprivate respondentsH their salaries corresponding to the une pired portion of the contractGsH Gof e$ploy$entH . . .?. 9 In the instant .etition for Certiorari, petitioner .I* assails the a#ard of the Fegional "irector and the )rder of the "eputy (inister as having been rendered #ithout jurisdiction9 for having been rendered #ithout support in the evidence of record since, allegedly, no hearing #as conducted by the hearing officer, *tty. !ose (. .ascual9 and for having been issued in disregard and in violation of petitioner:s rights under the e$ploy$ent contracts #ith private respondents. 1. .etitioner:s first contention is that the Fegional "irector, ()14, had no jurisdiction over the subject $atter of the co$plaint initiated by private respondents for illegal dis$issal, jurisdiction over the sa$e being lodged in the *rbitration Dranch of the @ational 1abor Felations 0o$$ission =?@1F0?> It appears to us beyond dispute, ho#ever, that both at the ti$e the co$plaint #as initiated in Septe$ber 1980 and at the ti$e the )rders assailed #ere rendered on !anuary 1981 =by Fegional "irector Francisco 1. 4strella> and *ugust 198+ =by "eputy (inister -icente 1eogardo, !r.>, the Fegional "irector had jurisdiction over ter$ination cases. *rt. +,8 of the 1abor 0ode, as it then e isted, forbade the ter$ination of the services of e$ployees #ith at least one =1> year of service #ithout prior clearance fro$ the "epart$ent of 1abor and 4$ploy$entC *rt. +,8. !iscellaneous *ro%isions = . . . =b> Bith or #ithout a collective agree$ent, no e$ployer $ay shut do#n his establish$ent or dis$iss or ter$inate the e$ploy$ent of e$ployees #ith at least one year of service during the last t#o =+> years, #hether such service is continuous or bro2en, #ithout prior #ritten authority issued in accordance #ith such rules and regulations as the Secretary $ay pro$ulgate . . . =e$phasis supplied> Fule LI-, Doo2 @o. ' of the Fules and Fegulations I$ple$enting the 1abor 0ode, $ade clear that in case of a ter$ination #ithout the necessary clearance, the Fegional "irector #as authori/ed to order the reinstate$ent of the e$ployee concerned and the pay$ent of bac2#ages9 necessarily, therefore, the Fegional "irector $ust have been given jurisdiction over such ter$ination casesC Sec. +. Shutdown or dismissal without clearance. R *ny shutdo#n or dis$issal #ithout prior clearance shall be conclusively presu$ed to be ter$ination of e$ploy$ent #ithout a just cause. 3he Fegional "irector shall, in such case order the i$$ediate reinstate$ent of the e$ployee and the pay$ent of his #ages fro$ the ti$e of the shutdo#n or dis$issal until the ti$e of reinstate$ent. =e$phasis supplied> .olicy Instruction @o. 1A issued by the Secretary of 1abor, dated +3 *pril 19,&, #as si$ilarly very e plicit about the jurisdiction of the Fegional "irector over ter$ination of e$ploy$ent casesC ;nder ." 8'0, ter$ination cases R #ith or #ithout 0D* R are no# placed under the original jurisdiction of the Fegional "irector. .reventive suspension cases, no# $ade cogni/able for the first ti$e, are also placed under the Fegional "irector. Defore ." 8'0, ter$ination cases #here there #as a 0D* #ere under the jurisdiction of the grievance $achinery and voluntary arbitration, #hile ter$ination cases #here there #as no 0D* #ere under the jurisdiction of the 0onciliation Section.

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In $ore details, the $ajor innovations introduced by ." 8'0 and its i$ple$enting rules and regulations #ith respect to ter$ination and preventive suspension cases areC 1. 3he Fegional "irector is no# re7uired to rule on every application for clearance, #hether there is opposition or not, #ithin ten days fro$ receipt thereof. =4$phasis supplied> +. 3he second contention of petitioner .I* is that, even if the Fegional "irector had jurisdiction, still his order #as null and void because it had been issued in violation of petitioner:s right to procedural due process . 6 3his clai$, ho#ever, cannot be given serious consideration. .etitioner #as ordered by the Fegional "irector to sub$it not only its position paper but also such evidence in its favor as it $ight have. .etitioner opted to rely solely upon its position paper9 #e $ust assu$e it had no evidence to sustain its assertions. 3hus, even if no for$al or oral hearing #as conducted, petitioner had a$ple opportunity to e plain its side. (oreover, petitioner .I* #as able to appeal his case to the (inistry of 1abor and 4$ploy$ent. / 3here is another reason #hy petitioner:s clai$ of denial of due process $ust be rejected. *t the ti$e the co$plaint #as filed by private respondents on +1 Septe$ber 1980 and at the ti$e the Fegional "irector issued his 7uestioned order on ++ !anuary 1981, applicable regulation, as noted above, specified that a ?dis$issal #ithout prior clearance shall be conclusively presumed to $e termination of e$ploy$ent without a cause?, and the Fegional "irector #as re7uired in such case to? order the i$$ediate reinstate$ent of the e$ployee and the pay$ent of his #ages fro$ the ti$e of the shutdo#n or dis$iss until . . . reinstate$ent.? In other #ords, under the then applicable rule, the Fegional "irector did not even have to re7uire sub$ission of position papers by the parties in vie# of the conclusive ,"uris et de "ure> character of the presu$ption created by such applicable la# and regulation. In Ce$u #nstitute of /echnolog2 %. !inister of La$or and (mplo2ment , . the 0ourt pointed out that ?under Fule 1A, Section +, of the I$ple$enting Fules and Fegulations, the ter$ination of Gan e$ployeeH #hich #as #ithout previous clearance fro$ the (inistry of 1abor is conclusively presu$ed to be #ithout GjustH cause . . . Ga presu$ption #hichH cannot be overturned by any contrary proof ho#ever strong.? 3. In its third contention, petitioner .I* invo2es paragraphs ' and & of its contract of e$ploy$ent #ith private respondents Farrales and (a$asig, arguing that its relationship #ith the$ #as governed by the provisions of its contract rather than by the general provisions of the 1abor 0ode. 9 .aragraph ' of that contract set a ter$ of three =3> years for that relationship, e tendible by agree$ent bet#een the parties9 #hile paragraph & provided that, not#ithstanding any other provision in the 0ontract, .I* had the right to ter$inate the e$ploy$ent agree$ent at any ti$e by giving one-$onth:s notice to the e$ployee or, in lieu of such notice, one-$onths salary. * contract freely entered into should, of course, be respected, as .I* argues, since a contract is the la# bet#een the parties. 10 3he principle of party autono$y in contracts is not, ho#ever, an absolute principle. 3he rule in *rticle 130&, of our 0ivil 0ode is that the contracting parties $ay establish such stipulations as they $ay dee$ convenient, >pro%ided they are not contrary to la#, $orals, good custo$s, public order or public policy.? 3hus, counter-balancing the principle of autono$y of contracting parties is the e7ually general rule that provisions of applicable la#, especially provisions relating to $atters affected #ith public policy, are dee$ed #ritten into the contract. 11 .ut a little differently, the governing principle is that parties $ay not contract a#ay applicable provisions of la# especially pere$ptory provisions dealing #ith $atters heavily i$pressed #ith public interest. 3he la# relating to labor and e$ploy$ent is clearly such an area and parties are not at liberty to insulate the$selves and their relationships fro$ the i$pact of labor la#s and regulations by si$ply contracting #ith each other. It is thus necessary to appraise the contractual provisions invo2ed by petitioner .I* in ter$s of their consistency #ith applicable .hilippine la# and regulations. *s noted earlier, both the 1abor *rbiter and the "eputy (inister, ()14, in effect held that paragraph ' of that e$ploy$ent contract #as inconsistent #ith *rticles +80 and +81 of the 1abor 0ode as they e isted at the ti$e the contract of e$ploy$ent #as entered into, and hence refused to give effect to said paragraph '. 3hese *rticles read as follo#sC *rt. +80. Securit2 of /enure. R In cases of regular e$ploy$ent, the e$ployer shall not ter$inate the services of an e$ployee e cept for a just cause or #hen authori/ed by this 3itle *n e$ployee #ho is unjustly dis$issed fro$ #or2 shall be entitled to reinstate$ent #ithout loss of seniority rights and to his bac2#ages co$puted fro$ the ti$e his co$pensation #as #ithheld fro$ hi$ up to the ti$e his reinstate$ent. *rt. +81. 'egular and Casual (mplo2ment. 3he provisions of #ritten agree$ent to the contrary not#ithstanding and regardless of the oral agree$ents of the parties, an e$ploy$ent shall be dee$ed to be regular #here the e$ployee has been engaged to perfor$ activities #hich are usually necessary or desirable in the usual business or trade of the e$ployer, e cept #here the e$ploy$ent has been fi ed for a specific project or underta2ing the co$pletion or ter$ination of #hich has been deter$ined at the ti$e of the engage$ent of the e$ployee or #here the #or2 or services to be perfor$ed is seasonal in nature and the e$ploy$ent is for the duration of the season. *n e$ploy$ent shall be dee$ed to be casual if it is not covered by the preceding paragraphC provided, that, an2 emplo2ee who has rendered at least one 2ear of ser%ice, whether such ser%ice is continuous or $ro6en, shall $e considered as regular emplo2ee #ith respect to the activity in #hich he is e$ployed and his e$ploy$ent shall continue #hile such actually e ists. =4$phasis supplied> In +rent School, #nc., et al. %. 'onaldo -amora, etc., et al., 12 the 0ourt had occasion to e a$ine in detail the 7uestion of #hether e$ploy$ent for a fi ed ter$ has been outla#ed under the above 7uoted provisions of the 1abor 0ode. *fter an e tensive e a$ination of the history and develop$ent of *rticles +80 and +81, the 0ourt reached the conclusion that a contract providing for e$ploy$ent #ith a fi ed period #as not necessarily unla#fulC 3here can of course be no 7uarrel #ith the proposition that where from the circumstances

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it is apparent that periods ha%e $een imposed to preclude ac4uisition of tenurial securit2 $2 the emplo2ee, the2 should $e struc6 down or disregarded as contrar2 to pu$lic polic2, morals, etc. Dut #here no such intent to circu$vent the la# is sho#n, or stated other#ise, #here the reason for the la# does not e ist e.g. #here it is indeed the e$ployee hi$self #ho insists upon a period or #here the nature of the engage$ent is such that, #ithout being seasonal or for a specific project, a definite date of ter$ination is a sine 4ua non #ould an agree$ent fi ing a period be essentially evil or illicit, therefore anathe$a Bould such an agree$ent co$e #ithin the scope of *rticle +80 #hich ad$ittedly #as enacted ?to prevent the circu$vention of the right of the e$ployee to be secured in . . . =his> e$ploy$entK? *s it is evident fro$ even only the three e a$ples already given that Article 9?@ of the La$or Code, under a narrow and literal interpretation, not onl2 fails to e0haust the gamut of emplo2ment contracts to which the lac6 of a fi0ed period would $e an anomal2, $ut would also appear to restrict, without reasona$le distinctions, the right of an emplo2ee to freel2 stipulate with his emplo2er the duration of his engagement, it logicall2 follows that such a literal interpretation should $e eschewed or a%oided. 3he la# $ust be given reasonable interpretation, to preclude absurdity in its application. )utla#ing the #hole concept of ter$ e$ploy$ent and subverting to boot the principle of freedo$ of contract to re$edy the evil of e$ployers? using it as a $eans to prevent their e$ployees fro$ obtaining security of tenure is li2e cutting off the nose to spite the face or, $ore relevantly, curing a headache by lopping off the head. *ccordingly, and since the entire purpose behind the develop$ent of legislation cul$inating in the present *rticle +80 of the 1abor 0ode clearly appears to have been, as already observed, to prevent circu$vention of the e$ployee:s right to be secure in his tenure, the clause in said article indiscri$inately and co$pletely ruling out all #ritten or oral agree$ents conflicting #ith the concept of regular e$ploy$ent as defined therein should be construed to refer to the substantive evil that the 0ode itself has singled outC agree$ents entered into precisely to circu$vent security of tenure. It should have no application to instances #here a fi ed period of e$ploy$ent #as agreed upon 2no#ingly and voluntarily by the parties, #ithout any force, duress or i$proper pressure being brought to bear upon the e$ployee and absent any other circu$stances vitiating his consent, or #here it satisfactorily appears that the e$ployer and e$ployee dealt #ith each other on $ore or less e7ual ter$s #ith no $oral do$inance #hatever being e ercised by the for$er over the latter. )nless thus limited in its pur%iew, the law would $e made to appl2 to purposes other than those e0plicitl2 stated $2 its framers3 it thus $ecomes pointless and ar$itrar2, un"ust in its effects and apt to lead to a$surd and unintended conse4uences. =e$phasis supplied> It is apparent fro$ +rent School that the critical consideration is the presence or absence of a substantial indication that the period specified in an e$ploy$ent agree$ent #as designed to circu$vent the security of tenure of regular e$ployees #hich is provided for in *rticles +80 and +81 of the 1abor 0ode. 3his indication $ust ordinarily rest upon so$e aspect of the agree$ent other than the $ere specification of a fi ed ter$ of the ernploy$ent agree$ent, or upon evidence aliunde of the intent to evade. 4 a$ining the provisions of paragraphs ' and & of the e$ploy$ent agree$ent bet#een petitioner .I* and private respondents, #e consider that those provisions $ust be read together and #hen so read, the fi ed period of three =3> years specified in paragraph ' #ill be seen to have been effectively neutrali/ed by the provisions of paragraph & of that agree$ent. .aragraph & in effect too2 bac2 fro$ the e$ployee the fi ed three =3>-year period ostensibly granted by paragraph ' by rendering such period in effect a facultative one at the option of the e$ployer .I*. For petitioner .I* clai$s to be authori/ed to shorten that ter$, at any ti$e and for any cause satisfactory to itself, to a one-$onth period, or even less by si$ply paying the e$ployee a $onth:s salary. Decause the net effect of paragraphs ' and & of the agree$ent here involved is to render the e$ploy$ent of private respondents Farrales and (a$asig basically e$ploy$ent at the pleasure of petitioner .I*, the 0ourt considers that paragraphs ' and & #ere intended to prevent any security of tenure fro$ accruing in favor of private respondents e%en during the limited period of three ,AB 2ears , 13 and thus to escape co$pletely the thrust of *rticles +80 and +81 of the 1abor 0ode. .etitioner .I* cannot ta2e refuge in paragraph 10 of its e$ploy$ent agree$ent #hich specifies, firstly, the la# of .a2istan as the applicable la# of the agree$ent and, secondly, lays the venue for settle$ent of any dispute arising out of or in connection #ith the agree$ent ?onl2 GinH courts of Earachi .a2istan?. 3he first clause of paragraph 10 cannot be invo2ed to prevent the application of .hilippine labor la#s and regulations to the subject $atter of this case, i.e., the e$ployer-e$ployee relationship bet#een petitioner .I* and private respondents. Be have already pointed out that the relationship is $uch affected #ith public interest and that the other#ise applicable .hilippine la#s and regulations cannot be rendered illusory by the parties agreeing upon so$e other la# to govern their relationship. @either $ay petitioner invo2e the second clause of paragraph 10, specifying the Earachi courts as the sole venue for the settle$ent of dispute9 bet#een the contracting parties. 4ven a cursory scrutiny of the relevant circu$stances of this case #ill sho# the $ultiple and substantive contacts bet#een .hilippine la# and .hilippine courts, on the one hand, and the relationship bet#een the parties, upon the otherC the contract #as not only e ecuted in the .hilippines, it #as also perfor$ed here, at least partially9 private respondents are .hilippine citi/ens and respondents, #hile petitioner, although a foreign corporation, is licensed to do business =and actually doing business> and hence resident in the .hilippines9 lastly, private respondents #ere based in the

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.hilippines in bet#een their assigned flights to the (iddle 4ast and 4urope. *ll the above contacts point to the .hilippine courts and ad$inistrative agencies as a proper foru$ for the resolution of contractual disputes bet#een the parties. ;nder these circu$stances, paragraph 10 of the e$ploy$ent agree$ent cannot be given effect so as to oust .hilippine agencies and courts of the jurisdiction vested upon the$ by .hilippine la#. Finally, and in any event, the petitioner .I* did not underta2e to plead and prove the contents of .a2istan la# on the $atter9 it $ust therefore be presu$ed that the applicable provisions of the la# of .a2istan are the sa$e as the applicable provisions of .hilippine la#. 10 Be conclude that private respondents Farrales and (a$asig #ere illegally dis$issed and that public respondent "eputy (inister, ()14, had not co$$itted any grave abuse of discretion nor any act #ithout or in e cess of jurisdiction in ordering their reinstate$ent #ith bac2#ages. .rivate respondents are entitled to three =3> years bac2#ages #ithout 7ualification or deduction. Should their reinstate$ent to their for$er or other substantially e7uivalent positions not be feasible in vie# of the length of ti$e #hich has gone by since their services #ere unla#fully ter$inated, petitioner should be re7uired to pay separation pay to private respondents a$ounting to one =1> $onth:s salary for every year of service rendered by the$, including the three =3> years service putatively rendered. *00)F"I@61N, the .etition for certiorari is hereby "IS(ISS4" for lac2 of $erit, and the )rder dated 1+ *ugust 198+ of public respondent is hereby *FFIF(4", e cept that =1> private respondents are entitled to three =3> years bac2#ages, #ithout deduction or 7ualification9 and =+> should reinstate$ent of private respondents to their for$er positions or to substantially e7uivalent positions not be feasible, then petitioner shall, in lieu thereof, pay to private respondents separation pay a$ounting to one =1>-$onth:s salary for every year of service actually rendered by the$ and for the three =3> years putative service by private respondents. 3he 3e$porary Festraining )rder issued on 13 Septe$ber 198+ is hereby 1IF34". 0osts against petitioner. S) )F"4F4". G.R. No. //029 12!e 19, 1991 T4E ROMAN CAT4OLIC ARC4<I-4OP O; MANILA, T4E ROMAN CAT4OLIC <I-4OP O; IMU-, &!* "$e -POU-E;LORENCIO IGNAO &!* -OLE6A6 C. IGNAO, petitioners, vs. 4ON. COURT O; APPEAL-, T4E E-TATE O; 6ECEA-E6 -POU-E- EU-E<IO 6E CA-TRO &!* MARTINA RIETA, re%re,e!"e* b3 MARINA RIETA GRANA6O- &!* T4ERE-A RIETA TOLENTINO, respondents. G.R. No. //090 12!e 19, 1991 T4E ROMAN CAT4OLIC ARC4<I-4OP O; MANILA, T4E ROMAN CAT4OLIC <I-4OP O; IMU-, &!* "$e -POU-E;LORENCIO IGNAO &!* -OLE6A6 C. IGNAO, petitioners, vs. 4ON. COURT O; APPEAL-, T4E E-TATE O; 6ECEA-E6 -POU-E- EU-E<IO 6E CA-TRO &!* MARTINA RIETA, re%re,e!"e* b3 MARINA RIETA GRANA6O- &!* T4ERE-A RIETA TOLENTINO, respondents. Se%erino C. Dominguez for petitioner 'oman Catholic +ishop of #mus, Ca%ite. Dolorfino and Dominguez Law &ffices for Sps. #gnao. Joselito '. (nri4uez for pri%ate respondents. REGALA6O, J.:p 3hese t#o petitions for revie# on certiorari 1 see2 to overturn the decision of the 0ourt of *ppeals in 0*-6.F. 0- @o. 0'A'& 2 #hich reversed and set aside the order of the Fegional 3rial 0ourt of I$us, 0avite dis$issing 0ivil 0ase @o. 09'-8A, as #ell as the order of said respondent court denying petitioner:s $otions for the reconsideration of its aforesaid decision. )n @ove$ber +9, 198A, private respondents as plaintiffs, filed a co$plaint for nullification of deed of donation, rescission of contract and reconveyance of real property #ith da$ages against petitioners Florencio and Soledad 0. Ignao and the Fo$an 0atholic Dishop of I$us, 0avite, together #ith the Fo$an 0atholic *rchbishop of (anila, before the Fegional 3rial 0ourt, Dranch LL, I$us, 0avite and #hich #as doc2eted as 0ivil 0ase @o. 09'-8A therein. 3 In their co$plaint, private respondents alleged that on *ugust +3, 1930, the spouses 4usebio de 0astro and (artina Fieta, no# both deceased, e ecuted a deed of donation in favor of therein defendant Fo$an 0atholic *rchbishop of (anila covering a parcel of land =1ot @o. &+&, 0adastral Survey of Ea#it>, located at Ea#it, 0avite, containing an area of 9&A s7uare $eters, $ore or less. 3he deed of donation allegedly provides that the donee shall not dispose or sell the property #ithin a period of one hundred =100> years fro$ the e ecution of the deed of donation, other#ise a violation of such condition #ould render ipso facto null and void the deed of donation and the property #ould revert to the estate of the donors. It is further alleged that on or about !une 30, 1980, and #hile still #ithin the prohibitive period to dispose of the property, petitioner Fo$an 0atholic Dishop of I$us, in #hose ad$inistration all properties #ithin the province of 0avite o#ned by the *rchdiocese of (anila #as allegedly transferred on *pril +&, 19&+, e ecuted a deed of absolute sale of the property subject of the donation in favor of petitioners Florencio and Soledad 0. Ignao in consideration of the su$ of .11A,000. 00. *s a conse7uence of the sale, 3ransfer 0ertificate of 3itle @o. 11'990 #as issued by the Fegister of "eeds of 0avite on @ove$ber 1', 1980 in the na$e of said petitioner spouses. Bhat transpired thereafter is narrated by respondent court in its assailed decision. 0 )n "ece$ber 1,, 198A, petitioners Florencio Ignao and Soledad 0. Ignao filed a $otion to dis$iss based on the grounds that =1> herein private respondents, as plaintiffs therein, have no legal capacity to sue9 and =+> the co$plaint states no cause of action. )n "ece$ber 19, 198A, petitioner Fo$an 0atholic Dishop of I$us also filed a $otion to dis$iss on three =3> grounds, the first t#o =+> grounds of #hich #ere identical to that of the $otion to dis$iss filed by the Ignao spouses, and the third ground being that the cause of action has prescribed. )n !anuary 9, 198', the Fo$an 0atholic *rchbishop of (anila li2e#ise filed a $otion to dis$iss on the ground that he is not a real party in interest and, therefore, the co$plaint does not state a cause of action against hi$. *fter private respondents had filed their oppositions to the said $otions to dis$iss and the petitioners had countered #ith their respective replies, #ith rejoinders thereto by private respondents, the trial court issued an order dated !anuary 31, 198', dis$issing the co$plaint on the ground that the cause of action has prescribed. 9 .rivate respondents thereafter appealed to the 0ourt of *ppeals raising the issues on =a> #hether or not the action for rescission of contracts =deed of donation and deed of sale> has prescribed9 and =b> #hether or not the dis$issal of the action for rescission of contracts =deed of donation and deed of sale>

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on the ground of prescription carries #ith it the dis$issal of the $ain action for reconveyance of real property. 6 )n "ece$ber +3, 198&, respondent 0ourt of *ppeals, holding that the action has not yet prescibed, rendered a decision in favor of private respondents, #ith the follo#ing dispositive portionC B<4F4F)F4, the )rder of !anuary 31, 198' dis$issing appellants: co$plaint is S43 *SI"4 and 0ivil 0ase @o. 09'-8A is hereby ordered F4I@S3*34" and F4(*@"4" to the lo#er court for further proceedings. @o 0osts. / .etitioners Ignao and the Fo$an 0atholic Dishop of I$us then filed their separate $otions for reconsideration #hich #ere denied by respondent 0ourt of *ppeals in its resolution dated February &, 198,, . hence, the filing of these appeals by certiorari. It is the contention of petitioners that the cause of action of herein private respondents has already prescribed, invo2ing *rticle ,&A of the 0ivil 0ode #hich provides that ?=t>he donation shall be revo2ed at the instance of the donor, #hen the donee fails to co$ply #ith any of the conditions #hich the for$er i$posed upon the latter,? and that ?=t>his action shall prescribe after four years fro$ the non-co$pliance #ith the condition, $ay be trans$itted to the heirs of the donor, and $ay be e ercised against the donee:s heirs. Be do not agree. *lthough it is true that under *rticle ,&A of the 0ivil 0ode an action for the revocation of a donation $ust be brought #ithin four =A> years fro$ the non-co$pliance of the conditions of the donation, the sa$e is not applicable in the case at bar. 3he deed of donation involved herein e pressly provides for auto$atic reversion of the property donated in case of violation of the condition therein, hence a judicial declaration revo2ing the sa$e is not necessary, *s aptly stated by the 0ourt of *ppealsC Dy the very e press provision in the deed of donation itself that the violation of the condition thereof #ould render ipso facto null and %oid the deed of donation, B4 are of the opinion that there #ould be no legal necessity any$ore to have the donation judicially declared null and void for the reason that the very deed of donation itself declares it so. For #here =sic> it other#ise and that the donors and the donee conte$plated a court action during the e ecution of the deed of donation to have the donation judicially rescinded or declared null and void should the condition be violated, then the phrase reading >would render ipso facto null and %oid> #ould not appear in the deed of donation. 9 In support of its aforesaid position, respondent court relied on the rule that a judicial action for rescission of a contract is not necessary #here the contract provides that it $ay be revo2ed and cancelled for violation of any of its ter$s and conditions. 10 It called attention to the holding that there is nothing in the la# that prohibits the parties fro$ entering into an agree$ent that a violation of the ter$s of the contract #ould cause its cancellation even #ithout court intervention, and that it is not al#ays necessary for the injured party to resort to court for rescission of the contract. 11 It reiterated the doctrine that a judicial action is proper only #hen there is absence of a special provision granting the po#er of cancellation. 12 It is true that the aforesaid rules #ere applied to the contracts involved therein, but #e see no reason #hy the sa$e should not apply to the donation in the present case. *rticle ,3+ of the 0ivil 0ode provides that donations inter %i%os shall be governed by the general provisions on contracts and obligations in all that is not deter$ined in 3itle III, Doo2 III on donations. @o#, said 3itle III does not have an e plicit provision on the $atter of a donation #ith a resolutory condition and #hich is subject to an e press provision that the sa$e shall be considered ipso facto revo2ed upon the breach of said resolutory condition i$posed in the deed therefor, as is the case of the deed presently in 7uestion. 3he suppletory application of the foregoing doctrinal rulings to the present controversy is conse7uently justified. 3he validity of such a stipulation in the deed of donation providing for the auto$atic reversion of the donated property to the donor upon non-co$pliance of the condition #as upheld in the recent case of De Luna, et al. %s. A$rigo, et al. 13 It #as held therein that said stipulation is in the nature of an agree$ent granting a party the right to rescind a contract unilaterally in case of breach, #ithout need of going to court, and that, upon the happening of the resolutory condition or non-co$pliance #ith the conditions of the contract, the donation is auto$atically revo2ed #ithout need of a judicial declaration to that effect. Bhile #hat #as the subject of that case #as an onerous donation #hich, under *rticle ,33 of the 0ivil 0ode is governed by the rules on contracts, since the donation in the case at bar is also subject to the sa$e rules because of its provision on auto$atic revocation upon the violation of a resolutory condition, fro$ parity of reasons said pronounce$ents in De Luna pertinently apply. 3he rationale for the foregoing is that in contracts providing for auto$atic revocation, judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already dee$ed rescinded by virtue of an agree$ent providing for rescission even #ithout judicial intervention, but in order to deter$ine #hether or not the rescission #as proper. 10 Bhen a deed of donation, as in this case, e pressly provides for auto$atic revocation and reversion of the property donated, the rules on contract and the general rules on prescription should apply, and not *rticle ,&A of the 0ivil 0ode. Since *rticle 130& of said 0ode authori/es the parties to a contract to establish such stipulations, clauses, ter$s and conditions not contrary to la#, $orals, good custo$s, public order or public policy, #e are of the opinion that, at the very least, that stipulation of the parties providing for auto$atic revocation of the deed of donation, #ithout prior judicial action for that purpose, is valid subject to the deter$ination of the propriety of the rescission sought. Bhere such propriety is sustained, the decision of the court #ill be $erely declaratory of the revocation, but it is not in itself the revocatory act. )n the foregoing ratiocinations, the 0ourt of *ppeals co$$itted no error in holding that the cause of action of herein private respondents has not yet prescribed since an action to enforce a #ritten contract prescribes in ten =10> years. 19 It is our vie# that *rticle ,&A #as intended to provide a judicial re$edy in case of non-fulfill$ent or contravention of conditions specified in the deed of donation if and #hen the parties have not agreed on the auto$atic revocation of such donation upon the occurrence of the contingency conte$plated therein. 3hat is not the situation in the case at bar. @onetheless, #e find that although the action filed by private respondents $ay not be dis$issed by reason of prescription, the sa$e should be dis$issed on the ground that private respondents have no cause of action against petitioners.

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3he cause of action of private respondents is based on the alleged breach by petitioners of the resolutory condition in the deed of donation that the property donated should not be sold #ithin a period of one hundred =100> years fro$ the date of e ecution of the deed of donation. Said condition, in our opinion, constitutes an undue restriction on the rights arising fro$ o#nership of petitioners and is, therefore, contrary to public policy. "onation, as a $ode of ac7uiring o#nership, results in an effective transfer of title over the property fro$ the donor to the donee. )nce a donation is accepted, the donee beco$es the absolute o#ner of the property donated. *lthough the donor $ay i$pose certain conditions in the deed of donation, the sa$e $ust not be contrary to la#, $orals, good custo$s, public order and public policy. 3he condition i$posed in the deed of donation in the case before us constitutes a patently unreasonable and undue restriction on the right of the donee to dispose of the property donated, #hich right is an indispensable attribute of o#nership. Such a prohibition against alienation, in order to be valid, $ust not be perpetual or for an unreasonable period of ti$e. 0ertain provisions of the 0ivil 0ode illustrative of the aforesaid policy $ay be considered applicable by analogy. ;nder the third paragraph of *rticle A9A, a donor or testator $ay prohibit partition for a period #hich shall not e ceed t#enty =+0> years. *rticle 8,0, on its part, declares that the dispositions of the testator declaring all or part of the estate inalienable for $ore than t#enty =+0> years are void. It is significant that the provisions therein regarding a testator also necessarily involve, in the $ain, the devolution of property by gratuitous title hence, as is generally the case of donations, being an act of liberality, the i$position of an unreasonable period of prohibition to alienate the property should be dee$ed anathe$a to the basic and actual intent of either the donor or testator. For that reason, the regulatory ar$ of the la# is or $ust be interposed to prevent an unreasonable departure fro$ the nor$ative policy e pressed in the aforesaid *rticles A9A and 8,0 of the 0ode. In the case at bar, #e hold that the prohibition in the deed of donation against the alienation of the property for an entire century, being an unreasonable e$asculation and denial of an integral attribute of o#nership, should be declared as an illegal or i$possible condition #ithin the conte$plation of *rticle ,+, of the 0ivil 0ode. 0onse7uently, as specifically stated in said statutory provision, such condition shall be considered as not i$posed. @o reliance $ay accordingly be placed on said prohibitory paragraph in the deed of donation. 3he net result is that, absent said proscription, the deed of sale supposedly constitutive of the cause of action for the nullification of the deed of donation is not in truth violative of the latter hence, for lac2 of cause of action, the case for private respondents $ust fail. It $ay be argued that the validity of such prohibitory provision in the deed of donation #as not specifically put in issue in the pleadings of the parties. 3hat $ay be true, but such oversight or inaction does not prevent this 0ourt fro$ passing upon and resolving the sa$e. It #ill readily be noted that the provision in the deed of donation against alienation of the land for one hundred =100> years #as the very basis for the action to nullify the deed of d donation. *t the sa$e ti$e, it #as li2e#ise the controverted funda$ent of the $otion to dis$iss the case a 4uo, #hich $otion #as sustained by the trial court and set aside by respondent court, both on the issue of prescription. 3hat ruling of respondent court interpreting said provision #as assigned as an error in the present petition. Bhile the issue of the validity of the sa$e provision #as not s7uarely raised, it is ineluctably related to petitioner:s aforesaid assign$ent of error since both issues are grounded on and refer to the very sa$e provision. 3his 0ourt is clothed #ith a$ple authority to revie# $atters, even if they are not assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the caseC 16 3hus, #e have held that an unassigned error closely related to an error properly assigned, 1/ or upon #hich the deter$ination of the 7uestion properly assigned is dependent, #ill be considered by the appellate court not#ithstanding the failure to assign it as error. 1. *dditionally, #e have laid do#n the rule that the re$and of the case to the lo#er court for further reception of evidence is not necessary #here the 0ourt is in a position to resolve the dispute based on the records before it. )n $any occasions, the 0ourt, in the public interest and for the e peditious ad$inistration of justice, has resolved actions on the $erits instead of re$anding the$ to the trial court for further proceedings, such as #here the ends of justice, #ould not be subserved by the re$and of the case. 19 3he aforestated considerations obtain in and apply to the present case #ith respect to the $atter of the validity of the resolutory condition in 7uestion. B<4F4F)F4, the judg$ent of respondent court is S43 *SI"4 and another judg$ent is hereby rendered "IS(ISSI@6 0ivil 0ase @o. 09'-8A of the Fegional 3rial 0ourt, Dranch LL, I$us, 0avite. S) )F"4F4". G.R. No. 90027 Mar:6 3, 1993 CA AGRO#IN"/ TRIAL "E!ELO+MENT COR+., Petitioner, vs. T,E ,ONORA(LE CO/RT OF A++EAL an0 EC/RITY (AN- AN" TR/ T COM+ANY, Respondents. "A!I"E, JR., J.: Is the contractual relation .et,een a co""ercial .an0 and another party in a contract of rent of a safety deposit .o' ,ith respect to its contents placed .y the latter one of .ailor and .ailee or one of lessor and lesseeK chanro.les virtual la, li.rary 2his is the cru' of the present controversy.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary On % -uly 19+9, petitioner 9throu!h its )resident, $er!io A!uirre: and the spouses #a"on and )aula )u!ao entered into an a!ree"ent ,here.y the for"er purchased fro" the latter t,o 9*: parcels of land for a consideration of )%50,&*5.00. Of this a"ount, )+5,+*5.00 ,as paid as do,npay"ent ,hile the .alance ,as covered .y three 9%: postdated chec0s. A"on! the ter"s and conditions of the a!ree"ent e".odied in a Me"orandu" of 2rue and Actual A!ree"ent of $ale of @and ,ere that the titles to the lots shall .e transferred to the petitioner upon full pay"ent of the purchase price and that the o,ner5s copies of the certificates of titles thereto, 2ransfer Certificates of 2itle 92C2: Bos. *8/&55 and *9*/%/, shall .e deposited in a safety deposit .o' of any .an0. 2he sa"e could .e ,ithdra,n only upon the oint si!natures of a representative of the petitioner and the )u!aos upon full pay"ent of the purchase price. )etitioner, throu!h $er!io A!uirre, and the )u!aos then rented $afety Ceposit 4o' Bo. 1//8 of private respondent $ecurity 4an0 and 2rust Co"pany, a do"estic .an0in! corporation hereinafter referred to as the respondent 4an0. For this purpose, .oth si!ned a contract of lease 91'hi.it 7*7: ,hich contains, inter alia, the follo,in! conditions6 1%. 2he .an0 is not a depositary of the contents of the safe and it has neither the possession nor control of the sa"e.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary

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1/. 2he .an0 has no interest ,hatsoever in said contents, e'cept herein e'pressly provided, and it assu"es a.solutely no lia.ility in connection there,ith. 1 chanro.les virtual la, li.rary After the e'ecution of the contract, t,o 9*: renter5s 0eys ,ere !iven to the renters = one to A!uirre 9for the petitioner: and the other to the )u!aos. A !uard 0ey re"ained in the possession of the respondent 4an0. 2he safety deposit .o' has t,o 9*: 0eyholes, one for the !uard 0ey and the other for the renter5s 0ey, and can .e opened only ,ith the use of .oth 0eys. )etitioner clai"s that the certificates of title ,ere placed inside the said .o'.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2hereafter, a certain Mrs. Mar!arita #a"os offered to .uy fro" the petitioner the t,o 9*: lots at a price of )**5.00 per s(uare "eter ,hich, as petitioner alle!ed in its co"plaint, translates to a profit of )100.00 per s(uare "eter or a total of )*80,500.00 for the entire property. Mrs. #a"os de"anded the e'ecution of a deed of sale ,hich necessarily entailed the production of the certificates of title. In vie, thereof, A!uirre, acco"panied .y the )u!aos, then proceeded to the respondent 4an0 on / Octo.er 19+9 to open the safety deposit .o' and !et the certificates of title. Ao,ever, ,hen opened in the presence of the 4an05s representative, the .o' yielded no such certificates. 4ecause of the delay in the reconstitution of the title, Mrs. #a"os ,ithdre, her earlier offer to purchase the lots3 as a conse(uence thereof, the petitioner alle!edly failed to realiDe the e'pected profit of )*80,500.00. Aence, the latter filed on 1 $epte".er 1980 a co"plaint 2for da"a!es a!ainst the respondent 4an0 ,ith the Court of First Instance 9no, #e!ional 2rial Court: of )asi!, Metro Manila ,hich doc0eted the sa"e as Civil Case Bo. %8%8*.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary In its Ans,er ,ith Counterclai", 3respondent 4an0 alle!ed that the petitioner has no cause of action .ecause of para!raphs 1% and 1/ of the contract of lease 91'hi.it 7*7:3 corollarily, loss of any of the ite"s or articles contained in the .o' could not !ive rise to an action a!ainst it. It then interposed a counterclai" for e'e"plary da"a!es as ,ell as attorney5s fees in the a"ount of )*0,000.00. )etitioner su.se(uently filed an ans,er to the counterclai". 4 chanro.les virtual la, li.rary In due course, the trial court, no, desi!nated as 4ranch 1&1 of the #e!ional 2rial Court 9#2C: of )asi!, Metro Manila, rendered a decision 5 adverse to the petitioner on 8 Cece".er 198&, the dispositive portion of ,hich reads6 <A1#1FO#1, pre"ises considered, ud!"ent is here.y rendered dis"issin! plaintiff5s co"plaint.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary On defendant5s counterclai", ud!"ent is here.y rendered orderin! plaintiff to pay defendant the a"ount of FI>1 2AO;$ABC 9)5,000.00: )1$O$ as attorney5s fees.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary <ith costs a!ainst plaintiff. $ chanro.les virtual la, li.rary 2he unfavora.le verdict is .ased on the trial court5s conclusion that under para!raphs 1% and 1/ of the contract of lease, the 4an0 has no lia.ility for the loss of the certificates of title. 2he court declared that the said provisions are .indin! on the parties.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary Its "otion for reconsideration 7havin! .een denied, petitioner appealed fro" the adverse decision to the respondent Court of Appeals ,hich doc0eted the appeal as CA=G.#. C> Bo. 15150. )etitioner ur!ed the respondent Court to reverse the challen!ed decision .ecause the trial court erred in 9a: a.solvin! the respondent 4an0 fro" lia.ility fro" the loss, 9.: not declarin! as null and void, for .ein! contrary to la,, pu.lic order and pu.lic policy, the provisions in the contract for lease of the safety deposit .o' a.solvin! the 4an0 fro" any lia.ility for loss, 9c: not concludin! that in this urisdiction, as ,ell as under A"erican urisprudence, the lia.ility of the 4an0 is settled and 9d: a,ardin! attorney5s fees to the 4an0 and denyin! the petitioner5s prayer for no"inal and e'e"plary da"a!es and attorney5s fees. ) chanro.les virtual la, li.rary In its Cecision pro"ul!ated on / -uly 1989, 9respondent Court affir"ed the appealed decision principally on the theory that the contract 91'hi.it 7*7: e'ecuted .y the petitioner and respondent 4an0 is in the nature of a contract of lease .y virtue of ,hich the petitioner and its co=renter ,ere !iven control over the safety deposit .o' and its contents ,hile the 4an0 retained no ri!ht to open the said .o' .ecause it had neither the possession nor control over it and its contents. As such, the contract is !overned .y Article 1&/% of the Civil Code 10,hich provides6 Art. 1&/%. In the lease of thin!s, one of the parties .inds hi"self to !ive to another the en oy"ent or use of a thin! for a price certain, and for a period ,hich "ay .e definite or indefinite. Ao,ever, no lease for "ore than ninety=nine years shall .e valid. It invo0ed !olentino vs. .on-ales 11- ,hich held that the o,ner of the property loses his control over the property leased durin! the period of the contract = and Article 19+5 of the Civil Code ,hich provides6 Art. 19+5. 2he depositary holdin! certificates, .onds, securities or instru"ents ,hich earn interest shall .e .ound to collect the latter ,hen it .eco"es due, and to ta0e such steps as "ay .e necessary in order that the securities "ay preserve their value and the ri!hts correspondin! to the" accordin! to la,.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2he a.ove provision shall not apply to contracts for the rent of safety deposit .o'es. and then concluded that 7IcJlearly, the defendant=appellee is not under any duty to "aintain the contents of the .o'. 2he stipulation a.solvin! the defendant=appellee fro" lia.ility is in accordance ,ith the nature of the contract of lease and cannot .e re!arded as contrary to la,, pu.lic order and pu.lic policy.7 122he appellate court ,as (uic0 to add, ho,ever, that under the contract of lease of the safety deposit .o', respondent 4an0 is not co"pletely free fro" lia.ility as it "ay still .e "ade ans,era.le in case unauthoriDed persons enter into the vault area or ,hen the rented .o' is forced open. 2hus, as e'pressly provided for in stipulation nu".er 8 of the contract in (uestion6 8. 2he 4an0 shall use due dili!ence that no unauthoriDed person shall .e ad"itted to any rented safe and .eyond this, the 4an0 ,ill not .e responsi.le for the contents of any safe rented fro" it. 13 chanro.les virtual la, li.rary Its "otion for reconsideration 14havin! .een denied in the respondent Court5s #esolution of *8 Au!ust 1989, 15petitioner too0 this recourse under #ule /5 of the #ules of Court and ur!es ;s to revie, and set aside the respondent Court5s rulin!. )etitioner avers that .oth the respondent Court and the trial court 9a: did not properly and le!ally apply the correct la, in this case, 9.: acted ,ith !rave a.use of discretion or in e'cess of urisdiction a"ountin! to lac0 thereof and 9c: set a precedent that is contrary to, or is a departure fro" precedents adhered to and affir"ed .y decisions of this Court and precepts in A"erican urisprudence adopted in the )hilippines. It reiterates the ar!u"ents it had raised in its "otion to reconsider the trial court5s decision, the .rief su."itted to the respondent Court and the "otion to reconsider the latter5s decision. In a nutshell, petitioner "aintains that re!ardless of no"enclature, the contract for the rent of the safety deposit .o' 91'hi.it 7*7: is actually a contract of deposit !overned .y 2itle MII, 4oo0 I> of the Civil Code of the )hilippines. 1$Accordin!ly, it is clai"ed that the respondent 4an0 is lia.le for the loss of the certificates of title pursuant to Article 19+* of the said Code ,hich provides6 Art. 19+*. 2he depositary is o.li!ed to 0eep the thin! safely and to return it, ,hen re(uired, to the depositor, or to his heirs and successors, or to the person ,ho "ay have .een desi!nated in the contract. Ais responsi.ility, ,ith re!ard to the safe0eepin! and the

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loss of the thin!, shall .e !overned .y the provisions of 2itle I of this 4oo0.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary If the deposit is !ratuitous, this fact shall .e ta0en into account in deter"inin! the de!ree of care that the depositary "ust o.serve. )etitioner then (uotes a passa!e fro" A"erican -urisprudence 17 ,hich is supposed to e'pound on the prevailin! rule in the ;nited $tates, to ,it6 2he prevailin! rule appears to .e that ,here a safe=deposit co"pany leases a safe=deposit .o' or safe and the lessee ta0es possession of the .o' or safe and places therein his securities or other valua.les, the relation of .ailee and .ail or is created .et,een the parties to the transaction as to such securities or other valua.les3 the fact that the safe=deposit co"pany does not 0no,, and that it is not e'pected that it shall 0no,, the character or description of the property ,hich is deposited in such safe=deposit .o' or safe does not chan!e that relation. 2hat access to the contents of the safe=deposit .o' can .e had only .y the use of a 0ey retained .y the lessee 9 ,hether it is the sole 0ey or one to .e used in connection ,ith one retained .y the lessor: does not operate to alter the fore!oin! rule. 2he ar!u"ent that there is not, in such a case, a delivery of e'clusive possession and control to the deposit co"pany, and that therefore the situation is entirely different fro" that of ordinary .ail"ent, has .een !enerally re ected .y the courts, usually on the !round that as possession "ust .e either in the depositor or in the co"pany, it should reasona.ly .e considered as in the latter rather than in the for"er, since the co"pany is, .y the nature of the contract, !iven a.solute control of access to the property, and the depositor cannot !ain access thereto ,ithout the consent and active participation of the co"pany. . . . 9citations o"itted:. and a se!"ent fro" <ords and )hrases 1),hich states that a contract for the rental of a .an0 safety deposit .o' in consideration of a fi'ed a"ount at stated periods is a .ail"ent for hire. )etitioner further ar!ues that conditions 1% and 1/ of the (uestioned contract are contrary to la, and pu.lic policy and should .e declared null and void. In support thereof, it cites Article 1%0& of the Civil Code ,hich provides that parties to a contract "ay esta.lish such stipulations, clauses, ter"s and conditions as they "ay dee" convenient, provided they are not contrary to la,, "orals, !ood custo"s, pu.lic order or pu.lic policy.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary After the respondent 4an0 filed its co""ent, this Court !ave due course to the petition and re(uired the parties to si"ultaneously su."it their respective Me"oranda.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 2he petition is partly "eritorious.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary <e a!ree ,ith the petitioner5s contention that the contract for the rent of the safety deposit .o' is not an ordinary contract of lease as defined in Article 1&/% of the Civil Code. Ao,ever, <e do not fully su.scri.e to its vie, that the sa"e is a contract of deposit that is to .e strictly !overned .y the provisions in the Civil Code on deposit3 19the contract in the case at .ar is a special 0ind of deposit. It cannot .e characteriDed as an ordinary contract of lease under Article 1&/% .ecause the full and a.solute possession and control of the safety deposit .o' ,as not !iven to the oint renters = the petitioner and the )u!aos. 2he !uard 0ey of the .o' re"ained ,ith the respondent 4an03 ,ithout this 0ey, neither of the renters could open the .o'. On the other hand, the respondent 4an0 could not li0e,ise open the .o' ,ithout the renter5s 0ey. In this case, the said 0ey had a duplicate ,hich ,as "ade so that .oth renters could have access to the .o'.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary Aence, the authorities cited .y the respondent Court 20on this point do not apply. Beither could Article 19+5, also relied upon .y the respondent Court, .e invo0ed as an ar!u"ent a!ainst the deposit theory. O.viously, the first para!raph of such provision cannot apply to a depositary of certificates, .onds, securities or instru"ents ,hich earn interest if such docu"ents are 0ept in a rented safety deposit .o'. It is clear that the depositary cannot open the .o' ,ithout the renter .ein! present.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary <e o.serve, ho,ever, that the deposit theory itself does not alto!ether find unani"ous support even in A"erican urisprudence. <e a!ree ,ith the petitioner that under the latter, the prevailin! rule is that the relation .et,een a .an0 rentin! out safe=deposit .o'es and its custo"er ,ith respect to the contents of the .o' is that of a .ail or and .ailee, the .ail"ent .ein! for hire and "utual .enefit. 212his is ust the prevailin! vie, .ecause6 2here is, ho,ever, so"e support for the vie, that the relationship in (uestion "i!ht .e "ore properly characteriDed as that of landlord and tenant, or lessor and lessee. It has also .een su!!ested that it should .e characteriDed as that of licensor and licensee. 2he relation .et,een a .an0, safe=deposit co"pany, or stora!e co"pany, and the renter of a safe=deposit .o' therein, is often descri.ed as contractual, e'press or i"plied, oral or ,ritten, in ,hole or in part. 4ut there is apparently no urisdiction in ,hich any rule other than that applica.le to .ail"ents !overns (uestions of the lia.ility and ri!hts of the parties in respect of loss of the contents of safe=deposit .o'es. 229citations o"itted: In the conte't of our la,s ,hich authoriDe .an0in! institutions to rent out safety deposit .o'es, it is clear that in this urisdiction, the prevailin! rule in the ;nited $tates has .een adopted. $ection +* of the General 4an0in! Act 23pertinently provides6 $ec. +*. In addition to the operations specifically authoriDed else,here in this Act, .an0in! institutions other than .uildin! and loan associations "ay perfor" the follo,in! services6 9a: #eceive in custody funds, docu"ents, and valua.le o. ects, and rent safety deposit .o'es for the safe!uardin! of such effects. ''' ''' ''' chanro.les virtual la, li.rary 2he .an0s shall perfor" the services per"itted under su.sections 9a:, 9.: and 9c: of this section as depositories or as a!ents. . . . 249e"phasis supplied: Bote that the pri"ary function is still found ,ithin the para"eters of a contract of deposit, i.e., the receivin! in custody of funds, docu"ents and other valua.le o. ects for safe0eepin!. 2he rentin! out of the safety deposit .o'es is not independent fro", .ut related to or in con unction ,ith, this principal function. A contract of deposit "ay .e entered into orally or in ,ritin! 25and, pursuant to Article 1%0& of the Civil Code, the parties thereto "ay esta.lish such stipulations, clauses, ter"s and conditions as they "ay dee" convenient, provided they are not contrary to la,, "orals, !ood custo"s, pu.lic order or pu.lic policy. 2he depositary5s responsi.ility for the safe0eepin! of the o. ects deposited in the case at .ar is !overned .y 2itle I, 4oo0 I> of the Civil Code. Accordin!ly, the depositary ,ould .e lia.le if, in perfor"in! its o.li!ation, it is found !uilty of fraud, ne!li!ence, delay or contravention of the tenor of the a!ree"ent. 2$In the a.sence of any stipulation prescri.in! the de!ree of dili!ence re(uired, that of a !ood father of a fa"ily is to .e o.served. 27Aence, any stipulation e'e"ptin! the depositary fro" any lia.ility arisin! fro" the loss of the thin! deposited on account of fraud, ne!li!ence or delay ,ould .e void for .ein! contrary to la, and pu.lic policy. In the instant case, petitioner "aintains that conditions 1% and 1/ of the (uestioned contract of lease of the safety deposit .o', ,hich read6 1%. 2he .an0 is not a depositary of the contents of the safe and it has neither the possession nor control of the sa"e.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary 1/. 2he .an0 has no interest ,hatsoever in said contents, e'cept herein e'pressly provided, and it assu"es a.solutely no lia.ility in connection there,ith. 2)

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are void as they are contrary to la, and pu.lic policy. <e find Ourselves in a!ree"ent ,ith this proposition for indeed, said provisions are inconsistent ,ith the respondent 4an05s responsi.ility as a depositary under $ection +*9a: of the General 4an0in! Act. 4oth e'e"pt the latter fro" any lia.ility e'cept as conte"plated in condition 8 thereof ,hich li"its its duty to e'ercise reasona.le dili!ence only ,ith respect to ,ho shall .e ad"itted to any rented safe, to ,it6 8. 2he 4an0 shall use due dili!ence that no unauthoriDed person shall .e ad"itted to any rented safe and .eyond this, the 4an0 ,ill not .e responsi.le for the contents of any safe rented fro" it. 29 Further"ore, condition 1% stands on a ,ron! pre"ise and is contrary to the actual practice of the 4an0. It is not correct to assert that the 4an0 has neither the possession nor control of the contents of the .o' since in fact, the safety deposit .o' itself is located in its pre"ises and is under its a.solute control3 "oreover, the respondent 4an0 0eeps the !uard 0ey to the said .o'. As stated earlier, renters cannot open their respective .o'es unless the 4an0 cooperates .y presentin! and usin! this !uard 0ey. Clearly then, to the e'tent a.ove stated, the fore!oin! conditions in the contract in (uestion are void and ineffective. It has .een said6 <ith respect to property deposited in a safe=deposit .o' .y a custo"er of a safe=deposit co"pany, the parties, since the relation is a contractual one, "ay .y special contract define their respective duties or provide for increasin! or li"itin! the lia.ility of the deposit co"pany, provided such contract is not in violation of la, or pu.lic policy. It "ust clearly appear that there actually ,as such a special contract, ho,ever, in order to vary the ordinary o.li!ations i"plied .y la, fro" the relationship of the parties3 lia.ility of the deposit co"pany ,ill not .e enlar!ed or restricted .y ,ords of dou.tful "eanin!. 2he co"pany, in rentin! safe=deposit .o'es, cannot e'e"pt itself fro" lia.ility for loss of the contents .y its o,n fraud or ne!li!ence or that of its a!ents or servants, and if a provision of the contract "ay .e construed as an atte"pt to do so, it ,ill .e held ineffective for the purpose. Althou!h it has .een held that the lessor of a safe=deposit .o' cannot li"it its lia.ility for loss of the contents thereof throu!h its o,n ne!li!ence, the vie, has .een ta0en that such a lessor "ay li"its its lia.ility to so"e e'tent .y a!ree"ent or stipulation. 309citations o"itted: 2hus, ,e reach the sa"e conclusion ,hich the Court of Appeals arrived at, that is, that the petition should .e dis"issed, .ut on !rounds (uite different fro" those relied upon .y the Court of Appeals. In the instant case, the respondent 4an05s e'oneration cannot, contrary to the holdin! of the Court of Appeals, .e .ased on or proceed fro" a characteriDation of the i"pu!ned contract as a contract of lease, .ut rather on the fact that no co"petent proof ,as presented to sho, that respondent 4an0 ,as a,are of the a!ree"ent .et,een the petitioner and the )u!aos to the effect that the certificates of title ,ere ,ithdra,a.le fro" the safety deposit .o' only upon .oth parties5 oint si!natures, and that no evidence ,as su."itted to reveal that the loss of the certificates of title ,as due to the fraud or ne!li!ence of the respondent 4an0. 2his in turn flo,s fro" this Court5s deter"ination that the contract involved ,as one of deposit. $ince .oth the petitioner and the )u!aos a!reed that each should have one 91: renter5s 0ey, it ,as o.vious that either of the" could as0 the 4an0 for access to the safety deposit .o' and, ,ith the use of such 0ey and the 4an05s o,n !uard 0ey, could open the said .o', ,ithout the other renter .ein! present.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary $ince, ho,ever, the petitioner cannot .e .la"ed for the filin! of the co"plaint and no .ad faith on its part had .een esta.lished, the trial court erred in conde"nin! the petitioner to pay the respondent 4an0 attorney5s fees. 2o this e'tent, the Cecision 9dispositive portion: of pu.lic respondent Court of Appeals "ust .e "odified.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary <A1#1FO#1, the )etition for #evie, is partially G#AB21C .y deletin! the a,ard for attorney5s fees fro" the / -uly 1989 Cecision of the respondent Court of Appeals in CA=G.#. C> Bo. 15150. As "odified, and su. ect to the pronounce"ent <e "ade a.ove on the nature of the relationship .et,een the parties in a contract of lease of safety deposit .o'es, the dispositive portion of the said Cecision is here.y AFFI#M1C and the instant )etition for #evie, is other,ise C1BI1C for lac0 of "erit.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary Bo pronounce"ent as to costs.chanro.lesvirtuala,li.rary chanro.les virtual la, li.rary $O O#C1#1C. C1CI$IOB )ABGABI4AB, J.6 Is a stipulation in a charter party that the 9o:,ners shall not .e responsi.le for loss, split, short=landin!, .rea0a!es and any 0ind of da"a!es to the car!o1 validK 2his is the "ain (uestion raised in this petition for revie, assailin! the Cecision of #espondent Court of Appeals* in CA=G.#. Bo. C>=*015& pro"ul!ated on Octo.er 15, 1991. 2he Court of Appeals "odified the ud!"ent of the #e!ional 2rial Court of >alenDuela, Metro Manila, 4ranch 1+1, the dispositive portion of ,hich reads6 <A1#1FO#1, -ud!"ent is here.y rendered orderin! $outh $ea $urety and Insurance Co., Inc. to pay plaintiff the su" of 2<O MI@@IOB )1$O$ 9)*,000,000.00: representin! the value of the policy of the lost lo!s ,ith le!al interest thereon fro" the date of de"and on Fe.ruary *, 198/ until the a"ount is fully paid or in the alternative, defendant $even 4rothers $hippin! Corporation to pay plaintiff the a"ount of 2<O MI@@IOB )1$O$ 9)*,000,000.00: representin! the value of lost lo!s plus le!al interest fro" the date of de"and on April */, 198/ until full pay"ent thereof3 the reasona.le attorneys fees in the a"ount e(uivalent to five 95: percent of the a"ount of the clai" and the costs of the suit. )laintiff is here.y ordered to pay defendant $even 4rothers $hippin! Corporation the su" of 2<O A;BC#1C 2AI#2H 2AO;$ABC )1$O$ 9)*%0,000.00: representin! the .alance of the stipulated frei!ht char!es. Cefendant $outh $ea $urety and Insurance Co"panys counterclai" is here.y dis"issed. In its assailed Cecision, #espondent Court of Appeals held6 <A1#1FO#1, the appealed ud!"ent is here.y AFFI#M1C e'cept in so far 9sic: as the lia.ility of the $even 4rothers $hippin! Corporation to the plaintiff is concerned ,hich is here.y #1>1#$1C and $12 A$IC1.%chanro.lesvirtualla,li.rary 2he Facts 2he factual antecedents of this case as narrated in the Court of Appeals Cecision are as follo,s6 It appears that on 1& -anuary 198/, plaintiff 9>alenDuela Aard,ood and Industrial $upply, Inc.: entered into an a!ree"ent ,ith the defendant $even 4rothers 9$hippin! Corporation: ,here.y the latter undertoo0 to load on .oard its vessel MN> $even A".assador the for"ers lauan round lo!s nu".erin! 9/0 at the port of Maconacon, Isa.ela for ship"ent to Manila.

;G.R. No. 10231$. Jun* 30, 1997<

!ALEN4/ELA ,AR"=OO" AN" IN"/ TRIAL /++LY, INC., Petitioner, vs. CO;#2 OF A))1A@$ ABC $1>1B 4#O2A1#$ $AI))IBG CO#)O#A2IOB, Respondents.

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On *0 -anuary 198/, plaintiff insured the lo!s a!ainst loss andNor da"a!e ,ith defendant $outh $ea $urety and Insurance Co., Inc. for )*,000,000.00 and the latter issued its Marine Car!o Insurance )olicy Bo. 8/N*/**9 for )*,000,000.00 on said date. On */ -anuary 198/, the plaintiff !ave the chec0 in pay"ent of the pre"iu" on the insurance policy to Mr. >ictorio Chua. In the "eanti"e, the said vessel MN> $even A".assador san0 on *5 -anuary 198/ resultin! in the loss of the plaintiffs insured lo!s. On %0 -anuary 198/, a chec0 for )5,&*5.00 91'h. 1: to cover pay"ent of the pre"iu" and docu"entary sta"ps due on the policy ,as tendered due to the insurer .ut ,as not accepted. Instead, the $outh $ea $urety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for non=pay"ent of the pre"iu" due in accordance ,ith $ection ++ of the Insurance Code. On * Fe.ruary 198/, plaintiff de"anded fro" defendant $outh $ea $urety and Insurance Co., Inc. the pay"ent of the proceeds of the policy .ut the latter denied lia.ility under the policy. )laintiff li0e,ise filed a for"al clai" ,ith defendant $even 4rothers $hippin! Corporation for the value of the lost lo!s .ut the latter denied the clai". After due hearin! and trial, the court a (uo rendered ud!"ent in favor of plaintiff and a!ainst defendants. 4oth defendants shippin! corporation and the surety co"pany appealed. Cefendant=appellant $even 4rothers $hippin! Corporation i"pute 9sic: to the court a (uo the follo,in! assi!n"ent of errors, to ,it6 A. 2he lo,er court erred in holdin! that the pro'i"ate cause of the sin0in! of the vessel $even A".assadors, ,as not due to fortuitous event .ut to the ne!li!ence of the captain in sto,in! and securin! the lo!s on .oard, causin! the iron chains to snap and the lo!s to roll to the portside. 4. 2he lo,er court erred in declarin! that the non=lia.ility clause of the $even 4rothers $hippin! Corporation fro" lo!s 9sic: of the car!o stipulated in the charter party is void for .ein! contrary to pu.lic policy invo0in! article 1+/5 of the Be, Civil Code. C. 2he lo,er court erred in holdin! defendant=appellant $even 4rothers $hippin! Corporation lia.le in the alternative and orderin!Ndirectin! it to pay plaintiff=appellee the a"ount of t,o "illion 9)*,000,000.00: pesos representin! the value of the lo!s plus le!al interest fro" date of de"and until fully paid. C. 2he lo,er court erred in orderin! defendant=appellant $even 4rothers $hippin! Corporation to pay appellee reasona.le attorneys fees in the a"ount e(uivalent to 5O of the a"ount of the clai" and the costs of the suit. 1. 2he lo,er court erred in not a,ardin! defendant=appellant $even 4rothers Corporation its counter=clai" for attorneys fees. F. 2he lo,er court erred in not dis"issin! the co"plaint a!ainst $even 4rothers $hippin! Corporation. Cefendant=appellant $outh $ea $urety and Insurance Co., Inc. assi!ns the follo,in! errors6 A. 2he trial court erred in holdin! that >ictorio Chua ,as an a!ent of defendant=appellant $outh $ea $urety and Insurance Co"pany, Inc. and li0e,ise erred in not holdin! that he ,as the representative of the insurance .ro0er Colu".ia Insurance 4ro0ers, @td. 4. 2he trial court erred in holdin! that >ictorio Chua received co"pensationNco""ission on the pre"iu"s paid on the policies issued .y the defendant=appellant $outh $ea $urety and Insurance Co"pany, Inc. C. 2he trial court erred in not applyin! $ection ++ of the Insurance Code. C. 2he trial court erred in disre!ardin! the receipt of pay"ent clause attached to and for"in! part of the Marine Car!o Insurance )olicy Bo. 8/N*/**9. 1. 2he trial court in disre!ardin! the state"ent of account or .ill statin! the a"ount of pre"iu" and docu"entary sta"ps to .e paid on the policy .y the plaintiff=appellee. F. 2he trial court erred in disre!ardin! the indorse"ent of cancellation of the policy due to non=pay"ent of pre"iu" and docu"entary sta"ps. G. 2he trial court erred in orderin! defendant=appellant $outh $ea $urety and Insurance Co"pany, Inc. to pay plaintiff=appellee )*,000,000.00 representin! value of the policy ,ith le!al interest fro" * Fe.ruary 198/ until the a"ount is fully paid, A. 2he trial court erred in not a,ardin! to the defendant=appellant the attorneys fees alle!ed and proven in its counterclai". 2he pri"ary issue to .e resolved .efore us is ,hether defendants shippin! corporation and the surety co"pany are lia.le to the plaintiff for the latters lost lo!s./chanro.lesvirtualla,li.rary 2he Court of Appeals affir"ed in part the #2C ud!"ent .y sustainin! the lia.ility of $outh $ea $urety and Insurance Co"pany 9$outh $ea:, .ut "odified it .y holdin! that $even 4rothers $hippin! Corporation 9$even 4rothers: ,as not lia.le for the lost car!o. 5 In "odifyin! the #2C ud!"ent, the respondent appellate court ratiocinated thus6 It appears that there is a stipulation in the charter party that the ship o,ner ,ould .e e'e"pted fro" lia.ility in case of loss. 2he court a (uo erred in applyin! the provisions of the Civil Code on co""on carriers to esta.lish the lia.ility of the shippin! corporation. 2he provisions on co""on carriers should not .e applied ,here the carrier is not actin! as such .ut as a private carrier. ;nder A"erican urisprudence, a co""on carrier underta0in! to carry a special car!o or chartered to a special person only, .eco"es a private carrier. As a private carrier, a stipulation e'e"ptin! the o,ner fro" lia.ility even for the ne!li!ence of its a!ent is valid 9Ao"e Insurance Co"pany, Inc. vs. A"erican $tea"ship A!encies, Inc., *% $C#A */:. 2he shippin! corporation should not therefore .e held lia.le for the loss of the lo!s.&chanro.lesvirtualla,li.rary $outh $ea and herein )etitioner >alenDuela Aard,ood and Industrial $upply, Inc. 9>alenDuela: filed separate petitions for revie, .efore this Court. In a #esolution dated -une *, 1995, this Court denied the petition of $outh $ea.+ 2here the Court found no reason to reverse the factual findin!s of the trial court and the Court of Appeals that Chua ,as indeed an authoriDed a!ent of $outh $ea ,hen he received >alenDuelas pre"iu" pay"ent for the "arine car!o insurance policy ,hich ,as thus .indin! on the insurer.8chanro.lesvirtualla,li.rary 2he Court is no, called upon to resolve the petition for revie, filed .y >alenDuela assailin! the CA Cecision ,hich e'e"pted $even 4rothers fro" any lia.ility for the lost car!o. 2he Issue )etitioner >alenDuelas ar!u"ents revolve around a sin!le issue6 ,hether or not respondent Court 9of Appeals: co""itted a reversi.le error in upholdin! the validity of the stipulation in the charter party e'ecuted .et,een the petitioner and the private respondent e'e"ptin! the latter fro" lia.ility for the loss of petitioners lo!s arisin! fro" the ne!li!ence of its 9$even 4rothers: captain.9chanro.lesvirtualla,li.rary 2he Courts #ulin! 2he petition is not "eritorious. >alidity of $tipulation is /is ota 2he charter party .et,een the petitioner and private respondent stipulated that the 9o:,ners shall not .e responsi.le for loss, split, short=landin!, .rea0a!es and any 0ind of da"a!es to the car!o. 10 2he validity of this stipulation is the lis mota of this case. It should .e noted at the outset that there is no dispute .et,een the parties that the pro'i"ate cause of the sin0in! of 0+ 1even Am(assadors resultin! in the loss of its car!o ,as the snappin! of the iron chains and the su.se(uent rollin! of the lo!s to the portside due

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to the ne!li!ence of the captain in sto,in! and securin! the lo!s on .oard the vessel and not due to fortuitous event.11 @i0e,ise undisputed is the status of )rivate #espondent $even 4rothers as a private carrier ,hen it contracted to transport the car!o of )etitioner >alenDuela. 1ven the latter ad"its this in its petition.1*chanro.lesvirtualla,li.rary 2he trial court dee"ed the charter party stipulation void for .ein! contrary to pu.lic policy,1% citin! Article 1+/5 of the Civil Code ,hich provides6 Art. 1+/5. Any of the follo,in! or si"ilar stipulations shall .e considered unreasona.le, un ust and contrary to pu.lic policy6 91: 2hat the !oods are transported at the ris0 of the o,ner or shipper3 9*: 2hat the co""on carrier ,ill not .e lia.le for any loss, destruction, or deterioration of the !oods3 9%: 2hat the co""on carrier need not o.serve any dili!ence in the custody of the !oods3 9/: 2hat the co""on carrier shall e'ercise a de!ree of dili!ence less than that of a !ood father of a fa"ily, or of a "an of ordinary prudence in the vi!ilance over the "ova.les transported3 95: 2hat the co""on carrier shall not .e responsi.le for the acts or o"issions of his or its e"ployees3 9&: 2hat the co""on carriers lia.ility for acts co""itted .y thieves, or of ro..ers ,ho do not act ,ith !rave or irresisti.le threat, violence or force, is dispensed ,ith or di"inished3 9+: 2hat the co""on carrier is not responsi.le for the loss, destruction, or deterioration of !oods on account of the defective condition of the car, vehicle, ship, airplane or other e(uip"ent used in the contract of carria!e. )etitioner >alenDuela adds that the stipulation is void for .ein! contrary to Articles 58& and 58+ of the Code of Co""erce1/ and Articles 11+0 and 11+% of the Civil Code. Citin! Article 1%0& and para!raph 1, Article 1/09 of the Civil Code,15 petitioner further contends that said stipulation !ives no duty or o.li!ation to the private respondent to o.serve the dili!ence of a !ood father of a fa"ily in the custody and transportation of the car!o.7 2he Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a private carrier in transportin! petitioners lauan lo!s. 2hus, Article 1+/5 and other Civil Code provisions on co""on carriers ,hich ,ere cited .y petitioner "ay not .e applied unless e'pressly stipulated .y the parties in their charter party. 1&chanro.lesvirtualla,li.rary In a contract of private carria!e, the parties "ay validly stipulate that responsi.ility for the car!o rests solely on the charterer, e'e"ptin! the shipo,ner fro" lia.ility for loss of or da"a!e to the car!o caused even .y the ne!li!ence of the ship captain. )ursuant to Article 1%0&1+ of the Civil Code, such stipulation is valid .ecause it is freely entered into .y the parties and the sa"e is not contrary to la,, "orals, !ood custo"s, pu.lic order, or pu.lic policy. Indeed, their contract of private carria!e is not even a contract of adhesion. <e stress that in a contract of private carria!e, the parties "ay freely stipulate their duties and o.li!ations ,hich perforce ,ould .e .indin! on the". ;nli0e in a contract involvin! a co""on carrier, private carria!e does not involve the !eneral pu.lic. Aence, the strin!ent provisions of the Civil Code on co""on carriers protectin! the !eneral pu.lic cannot ustifia.ly .e applied to a ship transportin! co""ercial !oods as a private carrier. Conse(uently, the pu.lic policy e".odied therein is not contravened .y stipulations in a charter party that lessen or re"ove the protection !iven .y la, in contracts involvin! co""on carriers. 2he issue posed in this case and the ar!u"ents raised .y petitioner are not novel3 they ,ere resolved lon! a!o .y this Court in 2ome 3nsurance Co. vs. American 1teamship A'encies, 3nc.18 In that case, the trial court si"ilarly nullified a stipulation identical to that involved in the present case for .ein! contrary to pu.lic policy .ased on Article 1+// of the Civil Code and Article 58+ of the Code of Co""erce. Conse(uently, the trial court held the shipo,ner lia.le for da"a!es resultin! fro" the partial loss of the car!o. 2his Court reversed the trial court and laid do,n, throu!h Mr. -ustice -ose ). 4en!Don, the follo,in! ,ell=settled o.servation and doctrine6 2he provisions of our Civil Code on co""on carriers ,ere ta0en fro" An!lo=A"erican la,. ;nder A"erican urisprudence, a co""on carrier underta0in! to carry a special car!o or chartered to a special person only, .eco"es a private carrier. As a private carrier, a stipulation e'e"ptin! the o,ner fro" lia.ility for the ne!li!ence of its a!ent is not a!ainst pu.lic policy, and is dee"ed valid. $uch doctrine <e find reasona.le. 2he Civil Code provisions on co""on carriers should not .e applied ,here the carrier is not actin! as such .ut as a private carrier. 2he stipulation in the charter party a.solvin! the o,ner fro" lia.ility for loss due to the ne!li!ence of its a!ent ,ould .e void only if the strict pu.lic policy !overnin! co""on carriers is applied. $uch policy has no force ,here the pu.lic at lar!e is not involved, as in this case of a ship totally chartered for the use of a sin!le party. 19 9;nderscorin! supplied.: Indeed, ,here the reason for the rule ceases, the rule itself does not apply. 2he !eneral pu.lic enters into a contract of transportation ,ith co""on carriers ,ithout a hand or a voice in the preparation thereof. 2he ridin! pu.lic "erely adheres to the contract3 even if the pu.lic ,ants to, it cannot su."it its o,n stipulations for the approval of the co""on carrier. 2hus, the la, on co""on carriers e'tends its protective "antle a!ainst one=sided stipulations inserted in tic0ets, invoices or other docu"ents over ,hich the ridin! pu.lic has no understandin! or, ,orse, no choice. Co"pared to the !eneral pu.lic, a charterer in a contract of private carria!e is not si"ilarly situated. It can == and in fact it usually does == enter into a free and voluntary a!ree"ent. In practice, the parties in a contract of private carria!e can stipulate the carriers o.li!ations and lia.ilities over the ship"ent ,hich, in turn, deter"ine the price or consideration of the charter. 2hus, a charterer, in e'chan!e for convenience and econo"y, "ay opt to set aside the protection of the la, on co""on carriers. <hen the charterer decides to e'ercise this option, he ta0es a nor"al .usiness ris0. )etitioner contends that the rule in 2ome 3nsurance is not applica.le to the present case .ecause it covers only a stipulation e'e"ptin! a private carrier fro" lia.ility for the ne!li!ence of his a!ent, .ut it does not apply to a stipulation e'e"ptin! a private carrier li0e private respondent fro" the ne!li!ence of his e"ployee or servant ,hich is the situation in this case.*0 2his contention of petitioner is .ereft of "erit, for it raises a distinction ,ithout any su.stantive difference. 2he case of 2ome 3nsurance specifically dealt ,ith the lia.ility of the shipo,ner for acts or ne!li!ence of its captain and cre,*1 and a charter party stipulation ,hich e'e"pts the o,ner of the vessel fro" any loss or da"a!e or delay arisin! fro" any other source, even fro" the ne!lect or fault of the captain or cre, or so"e other person e"ployed .y the o,ner on .oard, for ,hose acts the o,ner ,ould ordinarily .e lia.le e'cept for said para!raph. ** ;ndou.tedly, 2ome 3nsurance is applica.le to the case at .ar. 2he na0ed assertion of petitioner that the A"erican rule enunciated in 2ome 3nsurance is not the rule in the )hilippines*% deserves scant consideration. 2he Court there cate!orically held that said rule ,as reasona.le and proceeded to apply it in the resolution of that case. )etitioner "isera.ly failed to sho, such circu"stances or ar!u"ents ,hich ,ould necessitate a departure fro" a ,ell=settled rule. Conse(uently, our rulin! in said case re"ains a .indin! udicial precedent .ased on the doctrine of stare decisis and Article 8 of the Civil Code ,hich provides that 9 :udicial decisions applyin! or interpretin! the la,s or the Constitution shall for" part of the le!al syste" of the )hilippines. In fine, the respondent appellate court aptly stated that Iin the case ofJ a private carrier, a stipulation e'e"ptin! the o,ner fro" lia.ility

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even for the ne!li!ence of its a!ent is valid.*/chanro.lesvirtualla,li.rary Other Ar!u"ents On the .asis of the fore!oin! alone, the present petition "ay already .e denied3 the Court, ho,ever, ,ill discuss the other ar!u"ents of petitioner for the .enefit and satisfaction of all concerned. Articles 4"5 and 4"6, Code of Commerce )etitioner >alenDuela insists that the charter party stipulation is contrary to Articles 58& and 58+ of the Code of Co""erce ,hich confer on petitioner the ri!ht to recover da"a!es fro" the shipo,ner and ship a!ent for the acts or conduct of the captain.*5 <e are not persuaded. <hatever ri!hts petitioner "ay have under the afore"entioned statutory provisions ,ere ,aived ,hen it entered into the charter party. Article & of the Civil Code provides that 9r:i!hts "ay .e ,aived, unless the ,aiver is contrary to la,, pu.lic order, pu.lic policy, "orals, or !ood custo"s, or pre udicial to a person ,ith a ri!ht reco!niDed .y la,. As a !eneral rule patri"onial ri!hts "ay .e ,aived as opposed to ri!hts to personality and fa"ily ri!hts ,hich "ay not .e "ade the su. ect of ,aiver.*& 4ein! patently and undou.tedly patri"onial, petitioners ri!ht conferred under said articles "ay .e ,aived. 2his, the petitioner did .y accedin! to the contractual stipulation that it is solely responsi.le for any da"a!e to the car!o, there.y e'e"ptin! the private carrier fro" any responsi.ility for loss or da"a!e thereto. Further"ore, as discussed a.ove, the contract of private carria!e .inds petitioner and private respondent alone3 it is not i".ued ,ith pu.lic policy considerations for the !eneral pu.lic or third persons are not affected there.y. Articles ##6& and ##67, Civil Code )etitioner li0e,ise ar!ues that the stipulation su. ect of this controversy is void for .ein! contrary to Articles 11+0 and 11+% of the Civil Code*+ ,hich read6 Art. 11+0. 2hose ,ho in the perfor"ance of their o.li!ations are !uilty of fraud, ne!li!ence, or delay, and those ,ho in any "anner contravene the tenor thereof, are lia.le for da"a!es Art. 11+%. 2he fault or ne!li!ence of the o.li!or consists in the o"ission of that dili!ence ,hich is re(uired .y the nature of the o.li!ation and corresponds ,ith the circu"stances of the persons, of the ti"e and of the place. <hen ne!li!ence sho,s .ad faith, the provisions of articles 11+1 and **01, shall apply. If the la, does not state the dili!ence ,hich is to .e o.served in the perfor"ance, that ,hich is e'pected of a !ood father of a fa"ily shall .e re(uired. 2he Court notes that the fore!oin! articles are applica.le only to the o.li!or or the one ,ith an o.li!ation to perfor". In the instant case, )rivate #espondent $even 4rothers is not an o.li!or in respect of the car!o, for this o.li!ation to .ear the loss ,as shifted to petitioner .y virtue of the charter party. 2his shiftin! of responsi.ility, as earlier o.served, is not void. 2he provisions cited .y petitioner are, therefore, inapplica.le to the present case. Moreover, the factual "ilieu of this case does not ustify the application of the second para!raph of Article 11+% of the Civil Code ,hich prescri.es the standard of dili!ence to .e o.served in the event the la, or the contract is silent. In the instant case, Article %&* of the Code of Co""erce*8 provides the standard of ordinary dili!ence for the carria!e of !oods .y a carrier. 2he standard of dili!ence under this statutory provision "ay, ho,ever, .e "odified in a contract of private carria!e as the petitioner and private respondent had done in their charter party. Cases Cited (y Petitioner 3napplica(le )etitioner cites 1he8aram vs. Philippine Airlines, 3nc.*9 ,hich, in turn, (uoted Juan 9smael : Co. vs. .a(ino ;arreto : Co.%0 and ar!ues that the pu.lic policy considerations stated there vis--vis contractual stipulations li"itin! the carriers lia.ility .e applied ,ith e(ual force to this case.%1 It also cites anila Railroad Co. vs. Compaia !ransatlantica%* and contends that stipulations e'e"ptin! a party fro" lia.ility for da"a!es due to ne!li!ence should not .e countenanced and should .e strictly construed a!ainst the party clai"in! its .enefit.%% <e disa!ree. 2he cases of 1he8aram and 9smael .oth involve a co""on carrier3 thus, they necessarily ustify the application of such policy considerations and conco"itantly stricter rules. As already discussed a.ove, the pu.lic policy considerations .ehind the ri!orous treat"ent of co""on carriers are a.sent in the case of private carriers. Aence, the strin!ent la,s applica.le to co""on carriers are not applied to private carriers. 2he case of anila Railroad is also inapplica.le .ecause the action for da"a!es there does not involve a contract for transportation. Further"ore, the defendant therein "ade a pro"ise to use due care in the liftin! operations and, conse(uently, it ,as .ound .y its underta0in!3 .esides, the e'e"ption ,as intended to cover accidents due to hidden defects in the apparatus or other unforseea.le occurrences not caused .y its personal ne!li!ence. 2his pro"ise ,as thus construed to "a0e sense to!ether ,ith the stipulation a!ainst lia.ility for da"a!es.%/ In the present case, ,e stress that the private respondent "ade no such pro"ise. 2he a!ree"ent of the parties to e'e"pt the shipo,ner fro" responsi.ility for any da"a!e to the car!o and place responsi.ility over the sa"e to petitioner is the lone stipulation considered no, .y this Court. Finally, petitioner points to 1tandard ,il Co. of Ne8 9ork vs. /opeCostelo,%5 <alter A. 1mith : Co. vs. Cad8allader .i(son /um(er Co.,%& N. !. 2ashim and Co. vs. Rocha and Co.,%+ ,hta Development Co. vs. 1teamshipPompey%8 and /impan'co 1ons vs. 9an'co 1teamship Co.%9 in support of its contention that the shipo,ner .e held lia.le for da"a!es./0 2hese ho,ever are not on all fours ,ith the present case .ecause they do not involve a si"ilar factual "ilieu or an identical stipulation in the charter party e'pressly e'e"ptin! the shipo,ner fro" responsi.ility for any da"a!e to the car!o. =ffect of the $outh $ea Resolution In its "e"orandu", $even 4rothers ar!ues that petitioner has no cause of action a!ainst it .ecause this Court has earlier affir"ed the lia.ility of $outh $ea for the loss suffered .y petitioner. )rivate respondent su."its that petitioner is not le!ally entitled to collect t,ice for a sin!le loss./1 In vie, of the a.ove dis(uisition upholdin! the validity of the (uestioned charter party stipulation and holdin! that petitioner "ay not recover fro" private respondent, the present issue is "oot and acade"ic. It suffices to state that the #esolution of this Court dated -une *, 1995/* affir"in! the lia.ility of $outh $ea does not, .y itself, necessarily preclude the petitioner fro" proceedin! a!ainst private respondent. An a!!rieved party "ay still recover the deficiency fro" the person causin! the loss in the event the a"ount paid .y the insurance co"pany does not fully cover the loss. Article **0+ of the Civil Code provides6 A#2. **0+. If the plaintiffs property has .een insured, and he has received inde"nity fro" the insurance co"pany for the in ury or loss arisin! out of the ,ron! or .reach of contract co"plained of, the insurance co"pany shall .e su.ro!ated to the ri!hts of the insured a!ainst the ,ron!doer or the person ,ho has violated the contract. If the a"ount paid .y the insurance co"pany does not fully cover the in ury or loss, the a!!rieved party shall .e entitled to recover the deficiency fro" the person causin! the loss or in ury. =,EREFORE, pre"ises considered, the petition is here.y D=N3=D for its utter failure to sho, any reversi.le error on the part of #espondent Court. 2he assailed Cecision is A>>3R =D. $O O#C1#1C. G.R. No. 126.00 November 29, 1999 NATALIA P. <U-TAMANTE, petitioner, vs.

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-POU-E- RO6ITO ;. RO-EL &!* NORMA A. RO-EL, respondents. RE-OLUTION PAR6O, J.: 3he case before the 0ourt is a petition for revie# on certiorari 1 to annul the decision of the 0ourt of *ppeals, 2 reversing and setting aside the decision of the Fegional 3rial 0ourt, 3 Oue/on 0ity, Dranch 8A, in an action for specific perfor$ance #ith consignation. )n (arch 8, 198,, at Oue/on 0ity, @or$a Fosel entered into a loan agree$ent #ith petitioner @atalia Dusta$ante and her late husband Is$ael 0. Dusta$ante, under the follo#ing ter$s and conditionsC 1. 3hat the borro#ers are the registered o#ners of a parcel of land, evidenced by 3F*@SF4F 04F3IFI0*34 )F 3I314 @o. 80&&,, containing an area of F);F <;@"F4" 3B4@3N 3<F44 =A+3> SO;*F4 (eters, $ore or less, situated along 0ongressional *venue. +. 3hat the borro#ers #ere desirous to borro# the su$ of )@4 <;@"F4" 3<);S*@" =.100,000.00> .4S)S fro$ the 14@"4F, for a period of t#o =+> years, counted fro$ (arch 1, 198,, #ith an interest of 4I6<344@ =18Q> .4F04@3 per annum, and to guaranty the pay$ent thereof, they are putting as a collateral S4-4@3N =,0> SO;*F4 (434FS portion, inclusive of the apart$ent therein, of the aforestated parcel of land, ho#ever, in the event the borro#ers fail to pay, the lender has the option to buy or purchase the collateral for a total consideration of 3B) <;@"F4" 3<);S*@" =.+00,000.00> .4S)S, inclusive of the borro#ed a$ount and interest therein9 3. 3hat the lender do hereby $anifest her agree$ent and confor$ity to the preceding paragraph, #hile the borro#ers do hereby confess receipt of the borro#ed a$ount. 0 Bhen the loan #as about to $ature on (arch 1, 1989, respondents proposed to buy at the pre-set price of .+00,000.00, the seventy =,0> s7uare $eters parcel of land covered by 303 @o. 80&&,, given as collateral to guarantee pay$ent of the loan. .etitioner, ho#ever, refused to sell and re7uested for e tension of ti$e to pay the loan and offered to sell to respondents another residential lot located at Foad +0, .roject 8, Oue/on 0ity, #ith the principal loan plus interest to be used as do#n pay$ent. Fespondents refused to e tend the pay$ent of the loan and to accept the lot in Foad +0 as it #as occupied by s7uatters and petitioner and her husband #ere not the o#ners thereof but #ere $ere land developers entitled to subdivision shares or co$$ission if and #hen they developed at least one half of the subdivision area. 9 <ence, on (arch 1, 1989, petitioner tendered pay$ent of the loan to respondents #hich the latter refused to accept, insisting on petitioner:s signing a prepared deed of absolute sale of the collateral. )n February +8, 1990, respondents filed #ith the Fegional 3rial 0ourt, Oue/on 0ity, Dranch 8A, a co$plaint for specific perfor$ance #ith consignation against petitioner and her spouse. 6 @evertheless, on (arch A, 1990, respondents sent a de$and letter as2ing petitioner to sell the collateral pursuant to the option to buy e$bodied in the loan agree$ent. )n the other hand, on (arch ', 1990, petitioner filed in the Fegional 3rial 0ourt, Oue/on 0ity a petition for consignation, and deposited the a$ount of .1'3,000.00 #ith the 0ity 3reasurer of Oue/on 0ity on *ugust 10, 1990. / Bhen petitioner refused to sell the collateral and barangay conciliation failed, respondents consigned the a$ount of .A,,'00.00 #ith the trial court. . In arriving at the a$ount deposited, respondents considered the principal loan of .100,000.00 and 18Q interest per annum thereon, #hich a$ounted to .'+,'00.00. 9 3he principal loan and the interest ta2en together a$ounted to .1'+,'00.00, leaving a balance of . A,,'00.00. 10 *fter due trial, on @ove$ber 10, 199+, the trial court rendered decision holdingC B<4F4F)F4, pre$ises considered, judg$ent is hereby rendered as follo#sC 1. "enying the plaintiff:s prayer for the defendants: e ecution of the "eed of Sale to 0onvey the collateral in plaintiffs: favor9 +. )rdering the defendants to pay the loan of .100,000.00 #ith interest thereon at 18Q per annum co$$encing on (arch +, 1989, up to and until *ugust 10, 1990, #hen defendants deposited the a$ount #ith the )ffice of the 0ity 3reasurer under )fficial Feceipt @o. 011&'A8 =4 hibit ?+?>9 and 3. 3o pay *ttorney:s Fees in the a$ount of .',000.00, plus costs of suit. S) )F"4F4". Oue/on 0ity, .hilippines, @ove$ber 10, 199+. 34)")F) .. F46I@) !udge 11 )n @ove$ber 1&, 199+, respondents appealed fro$ the decision to the 0ourt of *ppeals. 12 )n !uly 8, 199&, the 0ourt of *ppeals rendered decision reversing the ruling of the Fegional 3rial 0ourt. 3he dispositive portion of the 0ourt of *ppeals: decision readsC I@ -I4B )F 3<4 F)F46)I@6, the judg$ent appeal =sic> fro$ is '(C('S(D and S(/ AS#D( and a ne# one entered in favor of the plaintiffs ordering the defendants to accept the a$ount of .A,,000.00 deposited #ith the 0ler2 of 0ourt of Fegional 3rial 0ourt of Oue/on 0ity under )fficial Feceipt @o. 0,198A,, and for defendants to e ecute the necessary "eed of Sale in favor of the plaintiffs over the ,0 SO;*F4 (434F portion and the apart$ent standing thereon being occupied by the plaintiffs and covered by 303 @o. 80&&, #ithin fifteen =1'> days fro$ finality hereof. "efendants, in turn, are allo#ed to #ithdra# the a$ount of .1'3,000.00 deposited by the$ under )fficial Feceipt @o. 011&'A8 of the 0ity 3reasurer:s )ffice of Oue/on 0ity. *ll other clai$s and counterclai$s are D#S!#SS(D, for lac2 of sufficient basis. @o costs. S) )F"4F4". 13 <ence, this petition. 10

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)n !anuary +0, 199,, #e re7uired respondents to co$$ent on the petition #ithin ten =10> days fro$ notice. 19 )n February +,, 199,, respondents filed their co$$ent. 16 )n February 9, 1998, #e resolved to deny the petition on the ground that there #as no reversible error on the part of respondent court in ordering the e ecution of the necessary deed of sale in confor$ity the #ith the parties: stipulated agree$ent. 3he contract is the la# bet#een the parties thereof =Syjuco v. 0ourt of *ppeals, 1,+ S0F* 111 118, citing *hil. American 7eneral #nsurance %. !utuc, &1 S0F* ++9 5errera %. *etrophil Corporation, 1A& S0F* 3&0>. 1/ )n (arch 1,, 1998, petitioner filed #ith this 0ourt a $otion for reconsideration of the denial alleging that the real intention of the parties to the loan #as to put up the collateral as guarantee si$ilar to an e7uitable $ortgage according to *rticle 1&0+ of the 0ivil 0ode. 1. )n *pril +1, 1998, respondents filed an opposition to petitioner:s $otion for reconsideration. 3hey contend that the agree$ent bet#een the parties #as not a sale #ith right of repurchase, but a loan #ith interest at 18Q per annum for a period of t#o years and if petitioner fails to pay, the respondent #as given the right to purchase the property or apart$ent for .+00,000.00, #hich is not contrary to la#, $orals, good custo$s, public order or public policy. 19 ;pon due consideration of petitioner:s $otion, #e no# resolve to grant the $otion for reconsideration. 3he 7uestions presented are #hether petitioner failed to pay the loan at its $aturity date and #hether the stipulation in the loan contract #as valid and enforceable. Be rule that petitioner did not fail to pay the loan. 3he loan #as due for pay$ent on (arch 1, 1989. )n said date, petitioner tendered pay$ent to settle the loan #hich respondents refused to accept, insisting that petitioner sell to the$ the collateral of the loan. Bhen respondents refused to accept pay$ent, petitioner consigned the a$ount #ith the trial court. Be note the eagerness of respondents to ac7uire the property given as collateral to guarantee the loan. 3he sale of the collateral is an obligation #ith a suspensive condition. 20 It is dependent upon the happening of an event, #ithout #hich the obligation to sell does not arise. Since the event did not occur, respondents do not have the right to de$and fulfill$ent of petitioner:s obligation, especially #here the sa$e #ould not only be disadvantageous to petitioner but #ould also unjustly enrich respondents considering the inade7uate consideration =.+00,000.00> for a ,0 s7uare $eter property situated at 0ongressional *venue, Oue/on 0ity. Fespondents argue that contracts have the force of la# bet#een the contracting parties and $ust be co$plied #ith in good faith. 21 3here are, ho#ever, certain e ceptions to the rule, specifically *rticle 130& of the 0ivil 0ode, #hich providesC *rt. 130&. 3he contracting parties $ay establish such stipulations, clauses, ter$s and conditions as they $ay dee$ convenient, provided they are not contrary to la#, $orals, good custo$s, public order, or public policy. * scrutiny of the stipulation of the parties reveals a subtle intention of the creditor to ac7uire the property given as security for the loan. 3his is e$braced in the concept of pactum commissorium, #hich is proscribed by la#. 22 3he ele$ents of pactum commissorium are as follo#sC =1> there should be a property $ortgaged by #ay of security for the pay$ent of the principal obligation, and =+> there should be a stipulation for auto$atic appropriation by the creditor of the thing $ortgaged in case of non-pay$ent of the principal obligation #ithin the stipulated period. 23 In .a6pil %s. #ntermediate Appellate Court, 20 #e saidC 3he arrange$ent entered into bet#een the parties, #hereby *ulong !aulap #as to be ?considered sold to hi$ =respondent> . . . in case petitioner fails to rei$burse -aldes, $ust then be construed as tanta$ount to pactum commissorium #hich is e pressly prohibited by *rt. +088 of the 0ivil 0ode. For, there #as to be auto$atic appropriation of the property by -aldes in the event of failure of petitioner to pay the value of the advances. 3hus, contrary to respondent:s $anifestation, all the ele$ents of a pactum commissorium #ere presentC there #as a creditor-debtor relationship bet#een the parties9 the property #as used as security for the loan9 and there #as auto$atic appropriation by respondent of *ulong !aulap in case of default of petitioner. * significant tas2 in contract interpretation is the ascertain$ent of the intention of the parties and loo2ing into the #ords used by the parties to project that intention. In this case, the intent to appropriate the property given as collateral in favor of the creditor appears to be evident, for the debtor is obliged to dispose of the collateral at the pre-agreed consideration a$ounting to practically the sa$e a$ount as the loan. In effect, the creditor ac7uires the collateral in the event of non pay$ent of the loan. 3his is #ithin the concept of pactum commissorium. Such stipulation is void. 29 *ll persons in need of $oney are liable to enter into contractual relationships #hatever the condition if only to alleviate their financial burden albeit te$porarily. <ence, courts are duty bound to e ercise caution in the interpretation and resolution of contracts lest the lenders devour the borro#ers li2e vultures do #ith their prey. B<4F4F)F4, #e 6F*@3 petitioner:s $otion for reconsideration and S43 *SI"4 the 0ourt:s resolution of February 9, 1998. Be F4-4FS4 the decision of the 0ourt of *ppeals in 0*-6.F. 0- @o. A0193. In lieu thereof, #e hereby "IS(ISS the co$plaint in 0ivil 0ase @o. O-90-A813. @o costs. S) )F"4F4". G.R. No. 15121) January 2), 2003 NATIONAL /GAR TRA"ING an0>or '6* /GAR REG/LATORY A"MINI TRATION, petitioners, vs. +,ILI++INE NATIONAL (AN-, respondent. YNARE # ANTIAGO, J.? 2his is a petition for revie, ,hich see0s to set aside the decision of the Court of Appeals dated Au!ust 10, *001 in CA=G.#. $). Bo. 5810*, 1 upholdin! the decision of the Office of the )resident dated $epte".er 1+, 1999, * as ,ell as the resolution dated Cece".er 1*, *001 denyin! petitioners5 "otion for reconsideration. 2he antecedent facts, as culled fro" the records, are as follo,s6 $o"eti"e in Fe.ruary 19+/, then )resident Ferdinand 1. Marcos issued )residential Cecree Bo. %88 % constitutin! the )hilippine $u!ar Co""ission 9)AI@$;COM:, as the sole .uyin! and sellin! a!ent of su!ar on the (uedan per"it level. In Bove".er of the sa"e year, )C 5+9 / ,as issued, authoriDin! the )hilippine 1'chan!e Co"pany, Inc. 9)AI@1MCAABG1:, a ,holly o,ned su.sidiary of )hilippine Bational 4an0 9)B4: to serve as the "ar0etin! a!ent of )AI@$;COM. )ursuant to )C 5+9, )AI@1MCAABG15s purchases of su!ar shall .e financed .y )B4 and the proceeds of su!ar tradin!

46 | P a g e
operations of )AI@1MCAABG1 shall .e used to pay its lia.ilities ,ith )B4. 5 $i"ilarly, in Fe.ruary 19+5, )C &59 ,as issued, constitutin! )AI@1MCAABG1 andNor )B4 as the e'clusive su!ar tradin! a!encies of the !overn"ent for .uyin! su!ar fro" planters or "illers and sellin! or e'portin! the". & )B4 then e'tended loans to )AI@1MCAABG1 for the latter5s su!ar tradin! operations. At first, )AI@1MCAABG1 reli!iously paid its o.li!ations to )B4 .y depositin! the proceeds of the sale of su!ar ,ith the .an0. $u.se(uently, ho,ever, ,ith the fall of su!ar prices in the ,orld "ar0et, )AI@1MCAABG1 defaulted in the pay"ents of its loans a"ountin! to )*0&,0+0,1+*.5+. + In -uly 19++, the Bational $u!ar 2radin! Corporation 9BA$;2#A: replaced )AI@1MCAABG1 as the "ar0etin! a!ent of )AI@$;COM. Accordin!ly, )AI@1MCAABG1 sold and turned over all su!ar (uedans to BA$;2#A. Ao,ever, no physical inventory of the su!ar covered .y the (uedans ,as "ade. 8 Beither BA$;2#A nor )AI@$;COM ,as re(uired to i""ediately pay )AI@1MCAABG1. Bot,ithstandin! this concession, BA$;2#A and )AI@$;COM still failed to pay the su!ar stoc0s covered .y (uedans to )AI@1MCAABG1 ,hich, as of -une %0, 198/, a"ounted to )/98,8*8,8/5.0%. As a conse(uence, )AI@1MCAABG1 ,as not a.le to pay its o.li!ations to )B4. 2o finance its su!ar tradin! operations, BA$;2#A applied for and ,as !ranted 9 a )/08 Million #evolvin! Credit @ine .y )B4 in 1981. 1very ti"e BA$;2#A availed of the credit line, 10 its 1'ecutive >ice=)resident, -ose ;nson, e'ecuted a pro"issory note in favor of )B4. In order to sta.iliDe su!ar li(uidation prices at a "ini"u" of )%00.00 per picul, )AI@$;COM issued on March 15, 1985 Circular @etter Bo. 1C=/=85, considerin! all su!ar produced durin! crop year 198/P 1985 as do"estic su!ar. Further"ore, )AI@$;COM5s Chair"an of 1'ecutive Co""ittee, Ar"ando C. Gustillo proposed on May 1/, 1985 the follo,in! li(uidation sche"e of the su!ar (uedans 11 assi!ned to )B4 .y the su!ar planters6 ;pon notice fro" BA$;2#A, )B4 shall credit the individual producer and "illers loan accounts for their su!ar proceeds and shall treat the sa"e as loans of BA$;2#A. $uch loans shall .e char!ed interest at the prevailin! rates and it shall co""ence five 95: days after receipt .y )B4 of (uedans fro" BA$;2#A. 1* )B4, for its part, issued #esolution Bo. %5% dated May *0, 1985 approvin! 1% the )AI@$;COMNBA$;2#A proposal for the pay"ent of the su!ar (uedans assi!ned to it. )ursuant to said resolution, BA$;2#A ,ould assu"e the interest on the planterN"ill loan accounts. 2he pertinent portion of the #esolution states6 Five 95: days after receipt of the (uedans, BA$;2#A shall a.sor. the accruin! interest on that portion of the planterN"ill loan ,ith )B4 co""ensurate to the net li(uidation value of the su!ar delivered, or in other ,ords, BA$;2#A proposes to assu"e interest that ,ill run on the planterN"ill loan e(uivalent to the net proceeds of the su!ar (uedans, rec0oned five 95: days after (uedan delivery to )B4. 1/ Cespite such li(uidation sche"e, BA$;2#AN)AI@$;COM still failed to re"it the interest pay"ents to )B4 and its .ranches, ,hich interests a"ounted to )&5,/1*,*/5.8/ in 198&. 15 As a result thereof, then )resident Marcos issued )C *005 dissolvin! BA$;2#A effective -anuary %1, 198&. BA$;2#A5s records of its su!ar tradin! operations, ho,ever, ,ere destroyed durin! the 1dsa #evolution in Fe.ruary 198&. On May *8, 198&, then )resident CoraDon C. A(uino issued 1'ecutive Order 91O: Bo. 18 creatin! the $u!ar #e!ulatory Ad"inistration 9$#A: and a.olishin! )AI@$;COM. All the assets and records of )AI@$;COM 1& includin! its .eneficial interests over the assets of BA$;2#A ,ere transferred to $#A. 1+ On -anuary */, 1989, .efore the co"pletion of the three=year ,indin! up period, BA$;2#A esta.lished a trusteeship to li(uidate and settle its accounts. 18 2his not,ithstandin!, BA$;2#A still defaulted in the pay"ent of its loans a"ountin! to )%89,*/&,%*/.&0 9principal and accrued interest: to )B4. In the "eanti"e, )B4 received re"ittances fro" forei!n .an0s totalin! ;$Q%&,5&/,558.90 or the e(uivalent of )&9&,*81,/05.09 representin! the proceeds of BA$;2#A5s su!ar e'ports. 19 $aid re"ittances ,ere then applied .y )B4 to the unpaid accounts of BA$;2#AN)AI@$;COM ,ith )B4 and )AI@1MCAABG1. 2he schedule of re"ittances and applications are as follo,s6 $CA1C;@1 OF #1MI22ABC1$ E A))@ICA2IOB$ Account of BA$;2#A -uly %1, 1988 #1MI22ABC1$ Cate 11=19=85 11=*&=85 0%=0&=8& #e"ittin! 4an0 4an0ers 2rust=Be, Hor0 4an0ers 2rust=Be, Hor0 Credit @yonnais=Manila

0/=**=8& 0&=09=8&

$ocietR GeneralR=Manila Credit @yonnais=Manila 2otal

8*,151,95%.10 5%&,158.&* )&9&,*81,/05.09

A))@ICA2IOB$ Cate 198& 198& Applied to BA$;2#A account ,ith )B4 Clai"s of various CA4 planters Clai"s of various )B4 .ranches for interest or the unpaid CH 198/P85 su!ar proceeds )hilsuco" account carried in the .oo0s of )hile'chan!e A"ount )%89,*/&,%*/.&0 15,8&%,898.+9

198+ 198+E 1988

&5,/1*,*/5.8/ *0&,0+0,1+*.5+ )&+&,59*,&/1.80

;napplied #e"ittance )19,&88,+&%.*97 *0 $u.se(uently, )B4 applied the )19,&88,+&%.*9 to )AI@$;COM5s account ,ith )AI@1MCAABG1 ,hich in turn ,as applied to )AI@1MCAABG15s account ,ith )B4. *1 Accordin!ly, BA$;2#A re(uested ** )B4 to furnish it ,ith the necessary docu"ents andNor e'planation *% concernin! the dispositionNapplication, accountin! and restitution of the re"ittances in (uestion. Cissatisfied, and .elievin! that )B4 failed to provide the" ,ith said docu"ents, BA$;2#A and $#A filed a petition for ar.itration */ ,ith the Cepart"ent of -ustice on Au!ust 1%, 1991. After due proceedin!s, the $ecretary of -ustice rendered a decision, to ,it6 <A1#1FO#1, ud!"ent is here.y rendered S 1. Ceclarin! that of the a"ount of $i' Aundred Binety $i' Million 2,o Aundred 1i!hty One 2housand Four Aundred Five and 09N100 )esos 9)&9&,*81,/05.09: e(uivalent of ;$Q%&,5&/,558.90, forei!n re"ittances received .y respondent )B4, for and in .ehalf of petitioner BA$;2#A S a: the a"ount of 2hree Aundred 1i!hty Bine Million 2,o Aundred Forty $i' 2housand 2hree A"ount Aundred 2,enty Four and &0N100 )esos 9)%89,*/&,%*/.&0: ,as validly applied to )*59,*5%,5+%./& outstandin! account of BA$;2#A to )B43 1//,/59,*/*.8/ .: the a"ount of $i'ty Five 4illion Four Aundred *09,880,/++.0+ 2,elve 2housand 2,o Aundred Forty Five and 8/N100 )esos 9)&5,/1*,*/5.8/: ,as validly applied

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to clai"s of various )B4 .ranches for interest on the unpaid CH 198/P85 su!ar proceeds3 Or a total of Four Aundred Fifty Four Million $i' Aundred Fifty 1i!ht 2housand Five Aundred $eventy and //N100 )esos 9)/5/,&58,5+0.//:. *. Orderin! respondent )B4 to pay petitioners S a: the a"ount of 2,o Aundred $i' Million $eventy 2housand One Aundred $eventy 2,o and 5+N100 )esos 9)*0&,0+0,1+*.5+: representin! the a"ount of re"ittance applied to )AI@$;COM account carried in the .oo0s of )hile'chan!e3 .: the a"ount of Fifteen Million 1i!ht Aundred $i'ty 2hree 2housand 1i!ht Aundred Binety 1i!ht and +9N100 )esos 9)15,8&%,898.+9: representin! the a"ount applied to settle Clai"s of >arious CA4 )lanters3 and to pay interest on .oth ite"s, at le!al rate fro" date of filin! of this case. Costs of suit ,ill .e shared e(ually .y the parties. $O O#C1#1C. *5 4oth parties appealed .efore the Office of the )resident. On $epte".er 1+, 1999, the Office of the )resident "odified the decision of the $ecretary of -ustice, to ,it6 IB >I1< OF A@@ 2A1 FO#1GOIBG, the decision of the $ecretary of -ustice is here.y AFFI#M1C ,ith the MOCIFICA2IOB that the application .y the )hilippine Bational 4an0 of the a"ounts of )**5,+58,9%5.8& and )15,8&%,898.+9 as pay"ent of the )hilippine $u!ar Co""ission5s account carried in the .oo0s of )hilippine 1'chan!e Co., Inc. and the clai"s of various CA4 planters, respectively, is here.y declared le!al and valid. $O O#C1#1C. *& )etitioners5 su.se(uent Motion for #econsideration ,as denied .y the Office of the )resident. *+ 2hereafter, petitioners filed a petition for revie, ,ith the Court of Appeals, alle!in!, inter alia, that the Office of the )resident erred ,hen it relied solely on the docu"ents su."itted .y )B4 to deter"ine the a"ount of the su. ect re"ittances and in not orderin! )B4 to render an accountin! of the said re"ittances3 in declarin! as valid and le!al )B45s application of the su. ect re"ittances to alle!ed BA$;2#A5s accounts ,ith )B4 and )AI@1MCAABG1 ,ithout BA$;2#A5s 0no,led!e, consent and authority. On Au!ust 10, *001, Court of Appeals rendered ud!"ent dis"issin! the petition. *8 )etitioners filed a Motion for #econsideration, ,hich ,as denied on Cece".er 1*, *001. Aence this petition, raisin! the lone issue6 2A1 CA C1CIC1C BO2 IB ACCO#C <I2A @A< ABC <I2A 2A1 A))@ICA4@1 C1CI$IOB OF 2AI$ AOBO#A4@1 CO;#2, ABC G#A>1@H A4;$1C I2$ CI$C#12IOB, <A1B I2 ;)A1@C 2A1 @1GA@I2H ABC >A@ICI2H OF 2A1 OFF$122IBG O# COM)1B$A2IOB OF 2A1 $;4-1C2 #1MI22ABC1$ 2O A@@1G1C ACCO;B2$ OF BA$;2#A <I2A )B4 ABC )AI@1M C1$)I21 2A1 FAC2 2AA2 BO C#1CI2O#=C142O# #1@A2IOB$AI) 1MI$21C 412<11B )B4 ABC BA$;2#A <I2A #1$)1C2 2O 2A1 $AIC #1MI22ABC1$. In essence, BA$;2#A and $#A aver that no co"pensation involvin! the su. ect re"ittances can ta0e effect .y operation of la, since the relationship created .et,een )B4 and BA$;2#A ,as one of trustee=.eneficiary and not one of creditor and de.tor. 2hey also clai" that no le!al co"pensation can ta0e place in favor of )AI@1MCAABG1 since the su. ect re"ittances ,ere received .y )B4 and not )AI@1MCAABG1, a corporation clothed ,ith a separate and distinct corporate personality fro" )B4. 2hey added that )AI@1MCAABG15s account had already prescri.ed. Moreover, BA$;2#A and $#A contend that, assu"in! ar!uendo that creditor=de.tor relationship e'isted .et,een )B4 and BA$;2#A, co"pensation ,as still ille!al, since )B4 has not proven the e'istence of the )/08 "illion revolvin! credit line and the CA4 )lanters Account. )etitioners also assert that the CA4 )lanters Account is an unli(uidated account considerin! that it still has to .e reco"puted pursuant to the $u!ar #econstitution @a,. *9 #espondent )B4 counters that it can apply the forei!n re"ittances on the lon!=overdue o.li!ations of BA$;2#A. 2hey ,ere entered into .y BA$;2#A ,ith the .lessin!, if not ,ith e'press "andate, of the Bational Govern"ent in the pursuit of national interest and policy. )B4 invo0es also the @etter of Intent su."itted .y the Bational Govern"ent to the International Monetary Fund 9IMF:, ,herein the !overn"ent "ade specific reference to the i""ediate pay"ent .y BA$;2#A and )AI@$;COM of their outstandin! o.li!ations ,ith )B4 to .uoy up the country5s sa!!in! econo"y. %0 )etitioners5 ar!u"ents are specious. Article 1%0& of the Be, Civil Code provides6 Contractin! parties "ay esta.lish such stipulations, clauses ter"s and conditions as they "ay dee" convenient provided they are not contrary to la,, "orals, !ood custo"s, pu.lic order or pu.lic policy. In the instant case, BA$;2#A applied for a )/08 "illion credit line ,ith )B4 in order to finance its tradin! operations. )B4, on the other hand, approved said credit line in its #esolution Bo. &8. 2hereafter, BA$;2#A availed of the credit and in fact dre, )%89,*/&,%*/.&0, in principal and accrued interest, fro" the approved credit line. 1vidence sho,s that every ti"e BA$;2#A availed of the credit, its 1'ecutive >ice )resident, -ose ;nson, e'ecuted a pro"issory note %1 in favor of )B4 ,ith the follo,in! proviso6 In the event that this note is not paid at "aturity or ,hen the sa"e .eco"es due under any of the provisions hereof, IN<e here.y authoriDe the 4an0, at its option and ,ithout notice, to apply to the pay"ent of this note, any and all "oneys, securities and thin!s of values ,hich "ay .e in the hands on deposit or other,ise .elon!in! to "eNus and for this purpose, IN<e here.y, ointly and severally, irrevoca.ly constitute and appoint the 4an0 to .e "yNour true Attorney=in=Fact ,ith full po,er and authority for "eNus and in "yNour na"e and .ehalf and ,ithout prior notice to ne!otiate, sell and transfer any "oneys, securities and thin!s of value ,hich it "ay hold, .y pu.lic or private sale and apply the proceeds thereof to the pay"ent of this note. 9Italics ours: <hile ,e a!ree ,ith petitioners that the application of su. ect re"ittances cannot .e ustified under Article 1*+8 in relation to Article 1*+9 of the Civil Code, considerin! that so"e ele"ents of le!al co"pensation ,ere lac0in!, application of the su. ect re"ittances to BA$;2#A5s account ,ith )B4 and the clai"s of various )B4 .ranches for interest on the unpaid CH 198/P1985 su!ar proceeds is authoriDed under the a.ove=(uoted stipulation. )B4 correctly treated the su. ect re"ittances for the account of BA$;2#A as "oneys in its hands ,hich "ay .e applied for the pay"ent of the note. Also, the relationship .et,een BA$;2#AN$#A and )B4 ,hen the for"er constituted the latter as its attorney=in=fact is not a si"ple a!ency. BA$;2#AN$#A has assi!ned and practically surrendered its ri!hts in favor of )B4 for a su.stantial consideration. %* 2o reiterate, BA$;2#AN$#A e'ecuted pro"issory notes in favor of )B4 every ti"e it availed of the credit line. 2he a!ency esta.lished .et,een the parties is one coupled ,ith interest ,hich cannot .e revo0ed or cancelled at ,ill .y any of the parties. %% Bot,ithstandin! its avail"ent of the approved credit, BA$;2#A, for reasons only 0no,n to itself, insisted in clai"in! for refund of the

48 | P a g e
re"ittances. BA$;2#A5s posture is untena.le. BA$;2#A5s actuation runs counter to the !ood faith covenant in contractual relations, re(uired under Article 1159 of the Civil Code, to ,it6 O.li!ations arisin! fro" contract have the force of la, .et,een the contractin! parties and should .e co"plied ,ith in !ood faith. >erily, parties "ay freely stipulate their duties and o.li!ations ,hich perforce ,ould .e .indin! on the". Bot .ein! repu!nant to any le!al proscription, the a!ree"ent entered into .y BA$;2#AN$#A and )B4 "ust .e respected and have the force of la, .et,een the". <ith respect to the application of the su" of )&5,/1*,*/5.8/, %/ the record sho,s that BA$;2#A failed to re"it the interest pay"ents to )B4 despite its o.li!ation under the li(uidation sche"e proposed .y the Chair"an of its 1'ecutive Co""ittee, Ar"ando C. Gustillo, to sta.iliDe su!ar li(uidation prices. Certainly, the authority !ranted .y BA$;2#A to Ar"ando Gustillo to propose such li(uidation sche"e ,as an authority to represent BA$;2#A. ;ndisputedly, any o.li!ation or lia.ility arisin! fro" such a!ree"ent shall .e .indin! on the parties. BA$;2#A, for its part, cannot no, rene!e on its duties, considerin! that it too0 advanta!e of the loan. Aavin! esta.lished that )B4 validly applied the su. ect re"ittances to the interest of BA$;2#A5s loan in the a"ount of )&5,/1*,*/5.8/, the application of the re"ainder of the re"ittance a"ountin! to )15,8&%,898.+9 to the principal is proper. <ith respect to the Central ADucarera de 4ais 9CA4: )lanters account, petitioners "aintained that the su. ect re"ittances cannot .e applied to pay"ent thereof, considerin! that it is unli(uidated and needs reco"putation, pursuant to $ection % of #epu.lic Act Bo. +*0* or the $u!ar #econstitution @a,, ,hich provides6 2he )hilippine Bational 4an0 of the )hilippines and other !overn"ent=o,ned and controlled financial institutions ,hich have !ranted loans to the su!ar producers shall e'tend to accounts of said su!ar producers incurred fro" Crop Hear 19+/P19+5 up to and includin! Crop Hear 198/P1985 the follo,in!6 9a: Condonation of interest char!ed .y the .an0s in e'cess of t,elve percent 91*O: per annu" and all penalties and surchar!es6 9.: 2he reco"puted loans shall .e a"ortiDed for a period of thirteen 91%: years inclusive of a three=year !race period on principal portion of the loan ,ill carry an interest rate of t,elve 91*O: and on the outstandin! .alance effective ,hen the ori!inal pro"issory notes ,ere si!ned and funds released to the producer. $ection & of #ules and #e!ulations i"ple"entin! #A Bo. +*0* also provides6 $1C2IOB *. In cases, ho,ever, ,here su!ar producers have no outstandin! loan .alance ,ith said financial institutions as of the date of effectivity of #A Bo. +*0* 9i.e. su!ar producers ,ho have fully paid their loans either throu!h actual pay"ent or foreclosure of collateral, or ,ho have partially paid their loans and after the co"putation of the interest char!es, they end up ,ith e'cess pay"ent to said financial institutions:, said producers shall .e entitled to the .enefits of reco"putation in accordance ,ith $ections % and / of #A Bo. +*0*, .ut the said financial institutions, instead of refundin! the interest in e'cess of t,elve 91*O: percent per annu", interests, penalties and surchar!es apply the e'cess pay"ent as an offset andNor as pay"ent for the producers5 outstandin! loan o.li!ations. Applications of restructurin! .an0s under $ection & of #A Bo. +*0* shall .e filed ,ith the Central Monetary Authority of the )hilippines ,ithin one 91: year fro" application of e'cess pay"ent. Althou!h it appears fro" said provision that )B4 ,as directed to condone interest, penalties and surchar!es char!ed in e'cess of 1*O per annu", the passa!e of said la, did not forestall le!al co"pensation that had ta0en place .efore its effectivity. 2he loan had .een definitely ascertained, assessed and deter"ined .y )B4. )ursuant to $ection / %5 of #A +*0*, there ,ould .e condonation of interest ,hether the accounts ,ere fully or partially paid. <ith re!ard to the application of the a"ount of )*0&,0+0,1+*.5+ to the )AI@$;COM account carried in the .oo0s of )AI@1MCAABG1, petitioners "aintain that there could .e no application of the su. ect re"ittance, considerin! that the re"ittances ,ere received .y )B4 and not )AI@1MCAABG1 ,hich has a personality separate and distinct fro" )B4. )etitioners5 contention is not ,ell=ta0en. 2here e'ist clear indications that insofar as su!ar tradin! ,as concerned, )AI@1MCAABG1 and )B4 ,ere treated as one entity. )urchases of su!ar of )AI@1MCAABG1 as the e'clusive su!ar tradin! ar" of )AI@$;COM ,ere financed .y )B4 pursuant to )C 5+9. More i"portantly, )B4, a ,holly o,ned .an0 of the !overn"ent at that ti"e, in turn ,holly o,ned and controlled )AI@1MCAABG1. Also, $ection * 9a:, )C &59 declared as ille!al the sale, transfer and assi!n"ent of su!ar .y any planter, producer, "iller, central, or refinery to any person or entity other than )hilippine 1'chan!e, Inc. andNor the )B4. 2o reiterate, )AI@1MCAABG1 failed to pay its loans ,ith )B4 .ecause of the fall of the su!ar prices in the ,orld "ar0et. <hen BA$;2#A su.stituted )AI@1MCAABG1 as "ar0etin! a!ent of )AI@$;COM, 1,/85,5%*./+ "etric tons %& of e'port su!ar ,ere turned over .y )AI@1MCAABG1 to BA$;2#A. 2o reiterate, the forei!n re"ittances constituted proceeds of the sale of the su!ar covered .y (uedans transferred .y )AI@1MCAABG1 to BA$;2#A. =,EREFORE, in vie, of the fore!oin!, the instant petition for revie, is "ENIE". 2he decision of the Court of Appeals dated Au!ust 10, *001 is AFFIRME". O OR"ERE". G.R. No. 134971 Mar:6 25, 2004 ,ERMINIO TAYAG, petitioner, vs. AMANCIA LAC ON, RO EN"O LAC ON, ANTONIO LAC ON, J/AN LAC ON, TEO"I IA LAC ON#E +INO A an0 T,E CO/RT OF A++EAL , respondents. C1CI$IOB CALLEJO, R., J.: 4efore us is a petition for revie, on certiorari of the Cecision1 and the #esolution* of respondent Court of Appeals in CA=G.#. $) Bo. //88%. 2he Case for the )etitioner #espondents An!elica 2iotuyco >da. de @acson,% and her children A"ancia, Antonio, -uan, and 2eodosia, all surna"ed @acson, ,ere the re!istered o,ners of three parcels of land located in Ma.alacat, )a"pan!a, covered .y 2ransfer Certificates of 2itle 92C2: Bos. %59**=#, %59*%=#, and %59*5=#, re!istered in the #e!ister of Ceeds of $an Fernando, )a"pan!a. 2he properties, ,hich ,ere tenanted a!ricultural lands,/ ,ere ad"inistered .y #enato 1spinosa for the o,ner. On March 1+, 199&, a !roup of ori!inal far"ersNtillers, na"ely, -ulio 2ia"son, #enato GoDun, #osita AernandeD, 4ienvenido 2on!ol, Alfonso Flores, Bor"a Luia".ao, #osita 2olentino, -ose $osa, Francisco 2olentino, $r., 1"iliano @a'a"ana, #u.en 2orres, Meliton Allani!ue, Co"in!a @a'a"ana, Felicencia de @eon, 1"iliano #a"os, and another !roup, na"ely, Felino G. 2olentino, #ica GoDun, )erla GoDun, 4eni!no 2olentino, #odolfo Luia".ao, #o"an @a'a"ana, 1ddie $an @uis, #icardo AernandeD, Bicenciana Miranda, -ose GoDun, Alfredo $osa, -ose 2ia"son, Au!usto 2olentino, $i'to AernandeD, Ale' Luia".ao, Isidro 2olentino, Ceferino de @eon,

49 | P a g e
Al.erto AernandeD, Orlando Flores, and Aurelio Flores,5 individually e'ecuted in favor of the petitioner separate Ceeds of Assi!n"ent& in ,hich the assi!nees assi!ned to the petitioner their respective ri!hts as tenantsNtillers of the landholdin!s possessed and tilled .y the" for and in consideration of )50.00 per s(uare "eter. 2he said a"ount ,as "ade paya.le 7,hen the le!al i"pedi"ents to the sale of the property to the petitioner no lon!er e'isted.7 2he petitioner ,as also !ranted the e'clusive ri!ht to .uy the property if and ,hen the respondents, ,ith the concurrence of the defendants=tenants, a!reed to sell the property. In the interi", the petitioner !ave varied su"s of "oney to the tenants as partial pay"ents, and the latter issued receipts for the said a"ounts. On -uly */, 199&, the petitioner called a "eetin! of the defendants= tenants to ,or0 out the i"ple"entation of the ter"s of their separate a!ree"ents.+ Ao,ever, on Au!ust 8, 199&, the defendants=tenants, throu!h -oven Mariano, ,rote the petitioner statin! that they ,ere not attendin! the "eetin! and instead !ave notice of their collective decision to sell all their ri!hts and interests, as tenantsNlessees, over the landholdin! to the respondents.8 1'plainin! their reasons for their collective decision, they ,rote as follo,s6 8a"i ay na!ti,ala sa inyo, na!in! tapat at nanindi!an sa lahat n! atin! napa!0asunduan, hindi tu"an!!ap n! i.an! .uyer o ahente, pero sinira ninyo an! a"in! pa!titi,ala sa pa"a"a!itan n! de"anda ninyo at pa!.i.i!ay n! pro.le"a sa a"in na hindi na"an na!.enta n! lupa. 8aya 0a"i ay na!pulon! at na!pasya na i.enta na lan! an! a"in! 0arapatan o an! a"in! lupan! sinasa0a sa lando,ner o sa "!a pa"ilyan! @acson, dahil aya, na"in! "a!0aroon n! pro.le"a. 8aya 0un! an! sasa.ihin ninyon! itoTy 0atan!ahan, lalo si!uron! "a!i!in! 0atan!ahan 0un! i.e.enta pa na"in sa inyo an! a"in! lupan! sinasa0a, 0aya pasensya na lan! Mister 2aya!. Cahil sinira ninyo an! a"in! pa!titi,ala at 0atapatan.9 On Au!ust 19, 199&, the petitioner filed a co"plaint ,ith the #e!ional 2rial Court of $an Fernando, )a"pan!a, 4ranch //, a!ainst the defendants=tenants, as ,ell as the respondents, for the court to fi' a period ,ithin ,hich to pay the a!reed purchase price of )50.00 per s(uare "eter to the defendants, as provided for in the Ceeds of Assi!n"ent. 2he petitioner also prayed for a ,rit of preli"inary in unction a!ainst the defendants and the respondents therein.10 2he case ,as doc0eted as Civil Case Bo. 10910. In his co"plaint, the petitioner alle!ed, inter alia, the follo,in!6 /. 2hat defendants -ulio 2ia"son, #enato GoDun, #osita AernandeD, 4ienvenido 2on!ol, Alfonso Flores, Bor"a Luia".ao, #osita 2olentino, -ose $osa, Francisco 2olentino, $r., 1"iliano @a'a"ana, #u.en 2orres, Meliton Allani!ue, Co"in!a @a'a"ana, Felicencia de @eon, 1"iliano #a"os are ori!inal far"ers or direct tillers of landholdin!s over parcels of lands covered .y 2ransfer Certificate of 2itle Bos. %59**=#, %59*%=# and %59*5=# ,hich are re!istered in the na"es of defendants @AC$OB$3 ,hile defendants Felino G. 2olentino, #ica GoDun, )erla GoDun, 4eni!no 2olentino, #odolfo Luia".ao, #o"an @a'a"ana, 1ddie $an @uis, Alfredo GoDun, -ose 2ia"son, Au!usto 2olentino, $i'to AernandeD, Ale' Luia".ao, Isidro 2olentino, Ceferino de @eon, Al.erto AernandeD, and Aurelio Flores are su.=tenants over the sa"e parcel of land.

o 2on!ol = == I$on of A.undio 2on!ol 9deceased :J 5. Alfonso Flores = = ) %0,000 ==== &. Bor"a Luia".ao ) 10,000 ==== +. #osita 2olentino ===== ) 10,000 *&,&/8./0 *%1*+1 5&,&/8./0

5. That on March 17, 1996 the defendants TIAMS !, et a"., entered #nto $eeds of Ass#gn%ent &#th the '"a#nt#ff () &h#ch the defendants ass#gned a"" the#r r#ghts and #nterests on the#r "andho"d#ngs to the '"a#nt#ff and that on the sa%e date *March 17, 1996+, the defendants rece#,ed fro% the '"a#nt#ff 'art#a" 'a)%ents #n the a%o-nts corres'ond#ng to the#r na%es. S-(se.-ent 'a)%ents &ere a"so rece#,ed/
1&' 2n0 +AYMEN +AYMEN T T 1.-ulio 2ia"son = ) *0,000 ===== *. #enato GoDun = = ==== Ison of Feli' GoDun 9deceased :J %. #osita Aernande D==== ) 10,000 ) 10,&*1.5/ 9&,000 C,EC - NO. TOTAL

/1,501.10

*%1*+9

51,501.10

**,1*&.08

*%1*8/

%*,1*&.08

8. -ose $osa = = = = ) 10,000 ===== 9. Francisco ) 10,000 2olentino, $r. 10. 1"iliano ) 10,000 @a'a"ana == 11. #u.en 2orres = = ==== I$on of ) 10,000 Mariano 2orres 9deceased :J 1*. Meliton ) 10,000

1/,8&1.%1

*%1*91

*/,8&1.%1

*/,*%+.&*

*%1*8%

%/,*%+.&*

*%1*81

) %0,&*1.5/ 10&,000.0 0

======

======

======

) %%,58+.%1

======

) /%,58+.%1

) 5,000

1/,%+/.*/ 1/,/&5.90

*%1*+/ *%1*85

) 19,%+/.*/ */,/&5.90

/. ) 10,000 4ienvenid

1*,9//.++

*%1*&9

) **,9//.++

50 | P a g e
+. 2hat on Au!ust 8, 199&, the defendants 2IAM$OB, et al., throu!h -oven Mariano, replied that they are no lon!er ,illin! to pursue ,ith the ne!otiations, and instead they !ave notice to the plaintiff that they ,ill sell all their ri!hts and interests to the re!istered o,ners 9defendants @AC$OB$:. A copy of the letter is hereto attached as Anne' 7A7 etc.3 8. 2hat the defendants 2IAM$OB, et. al., have no ri!ht to deal ,ith the defendants @AC$OB or ,ith any third persons ,hile their contracts ,ith the plaintiff are su.sistin!3 defendants @AC$OB$ are inducin! or have induced the defendants 2IAM$OB, et. al., to violate their contracts ,ith the plaintiff3 9. 2hat .y reason of the "alicious acts of all the defendants, plaintiff suffered "oral da"a!es in the for"s of "ental an!uish, "ental torture and serious an'iety ,hich in the su" of )500,000.00 for ,hich defendants should .e held lia.le ointly and severally. 11 In support of his plea for in unctive relief, the petitioner, as plaintiff, also alle!ed the follo,in! in his co"plaint6 11. 2hat to "aintain the status (uo, the defendants 2IAM$OB, et al., should .e restrained fro" rescindin! their contracts ,ith the plaintiff, and the defendants @AC$OB$ should also .e restrained fro" acceptin! any offer of sale or alienation ,ith the defendants 2IAM$OB, et al., in ,hatever for", the latterTs ri!hts and interests in the properties "entioned in para!raph / hereof3 further, the @AC$OB$ should .e restrained fro" encu".erin!Nalienatin! the su. ect properties covered .y 2C2 Bo. %59**=#, %59*%=# and 2C2 Bo. %59*5=#, #e!istry of Ceeds of $an Fernando, )a"pan!a3 1*. 2hat the defendants 2IAM$OB, et al., threaten to rescind their contracts ,ith the plaintiff and are also .ent on sellin!Nalienatin! their ri!hts and interests over the su. ect properties to their co=defendants 9@AC$OB$: or any other persons to the da"a!e and pre udice of the plaintiff ,ho already invested "uch "oney, efforts and ti"e in the said transactions3 1%. 2hat the plaintiff is entitled to the reliefs .ein! de"anded in the co"plaint3 1/. 2hat to prevent irrepara.le da"a!es and pre udice to the plaintiff, as the latter has no speedy and ade(uate re"edy under the ordinary course of la,, it is essential that a <rit of

Allani!ue 1%. Co"in!a ) 5,000 @a'a"ana 1/. Felicencia 10,000 de @eon 15. 1"iliano #a"os 5,000 **,*&9.0* *%1*+5 *+,*&9.0*

a Miranda *5. -ose GoDun *&. Alfredo $osa *+. -ose 2ia"son 18,8&9.&0 *%1*80 *%,8&9.&0 *8. Au!usto 2olentino *9. $i'to Aernande D 10,000 ====== ====== ======

5,000

======

======

======

======

======

======

10,000

======

======

======

5,000

======

======

======

1&. Felino G. 10,000 2olentino 1+. #ica GoDun 18. )erla GoDun 19. 4eni!no 2olentino 5,000 10,000

======

======

======

10,000

======

======

======

====== ======

====== ======

====== ======

%0. Ale' 10,000 Luia".ao %1. Isidro 2olentino 10,000

====== ======

====== ======

====== ======

10,000

======

======

======

*0. #odolfo 10,000 Luia".ao *1. #o"an 10,000 @a'a"ana **. 1ddie $an @uis *%. #icardo Aernande D 10,000

%*. Ceferino de @eon %%. Al.erto Aernande D %/. Orlando FloreD %5. Aurelio Flores

======

11,%+8.+0

*%1*+0

======

======

======

======

10,000

======

======

======

======

======

======

======

======

======

10,000

======

======

======

10,000

======

======

======

10,000

======

======

======

*/. 10,000 Bicencian

======

======

======

&. 2hat on -uly */, 199&, the plaintiff ,rote the defendants 2IAM$OB, et al., invitin! the" for a "eetin! re!ardin! the ne!otiationsNi"ple"entations of the ter"s of their Ceeds of Assi!n"ent3

51 | P a g e
)reli"inary In unction .e issued en oinin! and restrainin! the defendants 2IAM$OB, et al., fro" rescindin! their contracts ,ith the plaintiff and fro" sellin!Nalienatin! their properties to the @AC$OB$ or other persons3 15. 2hat the plaintiff is ,illin! and a.le to put up a reasona.le .ond to ans,er for the da"a!es ,hich the defendants ,ould suffer should the in unction prayed for and !ranted .e found ,ithout .asis.1* 2he petitioner prayed, that after the proceedin!s, ud!"ent .e rendered as follo,s6 1. )endin! the hearin!, a <rit of )reli"inary In unction .e issued prohi.itin!, en oinin! and restrainin! defendants -ulio 2ia"son, #enato GoDun, #osita AernandeD, 4ienvenido 2on!ol, Alfonso Flores, Bor"a Luia".ao, #osita 2olentino, -ose $osa, Francisco 2olentino $r., 1"iliano @a'a"ana, #u.en 2orres, Meliton Allani!ue, Co"in!a @a'a"ana, Felicencia de @eon, 1"iliano #a"os, Felino G. 2olentino, #ica GoDun, )erla GoDun, 4eni!no 2olentino, #odolfo Luia".ao, #o"an @a'a"ana, 1ddie $an @uis, #icardo AernandeD, Bicenciana Miranda, -ose GoDun, Alfredo $osa, -ose 2ia"son, Au!usto 2olentino, Ceferino de @eon, Al.erto AernandeD, Orlando Flores, and Aurelio Flores fro" rescindin! their contracts ,ith the plaintiff and fro" alienatin! their ri!hts and interest over the afore"entioned properties in favor of defendants @AC$OB$ or any other third persons3 and prohi.itin! the defendants @AC$OB$ fro" encu".erin!Nalienatin! 2C2 Bos. %59**= #, %59*%=# and %59*5=# of the #e!istry of Ceeds of $an Fernando, )a"pan!a. *. And pendin! the hearin! of the )rayer for a <rit of )reli"inary In unction, it is prayed that a restrainin! order .e issued restrainin! the afore"entioned defendants 92IAM$OB, et al.: fro" rescindin! their contracts ,ith the plaintiff and fro" alienatin! the su. ect properties to the defendants @AC$OB$ or any third persons3 further, restrainin! and en oinin! the defendants @AC$OB$ fro" encu".erin!Nsellin! the properties covered .y 2C2 Bos. %59**=#, %59*%=#, and %59*5=# of the #e!istry of Ceeds of $an Fernando, )a"pan!a. %. Fi'in! the period ,ithin ,hich plaintiff shall pay the .alance of the purchase price to the defendants 2IAM$OB, et al., after the lapse of le!al i"pedi"ent, if any. /. Ma0in! the <rit of )reli"inary In unction per"anent3 5. Orderin! the defendants to pay the plaintiff the su" of )500,000.00 as "oral da"a!es3 &. Orderin! the defendants to pay the plaintiff attorneyTs fees in the su" of )100,000.00 plus liti!ation e'penses of )50,000.003 )laintiff prays for such other relief as "ay .e ust and e(uita.le under the pre"ises.1% In their ans,er to the co"plaint, the respondents as defendants asserted that 9a: the defendant An!elica >da. de @acson had died on April */, 199%3 9.: t,elve of the defendants ,ere tenantsNlessees of respondents, .ut the tenancy status of the rest of the defendants ,as uncertain3 9c: they never induced the defendants 2ia"son to violate their contracts ,ith the petitioner3 and, 9d: .ein! "erely tenants= tillers, the defendants=tenants had no ri!ht to enter into any transactions involvin! their properties ,ithout their 0no,led!e and consent. 2hey also averred that the transfers or assi!n"ents of leasehold ri!hts "ade .y the defendants=tenants to the petitioner is contrary to )residential Cecree 9).C.: Bo. *+ and #epu.lic Act Bo. &&5+, the Co"prehensive A!rarian #efor" )ro!ra" 9CA#):.1/ 2he respondents interposed counterclai"s for da"a!es a!ainst the petitioner as plaintiff. 2he defendants=tenants 2ia"son, et al., alle!ed in their ans,er ,ith counterclai" for da"a!es, that the "oney each of the" received fro" the petitioner ,ere in the for" of loans, and that they ,ere deceived into si!nin! the deeds of assi!n"ent6 a: 2hat all the fore!oin! alle!ations in the Ans,er are here.y repleaded and incorporated in so far as they are "aterial and relevant herein3 .: 2hat the defendants 2ia"son, et al., in so far as the Ceeds of Assi!n"ent are concernIedJ never 0ne, that ,hat they did si!n is a Ceed of Assi!n"ent. <hat they 0ne, ,as that they ,ere "ade to si!n a docu"ent that ,ill serve as a receipt for the loan !ranted ItoJ the" .y the plaintiff3 c: 2hat the Ceeds of Assi!n"ent ,ere si!ned throu!h the e"ploy"ent of fraud, deceit and false pretenses of plaintiff and "ade the defendants .elieve that ,hat they si!nIedJ ,as a "ere receipt for a"ounts received .y ,ay of loans3 d: 2hat the docu"ents si!ned in .lan0 ,ere filled up and co"pleted after the defendants 2ia"son, et al., si!ned the docu"ents and their co"pletion and acco"plish"ent ,as done in the a.sence of said defendants and, ,orst of all, defendants ,ere not provided a copy thereof3 e: 2hat as co"pleted, the Ceeds of Assi!n"ent reflected that the defendants 2ia"son, et al., did assi!n all their ri!hts and interests in the properties or landholdin!s they ,ere tillin! in favor of the plaintiff. 2hat if this is so, assu"in! ar!uendo that the docu"ents ,ere voluntarily e'ecuted, the defendants 2ia"son, et al., do not have any ri!ht to transfer their interest in the landholdin!s they are tillin! as they have no ri!ht ,hatsoever in the landholdin!s, the landholdin!s .elon! to their co=defendants, @acson, et al., and therefore, the contract is null and void3 f: 2hat ,hile it is ad"itted that the defendants 2ia"son, et al., received su"s of "oney fro" plaintiffs, the sa"e ,ere received as approved loans !ranted .y plaintiff to the defendants 2ia"son, et al., and not as part consideration of the alle!ed Ceeds of Assi!n"ent3 and .y ,ay of6U15 At the hearin! of the petitionerTs plea for a ,rit of preli"inary in unction, the respondentsT counsel failed to appear. In support of his plea for a ,rit of preli"inary in unction, the petitioner adduced in evidence the Ceeds of Assi!n"ent,1& the receipts1+ issued .y the defendants=tenants for the a"ounts they received fro" hi"3 and the letter18 the petitioner received fro" the defendants=tenants. 2he petitioner then rested his case. 2he respondents, thereafter, filed a Co""entNMotion to dis"issNdeny the petitionerTs plea for in unctive relief on the follo,in! !rounds6 9a: the Ceeds of Assi!n"ent e'ecuted .y the defendants=tenants ,ere contrary to pu.lic policy and ).C. Bo. *+ and #ep. Act Bo. &&5+3 9.: the petitioner failed to prove that the respondents induced the defendants=tenants to rene!e on their o.li!ations under the 7Ceeds of Assi!n"ent37 9c: not .ein! privy to the said deeds, the respondents are not .ound .y the said deeds3 and, 9d: the respondents had the a.solute ri!ht to sell and dispose of their property and to encu".er the sa"e and cannot .e en oined fro" doin! so .y the trial court. 2he petitioner opposed the "otion, contendin! that it ,as pre"ature for the trial court to resolve his plea for in unctive relief, .efore the respondents and the defendants=tenants adduced evidence in opposition thereto, to afford the petitioner a chance to adduce re.uttal evidence and prove his entitle"ent to a ,rit of preli"inary in unction. 2he respondents replied that it ,as the .urden of the petitioner to esta.lish the re(uisites of a ,rit of preli"inary in unction ,ithout any evidence on their part, and that they ,ere not .ound to adduce any evidence in opposition to the petitionerTs plea for a ,rit of preli"inary in unction.

52 | P a g e
On Fe.ruary 1%, 199+, the court issued an Order19 denyin! the "otion of the respondents for .ein! pre"ature. It directed the hearin! to proceed for the respondents to adduce their evidence. 2he court ruled that the petitioner, on the .asis of the "aterial alle!ations of the co"plaint, ,as entitled to in unctive relief. It also held that .efore the court could resolve the petitionerTs plea for in unctive relief, there ,as need for a hearin! to ena.le the respondents and the defendants= tenants to adduce evidence to controvert that of the petitioner. 2he respondents filed a "otion for reconsideration, ,hich the court denied in its Order dated April 1&, 199+. 2he trial court ruled that on the face of the aver"ents of the co"plaint, the pleadin!s of the parties and the evidence adduced .y the petitioner, the latter ,as entitled to in unctive relief unless the respondents and the defendants= tenants adduced controvertin! evidence. 2he respondents, the petitioners therein, filed a petition for certiorari in the Court of Appeals for the nullification of the Fe.ruary 1%, 199+ and April 1&, 199+ Orders of the trial court. 2he case ,as doc0eted as CA=G.#. $) Bo. //88%. 2he petitioners therein prayed in their petition that6 1. An order .e issued declarin! the orders of respondent court dated Fe.ruary 1%, 199+ and April 1&, 199+ as null and void3 *. An order .e issued directin! the respondent court to issue an order denyin! the application of respondent Aer"inio 2aya! for the issuance of a <rit of )reli"inary In unction andNor restrainin! order. %. In the "eanti"e, a <rit of )reli"inary In unction .e issued a!ainst the respondent court, prohi.itin! it fro" issuin! its o,n ,rit of in unction a!ainst )etitioners, and thereafter "a0in! said in unction to .e issued .y this Court per"anent. $uch other orders as "ay .e dee"ed ust E e(uita.le under the pre"ises also prayed for.*0 2he respondents asserted that the Ceeds of Assi!n"ent e'ecuted .y the assi!nees in favor of the petitioner ,ere contrary to para!raph 1% of ).C. Bo. *+ and the second para!raph of $ection +0 of #ep. Act Bo. &&5+, and, as such, could not .e enforced .y the petitioner for .ein! null and void. 2he respondents also clai"ed that the enforce"ent of the deeds of assi!n"ent ,as su. ect to a supervenin! condition6 %. 2hat this e'clusive and a.solute ri!ht !iven to the assi!nee shall .e e'ercised only ,hen no le!al i"pedi"ents e'ist to the lot to effect the s"ooth transfer of la,ful o,nership of the lotNproperty in the na"e of the A$$IGB11.*1 2he respondents ar!ued that until such condition too0 place, the petitioner ,ould not ac(uire any ri!ht to enforce the deeds .y in unctive relief. Further"ore, the petitionerTs plea in his co"plaint .efore the trial court, to fi' a period ,ithin ,hich to pay the .alance of the a"ounts due to the tenants under said deeds after the 7lapse7 of any le!al i"pedi"ent, assu"ed that the deeds ,ere valid, ,hen, in fact and in la,, they ,ere not. Accordin! to the respondents, they ,ere not parties to the deeds of assi!n"ent3 hence, they ,ere not .ound .y the said deeds. 2he issuance of a ,rit of preli"inary in unction ,ould restrict and i"pede the e'ercise of their ri!ht to dispose of their property, as provided for in Article /*8 of the Be, Civil Code. 2hey asserted that the petitioner had no cause of action a!ainst the" and the defendants=tenants. On April 1+, 1998, the Court of Appeals rendered its decision a!ainst the petitioner, annullin! and settin! aside the assailed orders of the trial court3 and per"anently en oinin! the said trial court fro" proceedin! ,ith Civil Case Bo. 10901. 2he decretal portion of the decision reads as follo,s6 Ao,ever, even if private respondent is denied of the in unctive relief he de"ands in the lo,er court still he could avail of other course of action in order to protect his interest such as the institution of a si"ple civil case of collection of "oney a!ainst 2IAM$OB, et al. For all the fore!oin! considerations, the orders dated 1% Fe.ruary 199+ and 1& April 199+ are here.y B;@@IFI1C and ordered $12 A$IC1 for havin! .een issued ,ith !rave a.use of discretion a"ountin! to lac0 or e'cess of urisdiction. Accordin!ly, pu.lic respondent is per"anently en oined fro" proceedin! ,ith the case desi!nated as Civil Case Bo. 10901.** 2he CA ruled that the respondents could not .e en oined fro" alienatin! or even encu".erin! their property, especially so since they ,ere not privies to the deeds of assi!n"ent e'ecuted .y the defendants=tenants. 2he defendants=tenants ,ere not yet o,ners of the portions of the landholdin!s respectively tilled .y the"3 as such, they had nothin! to assi!n to the petitioner. Finally, the CA ruled that the deeds of assi!n"ent e'ecuted .y the defendants=tenants ,ere contrary to ).C. Bo. *+ and #ep. Act Bo. &&5+. On Au!ust /, 1998, the CA issued a #esolution denyin! the petitionerTs "otion for reconsideration.*% Aence, the petitioner filed his petition for revie, on certiorari .efore this Court, contendin! as follo,s6 I A M1#1 A@@1GA2IOB IB 2A1 AB$<1# OF 2A1 21BAB2$ CO;@C BO2 41 ;$1C A$ 1>IC1BC1 O# 4A$I$ FO# ABH COBC@;$IOB, A$ 2AI$ A@@1GA2IOB, I$ $2I@@ 2A1 $;4-1C2 OF 2#IA@ IB 2A1 @O<1# CO;#2 9#2C:.*/ II 2A1 CO;#2 OF A))1A@$ CABBO2 1B-OIB 2A1 A1A#IBG OF A )12I2IOB FO# )#1@IMIBA#H IB-;BC2IOB A2 A 2IM1 <A1B 2A1 @O<1# CO;#2 9#2C: I$ $2I@@ #1C1I>IBG 1>IC1BC1 )#1CI$1@H 2O C121#MIB1 <A12A1# O# BO2 2A1 <#I2 OF )#1@IMIBA#H IB-;BC2IOB 41IBG )#AH1C FO# 4H 2AHAG $AO;@C 41 G#AB21C O# BO2.*5 III 2A1 CO;#2 OF A))1A@$ CABBO2 ;$1 7FAC2$7 BO2 IB 1>IC1BC1, 2O $;))O#2 I2$ COBC@;$IOB 2AA2 2A1 21BAB2$ A#1 BO2 H12 7A<A#C11$ OF 2A1 @ABC #1FO#M.*& I> 2A1 CO;#2 OF A))1A@$ CABBO2 CA;$1 2A1 )1#MAB1B2 $2O))AG1 OF 2A1 1B2I#1 )#OC11CIBG$ 41@O< IBC@;CIBG 2A1 2#IA@ OB 2A1 M1#I2$ OF 2A1 CA$1 COB$IC1#IBG 2AA2 2A1 I$$;1 IB>O@>1C OB@H 2A1 )#O)#I12H OF MAIB2AIBIBG 2A1 $2A2;$ L;O.*+ > 2A1 CO;#2 OF A))1A@$ CABBO2 IBC@;C1 IB I2$ C1CI$IOB 2A1 CA$1 OF 2A1 O2A1# %5 21BAB2$ <AO CO BO2 L;1$2IOB 2A1 -;#I$CIC2IOB OF 2A1 @O<1# CO;#2 9#2C: O>1# 2A1 CA$1 ABC <AO A#1 IB FAC2 $2I@@ )#1$1B2IBG 2A1I# 1>IC1BC1 2O O))O$1 2A1 IB-;BC2IOB )#AH1C FO#, ABC 2O )#O>1 A2 2A1 $AM1 2IM1 2A1 CO;B21#=C@AIM$ 2A1H FI@1C AGAIB$2 2A1 )12I2IOB1#.*8 >I 2A1 @O<1# CO;#2 9#2C: AA$ -;#I$CIC2IOB O>1# 2A1 CA$1 FI@1C 4H 2AHAG FO# 7FIMIBG OF )1#IOC7 ;BC1# A#2. 119+ OF 2A1 B1< CI>I@ COC1 ABC FO# 7CAMAG1$7 AGAIB$2 2A1 @AC$OB$ ;BC1# A#2. 1%1/ OF 2A1 $AM1 COC1. 2AI$ CA$1 CABBO2 41 $;))#1$$1C O# #1BC1#1C B;GA2O#H ;BC1#1MOBIO;$@H. *9 2he petitioner faults the Court of Appeals for per"anently en oinin! the trial court fro" proceedin! ,ith Civil Case Bo. 10910. Ae opines that the sa"e ,as too drastic, tanta"ount to a dis"issal of the case. Ae ar!ues that at that sta!e, it ,as pre"ature for the appellate court to deter"ine the "erits of the case since no evidentiary hearin! thereon

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,as conducted .y the trial court. 2his, the Court of Appeals cannot do, since neither party "oved for the dis"issal of Civil Case Bo. 10910. 2he petitioner points out that the Court of Appeals, in "a0in! its findin!s, ,ent .eyond the issue raised .y the private respondents, na"ely, ,hether or not the trial court co""itted a !rave a.use of discretion a"ountin! to e'cess or lac0 of urisdiction ,hen it denied the respondentTs "otion for the denialNdis"issal of the petitionerTs plea for a ,rit of preli"inary in unction. Ae, li0e,ise, points out that the appellate court erroneously presu"ed that the leaseholders ,ere not CA# a,ardees and that the deeds of assi!n"ent ,ere contrary to la,. Ae contends that leasehold tenants are not prohi.ited fro" conveyin! or ,aivin! their leasehold ri!hts in his favor. Ae insists that there is nothin! ille!al ,ith his contracts ,ith the leaseholders, since the sa"e shall .e effected only ,hen there are no "ore 7le!al i"pedi"ents.7 At .otto", the petitioner contends that, at that sta!e, it ,as pre"ature for the appellate court to deter"ine the "erits of his case since no evidentiary hearin! on the "erits of his co"plaint had yet .een conducted .y the trial court. !he Comment0 otion of the Respondents to Dismiss0Deny Petitioner?s Plea for a <rit of Preliminary 3n@unction <as Not Premature. Contrary to the rulin! of the trial court, the "otion of the respondents to dis"issNdeny the petitionerTs plea for a ,rit of preli"inary in unction after the petitioner had adduced his evidence, testi"onial and docu"entary, and had rested his case on the incident, ,as proper and ti"ely. It .ears stressin! that the petitioner had the .urden to prove his ri!ht to a ,rit of preli"inary in unction. Ae "ay rely solely on the "aterial alle!ations of his co"plaint or adduce evidence in support thereof. 2he petitioner adduced his evidence to support his plea for a ,rit of preli"inary in unction a!ainst the respondents and the defendants=tenants and rested his case on the said incident. 2he respondents then had three options6 9a: file a "otion to denyNdis"iss the "otion on the !round that the petitioner failed to dischar!e his .urden to prove the factual and le!al .asis for his plea for a ,rit of preli"inary in unction and, if the trial court denies his "otion, for the" to adduce evidence in opposition to the petitionerTs plea3 9.: for!o their "otion and adduce testi"onial andNor docu"entary evidence in opposition to the petitionerTs plea for a ,rit of preli"inary in unction3 or, 9c: ,aive their ri!ht to adduce evidence and su."it the incident for consideration on the .asis of the pleadin!s of the parties and the evidence of the petitioner. 2he respondents opted not to adduce any evidence, and instead filed a "otion to deny or dis"iss the petitionerTs plea for a ,rit of preli"inary in unction a!ainst the", on their clai" that the petitioner failed to prove his entitle"ent thereto. 2he trial court cannot co"pel the respondents to adduce evidence in opposition to the petitionerTs plea if the respondents opt to ,aive their ri!ht to adduce such evidence. 2hus, the trial court should have resolved the respondentsT "otion even ,ithout the latterTs opposition and the presentation of evidence thereon. 2he #2C Co""itted a Grave A.use of Ciscretion A"ountin! to 1'cess or @ac0 of -urisdiction in Issuin! its Fe.ruary 1%, 199+ and April 1&, 199+ Orders In its Fe.ruary 1%, 199+ Order, the trial court ruled that the petitioner ,as entitled to a ,rit of preli"inary in unction a!ainst the respondents on the .asis of the "aterial aver"ents of the co"plaint. In its April 1&, 199+ Order, the trial court denied the respondentsT "otion for reconsideration of the previous order, on its findin! that the petitioner ,as entitled to a ,rit of preli"inary in unction .ased on the "aterial alle!ations of his co"plaint, the evidence on record, the pleadin!s of the parties, as ,ell as the applica.le la,s6 U For the record, the Court denied the @AC$OB$T COMM1B2NMO2IOB on the .asis of the facts culled fro" the evidence presented, the pleadin!s and the la, applica.le uns,ayed .y the partisan or personal interests, pu.lic opinion or fear of criticis" 9Canon %, #ule %.0*, Code of -udicial 1thics:.%0 $ection %, #ule 58 of the #ules of Court, as a"ended, enu"erates the !rounds for the issuance of a ,rit of preli"inary in unction, thus6 9a: 2hat the applicant is entitled to the relief de"anded, and the ,hole or part of such relief consists in restrainin! the co""ission or continuance of the act or acts co"plained of, or in re(uirin! the perfor"ance of an act or acts, either for a li"ited period or perpetually3 9.: 2hat the co""ission, continuance or non=perfor"ance of the act or acts co"plained of durin! the liti!ation ,ould pro.a.ly ,or0 in ustice to the applicant3 or 9c: 2hat a party, court, a!ency or a person is doin!, threatenin!, or is atte"ptin! to do, or is procurin! or sufferin! to .e done, so"e act or acts pro.a.ly in violation of the ri!hts of the applicant respectin! the su. ect of the action or proceedin!, and tendin! to render the ud!"ent ineffectual. A preli"inary in unction is an e'traordinary event calculated to preserve or "aintain the status (uo of thin!s ante lite" and is !enerally availed of to prevent actual or threatened acts, until the "erits of the case can .e heard. In unction is accepted as the stron! ar" of e(uity or a transcendent re"edy.%1 <hile !enerally the !rant of a ,rit of preli"inary in unction rests on the sound discretion of the trial court ta0in! co!niDance of the case, e'tre"e caution "ust .e o.served in the e'ercise of such discretion.%* Indeed, in Olalia v. AiDon,%% ,e held6 It has .een consistently held that there is no po,er the e'ercise of ,hich is "ore delicate, ,hich re(uires !reater caution, deli.eration and sound discretion, or "ore dan!erous in a dou.tful case, than the issuance of an in unction. It is the stron! ar" of e(uity that should never .e e'tended unless to cases of !reat in ury, ,here courts of la, cannot afford an ade(uate or co""ensurate re"edy in da"a!es. 1very court should re"e".er that an in unction is a li"itation upon the freedo" of action of the defendant and should not .e !ranted li!htly or precipitately. It should .e !ranted only ,hen the court is fully satisfied that the la, per"its it and the e"er!ency de"ands it.%/ 2he very foundation of the urisdiction to issue ,rit of in unction rests in the e'istence of a cause of action and in the pro.a.ility of irrepara.le in ury, inade(uacy of pecuniary co"pensation and the prevention of the "ultiplicity of suits. <here facts are not sho,n to .rin! the case ,ithin these conditions, the relief of in unction should .e refused.%5 For the court to issue a ,rit of preli"inary in unction, the petitioner ,as .urdened to esta.lish the follo,in!6 91: a ri!ht in esse or a clear and un"ista0a.le ri!ht to .e protected3 9*: a violation of that ri!ht3 9%: that there is an ur!ent and per"anent act and ur!ent necessity for the ,rit to prevent serious da"a!e.%& 2hus, in the a.sence of a clear le!al ri!ht, the issuance of the in unctive ,rit constitutes a !rave a.use of discretion. <here the co"plainantTs ri!ht is dou.tful or disputed, in unction is not proper. In unction is a preservative re"edy ai"ed at protectin! su.stantial ri!hts and interests. It is not desi!ned to protect contin!ent or future ri!hts. 2he possi.ility of irrepara.le da"a!e ,ithout proof of ade(uate e'istin! ri!hts is not a !round for in unction.%+ <e have revie,ed the pleadin!s of the parties and found that, as contended .y the respondents, the petitioner failed to esta.lish the essential re(uisites for the issuance of a ,rit of preli"inary in unction. Aence, the trial court co""itted a !rave a.use of its

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discretion a"ountin! to e'cess or lac0 of urisdiction in denyin! the respondentsT co""entN"otion as ,ell as their "otion for reconsideration. First. 2he trial court cannot en oin the respondents, at the instance of the petitioner, fro" sellin!, disposin! of and encu".erin! their property. As the re!istered o,ners of the property, the respondents have the ri!ht to en oy and dispose of their property ,ithout any other li"itations than those esta.lished .y la,, in accordance ,ith Article /*8 of the Civil Code. 2he ri!ht to dispose of the property is the po,er of the o,ner to sell, encu".er, transfer, and even destroy the property. O,nership also includes the ri!ht to recover the possession of the property fro" any other person to ,ho" the o,ner has not trans"itted such property, .y the appropriate action for restitution, ,ith the fruits, and for inde"nification for da"a!es.%8 2he ri!ht of o,nership of the respondents is not, of course, a.solute. It is li"ited .y those set forth .y la,, such as the a!rarian refor" la,s. ;nder Article 1%0& of the Be, Civil Code, the respondents "ay enter into contracts coverin! their property ,ith another under such ter"s and conditions as they "ay dee" .eneficial provided they are not contrary to la,, "orals, !ood conduct, pu.lic order or pu.lic policy. 2he respondents cannot .e en oined fro" sellin! or encu".erin! their property si"ply and "erely .ecause they had e'ecuted Ceeds of Assi!n"ent in favor of the petitioner, o.li!in! the"selves to assi!n and transfer their ri!hts or interests as a!ricultural far"ersNla.orersNsu.=tenants over the landholdin!, and !rantin! the petitioner the e'clusive ri!ht to .uy the property su. ect to the occurrence of certain conditions. 2he respondents ,ere not parties to the said deeds. 2here is no evidence that the respondents a!reed, e'pressly or i"pliedly, to the said deeds or to the ter"s and conditions set forth therein. Indeed, they assailed the validity of the said deeds on their clai" that the sa"e ,ere contrary to the letter and spirit of ).C. Bo. *+ and #ep. Act Bo. &&5+. 2he petitioner even ad"itted ,hen he testified that he did not 0no, any of the respondents, and that he had not "et any of the" .efore he filed his co"plaint in the #2C. Ae did not even 0no, that one of those ,ho" he had i"pleaded as defendant, An!elica >da. de @acson, ,as already dead. L6 4ut you have not "et any of these @acsonsK A6 Bot yet, sir. L6 Co you 0no, that t,o 9*: of the defendants are residents of the ;nited $tatesK A6 I do not 0no,, sir. L6 Hou do not 0no, also that An!ela 2iotuvie 9sic: >da. de @acson had already .een deadK A6 I a" a,are of that, sir.%9 <e are one ,ith the Court of Appeals in its rulin! that6 <e cannot see our ,ay clear on ho, or ,hy in unction should lie a!ainst petitioners. As o,ners of the lands .ein! tilled .y 2IAM$OB, et al., petitioners, under the la,, have the ri!ht to en oy and dispose of the sa"e. 2hus, they have the ri!ht to possess the lands, as ,ell as the ri!ht to encu".er or alienate the". 2his principle of la, not,ithstandin!, private respondent in the lo,er court sou!ht to restrain the petitioners fro" encu".erin! andNor alienatin! the properties covered .y 2C2 Bo. %59**=#, %59*%=# and 2C2 Bo. %59*5=# of the #e!istry of Ceeds of $an Fernando, )a"pan!a. 2his cannot .e allo,ed to prosper since it ,ould constitute a li"itation or restriction, not other,ise esta.lished .y la, on their ri!ht of o,nership, "ore so considerin! that petitioners ,ere not even privy to the alle!ed transaction .et,een private respondent and 2IAM$OB, et al./0 $econd. A readin! the aver"ents of the co"plaint ,ill sho, that the petitioner clearly has no cause of action a!ainst the respondents for the principal relief prayed for therein, for the trial court to fi' a period ,ithin ,hich to pay to each of the defendants=tenants the .alance of the )50.00 per s(uare "eter, the consideration under the Ceeds of Assi!n"ent e'ecuted .y the defendants=tenants. 2he respondents are not parties or privies to the deeds of assi!n"ent. 2he "atter of the period for the petitioner to pay the .alance of the said a"ount to each of the defendants=tenants is an issue .et,een the", the parties to the deed. 2hird. On the face of the co"plaint, the action of the petitioner a!ainst the respondents and the defendants=tenants has no le!al .asis. ;nder the Ceeds of Assi!n"ent, the o.li!ation of the petitioner to pay to each of the defendants=tenants the .alance of the purchase price ,as conditioned on the occurrence of the follo,in! events6 9a: the respondents a!ree to sell their property to the petitioner3 9.: the le!al i"pedi"ents to the sale of the landholdin! to the petitioner no lon!er e'ist3 and, 9c: the petitioner decides to .uy the property. <hen he testified, the petitioner ad"itted that the le!al i"pedi"ents referred to in the deeds ,ere 9a: the respondentsT refusal to sell their property3 and, 9.: the lac0 of approval of the Cepart"ent of A!rarian #efor"6 L 6 2here is no specific a!ree"ent prior to the e'ecution of those docu"ents as ,hen they ,ill payK A 6 <e a!reed to that, that I ,ill pay the" ,hen there are no le!al i"pedi"ent, sir. L 6 Many of the docu"ents are unlattered 9sic: and you ,ant to convey to this Aonora.le Court that prior to the e'ecution of these docu"ents you have those tentative a!ree"ent for instance that the a"ount or the cost of the price is to .e paid ,hen there are no le!al i"pedi"ent, you are usin! the ,ord 7le!al i"pedi"ent,7 do you 0no, the "eanin! of thatK A 6 <hen there are 9sic: no "ore le!al i"pedi"ent e'ist, sir. L 6 Cid you "a0e ho, 9sic: to the effect that the "eanin! of that phrase that you used the unlettered defendantsK A 6 <e have a!reed to that, sir. A22H. OCAM)O6 May I as0, Hour Aonor, that the ,itness please ans,er "y (uestion not to ans,er in the ,ay he ,anted it. CO;#26 -ust ans,er the (uestion, Mr. 2aya!. <I2B1$$6 Hes, Hour Aonor. A22H. OCAM)O6 L 6 Cid you e'plain to the"K A 6 Hes, sir. L 6 <hat did you tell the"K A 6 I e'plainIedJ to the", sir, that the le!al i"pedi"ent then especially if the @acsons ,ill not a!ree to sell their shares to "e or to us it ,ould .e hard to 9sic: "e to pay the" in full. And those covered .y CA#. I e'plainIedJ to the" and it ,as clearly stated in the title that there is IaJ prohi.ited period of ti"e .efore you can sell the property. I e'plained every detail to the"./1 It is only upon the occurrence of the fore!oin! conditions that the petitioner ,ould .e o.li!ed to pay to the defendants=tenants the .alance of the )50.00 per s(uare "eter under the deeds of assi!n"ent. 2hus6 *. 2hat in case the A$$IGBO# and @ABCO<B1# ,ill "utually a!ree to sell the said lot to the A$$IGB11, ,ho is !iven an e'clusive and a.solute ri!ht to .uy the lot, the A$$IGBO# shall receive the su" of FIF2H )1$O$ 9)50.00: per s(uare "eter as consideration of the total area actually tilled and possessed .y the A$$IGBO#, less ,hatever a"ount received .y the A$$IGBO# includin! co""issions, ta'es and all allo,a.le deductions relative to the sale of the su. ect properties.

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%. 2hat this e'clusive and a.solute ri!ht !iven to the A$$IGB11 shall .e e'ercised only ,hen no le!al i"pedi"ents e'ist to the lot to effect the s"ooth transfer of la,ful o,nership of the lotNproperty in the na"e of the A$$IGB113 /. 2hat the A$$IGBO# ,ill re"ain in peaceful possession over the said property and shall en oy the fruitsNearnin!s andNor harvest of the said lot until such ti"e that full pay"ent of the a!reed purchase price had .een "ade .y the A$$IGB11./* 2here is no sho,in! in the petitionerTs co"plaint that the respondents had a!reed to sell their property, and that the le!al i"pedi"ents to the a!ree"ent no lon!er e'isted. 2he petitioner and the defendants= tenants had yet to su."it the Ceeds of Assi!n"ent to the Cepart"ent of A!rarian #efor" ,hich, in turn, had to act on and approve or disapprove the sa"e. In fact, as alle!ed .y the petitioner in his co"plaint, he ,as yet to "eet ,ith the defendants=tenants to discuss the i"ple"entation of the deeds of assi!n"ent. ;nless and until the Cepart"ent of A!rarian #efor" approved the said deeds, if at all, the petitioner had no ri!ht to enforce the sa"e in a court of la, .y as0in! the trial court to fi' a period ,ithin ,hich to pay the .alance of the purchase price and prayin! for in unctive relief. <e do not a!ree ,ith the contention of the petitioner that the deeds of assi!n"ent e'ecuted .y the defendants=tenants are perfected option contracts./% An option is a contract .y ,hich the o,ner of the property a!rees ,ith another person that he shall have the ri!ht to .uy his property at a fi'ed price ,ithin a certain ti"e. It is a condition offered or contract .y ,hich the o,ner stipulates ,ith another that the latter shall have the ri!ht to .uy the property at a fi'ed price ,ithin a certain ti"e, or under, or in co"pliance ,ith certain ter"s and conditions, or ,hich !ives to the o,ner of the property the ri!ht to sell or de"and a sale. It i"poses no .indin! o.li!ation on the person holdin! the option, aside fro" the consideration for the offer. ;ntil accepted, it is not, properly spea0in!, treated as a contract.// 2he second party !ets in praesenti, not lands, not an a!ree"ent that he shall have the lands, .ut the ri!ht to call for and receive lands if he elects./5 An option contract is a separate and distinct contract fro" ,hich the parties "ay enter into upon the con unction of the option./& In this case, the defendants=tenants=su.tenants, under the deeds of assi!n"ent, !ranted to the petitioner not only an option .ut the e'clusive ri!ht to .uy the landholdin!. 4ut the !rantors ,ere "erely the defendants=tenants, and not the respondents, the re!istered o,ners of the property. Bot .ein! the re!istered o,ners of the property, the defendants=tenants could not le!ally !rant to the petitioner the option, "uch less the 7e'clusive ri!ht7 to .uy the property. As the @atin sayin! !oes, 7B1MO CA2 L;OC BOB AA412.7 Fourth. 2he petitioner i"pleaded the respondents as parties= defendants solely on his alle!ation that the latter induced or are inducin! the defendants=tenants to violate the deeds of assi!n"ent, contrary to the provisions of Article 1%1/ of the Be, Civil Code ,hich reads6 Art. 1%1/. Any third person ,ho induces another to violate his contract shall .e lia.le for da"a!es to the other contractin! party. In $o )in! 4un v. Court of Appeals,/+ ,e held that for the said la, to apply, the pleader is .urdened to prove the follo,in!6 91: the e'istence of a valid contract3 9*: 0no,led!e .y the third person of the e'istence of the contract3 and 9%: interference .y the third person in the contractual relation ,ithout le!al ustification. <here there ,as no "alice in the interference of a contract, and the i"pulse .ehind oneTs conduct lies in a proper .usiness interest rather than in ,ron!ful "otives, a party cannot .e a "alicious interferer. <here the alle!ed interferer is financially interested, and such interest "otivates his conduct, it cannot .e said that he is an officious or "alicious inter"eddler./8 In fine, one ,ho is not a party to a contract and ,ho interferes thereon is not necessarily an officious or "alicious inter"eddler. 2he only evidence adduced .y the petitioner to prove his clai" is the letter fro" the defendants=tenants infor"in! hi" that they had decided to sell their ri!hts and interests over the landholdin! to the respondents, instead of honorin! their o.li!ation under the deeds of assi!n"ent .ecause, accordin! to the", the petitioner harassed those tenants ,ho did not ,ant to e'ecute deeds of assi!n"ent in his favor, and .ecause the said defendants=tenants did not ,ant to have any pro.le" ,ith the respondents ,ho could cause their eviction for e'ecutin! ,ith the petitioner the deeds of assi!n"ent as the said deeds are in violation of ).C. Bo. *+ and #ep. Act Bo. &&5+./9 2he defendants=tenants did not alle!e therein that the respondents induced the" to .reach their contracts ,ith the petitioner. 2he petitioner hi"self ad"itted ,hen he testified that his clai" that the respondents induced the defendants=assi!nees to violate contracts ,ith hi" ,as .ased "erely on ,hat 7he heard,7 thus6 L6 Goin! to your last state"ent that the @acsons induces 9sic: the defendants, did you see that the @acsons ,ere inducin! the defendantsK A6 I heard and so"eti"e in ItheJ first ,ee0 of Au!ust, sir, they ,ent in the .arrio 9sic:. As a "atter of fact, that is the reason ,hy they sent "e letter that they ,ill sell it to the @acsons. L6 Incidentally, do you 0ne, 9sic: these @acsons individuallyK A6 Bo, sir, it ,as only Mr. 1spinosa ,ho I 0ne, 9sic: personally, the alle!ed ne!otiator and has the authority to sell the property.50 1ven if the respondents received an offer fro" the defendants=tenants to assi!n and transfer their ri!hts and interests on the landholdin!, the respondents cannot .e en oined fro" entertainin! the said offer, or even ne!otiatin! ,ith the defendants=tenants. 2he respondents could not even .e e'pected to ,arn the defendants=tenants for e'ecutin! the said deeds in violation of ).C. Bo. *+ and #ep. Act Bo. &&5+. ;nder $ection ** of the latter la,, .eneficiaries under ).C. Bo. *+ ,ho have culpa.ly sold, disposed of, or a.andoned their land, are dis(ualified fro" .eco"in! .eneficiaries. Fro" the pleadin!s of the petitioner, it is (uite evident that his purpose in havin! the defendants=tenants e'ecute the Ceeds of Assi!n"ent in his favor ,as to ac(uire the landholdin! ,ithout any tenants thereon, in the event that the respondents a!reed to sell the property to hi". 2he petitioner 0ne, that under $ection 11 of #ep. Act Bo. %8//, if the respondents a!reed to sell the property, the defendants=tenants shall have preferential ri!ht to .uy the sa"e under reasona.le ter"s and conditions6 $1C2IOB 11. @esseeTs #i!ht of )re=e"ption. P In case the a!ricultural lessor desires to sell the landholdin!, the a!ricultural lessee shall have the preferential ri!ht to .uy the sa"e under reasona.le ter"s and conditions6 )rovided, 2hat the entire landholdin! offered for sale "ust .e pre=e"pted .y the @and Authority if the lando,ner so desires, unless the "a ority of the lessees o. ect to such ac(uisition6 )rovided, further, 2hat ,here there are t,o or "ore a!ricultural lessees, each shall .e entitled to said preferential ri!ht only to the e'tent of the area actually cultivated .y hi". U51 ;nder $ection 1* of the la,, if the property ,as sold to a third person ,ithout the 0no,led!e of the tenants thereon, the latter shall have the ri!ht to redee" the sa"e at a reasona.le price and consideration. 4y assi!nin! their ri!hts and interests on the landholdin! under the deeds of assi!n"ent in favor of the petitioner, the defendants=tenants there.y ,aived, in favor of the petitioner, ,ho is not a .eneficiary under $ection ** of #ep. Act Bo. &&5+, their ri!hts of pree"ption or rede"ption under #ep. Act Bo. %8//. 2he defendants=tenants ,ould then have to vacate the property in favor of the petitioner upon full

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pay"ent of the purchase price. Instead of ac(uirin! o,nership of the portions of the landholdin! respectively tilled .y the", the defendants=tenants ,ould a!ain .eco"e landless for a "easly su" of )50.00 per s(uare "eter. 2he petitionerTs sche"e is su.versive, not only of pu.lic policy, .ut also of the letter and spirit of the a!rarian la,s. 2hat the sche"e of the petitioner had yet to ta0e effect in the future or ten years hence is not a ustification. 2he respondents "ay ,ell ar!ue that the a!rarian la,s had .een violated .y the defendants= tenants and the petitioner .y the "ere e'ecution of the deeds of assi!n"ent. In fact, the petitioner has i"ple"ented the deeds .y payin! the defendants=tenants a"ounts of "oney and even sou!ht their i""ediate i"ple"entation .y settin! a "eetin! ,ith the defendants=tenants. In fine, the petitioner ,ould not ,ait for ten years to evict the defendants=tenants. For hi", ti"e is of the essence. 2he Appellate Court 1rred In )er"anently 1n oinin! 2he #e!ional 2rial Court Fro" Continuin! ,ith the )roceedin!s in Civil Case Bo. 10910. <e a!ree ,ith the petitionerTs contention that the appellate court erred ,hen it per"anently en oined the #2C fro" continuin! ,ith the proceedin!s in Civil Case Bo. 10910. 2he only issue .efore the appellate court ,as ,hether or not the trial court co""itted a !rave a.use of discretion a"ountin! to e'cess or lac0 of urisdiction in denyin! the respondentsT "otion to deny or dis"iss the petitionerTs plea for a ,rit of preli"inary in unction. Bot one of the parties prayed to per"anently en oin the trial court fro" further proceedin! ,ith Civil Case Bo. 10910 or to dis"iss the co"plaint. It .ears stressin! that the petitioner "ay still a"end his co"plaint, and the respondents and the defendants=tenants "ay file "otions to dis"iss the co"plaint. 4y per"anently en oinin! the trial court fro" proceedin! ,ith Civil Case Bo. 10910, the appellate court acted ar.itrarily and effectively dis"issed the co"plaint "otu proprio, includin! the counterclai"s of the respondents and that of the defendants=tenants. 2he defendants=tenants ,ere even deprived of their ri!ht to prove their special and affir"ative defenses. IB @IGA2 OF A@@ 2A1 FO#1GOIBG, the petition is )A#2IA@@H G#AB21C. 2he Cecision of the Court of Appeals nullifyin! the Fe.ruary 1%, 199& and April 1&, 199+ Orders of the #2C is AFFI#M1C. 2he ,rit of in unction issued .y the Court of Appeals per"anently en oinin! the #2C fro" further proceedin! ,ith Civil Case Bo. 10910 is here.y @IF21C and $12 A$IC1. 2he #e!ional 2rial Court of Ma.alacat, )a"pan!a, 4ranch //, is O#C1#1C to continue ,ith the proceedin!s in Civil Case Bo. 10910 as provided for .y the #ules of Court, as a"ended. $O O#C1#1C. Puno, AChairmanB, Cuisum(in', Austria- artine-, and !in'a, JJ., concur. G.R. No. 147324 ? May 25, 2004 +,ILI++INE COMM/NICATION ATELLITE COR+ORATION, petitioner, vs.GLO(E TELECOM, INC. 5@or2*r8y an0 G8o3* M:Aay Ca38* an0 Ra07o CorBora'7on9, Respondents. G.R. No. 147334 ? May 25, 2004 GLO(E TELECOM, INC., petitioner, vs.+,ILI++INE COMM/NICATION ATELLITE COR+ORATION, Respondent. "ECI ION "onths, or five 95: years.% In turn, Glo.e pro"ised to pay )hilco"sat "onthly rentals for each leased circuit involved./ At the ti"e of the e'ecution of the A!ree"ent, .oth parties 0ne, that the Military 4ases A!ree"ent .et,een the #epu.lic of the )hilippines and the ;$ 9#)=;$ Military 4ases A!ree"ent:, ,hich ,as the .asis for the occupancy of the Clar0 Air 4ase and $u.ic Baval 4ase in Cu.i )oint, ,as to e'pire in 1991. ;nder $ection *5, Article M>III of the 198+ Constitution, forei!n "ilitary .ases, troops or facilities, ,hich include those located at the ;$ Baval Facility in Cu.i )oint, shall not .e allo,ed in the )hilippines unless a ne, treaty is duly concurred in .y the $enate and ratified .y a "a ority of the votes cast .y the people in a national referendu" ,hen the Con!ress so re(uires, and such ne, treaty is reco!niDed as such .y the ;$ Govern"ent. $u.se(uently, )hilco"sat installed and esta.lished the earth station at Cu.i )oint and the ;$CCA "ade use of the sa"e. On 1& $epte".er 1991, the $enate passed and adopted $enate #esolution Bo. 1/1, e'pressin! its decision not to concur in the ratification of the 2reaty of Friendship, Cooperation and $ecurity and its $upple"entary A!ree"ents that ,as supposed to e'tend the ter" of the use .y the ;$ of $u.ic Baval 4ase, a"on! others.5 2he last t,o para!raphs of the #esolution state6 FIBCIBG that the 2reaty constitutes a defective fra"e,or0 for the continuin! relationship .et,een the t,o countries in the spirit of friendship, cooperation and soverei!n e(uality6 Bo,, therefore, .e it #esolved .y the $enate, as it is here.y resolved, 2o e'press its decision not to concur in the ratification of the 2reaty of Friendship, Cooperation and $ecurity and its $upple"entary A!ree"ents, at the sa"e ti"e reaffir"in! its desire to continue friendly relations ,ith the !overn"ent and people of the ;nited $tates of A"erica.& On %1 Cece".er 1991, the )hilippine Govern"ent sent a Note +er(ale to the ;$ Govern"ent throu!h the ;$ 1".assy, notifyin! it of the )hilippines ter"ination of the #)=;$ Military 4ases A!ree"ent. 2he Note +er(ale stated that since the #)=;$ Military 4ases A!ree"ent, as a"ended, shall ter"inate on %1 Cece".er 199*, the ,ithdra,al of all ;$ "ilitary forces fro" $u.ic Baval 4ase should .e co"pleted .y said date. In a letter dated 0& Au!ust 199*, Glo.e notified )hilco"sat of its intention to discontinue the use of the earth station effective 08 Bove".er 199* in vie, of the ,ithdra,al of ;$ "ilitary personnel fro" $u.ic Baval 4ase after the ter"ination of the #)=;$ Military 4ases A!ree"ent. Glo.e invo0ed as .asis for the letter of ter"ination $ection 8 9Cefault: of the A!ree"ent, ,hich provides6

TINGA, J.?
4efore the Court are t,o Petitions for Revie8 assailin! the Decision of the Court of Appeals, dated *+ Fe.ruary *001, in CA=G.#. C> Bo. &%&19.1 2he facts of the case are undisputed. For several years prior to 1991, Glo.e Mc0ay Ca.le and #adio Corporation, no, Glo.e 2eleco", Inc. 9Glo.e:, had .een en!a!ed in the coordination of the provision of various co""unication facilities for the "ilitary .ases of the ;nited $tates of A"erica 9;$: in Clar0 Air 4ase, An!eles, )a"pan!a and $u.ic Baval 4ase in Cu.i )oint, ?a".ales. 2he said co""unication facilities ,ere installed and confi!ured for the e'clusive use of the ;$ Cefense Co""unications A!ency 9;$CCA:, and for security reasons, ,ere operated only .y its personnel or those of A"erican co"panies contracted .y it to operate said facilities. 2he ;$CCA contracted ,ith said A"erican co"panies, and the latter, in turn, contracted ,ith Glo.e for the use of the co""unication facilities. Glo.e, on the other hand, contracted ,ith local service providers such as the )hilippine Co""unications $atellite Corporation 9)hilco"sat: for the provision of the co""unication facilities. On 0+ May 1991, )hilco"sat and Glo.e entered into an A!ree"ent ,here.y )hilco"sat o.li!ated itself to esta.lish, operate and provide an I4$ $tandard 4 earth station 9earth station: ,ithin Cu.i )oint for the e'clusive use of the ;$CCA.* 2he ter" of the contract ,as for &0

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Beither party shall .e held lia.le or dee"ed to .e in default for any failure to perfor" its o.li!ation under this A!ree"ent if such failure results directly or indirectly fro" force "a eure or fortuitous event. 1ither party is thus precluded fro" perfor"in! its o.li!ation until such force "a eure or fortuitous event shall ter"inate. For the purpose of this para!raph, force "a eure shall "ean circu"stances .eyond the control of the party involved includin!, .ut not li"ited to, any la,, order, re!ulation, direction or re(uest of the Govern"ent of the )hilippines, stri0es or other la.or difficulties, insurrection riots, national e"er!encies, ,ar, acts of pu.lic ene"ies, fire, floods, typhoons or other catastrophies or acts of God. )hilco"sat sent a reply letter dated 10 Au!ust 199* to Glo.e, statin! that ,e e'pect IGlo.eJ to 0no, its co""it"ent to pay the stipulated rentals for the re"ainin! ter"s of the A!ree"ent even after IGlo.eJ shall have discontinueIdJ the use of the earth station after Bove".er 08, 199*.+ )hilco"sat referred to $ection + of the A!ree"ent, statin! as follo,s6 +.CI$COB2IB;ABC1 OF $1#>IC1 $hould IGlo.eJ decide to discontinue ,ith the use of the earth station after it has .een put into operation, a ,ritten notice shall .e served to )AI@COM$A2 at least si'ty 9&0: days prior to the e'pected date of ter"ination. Bot,ithstandin! the non=use of the earth station, IGlo.eJ shall continue to pay )AI@COM$A2 for the rental of the actual nu".er of 21 circuits in use, .ut in no case shall .e less than the first t,o 9*: 21 circuits, for the re"ainin! life of the a!ree"ent. Ao,ever, should )AI@COM$A2 "a0e use or sell the earth station su. ect to this a!ree"ent, the o.li!ation of IGlo.eJ to pay the rental for the re"ainin! life of the a!ree"ent shall .e at such "onthly rate as "ay .e a!reed upon .y the parties.8 After the ;$ "ilitary forces left $u.ic Baval 4ase, )hilco"sat sent Glo.e a letter dated */ Bove".er 199% de"andin! pay"ent of its outstandin! o.li!ations under the A!ree"ent a"ountin! to ;$Q/,910,1%&.00 plus interest and attorneys fees. Ao,ever, Glo.e refused to heed )hilco"sats de"and. On *+ -anuary 1995, )hilco"sat filed ,ith the #e!ional 2rial Court of Ma0ati a Complaint a!ainst Glo.e, prayin! that the latter .e ordered to pay li(uidated da"a!es under the A!ree"ent, ,ith le!al interest, e'e"plary da"a!es, attorneys fees and costs of suit. 2he case ,as raffled to 4ranch 59 of said court. Glo.e filed an Ans8er to the Complaint, insistin! that it ,as constrained to end the A!ree"ent due to the ter"ination of the #)= ;$ Military 4ases A!ree"ent and the non=ratification .y the $enate of the 2reaty of Friendship and Cooperation, ,hich events constituted force ma@eure under the A!ree"ent. Glo.e e'plained that the occurrence of said events e'e"pted it fro" payin! rentals for the re"ainin! period of the A!ree"ent. On 05 -anuary 1999, the trial court rendered its Decision, the dispositive portion of ,hich reads6 <A1#1FO#1, pre"ises considered, ud!"ent is here.y rendered as follo,s6 1.Orderin! the defendant to pay the plaintiff the a"ount of Binety 2,o 2housand 2,o Aundred 2hirty 1i!ht ;$ Collars 9;$Q9*,*%8.00: or its e(uivalent in )hilippine Currency 9co"puted at the e'chan!e rate prevailin! at the ti"e of co"pliance or pay"ent: representin! rentals for the "onth of Cece".er 199* ,ith interest thereon at the le!al rate of t,elve percent 91*O: per annu" startin! Cece".er 199* until the a"ount is fully paid3 *.Orderin! the defendant to pay the plaintiff the a"ount of 2hree Aundred 2housand 9)%00,000.00: )esos as and for attorneys fees3 %.Orderin! the CI$MI$$A@ of defendants counterclai" for lac0 of "erit3 and /.<ith costs a!ainst the defendant. $O O#C1#1C.9 4oth parties appealed the trial courts Decision to the Court of Appeals. )hilco"sat clai"ed that the trial court erred in rulin! that6 91: the non=ratification .y the $enate of the 2reaty of Friendship, Cooperation and $ecurity and its $upple"entary A!ree"ents constitutes force ma@eure ,hich e'e"pts Glo.e fro" co"plyin! ,ith its o.li!ations under the A!ree"ent3 9*: Glo.e is not lia.le to pay the rentals for the re"ainder of the ter" of the A!ree"ent3 and 9%: Glo.e is not lia.le to )hilco"sat for e'e"plary da"a!es. Glo.e, on the other hand, contended that the #2C erred in holdin! it lia.le for pay"ent of rent of the earth station for Cece".er 199* and of attorneys fees. It e'plained that it ter"inated )hilco"sats services on 08 Bove".er 199*3 hence, it had no reason to pay for rentals .eyond that date. On *+ Fe.ruary *001, the Court of Appeals pro"ul!ated its Decision dis"issin! )hilco"sats appeal for lac0 of "erit and affir"in! the trial courts findin! that certain events constitutin! force ma@eure under $ection 8 the A!ree"ent occurred and ustified the non=pay"ent .y Glo.e of rentals for the re"ainder of the ter" of the A!ree"ent. 2he appellate court ruled that the non=ratification .y the $enate of the 2reaty of Friendship, Cooperation and $ecurity, and its $upple"entary A!ree"ents, and the ter"ination .y the )hilippine Govern"ent of the #)=;$ Military 4ases A!ree"ent effective %1 Cece".er 1991 as stated in the )hilippine Govern"ents Note +er(ale to the ;$ Govern"ent, are acts, directions, or re(uests of the Govern"ent of the )hilippines ,hich constitute force ma@eure. In addition, there ,ere circu"stances .eyond the control of the parties, such as the issuance of a for"al order .y Cdr. <alter Corliss of the ;$ Bavy, the issuance of the letter notification fro" A22 and the co"plete ,ithdra,al of all ;$ "ilitary forces and personnel fro" Cu.i )oint, ,hich prevented further use of the earth station under the A!ree"ent. Ao,ever, the Court of Appeals ruled that althou!h Glo.e sou!ht to ter"inate )hilco"sats services .y 08 Bove".er 199*, it is still lia.le to pay rentals for the Cece".er 199*, a"ountin! to ;$Q9*,*%8.00 plus interest, considerin! that the ;$ "ilitary forces and personnel co"pletely ,ithdre, fro" Cu.i )oint only on %1 Cece".er 199*.10 4oth parties filed their respective Petitions for Revie8 assailin! the Decision of the Court of Appeals. In G.R. No. 147324,11 petitioner )hilco"sat raises the follo,in! assi!n"ents of error6 A.2A1 AOBO#A4@1 CO;#2 OF A))1A@$ 1##1C IB ACO)2IBG A C1FIBI2IOB OF >,RC= AJ=DR= CIFF1#1B2 F#OM <AA2 I2$ @1GA@ C1FIBI2IOB FO;BC IB A#2IC@1 11+/ OF 2A1 CI>I@ COC1, )#O>IC1$, $O A$ 2O 1M1M)2 G@O41 21@1COM F#OM COM)@HIBG <I2A I2$ O4@IGA2IOB$ ;BC1# 2A1 $;4-1C2 AG#11M1B2. 4.2A1 AOBO#A4@1 CO;#2 OF A))1A@$ 1##1C IB #;@IBG 2AA2 G@O41 21@1COM I$ BO2 @IA4@1 2O )AI@COM$A2 FO# #1B2A@$ FO# 2A1 #1MAIBIBG 21#M OF 2A1 AG#11M1B2, C1$)I21 2A1 C@1A# 21BO# OF $1C2IOB + OF 2A1 AG#11M1B2. C.2A1 AOBO#A4@1 OC;#2 OF A))1A@$ 1##1C IB C1@12IBG 2A1 2#IA@ CO;#2$ A<A#C OF A22O#B1H$ F11$ IB FA>O# OF )AI@COM$A2. C.2A1 AOBO#A4@1 CO;#2 OF A))1A@$ 1##1C IB #;@IBG 2AA2 G@O41 21@1COM I$ BO2 @IA4@1 2O )AI@COM$A2 FO# 1M1M)@A#H CAMAG1$.1*

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)hilco"sat ar!ues that the ter"ination of the #)=;$ Military 4ases A!ree"ent cannot .e considered a fortuitous event .ecause the happenin! thereof ,as foreseea.le. Althou!h the A!ree"ent ,as freely entered into .y .oth parties, $ection 8 should .e dee"ed ineffective .ecause it is contrary to Article 11+/ of the Civil Code. )hilco"sat posits the vie, that the validity of the parties definition of force ma@eure in $ection 8 of the A!ree"ent as circu"stances .eyond the control of the party involved includin!, .ut not li"ited to, any la,, order, re!ulation, direction or re(uest of the Govern"ent of the )hilippines, stri0es or other la.or difficulties, insurrection riots, national e"er!encies, ,ar, acts of pu.lic ene"ies, fire, floods, typhoons or other catastrophies or acts of God, should .e dee"ed su. ect to Article 11+/ ,hich defines fortuitous events as events ,hich could not .e foreseen, or ,hich, thou!h foreseen, ,ere inevita.le.1% )hilco"sat further clai"s that the Court of Appeals erred in holdin! that Glo.e is not lia.le to pay for the rental of the earth station for the entire ter" of the A!ree"ent .ecause it runs counter to ,hat ,as plainly stipulated .y the parties in $ection + thereof.Moreover, said rulin! is inconsistent ,ith the appellate courts pronounce"ent that Glo.e is lia.le to pay rentals for Cece".er 199* even thou!h it ter"inated )hilco"sats services effective 08 Bove".er 199*, .ecause the ;$ "ilitary and personnel co"pletely ,ithdre, fro" Cu.i )oint only in Cece".er 199*. )hilco"sat points out that it ,as Glo.e ,hich proposed the five=year ter" of the A!ree"ent, and that the other provisions of the A!ree"ent, such as $ection /.11/ thereof, evince the intent of Glo.e to .e .ound to pay rentals for the entire five=year ter".15 )hilco"sat also "aintains that contrary to the appellate courts findin!s, it is entitled to attorneys fees and e'e"plary da"a!es. 1& In its Comment to )hilco"sats Petition, Glo.e asserts that $ection 8 of the A!ree"ent is not contrary to Article 11+/ of the Civil Code .ecause said provision does not prohi.it parties to a contract fro" providin! for other instances ,hen they ,ould .e e'e"pt fro" fulfillin! their contractual o.li!ations. Glo.e also clai"s that the ter"ination of the #)=;$ Military 4ases A!ree"ent constitutes force ma@eure and e'e"pts it fro" co"plyin! ,ith its o.li!ations under the A!ree"ent.1+ On the issue of the propriety of a,ardin! attorneys fees and e'e"plary da"a!es to )hilco"sat, Glo.e "aintains that )hilco"sat is not entitled thereto .ecause in refusin! to pay rentals for the re"ainder of the ter" of the A!ree"ent, Glo.e only acted in accordance ,ith its ri!hts.18 In G.R. No. 147334,19 Glo.e, the petitioner therein, contends that the Court of Appeals erred in findin! it lia.le for the a"ount of ;$Q9*,*%8.00, representin! rentals for Cece".er 199*, since )hilco"sats services ,ere actually ter"inated on 08 Bove".er 199*.*0 In its Comment, )hilco"sat clai"s that Glo.es petition should .e dis"issed as it raises a factual issue ,hich is not co!niDa.le .y the Court in a petition for revie, on certiorari.*1 On 15 Au!ust *001, the Court issued a Resolution !ivin! due course to )hilco"sats Petition in G.R. No. 147324 and re(uired the parties to su."it their respective "e"oranda.** $i"ilarly, on *0 Au!ust *001, the Court issued a Resolution !ivin! due course to the Petition filed .y Glo.e in G.R. No. 147334 and re(uired .oth parties to su."it their "e"oranda.*% )hilco"sat and Glo.e thereafter filed their respective Consolidated emoranda in the t,o cases, reiteratin! their ar!u"ents in their respective petitions. 2he Court is tas0ed to resolve the follo,in! issues6 91: ,hether the ter"ination of the #)=;$ Military 4ases A!ree"ent, the non= ratification of the 2reaty of Friendship, Cooperation and $ecurity, and the conse(uent ,ithdra,al of ;$ "ilitary forces and personnel fro" Cu.i )oint constitute force ma@eure ,hich ,ould e'e"pt Glo.e fro" co"plyin! ,ith its o.li!ation to pay rentals under its A!ree"ent ,ith )hilco"sat3 9*: ,hether Glo.e is lia.le to pay rentals under the A!ree"ent for the "onth of Cece".er 199*3 and 9%: ,hether )hilco"sat is entitled to attorneys fees and e'e"plary da"a!es. Bo reversi.le error ,as co""itted .y the Court of Appeals in issuin! the assailed DecisionE hence the petitions are denied. 2here is no "erit is )hilco"sats ar!u"ent that $ection 8 of the A!ree"ent cannot .e !iven effect .ecause the enu"eration of events constitutin! force ma@eure therein unduly e'pands the concept of a fortuitous event under Article 11+/ of the Civil Code and is therefore invalid. In support of its position, )hilco"sat contends that under Article 11+/ of the Civil Code, an event "ust .e unforeseen in order to e'e"pt a party to a contract fro" co"plyin! ,ith its o.li!ations therein. It insists that since the e'piration of the #)=;$ Military 4ases A!ree"ent, the non=ratification of the 2reaty of Friendship, Cooperation and $ecurity and the ,ithdra,al of ;$ "ilitary forces and personnel fro" Cu.i )oint ,ere not unforeseea.le, .ut ,ere possi.ilities 0no,n to it and Glo.e at the ti"e they entered into the A!ree"ent, such events cannot e'e"pt Glo.e fro" perfor"in! its o.li!ation of payin! rentals for the entire five=year ter" thereof. Ao,ever, Article 11+/, ,hich e'e"pts an o.li!or fro" lia.ility on account of fortuitous events or force ma@eure, refers not only to events that are unforeseea.le, 3u' a8&o 'o '6o&* C67:6 ar* @or*&**a38*, 3u' 7n*17'a38*? Art. 11+/. 1'cept in cases specified .y the la,, or ,hen it is other,ise declared .y stipulation, or ,hen the nature of the o.li!ation re(uires the assu"ption of ris0, no person shall .e responsi.le for those events ,hich, could not .e foreseen, or ,hich, thou!h foreseen ,ere inevita.le. A fortuitous event under Article 11+/ "ay either .e an act of God, or natural occurrences such as floods or typhoons,*/ or an act of "an, such as riots, stri0es or ,ars.*5 )hilco"sat and Glo.e a!reed in $ection 8 of the A!ree"ent that the follo,in! events shall .e dee"ed events constitutin! force ma@eure6 1.Any la,, order, re!ulation, direction or re(uest of the )hilippine Govern"ent3 *.$tri0es or other la.or difficulties3 %.Insurrection3 /.#iots3 5.Bational e"er!encies3 &.<ar3 +.Acts of pu.lic ene"ies3 8.Fire, floods, typhoons or other catastrophies or acts of God3 9.Other circu"stances .eyond the control of the parties. Clearly, the fore!oin! are either unforeseea.le, or foreseea.le .ut .eyond the control of the parties. 2here is nothin! in the enu"eration that runs contrary to, or e'pands, the concept of a fortuitous event under Article 11+/. Further"ore, under Article 1%0&*& of the Civil Code, parties to a contract "ay esta.lish such stipulations, clauses, ter"s and conditions as they "ay dee" fit, as lon! as the sa"e do not run counter to the la,, "orals, !ood custo"s, pu.lic order or pu.lic policy.*+ Article 1159 of the Civil Code also provides that IoJ.li!ations arisin! fro" contracts have the force of la, .et,een the contractin! parties and should .e co"plied ,ith in !ood faith.*8 Courts cannot stipulate for the parties nor a"end their a!ree"ent ,here the sa"e does not contravene la,, "orals, !ood custo"s, pu.lic order or pu.lic policy, for to do so ,ould .e to alter the real intent of the parties, and ,ould run contrary to the function of the courts to !ive force and effect thereto.*9

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Bot .ein! contrary to la,, "orals, !ood custo"s, pu.lic order, or pu.lic policy, $ection 8 of the A!ree"ent ,hich )hilco"sat and Glo.e freely a!reed upon has the force of la, .et,een the".%0 In order that Glo.e "ay .e e'e"pt fro" non=co"pliance ,ith its o.li!ation to pay rentals under $ection 8, the concurrence of the follo,in! ele"ents "ust .e esta.lished6 91: the event "ust .e independent of the hu"an ,ill3 9*: the occurrence "ust render it i"possi.le for the de.tor to fulfill the o.li!ation in a nor"al "anner3 and 9%: the o.li!or "ust .e free of participation in, or a!!ravation of, the in ury to the creditor.%1 2he Court a!rees ,ith the Court of Appeals and the trial court that the a.ove"entioned re(uisites are present in the instant case. )hilco"sat and Glo.e had no control over the non=rene,al of the ter" of the #)= ;$ Military 4ases A!ree"ent ,hen the sa"e e'pired in 1991, .ecause the prero!ative to ratify the treaty e'tendin! the life thereof .elon!ed to the $enate. Beither did the parties have control over the su.se(uent ,ithdra,al of the ;$ "ilitary forces and personnel fro" Cu.i )oint in Cece".er 199*6 O.viously the non=ratification .y the $enate of the #)=;$ Military 4ases A!ree"ent 9and its $upple"ental A!ree"ents: under its #esolution Bo. 1/1. 9=xhi(it %: on $epte".er 1&, 1991 is .eyond the control of the parties. 2his resolution ,as follo,ed .y the sendin! on Cece".er %1, 1991 oIfJ a No'* !*r3a8* 9=xhi(it 7: .y the )hilippine Govern"ent to the ;$ Govern"ent notifyin! the latter of the for"ers ter"ination of the #)=;$ Military 4ases A!ree"ent 9as a"ended: on %1 Cece".er 199* and that accordin!ly, the ,ithdra,al of all ;.$. "ilitary forces fro" $u.ic Baval 4ase should .e co"pleted .y said date. $u.se(uently, defendant IGlo.eJ received a for"al order fro" Cdr. <alter F. Corliss II Co""ander ;$B dated -uly %1, 199* and a notification fro" A22 dated -uly *9, 199* to ter"inate the provision of 21s services 9via an I4$ $tandard 4 1arth $tation: effective Bove".er 08, 199*. )laintiff I)hilco"satJ ,as furnished ,ith copies of the said order and letter .y the defendant on Au!ust 0&, 199*. #esolution Bo. 1/1 of the )hilippine $enate and the Bote >er.ale of the )hilippine Govern"ent to the ;$ Govern"ent are acts, direction or re(uest of the Govern"ent of the )hilippines and circu"stances .eyond the control of the defendant. 2he for"al order fro" Cdr. <alter Corliss of the ;$B, the letter notification fro" A22 and the co"plete ,ithdra,al of all the "ilitary forces and personnel fro" Cu.i )oint in the year=end 199* are also acts and circu"stances .eyond the control of the defendant. Considerin! the fore!oin!, the Court finds and so holds that the afore=narrated circu"stances constitute force "a eure or fortuitous event9s: as defined under para!raph 8 of the A!ree"ent. Fro" the fore!oin!, the Court finds that the defendant is e'e"pted fro" payin! the rentals for the facility for the re"ainin! ter" of the contract. As a conse(uence of the ter"ination of the #)=;$ Military 4ases A!ree"ent 9as a"ended: the continued stay of all ;$ Military forces and personnel fro" $u.ic Baval 4ase ,ould no lon!er .e allo,ed, hence, plaintiff ,ould no lon!er .e in any position to render the service it ,as o.li!ated under the A!ree"ent. 2o put it .lantly 9sic:, since the ;$ "ilitary forces and personnel left or ,ithdre, fro" Cu.i )oint in the year end Cece".er 199*, there ,as no lon!er any necessity for the plaintiff to continue "aintainin! the I4$ facility. %* 91"phasis in the ori!inal.: 2he afore"entioned events "ade i"possi.le the continuation of the A!ree"ent until the end of its five=year ter" ,ithout fault on the part of either party. 2he Court of Appeals ,as thus correct in rulin! that the happenin! of such fortuitous events rendered Glo.e e'e"pt fro" pay"ent of rentals for the re"ainder of the ter" of the A!ree"ent. Moreover, it ,ould .e un ust to re(uire Glo.e to continue payin! rentals even thou!h )hilco"sat cannot .e co"pelled to perfor" its correspondin! o.li!ation under the A!ree"ent. As noted .y the appellate court6 <e also point out the sheer ine(uity of )AI@COM$A2s position. )AI@COM$A2 ,ould li0e to char!e G@O41 rentals for the .alance of the lease ter" ,ithout there .ein! any correspondin! teleco""unications service su. ect of the lease.It ,ill .e !rossly unfair and ini(uitous to hold G@O41 lia.le for lease char!es for a service that ,as not and could not have .een rendered due to an act of the !overn"ent ,hich ,as clearly .eyond G@O41s control. 2he .indin! effect of a contract on .oth parties is .ased on the principle that the o.li!ations arisin! fro" contracts have the force of la, .et,een the contractin! parties, and there "ust .e "utuality .et,een the" .ased essentially on their e(uality under ,hich it is repu!nant to have one party .ound .y the contract ,hile leavin! the other party free therefro" 9Allied Banking Corporation v. Court of Appeals, 284 SCRA 35 :.%% <ith respect to the issue of ,hether Glo.e is lia.le for pay"ent of rentals for the "onth of Cece".er 199*, the Court li0e,ise affir"s the appellate courts rulin! that Glo.e should pay the sa"e. Althou!h Glo.e alle!ed that it ter"inated the A!ree"ent ,ith )hilco"sat effective 08 Bove".er 199* pursuant to the for"al order issued .y Cdr. Corliss of the ;$ Bavy, the date ,hen they actually ceased usin! the earth station su. ect of the A!ree"ent ,as not esta.lished durin! the trial.%/ Ao,ever, the trial court found that the ;$ "ilitary forces and personnel co"pletely ,ithdre, fro" Cu.i )oint only on %1 Cece".er 199*.%5 2hus, until that date, the ;$CCA had control over the earth station and had the option of usin! the sa"e. Further"ore, )hilco"sat could not have re"oved or rendered ineffective said co""unication facility until after %1 Cece".er 199* .ecause Cu.i )oint ,as accessi.le only to ;$ naval personnel up to that ti"e. Aence, the Court of Appeals did not err ,hen it affir"ed the trial courts rulin! that Glo.e is lia.le for pay"ent of rentals until Cece".er 199*. Beither did the appellate court co""it any error in holdin! that )hilco"sat is not entitled to attorneys fees and e'e"plary da"a!es. 2he a,ard of attorneys fees is the e'ception rather than the rule, and "ust .e supported .y factual, le!al and e(uita.le ustifications. %& In previously decided cases, the Court a,arded attorneys fees ,here a party acted in !ross and evident .ad faith in refusin! to satisfy the other partys clai"s and co"pelled the for"er to liti!ate to protect his ri!hts3%+ ,hen the action filed is clearly unfounded,%8 or ,here "oral or e'e"plary da"a!es are a,arded.%9 Ao,ever, in cases ,here .oth parties have le!iti"ate clai"s a!ainst each other and no party actually prevailed, such as in the present case ,here the clai"s of .oth parties ,ere sustained in part, an a,ard of attorneys fees ,ould not .e ,arranted./0 1'e"plary da"a!es "ay .e a,arded in cases involvin! contracts or (uasi=contracts, if the errin! party acted in a ,anton, fraudulent, rec0less, oppressive or "alevolent "anner./1 In the present case, it ,as not sho,n that Glo.e acted ,antonly or oppressively in not heedin! )hilco"sats de"ands for pay"ent of rentals. It ,as esta.lished durin! the trial of the case .efore the trial court that Glo.e had valid !rounds for refusin! to co"ply ,ith its contractual o.li!ations after 199*. =,EREFORE, the Petitions are C1BI1C for lac0 of "erit. 2he assailed Decision of the Court of Appeals in CA=G.#. C> Bo. &%&19 is AFFI#M1C. O OR"ERE". G.R. No. 155$34 Au%u&' 1$, 2004 RE+/(LIC OF T,E +,ILI++INE , R*Br*&*n'*0 3y '6* OCIAL EC/RITY Y TEM, petitioner, vs. JERRY !. "A!I", respondent.

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7Curin! the pre=trial of the case, the court o.served that ,hile the co"plaint ,as captioned 5)etition for #ecovery of )ossession ,ith I)Jrayer for Issuance of a <rit of )ossession,5 an e'a"ination of its .ody sho,s that the prayer ,as actually for the rescission of the deed of conditional sale. For this reason, the court ordered the a"end"ent of the co"plaint and in co"pliance thereto, IpetitionerJ su."itted its a"ended co"plaint on March 19, 199+. 7I#espondentJ Cavid denied the alle!ed violations of the deed of conditional sale, statin! that 4uenaventura )enus, alluded to .y the IpetitionerJ as possessor=occupant of the su. ect property, ,as in fact a careta0er until and after the necessary renovations and "odifications on the house ,ere "ade. 7In a ICJecision dated -uly 1, 1998, the court a )uo dis"issed the co"plaint and ad ud!ed the IpetitionerJ lia.le for costs. 2he dispositive portion of the trial court5s decision reads6 5<A1#1FO#1, in the li!ht of the fore!oin!, the A"ended Co"plaint is dis"issed, ,ith costs a!ainst the plaintiff. 5$O O#C1#1C.5 7In dis"issin! the co"plaint, the court ruled that the IpetitionerJ failed to prove that the IrespondentJ purchased the su. ect property for the use and .enefit of another undisclosed party and not for his e'clusive use, or that the defendant sold, assi!ned, encu".ered, "ort!a!ed, leased, su.leased or in any "anner altered or disposed of the su. ect property or his ri!hts thereto at any other ti"e. In arrivin! at its ICJecision, the lo,er court considered the testi"ony of the IrespondentJ that ,hen the su. ect property ,as delivered to hi" on Octo.er *%, 199*, the unit ,as not ha.ita.le so he had to "a0e a fe, constructions thereon. Ae secured the services of his cousin, 4uenaventura )enus, to .e the careta0er ,hile construction on the house ,as !oin! on. <ith this, the court concluded that possession, as a condition of the deed of sale .et,een the parties, ,as sufficiently satisfied. 7A!!rieved, I)etitionerJ $$$ .rou!ht IanJ appeal Ito the CAJ, ar!uin! that the court a )uo erred in holdin! that IrespondentJ did not violate the ter"s and conditions of the Ceed of Conditional $ale and in conse(uently dis"issin! the case.7/ Ru87n% o@ '6* Cour' o@ ABB*a8& Affir"in! the trial court, the CA ruled that ,hile other persons had .een found occupyin! the su. ect property, no proof ,as adduced .y petitioner to prove that they had ta0en possession of it on their o,n .ehalf and not "erely as respondent5s careta0ers. 2he appellate court added that .ecause of the s(ualid condition of the property ,hen it ,as delivered, respondent had to "a0e i"prove"ents thereon as ,ell as as0 )enus, and later on Oden Co"in!o, to stay there as careta0ers. 2hrou!h his careta0ers, respondent ,as dee"ed to have occupied and possessed the property as re(uired .y the Ceed of $ale .et,een hi" and petitioner. 2he CA concluded that the property had clearly .een su. ect to respondent5s ,ill, a fact e(uivalent to possession under Article 5%15 of the Civil Code. Aence, this )etition.& I&&u*& In its Me"orandu", petitioner raises this sole issue6 7,hether the Court of Appeals co""itted reversi.le error in affir"in! the Cecision of the trial court holdin! that respondent did not violate the ter"s and conditions of the Ceed of Conditional $ale.7+ T6* Cour'D& Ru87n% 2he )etition is "eritorious. o8* I&&u*? !iolation of t"e #er$s and Conditions of t"e %eed of Conditional Sale )etitioner avers that respondent violated the ter"s and conditions of the Ceed of Conditional $ale, ,hen he failed to 7actually occupy and possess the property at all ti"es78 and allo,ed other persons to do so.9 It ar!ues that contrary to the rulin!s of the trial and the appellate courts, the Ceed of Conditional $ale re(uired 7actual physical possession at all ti"es,7 not ust si"ple possession. It contends that the "aterial occupation of the property .y other persons ran counter to the o. ective of the $ocial $ecurity $yste" 9$$$: housin! pro!ra" to restrict the use and en oy"ent of the housin! units to $$$ e"ployees and their i""ediate fa"ilies only. )etitioner li0e,ise su."its that the appellate court erred in .elievin! the clai" of respondent that the house ,as uninha.ita.le ,hen it ,as delivered to hi" in 199*. Ais clai" ,as .elied .y his acceptance of the property ,ithout protest, as ,ell as .y the fact that his alle!ed careta0ers had lived there fro" 199* to 199&. )etitioner adds that he should have used his availa.le "oney to i"prove the property, if the unit ,as indeed unliva.le, instead of fully settlin! in advance in Cece".er 199* the unpaid .alance of its purchase price.

;nder the ter"s of the su. ect Contract, 7actual possession7 cannot .e e(uated ,ith 7actual occupancy.7 Inas"uch as the housin! unit ,as physically occupied .y parties other than those intended to .e .enefited .y the housin! pro!ra" of the $ocial $ecurity $yste", there ,as a clear violation of the Contract. $ince respondent did not co"ply ,ith his o.li!ations, rescission is proper. T6* Ca&* 4efore us is a )etition for #evie,1 under #ule /5 of the #ules of Court, assailin! the Octo.er 9, *00* Cecision* of the Court of Appeals 9CA: in CA=G# C> Bo. &1%+/. 2he appellate court disposed as follo,s6 7=,EREFORE, the instant appeal is "ENIE" for lac0 of "erit. 2he decision of the #e!ional 2rial Court, LueDon City, 4ranch 105, in Civil Case Bo. L=9&=*+0%1 is here.y AFFIRME".7% T6* Fa:'& 2he CA narrated the facts thus6 7' ' ' I#espondentJ -erry >. Cavid is an e"ployee of the $$$, for"erly assi!ned at its Me".ership 94ac0roo": Cepart"ent. )ursuant to its 1"ployees5 Aousin! @oan )ro!ra", $$$ a,arded Cavid a house and lot located at Borth Fairvie,, LueDon City. A Ceed of Conditional $ale over the su. ect property ,as thereafter e'ecuted .et,een the parties. 7On reports that nu"erous violations have .een co""itted .y so"e of the housin! a,ardees in connection ,ith the conditions !overnin! their sales, $$$ conducted an investi!ation on the "atter. 2he investi!ation revealed that in the case of I#espondentJ Cavid, he co""itted t,o 9*: violations of his deed of conditional sale, to ,it6 91: neither the IrespondentJ nor his i""ediate fa"ily resided andNor occupied the said housin! unit, and 9*: he allo,ed a certain 4uenaventura )enus to possess and occupy the property. 7As a conse(uence of these violations, $$$ sent a letter to Cavid for"ally revo0in!, ter"inatin! andNor rescindin! the deed of conditional sale. Ao,ever, the latter refused to vacate and surrender possession of the su. ect property, pro"ptin! $$$ to institute a co"plaint ,ith the LueDon City #2C on March *8, 199& revo0in! the deed of conditional sale and li0e,ise prayin! for the issuance of a ,rit of possession in its favor.

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&ropriet' of Revie( At the outset, the Court stresses that a (uestion of la, has arisen fro" petitioner5s contention that si"ple possession under Article 5%1 of the Civil Code is not the sa"e as 7actual occupancy and possession at all ti"es,7 as re(uired of respondent under the Ceed. $uch (uestion == of ,hat la,, rule or principle is to !overn a !iven state of facts == is decidedly one of la,.10 It "ay .e raised in this appeal .y certiorari under #ule /5 of the #ules of Court. Rules of Contra)t *nterpretation Certain rules of contract interpretation co"e to "ind at this point. >irst, in construin! a contract, it is a funda"ental tas0 to ascertain the intention of the contractin! parties.11 As a rule, such intention is deter"ined .y loo0in! at the ,ords used == at all the ,ords rather than at a particular ,ord or t,o3 and at ,ords in conte't rather than ust ,ords standin! alone.1* Indeed, under Article 1%+/ of the Civil Code, 7the various stipulations of a contract shall .e interpreted to!ether, attri.utin! to the dou.tful ones that sense ,hich "ay result fro" all of the" ta0en ointly.7 1econd, the ascertained intention of the parties is dee"ed an inte!ral part of the contract, as thou!h it has .een ori!inally e'pressed in une(uivocal ter"s.1% And third, the reasona.leness of the result o.tained, after analysis and construction of a contract, "ust also .e carefully considered.1/ 2he conditions that ,ere alle!edly violated .y respondent are contained in para!raph 10 of the Ceed of Conditional $ale, as follo,s6 710. 2he Contract shall further IprovideJ the follo,in! ter"s and conditions6 9a: !he +=ND== is makin' this purchase for his0her o8n exclusive use and (enefit and not for the use and (enefit of another undisclosed party0parties3 9.: 2he purpose of the sale shall .e to aid the >1BC11 in ac(uirin! a house and lot for hi"selfNherself andNor hisNher i""ediate fa"ily, and not to provide hi"Nher ,ith a "eans for speculation or profit .y a future assi!n"ent of hisNher ri!ht herein ac(uired or the resale of the )#O)1#2H su. ect of this Contract. 2herefore, the >1BC11, ,ithin the first FI>1 95: years of the e'istence of this contract a!rees not to sell, assi!n, encu".er, "ort!a!e, lease, su.=let or in any "anner alter or dispose of the property su. ect hereof, or his ri!hts thereto, at any ti"e, in ,hole or in part. After the FI>1 95: year period, >1BC11 shall have the ri!ht to the full disposal of the property, provided that, >1BC11 has .een a.le to fully pay all of hisNher o.li!ations herein. Ao,ever, the fore!oin! not,ithstandin!, the >1BC11 "ay ' ' ' at any ti"e ,ith prior consent of the >1BCO# transfer his ri!ht to the )#O)1#2H to any eli!i.le e"ployee of the >1BCO#, su. ect, ho,ever, to the ri!ht of first refusal .y the >1BCO# ,ho "ay refund to the >1BC11 all of hisNher install"ent pay"ents and the value of su.stantial i"prove"ents introduced .y hi"Nher if any, as appraised .y the >1BCO#3 9c: !he +=ND==, and his heirs and0or successors, shall actually occupy and (e in possession of the PR,P=R!9 at all times3 9d: 2he >1BC11 shall not o.struct or interfere in any "anner ,hatsoever ,ith the ri!ht of the >1BCO# or any of its duly authoriDed representatives to inspect, survey, repair, lay ,ater pipes, !as, electric and telephone lines or other ,or0s of si"ilar purposes3 9e: 2he >1BC11 shall a.ide .y and co"ply ,ith the >endor5s Occupancy #ules and #e!ulations the ter"s and conditions of ,hich are "ade an inte!ral part hereof .y reference, as ,ell as that issued .y any other !overn"ental authority ,hich "ay, fro" ti"e to ti"e, .e pro"ul!ated in re!ard to the use and preservation of the house and lot3 9f: 2he >1BC11 ,arrants in full the truth of the representation "ade in hisNher Application For 1M)@OH11 AO;$IBG @OAB, the ter"s of ,hich are li0e,ise "ade an inte!ral part hereof .y reference. 72he violation of any of the conditions herein stipulated shall .e considered as a .reach of this Contract, and shall su. ect the >1BC11 to the penalties provided for in para!raphs 911: and 91*: hereof, includin! ad"inistrative sanctions, ,hen ,arranted, in the event ' ' ' the >1BC11 has .een found to have co""itted a "isrepresentationNfalsification in hisNher application for an 1"ployee Aousin! @oan.715 A)tual +))upan)' and &ossession at All #i$es )lainly, the pri"ary intention .ehind the a.ove=(uoted stipulations is to restrict the sale, the use and the .enefit of the housin! units to $$$ e"ployees and their i""ediate fa"ilies only. 2his o. ective is in line ,ith that of the $$$ housin! loan pro!ra" == to aid its e"ployees in ac(uirin! their o,n d,ellin! units at a lo, cost.1& $uch intent, dra,s life also fro" the social ustice policy of #A 11&1, as a"ended, other,ise 0no,n as the 7$ocial $ecurity $yste" @a,7 !rantin! direct housin! loans to covered e"ployees and !ivin! priority to lo,= inco"e !roups.1+ Indeed, the a.ove !oal is confir"ed .y the re(uire"ent that respondent=vendee and his heirs or assi!ns "ust actually occupy and possess the property at all ti"es3 .y the proscription that he "ust not sell, assi!n, encu".er, "ort!a!e, lease, su.let or in any "anner alter or dispose of the property for the first five 95: years3 and .y the further proviso that he "ay alienate or transfer his ri!hts thereto at any ti"e prior to full pay"ent, .ut only to petitioner under its ri!ht of first refusal or to any other eli!i.le $$$ e"ployee. 2hese restrictive covenants are undenia.ly valid under Article 1%0&18 of the Civil Code. 2he use of the con unctive and in su.para!raph 9c: is not .y any chance a surplusa!e. Beither is it "eant to .e ,ithout any le!al si!nification. Its use is confir"atory of the restrictive intent that the houses provided .y petitioner should .e for the e'clusive use and .enefit of the $$$ e"ployee=.eneficiary. It is easily discerni.le, therefore, that .oth 7actual occupancy7 and 7possession at all ti"es7 == not ust one or the other == ,ere i"posed as conditions upon respondent. 2he ,ord and == ,hether it is used to connect ,ords, phrases or full sentences == "ust .e accepted in its co""on and usual "eanin! as 7.indin! to!ether and as relatin! to one another.719 And i"plies a con unction, oinder or union.*0 2hus, respondent had to co"ply ,ith not one, .ut t,o, concurrin! conditions == actual occupancy and possession at all ti"es. 2he (uestion is, did heK <e rule that he did not. ,o A)tual +))upan)' >irst, actual possession is not the sa"e as actual occupancy. Aence, it ,as an error on the part of the lo,er courts to hold that the re(uire"ent of possession alone ,as a sufficient co"pliance ,ith the conditions under su.para!raphs 9a: and 9c:. ;nder the la,,*1 7IpJossession is ac(uired .y the "aterial occupation of a thin! or the e'ercise of a ri!ht, or .y the fact that it is su. ect to

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the action of our ,ill, or .y the proper acts and le!al for"alities esta.lished for ac(uirin! such ri!ht.7 As such, actual possession consists in the "anifestation of acts of do"inion over property of such a nature as a party ,ould naturally e'ercise over his o,n** == as ,hen respondent hi"self is physically in occupation of the property, or even ,hen another person ,ho reco!niDes the for"er5s ri!hts as o,ner is in occupancy. *% In short, possession can .e either 7actual7 or "erely constructive. On the other hand, actual occupancy connotes 7so"ethin! real, or actually e'istin!, as opposed to so"ethin! "erely possi.le, or to so"ethin! ,hich is presu"ptive or constructive.7*/ ;nli0e possession, it can only .e actual or real, not constructive. 1econd, the uncontroverted fact re"ains that it ,as not respondent andNor his i""ediate fa"ily, .ut )enus and his ,ife, ,ho had lived in the property since 199*3 and that it ,as fro" )enus that Co"in!o too0 over possession in 199&. 2hus, ,hile it "ay .e conceded that respondent 7possessed7 the property throu!h his careta0ers, there is no escapin! the fact that he andNor his i""ediate fa"ily did not 7actually occupy7 it3 and that he allo,ed other persons to .enefit fro" its use. In his letter to $$$ Assistant Ad"inistrator A"ador Monteiro on -anuary */, 199&,*5 respondent ad"itted as "uch, .ut tried to ustify his nonco"pliance .y sayin! that the property ,as not in a ha.ita.le condition at the ti"e of delivery. 2his line of defense ,as sustained .y the trial court on the !round of respondent5s alle!edly 7uncontroverted or unre.utted evidence.7*& 2he #2C5s findin!, ho,ever, is neither .orne out .y the records nor .y su.stantial evidence. Aence, it constitutes an e'ception to the rule that this Court cannot revie, factual findin!s.*+ Indeed, a thorou!h revie, of the records reveals that the aver"ents of respondent ,ere a.ly controverted .y denials "ade .y petitioner. Be!atin! his clai" that the house ,as located ad acent to a cree0,*8 it len!thily ar!ued a!ainst it in the Me"orandu" it su."itted to the trial court. @i0e,ise, it "ust .e stressed that under the #ules of Court,*9 the defense alle!ed in his Ans,er is dee"ed controverted, ,hether or not petitioner filed a reply. Moreover, it is a .asic rule of evidence that the party assertin! an affir"ative alle!ation "ust prove it.%0 Ao,ever, all that there is to .ac0 up the defense of respondent in this case is his self=servin! testi"ony and that of his ,itness, Co"in!o. As to the latter5s testi"ony, it suffices to say that he could not have affir"ed the alle!ed condition of the unit in 199*, as he too0 possession of it only in 199&, four years after it had lain e'posed to the ele"ents ,ith no i"prove"ents ,hatsoever. For four years, respondent li0e,ise 0ept his silence a.out the purported condition of the unit. Ae accepted it ,ithout any ,hi"per of protest on Octo.er *%, 199*, and even paid the housin! loan in full in Cece".er of the sa"e year. If it ,as indeed uninha.ita.le, he should have refused to accept it or i""ediately protested its condition. On the other hand, there is enou!h docu"entary evidence to de.un0 his clai". 2he report of petitioner5s Internal Audit $ervice%1 si!nificantly esta.lished that 509 of the +*8 a,ardees == presu"a.ly situated si"ilarly as he ,as == had occupied their units in co"pliance ,ith the assailed re(uire"ent. 2he Intervie, $lip%* su."itted in evidence .y petitioner also sho,ed that )enus and his ,ife, and later Co"in!o, had lived in the unit since 199*. In the face of these facts, it is difficult to .elieve the defense of respondent. For ho, could the units .e ha.ita.le to "any others, .ut not to hi"K @i0e,ise, this Court ta0es udicial notice of the fact that lo,=cost houses such as those offered .y petitioner%% are usually core or shell units ,ithout ade(uate divisions, ceilin!s, ca.inets, paint and, in so"e cases, electrical connections == features that have to .e installed, co"pleted or refur.ished .y the a,ardees. 2he idea, of course, is to provide i""ediate .ut afforda.le livin! spaces that they can ,or0 at i"provin!, accordin! to their needs and finances and ,hile livin! therein. Certainly, at )1+*,9+8.85 9the cost of the house and lot in this case:, it is .ut fair to accept the lac0 of a"enities. Beither can respondent assail the validity of the Contract as a one= sided 7ta0e it or leave it7 a!ree"ent. 2o .e!in ,ith, a contract of adhesion == ,herein one party i"poses a ready="ade for" of contract on the other == is not strictly a!ainst the la,.%/ 2he ter"s of the a!ree"ent cannot .e "odified, .ut can .e freely re ected in its entirety, .y the other party. On the other hand, the latter5s adherence thereto ,ould "ean consent.%5 <e need only to re"ind respondent that contractual o.li!ations .et,een the parties have the force of la, and "ust .e co"plied ,ith in !ood faith.%& <e therefore do not see any reason to discuss respondent5s added ar!u"ents, other than to say that the o. ectives of lo,=cost housin! == "andated under the social ustice provisions of the Constitution%+ == are too i"portant to .e sidetrac0ed .y la"e, unti"ely and unfounded e'cuses. $uch e'cuses do nothin! .ut har" to the salutary efforts of providin! the underprivile!ed and the ho"eless ,ith cheap .ut decent houses. It is for this reason that ,e re!ard this case as no ordinary s0ir"ish over contractual relations. Res)ission In vie, of the fore!oin! discussion, ,e rule that rescission of the Contract is the proper recourse. Article 1191 of the Civil Code provides6 7Art. 1191. 2he po,er to rescind o.li!ations is i"plied in reciprocal ones, in case one of the o.li!ors should not co"ply ,ith ,hat is incu".ent upon hi". 72he in ured party "ay choose .et,een fulfill"ent and the rescission of the o.li!ation, ,ith the pay"ent of da"a!es in either case. Ae "ay also see0 rescission even after he has chosen fulfill"ent, if the latter should .eco"e i"possi.le.7 As noted in previous cases, the rescission conte"plated under Article 1191 is a principal action for 7resolution,7 ,hich is .ased on a .reach .y a party of its reciprocal o.li!ations.%8 2he present Contract is one of conditional sale == oftenti"es referred to as a contract to sell, ,herein o,nership or title is retained .y the vendor%9 until 7full pay"ent .y the >1BC11 of the full purchase price of the )#O)1#2H, ,ith all the interest due thereon, as ,ell as ta'es and other char!es ABC upon their faithful co"pliance ,ith all the conditions of this Contract ' ' '.7/0 Althou!h a transfer of o,nership or title fro" the seller to the .uyer is normally predicated upon the pay"ent of the purchase price, the parties are nevertheless free to stipulate other la,ful conditions .y ,hich they .ind the"selves and upon ,hich transfer of o,nership depends./1 In this case, that other o.li!ation ,as faithful co"pliance ,ith the conditions of the Contract. #espondent did not faithfully co"ply ,ith the conditions under su.para!raphs 910:9a: and 9c:. Ais nonco"pliance also constituted a .reach of his reciprocal o.li!ations under the Ceed. 2he Ceed itself provides for its annul"ent and cancellation .y reason of a .reach of the ter"s and conditions stipulated therein. )ara!raphs 11 and 1* provide thus6 711. 1hould the +=ND== violate, refuse or fail to comply 8ith any of the terms and conditions stipulated herein, for 8hatever reason, or is found to have co""itted any "isrepresentation in hisNher application for 1M)@OH11 AO;$IBG @OAB, this Contract shall (e deemed annulled and cancelled ,ithout pre udice of the ri!hts of the parties under #epu.lic Act Bo. &&5*, other,ise 0no,n as the Maceda @a,, and shall entitle the >1BCO# to i""ediately repossess the property as if this Contract ,as never "ade3 for this purpose, the >1BC11 shall .e considered and treated as a tenant holdin! the property ,ithout the per"ission of the >1BCO#, and "ust peacefully vacate the

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pre"ises i""ediately upon repossession thereof .y the >1BCO#. 2he annul"ent and cancellation of this Contract and the ri!ht of the >1BCO# to repossess the property shall .eco"e effective upon "ere ,ritten notice thereof to the >1BC11. 71*. In addition to the conse(uences stated in the i""ediately precedin! para!raph, the >1BC11 shall forfeit in favor of the >1BCO# all the install"ents "ade, to stand as rent for hisNher occupation of the property, li0e,ise su. ect to the provisions of #epu.lic Act Bo. &55*.7/* 9Italics supplied: Ao,ever, this Court holds that the forfeiture provision under para!raph 1* does not apply to the pay"ent "ade .y respondent. 2he plain and si"ple reason is that he did not pay the purchase price .y install"ent, .ut instead paid it in full in Cece".er 199* == t,o "onths after the delivery of the unit. Aence, that pay"ent ,as .eyond the a".it of #epu.lic Act &55*, other,ise 0no,n as the #ealty Install"ent 4uyer Act or the Maceda @a,. Coctrinally, "utual restitution "ust follo, rescission. ;nder Article 1%85 of the Civil Code, 7rescission creates the o.li!ation to return the thin!s ,hich ,ere the o. ect of the contract, to!ether ,ith their fruits, and the price ,ith its interests ' ' '.7/% Moreover, 7ItJo rescind is to declare a contract void at its inception and to put an end to it as thou!h it never ,as.7// Aence, rescission restores the parties to their relative positions, as if no contract has .een "ade. )ara!raph 11, cited a.ove, supports the "utual restitution re(uired in rescission. #espondent is thus o.li!ed to return the house and lot sold, as ,ell as rental pay"ents he "ay have earned, if any. On the other hand, petitioner is "andated to refund to hi" his full pay"ent of )1+*,9+8.85 plus le!al interest of & percent per annu", as ,ell as the value of su.stantial i"prove"ents introduced .y hi", as appraised .y petitioner. Indeed, stipulated in the Ceed is such appraisal .y the vendor,/5 upon transfer of the property to petitioner or to any of its eli!i.le e"ployees. 2his condition is reasona.ly and ustly applica.le and proper in the present case. =,EREFORE, this )etition is here.y .RAN!=D and the assailed Cecision 1=! A13D=. 2he Ceed of Conditional $ale is CANC=//=D. )etitioner is ,RD=R=D to pay respondent )1+*,9+8.85, plus the le!al interest and the value of any su.stantial i"prove"ents thereon. #espondent is ,RD=R=D to vacate i""ediately 4loc0 18, @ot 8, $$$ Aousin!, Borth Fairvie,, LueDon City3 and to surrender possession thereof to petitioner. Bo costs. O OR"ERE".