CASE #71

G.R. No. L-14132 January 22, 1920

LUCIANO VITUG DIMATULAC, plaintiff-appellee,
vs.
DOLORES CORONEL, defendant-appellant.
Ceferino Hilario for appellant.
Aurelio Pineda for appellee.
STREET, J .:
The plaintiff in this action, Luciano Vitug Dimatulac, resident of the municipality of Lubao, in the
Province of Pampanga, seeks to redeem several parcels of land, with a dwelling-house and other
improvements thereon, from a contract of sale with pacto de retro, whereby said property was
transferred by the plaintiff on June 30, 1911, to the defendant, Dolores Coronel. The trial judge
sustained the action and entered a judgment requiring the defendant to permit the redemption and to
surrender such of the property as is now in her possession. From this judgment the defendant
appealed.
It appears in evidence that, upon June 30, 1911, the plaintiff sold the property in question to Dolores
Coronel for the sum of P9,000, reserving the privilege to repurchase within the period of five years.
The contract contained a provision, commonly found in contracts of this character, converting the
vendor into a lessee of the vendee at an agreed rental, payable annually in the months of January
and February, and permitting the vendor to retain possession of the property as lessee until the time
allowed for repurchase should be past. It was also stipulated that in the event the original vendor
(now lessee) should fail to pay the agreed rental for any year of the five, the right to repurchase
would be lost and the property consolidated in the vendee.
Under this contract the payment of rent should have begun in the year 1912. The vendor, however,
entirely failed in the performance of this obligation and continued in arrears upon account of rent for
at least three years. In view of this default Dolores Coronel, the vendee, decided to take advantage
of the clause in the contract by which the consolidation of the property was accelerated; and to this
end she impleaded Dimatulac in a civil action (No. 1092 of the Court of First Instance of Pampanga)
to compel him to surrender the property in question and to pay the past-due rent. This action was
settled by a compromise, which was reduced to writing, approved by the Judge of the Court of First
Instance, and entered of record in that action on April 9, 1915. By the terms of this compromise
Dimatulac agreed to place at the disposition of Dolores Coronel all the property to which the action
related, including the crops already harvested thereon but not yet converted into money; and
inasmuch as Dimatulac had already made an agreement with a third person for the sale of the
growing cane, Dolores Coronel was authorized to arrange with the buyer as to the price, to receive
the proceeds, and to apply the same to the satisfaction of the past-due rent. In conformity with this
agreement Dimatulac surrendered to Dolores Coronel the possession of most, but not all, of the
parcels in question, including the crops harvested and to be harvested thereon.
Thus the situation remained until in May of the year 1916, when Dimatulac, through his wife, offered
to redeem the entire property under the original contract of sale with pacto de retro, the five years
named therein as the period during which repurchase might be effected not having as yet expired.
This redemption Dolores Coronel refused to concede, on the ground that the title to the property had
become absolute in herself. Thereupon the present action was instituted, as already stated, to
compel her to permit redemption.
It is undeniable that the clause in the contract of sale with pacto de retro of June 30, 1911, providing
for extinction of the right of the plaintiff to repurchase in case he should default in the payment of the
rent for any year was lawful. The parties to a contract of this character may legitimately fix any
period they please, not in excess of ten years, for the redemption of the property by the vendor; and
no sufficient reason occurs to us why the determination of the right of redemption may not be made
to depend upon the delinquency of the vendor now become lessee in the payment of the
stipulated rent. The supreme court of Spain sustains the affirmative of this proposition (decision of
January 18, 1900); and although such a provision, being of penal nature, may involve hardship to
the lessee, the consequences are not worse than such as follow from many other form of agreement
to which contracting parties may lawfully attach their signatures. Nevertheless, admitting the validity
of such a provision, it is not to be expected that any court will be reluctant to relieve from its effects
wherever this can be done consistently with established principles of law.
Considering this clause in the light of a penal provision, or stipulation for the forfeiture of the right to
repurchase, it is at once evident that Dolores Coronel, upon the default in the payment of any of the
installments of annual rent, had the choice either to avail herself of the forfeiture and take
possession of the property as owner or to waive the forfeiture and claim the payment of the past-due
rent as a subsisting debt. She could not claim for the rent during the whole period and at the same
time assert her ownership to the whole, the two positions being mutually inconsistent. The trial court
was, therefore, justified in holding that when provision was made in the compromise agreement of
1915 for the payment of the past-due rent and the claim therefor was recognized as a subsisting
debt, Dolores Coronel in effect waived the forfeiture which was incident to the non-payment of the
rent on the date due. She could not insist on the performance of the principal obligation and at the
same time exact the penalty (art. 1153, Civ. Code). Furthermore, when she assumed possession of
the property, by taking it out of the hands of the former owner, then her lessee, his obligation for
future rent ceased. In Municipality of Moncada vs. Cajuigan(21 Phil. Rep., 184), it was held that
where the lessee was ousted before the expiration of the stipulated period, the landlord could not
recover rent from the date of such ouster, even though by the contract the rent was payable prior to
the date of the ouster and was then in arrears.
It results from the foregoing that Luciano Vitug Dimatulac, the former owner of the property in
question and plaintiff herein, was relieved from the forfeiture resulting from his failure to pay the rent
upon the date due; and his right to repurchase must be considered to have been still subsisting
when the offer to redeem was made.
Counsel for the appellant insists that the rights of the parties with respect to the property in question
were conclusively settled by the compromise agreement effected with the approval of the court in
civil case No. 1092, it being supposed that by the agreement Dolores Coronel was recognized as
absolute owner. In this we are unable to concur. Any right which Dolores Coronel may have derived
from that contract is entirely consistent with the title which she had acquired under the original
contract; and there is nothing in the compromise agreement which has the necessary effect of
extinguishing the right of redemption. Her possession under this agreement must therefore be
considered to be of the same character, and her rights of the same extent, as if she had taken
possession at once when the original contract was executed. (Art. 1815, Civ. Code.) It must be
admitted that the provision for the lease, under which the plaintiff was permitted to retain possession
of the property, was abrogated as a result of the compromise agreement, but it would be an
unnecessary and unjust inference to say that the right of redemption created by the original contract
had also been destroyed. Every intendment both of law and equity favors the preservation of that
right.
As already stated, the plaintiff Dimatulac did not surrender all of the property of Dolores Coronel as
he had agreed to do in the compromise of 1915. This circumstance can not affect the solution of this
case, and it is immaterial whether he remained in possession of part in defiance of Dolores Coronel
or retained it with her consent. Of course he might be required to account for the value of the use
and occupation of the property so retained, prior to the offer to redeem, but his right to redeem within
the period limited by the contract cannot be made to depend upon his performance in good faith of
the compromise agreement.
What has been said effectually disposes of all the grounds of error assigned by the appellant in this
Court. The affirmance of the judgment is therefore appropriate and it is accordingly ordered that the
same be affirmed, with costs against the appellant. So ordered.
Arellano, C.J., Torres, Johnson, Araullo, Malcolm and Avancea, JJ., concur.

CASE #72
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.

FELICIANO, J .:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap
metal in Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would
bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for
hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles
with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For
that service, respondent charged freight rates which were commonly lower than regular commercial
rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for
the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a
truck driven by respondent himself, while 600 cartons were placed on board the other truck which
was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and
the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First
Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a
common carrier, and having failed to exercise the extraordinary diligence required of him by the law,
should be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that he could
not be held responsible for the value of the lost goods, such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision
1
finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for
P 4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering
him a common carrier; in finding that he had habitually offered trucking services to the public; in not
exempting him from liability on the ground of force majeure; and in ordering him to pay damages and
attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been
engaged in transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to
this Court by way of a Petition for Review assigning as errors the following conclusions of the Court
of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the
facts earlier set forth, be properly characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or
dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a common carrier even
though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although
such back-hauling was done on a periodic or occasional rather than regular or scheduled manner,
and even though private respondent'sprincipal occupation was not the carriage of goods for others.
There is no dispute that private respondent charged his customers a fee for hauling their goods; that
fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of
public convenience is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of the
applicable regulatory statute and implementing regulations and has been granted a certificate of
public convenience or other franchise. To exempt private respondent from the liabilities of a common
carrier because he has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent precisely for failing to
comply with applicable statutory requirements. The business of a common carrier impinges directly
and intimately upon the safety and well being and property of those members of the general
community who happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services and the law cannot
allow a common carrier to render such duties and liabilities merely facultative by simply failing to
obtain the necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy"
2
are held to a
very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of
passengers. The specific import of extraordinary diligence in the care of goods transported by a common
carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and
7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.
It is important to point out that the above list of causes of loss, destruction or deterioration which
exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force majeure fall within the scope of
Article 1735, which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as required in Article 1733. (Emphasis
supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in
the instant case the hijacking of the carrier's truck does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of
the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the
private respondent as common carrier is presumed to have been at fault or to have acted
negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on
the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary
diligence required private respondent to retain a security guard to ride with the truck and to engage
brigands in a firelight at the risk of his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or
armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or
of robbers who donot act with grave or irresistible threat, violence or
force, is dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment used in
the contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to
divest or to diminish such responsibility even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence
or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance
over the goods carried are reached where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by private respondent which carried
petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of
First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v.
Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the
accused were charged with willfully and unlawfully taking and carrying away with them the second
truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for
delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the
accused acted with grave, if not irresistible, threat, violence or force.
3
Three (3) of the five (5) hold-
uppers were armed with firearms. The robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several days and later releasing them in another
province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The
Court of First Instance convicted all the accused of robbery, though not of robbery in band.
4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is
necessary to recall that even common carriers are not made absolute insurers against all risks of
travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen
or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary
diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendana is not liable for the value of the undelivered merchandise which was lost because of an
event entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the
Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.




CASE #73
G.R. No. 2001 February 14, 1907
SALVADOR PANGANIBAN, plaintiff-appellee,
vs.
AGUSTIN CUEVAS, defendant-appellant.
Del-Pan, Ortigas, & Fisher for appellant.
Isabelo Artacho for appellee.
ARELLANO, C.J .:
This is an appeal from a judgment of the Court of First Instance of the Province of Pangasinan,
wherein it was held that the land and camarin in question were the property of Salvador Panganiban,
and the defendant, Agustin Cuevas, was ordered to return the said property to the plaintiff,
Panganiban, and to pay the costs of proceedings, the court reserving to the said plaintiff the right to
bring an action for damages against the defendant and holding that the deposit in the hands of the
clerk, amounting to 200 pesos, Mexican currency, made by Cuevas was improperly made, which
said sum the court ordered refunded to the said Cuevas. This case was tried in accordance with the
provisions of the former Code of Civil Procedure, and it appears:
(1) That on the 10th of December, 1897, Salvador Panganiban was the owner of a camarin and lot,
the camarinbeing of bamboo nipa construction, divided into five apartments, each apartment having
two doors opening on the front, the whole property being more specifically described in the
instrument executed by the said Panganiban, wherein he sold and transferred the same to one
Francisco Gonzales for the sum of 1,300 pesos, it having been stipulated therein, among other
things: "Seventh. The vendor reserves the right to repurchase the property within six months from
date, after complying with the obligations mentioned in article 1518 of the Civil Code, and in case of
his failure to do so within the tome stipulated, the vendee will pay to him the additional sum of 200
pesos and will become the absolute owner of the property and the vendee may dispose of the same,
as long as the condition subsequent continues to exist with the limitations provided by the Mortgage
Law, of the provisions of which he has been duly informed." (Record, p. 45.) This deed was recorded
in the Register of Property on the 13th of August, 1900.
(2) That on the let of August, 1900, Francisco Gonzales sold the property to Agustin Cuevas for the
same price, the following statement appearing in the deed of sale: "Second. That the vendor
(Panganiban) reserves to himself the right to repurchase the property thus sold within the period of
six months from the tenth of December, 1897, for the same price, thirteen hundred pesos, and in
case he fails to do so, the said Gonzales will pay to the vendor, Salvador Panganiban, the additional
sum of two hundred pesos. . . ." (Record, p. 49.) This instrument was recorded on the same date as
the instrument executed on the 13th of August, 1900.
(3) That on the said 13th of August, 1900, Cuevas Asked for and was granted, in ex
parte proceedings, the judicial possession of the property on the 14th of the said month, notice
thereof having been given to those who occupied the various apartments, among them
Panganiban's wife in the latter's absence. (Record, pp. 52-55.) Subsequently, on the 10th of August,
he attempted to pay Panganiban the sum of 200 pesos, which he deposited in court, and Cuevas, in
a petition presented to the said court stated: ". . . I have succeeded to all the rights of the former
purchaser, Francisco Gonzales, and desiring to acquire the ownership of the property irrevocably, I
deposit the additional sum of two hundred pesos which my grantor undertook to pay. . . ." (Record,
p. 133.) This sum Panganiban refused to receive. (Record, p. 135.)
(4) That on the 1st of October of the same year, 1900, Cuevas brought an action for ejectment
against Panganiban. (Record, pp. 138141.)
(5) And that on the 12th of the same month Panganiban filed a complaint in this action for the
recovery of possession, the proceedings in the action for ejectment having been suspended.
(Record, pp. 27-39.)
Such are the antecedents of the present case.
The complaint contains the following allegation:
(1) That in the month of May, 1898, Panganiban attempted to effect the repurchase of the property,
but the creditor, Gonzales, being absent from his place of residence on account of the war, he was
unable to do so, nor was he able to deposit the purchase price with the clerk of the court for the
same reason; and (2) that the revolution broke out that time and the land and improvements in
question were seizes by the Filipino government from Francisco Gonzales, the property having been
redeemed by Panganiban from the Filipino government on the 12th of November, 1898. These facts
the plaintiff attempted to prove by the records of the proceedings relating to the said seizure and
repurchase, which records he attached to his complaint and made a part thereof, and further by the
receipt of the purchase price paid to the revolutionary government which had seized the land from
Gonzales.
The defendant, Cuevas, objected to the introduction of evidence upon these points, admitting the
facts, and stated: "(1) That both parties were bound by the terms of the contract which is the basis of
this action: (2) that there is no doubt that the deposit alleged to have been made by the plaintiff could
not have been made: and (3) that the other facts alleged by the plaintiff, even though they were fully
established, such as the fact that Panganiban was absent from the town. . ., that Hison was then
commissioned by the Filipino government to resell the property, and other facts of minor importance,
would not change the essence of the question. . . .," (Record, p. 120.)
From the evidence of record we draw the following conclusions:
The appelle alleges, and the appellant admits, that the property in question was repurchased
(properly or improperly ) by the appellee from the revolutionary government. The first, second, third,
and sixth assignments of error refer to this point. The fact was established by the original document
appearing on page 180 of the record and by the testimony of the witnesses for the appelle,
uncontradicted by the appellant.
It is a fact admitted by the appellant that the property of Francisco Gonzales was seized by the
revolutionary government and subsequently returned to him by the latter.
Several witnesses testified, and their testimony appears uncontradicted by the appellant, that when
the property seized from Francisco Gonzales, among the same the house and lot in question, was
returned to him, the latter property was retained by the revolutionary government without any protest
on his part, and that on November, 1898, the said house and lot was resold to Panganiban by the
revolutionary government some time before Gonzalez's property was returned to him.
It is an evident fact that from November, 1898, until the 15th of August, 1900, when Cuevas took
judicial possession of the property by an ex parte proceeding, Panganiban had been in the quiet and
peaceful possession of the property. This fact was established by the testimony of the witnesses
referred to and by the judicial proceedings introduced in evidence in this case, from which it appears
that when the occupants of the various apartments of Panganiban's house were notified of the
judicial possession given to Cuevas, Faustina Terrado, "who occupied one of the apartments of the
said house," was else notified, as the "wife of Salvador Panganiban, who was absent when the
notice was served upon the said occupant." (Record, p. 54.)
If Panganiban had not been absent and had simply objected to the possession sought by Cuevas,
the latter could not have been given possession of the premises in such an ex parte proceedings as
that instituted by him for this purpose, and it would have necessary for Cuevas to bring an ordinary
action, everything remaining as it was prior to the institution of such ex parte proceeding.
It was sufficient to restore everything to its former condition in order to preserve the regularity and
consistency required in judicial proceedings by the old Code of Civil Procedure, which provided that
the proper action in such cases should be a plenary action for possession.
Panganiban was in possession of the property in question from November, 1898, until the 14th of
August, 1900 that is to say, for more than a year quietly and peacefully, with title in good faith.
He could not therefore, be called upon to surrender the said possession, particularly in view of the
fact that he had not acquired the same by forcible or unlawful means. Cuevas or Gonzalez had a
right to deposit the 200 pesos in court and attempt to acquire in a separate action the ownership of
the property in question by virtue of the stipulation contained in the deed.
In view of the fact that all these rights and actions have been discussed in these proceedings, this
court, by virtue of the authority and powers vested in it, will now proceed to decide all the questions
raised on this appeal.
The first question relates to the repurchase made by the appelle, as to which the appellant claims
that the Court of First Instance erred in deciding that the sale made by the revolutionary government
was valid and that all the obligations incurred by Panganiban in favor of Gonzalez had been
extinguished as the result of the repurchase. (Assignments of error 1,2,3, and 6.) The appelle in his
complaint relied, however, for the validity and efficacy of the said sale upon article 1164 and
paragraph 2, article 1163, of the Civil Code, and his brief filed in this court he relies upon the
provisions of paragraph 3, article 1203, and articles 1209, 1210,1249 and 1253 of the same code.
Article 1164 of the Civil Code provides that "a payment made in good faith to the person who is in
possession of the credit shall release the debtor," and article 1163, paragraph 2, reads as follows: "A
payment made to a third person shall also be valid in so far as it may have been beneficial to the
creditor."
But the revolutionary government to which the payment was made not in possession of the credit; it
did nothing but seize the property of the vendor, including the house and lot in question. Seizure is
not, in itself, a confiscation. The appellee in his brief admits that there was no confiscation. The
reason why the seizure was made does not appear. A seizure or embargo is nothing but a
prohibition enjoining the owner from disposing of his property. By the mere embargo of a property
the owner does not lose his title thereto. The authorities (lawful or unlawful) who, legally or illegally,
order the seizure do not become the owners of the same. What the vendor in this case did was to
attempt to reacquire the ownership of the property transferred to the vendee from a third person to
whom the property had not been transferred by the said vendee in any manner whatsoever.
Therefore, the vendor from a person who was not the owner of the same. This is obvious.
If the revolutionary government, by reason of the seizure or the embargo, did not acquire the title to
the property or vested in the vendee, neither could the purchaser have acquired from the latter, even
though an embargo, the credit which the said vendee had under the right of redemption in case such
redemption should take place; the property of the vendee thus seized had included the right to
demand the stipulated price for the repurchase, perhaps the payment of such price to the person
rightfully entitled to it under the embargo would have been proper. But there was nothing, it is
alleged, but an embargo of the real estate of the vendee including the property in question. So that
article 1164 of the Civil Code is not applicable to the case at bar, nor is paragraph 2 of article 1163
applicable to this case, because their is nothing in the record to show that a payment made by
Panganiban to the revolutionary government was for the benefit of Gonzalez. "That the creditor was
benefited by the payment made to a third person by his debtor can not be presumed, and must,
therefore, be satisfactorily established by the person interested in proving this fact." Manresa, 8 Civil
Code, 257.)
Finally assuming, without deciding, that the payment of the 1,300 pesos in question to the
revolutionary government was properly made, yet it does not appear that the deed of sale had been
canceled that is to say, that no other deed of repurchase canceling the said deed of sale had
been executed in short, the obligation the payment of which was necessary to redeem the
property was not canceled. This is also one of the conclusions arrived at by the court below in the
decision. A credit is not extinguished against the will of creditor except by the judgment of a court or
by the expiration of the period prescribed by the statue of limitations.
Paragraph 3 of article 1203 provides that "obligations may be modified by subrogating a third person
to the rights of the creditor." Article 1209 provides that "the subrogation of a third person to the rights
of a creditor can not be presumed except in the cases expressly mentioned in the code, it being
necessary in other cases to prove such subrogation clearly in order that it may be effective."
Paragraph 3 of article 1210 provides that "when the person who is interested in the fulfillment of the
obligation pays, subrogation shall be presumed." Article 1249 provides that "presumptions are not
admissible, except when the fact from which they are to be deduced is fully proved." And article
1253 provides that "in order that presumptions, not established by law, may be admitted as means of
evidence, it is indispensable that between the fact demonstrated and the one it is desired to deduce
there should exist a precise and direct connection according to the rules of human judgment." All
these provisions of law are relied upon by the appellee in his brief in support of the following
proposition: "All the facts above set out, and particularly those relating to the embargo and the
deposit of the property of Gonzalez and the return of the same after redemption, established the
presumption of the existence of an obligation on the part of Gonzalez in favor of the so called
Philippine government either for war taxes or some other indebtedness. . . ." (Brief, p. 9.)
But no other fact except the embargo of Gonzalez's property and the return of the same to
Panganiban having been proved, the contention of the appellee is absolutely contrary to the
provision of article 1209 of the Civil Code above quoted.
In conclusion, we hold that the court below committed the errors pointed out by the appellant under
the first, second, third, and sixth assignments.
The payment made by Panganiban to the revolutionary government of the 1,300 pesos which he
should have paid to Francisco Gonzalez in order to redeem the property, could not have
extinguished the obligation incurred by him in favor of the latter. The supreme court of Spain, in a
judgment rendered on the 28th of February, 1896, said: "The payment of the debt in order to
extinguish the obligation must be made to the person or persons in whose favor it was incurred or to
his or their duly authorized agent. It follows, therefore, that the payment made to a third person, even
through error and in good faith, shall not release the debtor of the obligation to pay and will not
deprive the creditor of his right to demand payment. If it becomes impossible to recover what was
unduly paid, any loss resulting therefrom shall be borne by the deceived debtor, who is the only one
responsible for his own acts unless there is a stipulation to the contrary or unless the creditor himself
is responsible for the wrongful payment."
The fourth and fifth assignments of error relate to the second question, in so far as the appellant
claims that the court below erred in holding that neither Gonzalez nor Cuevas ever had a title to the
property in question, they not having paid as stipulated in the contract the additional 200 pesos, and
in holding that the irrevocability of the sale depended upon the payment of the said additional sum of
200 pesos. The question arises whether there were one or two conditions stipulated in the contract
which should be complied with in order to make the conditional sale irrevocable. The appellant
contends that there was only one condition stipulated, to wit, the lapse of a period of six months,
whereas the appellee claims that there were two conditions, viz, the lapse of the period of six
months and the payment of 200 pesos in addition to the purchase price.
This question may be decided as a matter of fact by reference to appellant's own statement as set
out in the third paragraph of this decision, wherein he is quoted as saying: "Desiring to acquire the
ownership of the property irrevocably, I deposit the additional sum of two hundred pesos. . . ." So
that prior to that deposit he had the conviction of he had not as yet acquired the ownership of the
property irrevocably. And as a matter of law, first, by the terms of the agreement itself, according to
which, after setting forth the true conditions, to wit, the lapse of the time provided therein and the
additional payment of 200 pesos, the appellant, referring to the acquisition of the ownership in an
irrevocable manner, stipulated as follows: "Shall pay the sum of two hundred pesos in addition to the
sum already stated, the vendee acquiring the ownership of the property irrevocably;" and, second,
because the agreement to pay an additional sum of 200 pesos presupposes that the first conditional
sale was made in consideration of the sum of 1.300 pesos, but the consideration for the irrevocable
and definite sale was 1,500 pesos; and it is well known that where property is sold, the consideration
therefor being paid at the time of the sale, title does not pass to the vendee unless the property is
actually delivered and the purchase price actually received.
There can be no question, therefore, that up to the 10th of August, 1900, when Cuevas deposited
the 200 pesos in court for the purpose, as stated, of acquiring the ownership irrevocably, the
property could have been redeemed.
The third question is whether after the deposit of the 200 pesos on August 10, 1900, the vendor lost
his right to repurchase the property.
The provisions of the Civil Code relating to this subject are as follows:
"Consignation shall be made by depositing the things due at the disposal of the judicial authorities
before whom the tender shall be proved in a proper case and the notice of the consignation in other
cases." (Art. 1178.) There is nothing in the record to show that Cuevas tendered the payment of the
200 pesos in question to Panganiban or that he gave notice of his intention to deposit the said sum
in court in case said tender was refused by Panganiban. According to article 1176, "If the creditor to
whom the tender of payment has been made should refuse to accept it, without reason, the debtor
shall remain released from all liability by the consignation of the thing due," and, further, that "the
same effect shall be produced by the consignation alone when made in the absence of the creditor,
or when the latter shall be incapacitated to accept the payment when it is due, and when several
persons claim to have a right to collect it, or when the instrument mentioning the obligation has been
mislaid." There being no evidence of anything except the consignation and the plaintiff Panganiban
not being either absent or incapacitated so that the consignation alone could have produced the
effect of releasing the debtor, it follows that the consignation made by Cuevas did not produce the
effect which it would have produced had it been made as provided in the code. It is therefore evident
that Cuevas never complied with the condition stipulated in the contract in order to acquire the
ownership irrevocably.
It appears, therefore, from the facts as established in this case:
(1) That Salvador Panganiban did not comply with the condition stipulated in the contract in order to
reacquire the ownership of the property sold by him on condition of redemption, for the reason that
he did not pay the price agreed upon to the creditor or to his duly authorized agent or to the person
entitled to receive the same for the creditor.
(2) That Agustin Cuevas did not comply with the other condition imposed upon him (or upon
Gonzalez) by the terms of the contract in order to acquire the ownership of the property irrevocably,
as he did not make the additional payment agreed upon for the definite sale of the property in such a
manner as would have relieved him of this liability under the law.
So that even after the 10th of August, 1900, and up to the present date, the redemption of the
property could have been effected and the parties could have enforced their respective rights as
though nothing had been done, for nothing was done in the manner prescribed by law so as to have
sufficient force to create a juridical status or become res adjudicata.
The judgment of the court below is accordingly reversed without special provision as to costs. And
being of the opinion that this action was brought for the purpose of securing the repurchase of the
property, and for this purpose we shall consider the complaint amended so as to make it conform to
the facts established by the evidence, we hold that Salvador Panganiban may repurchase the
property if he so desires; and the court below is accordingly directed to require the said Panganiban
to comply with the provisions of article 1518 of the Civil Code, and in case he complies therewith to
the satisfaction of the court, to enter judgment authorizing the repurchase and requiring Agustin
Cuevas to execute the deed of resale, cancelling the former deed of sale and the entry thereof made
in the Registry of Property, or otherwise to dismiss the action. After the expiration of twenty days let
judgment be entered in accordance herewith and ten days thereafter the case be remanded to the
court below for execution. So ordered.
Torres, Mapa and Johnson, JJ., concur.
Carson, J., concurs in the result.

CASE #75
G.R. No. L-33158 October 17, 1985
VALENTINA G. VILLANUEVA, assisted by her husband SEVERINO FERI, ANTONIO G.
VILLANUEVA, ANGEL G. VILLANUEVA and OLIMPIA G. VILLANUEVA, assisted by her
husband F. DAGUIMOL, petitioners,
vs.
HON. ALFREDO C. FLORENDO, Judge of the CFI of Cagayan, Second Branch, ERLINDA V.
VALLANGCA, CONCEPCION G. VILLANUEVA and MACARIO K. VILLANUEVA, respondents.

CUEVAS, J .:
Petition for review on certiorari of the decision
1
dated July 14, 1970 of the then Court of First Instance
of Cagayan Branch II, in Civil Case No. 1486-A, entitled "Valentina G. Villanueva, et al., plaintiffs, versus
Erlinda V. Vallangca, et al., defendants", the dispositive portion of which reads as follows:
WHEREFORE, the Court hereby renders judgment
1. Ordering the reformation and amendment of Exhibit "3" by deleting the phrase
located at the western side of the lot which is five and one half (5-) meters in width
and fifteen (15) meters long';
2. Declaring Erlinda Vallangca, married to Concepcion Villanueva absolute owners of
an Ideal and undivided share of one-half () of the land described in paragraph 2 of
the complaint, which was conveyed to them by Exhibit;
3. Ordering the partition of the land described in paragraph 2 of the complaint among
the heirs of Basilia Garcia;
4. Ordering the dismissal of the defendants' counterclaim; and
5. Ordering the Clerk of Court to return to the plaintiffs the sum of P1,000.00
deposited by them with costs de oficio.
SO ORDERED.
Petitioners and respondent Concepcion Villanueva are the children of spouses Macario Villanueva
(one of the respondents) and Basilia Garcia. Said spouses owned a small parcel of land with an area
of 165 square meters situated along Pres. Quezon St., in the Poblacion of Aparri, Cagayan.
Sometime in 1944, Basilia Garcia died intestate, leaving her husband, Macario Villanueva and
children (herein petitioners) as her sole and only legitimate heirs.
On May 13, 1964, the surviving spouse, Macario, without the subject lot having been partitioned,
sold in favor of Erlinda Vallangca, the wife of respondent Concepcion Villanueva, one-half or 82.5
square meters of the aforementioned lot, particularly the western portion thereof, measuring 15-
meters by 15 meters, for P1,100.00, as evidenced by a Deed of Sale marked as Exhibit "3".
2
Having
been informed of the sale, petitioners signified their intention to redeem the lot in question but respondent
vendee refused to allow such redemption contending that she is the wife of one of the legal heirs and
therefore redemption will not lie against her because she is not the "third party" or "stranger"
contemplated in the law.
Petitioners filed a complaint for rescission of sale and legal redemption of the portion sold to
Vallangca. The trial court, on July 14, 1970, rendered a decision ordering among other things, the
reformation of the Deed of Sale and declaring the vendee the absolute owner of the subject lot.
Petitioners now submit
3
that the lower court erred
(1) in holding that the property sold to Erlinda Vallangca, married to Concepcion Villanueva, is a
conjugal partnership property of the spouses, and therefore, the right of legal redemption will not lie
against Erlinda Vallangca and Concepcion Villanueva, instead of holding that Erlinda V. Vallangca,
being a "third person" or .stranger the right of legal redemption contemplated under Art. 1620 and, or
1088 (NCC) can be exercised as against the vendee in the sale;
(2) inordering for the formation and amendment Exh. 3 by deletion of the phrase "located at the
western side of the lot which is five and one-half meters in width and 15 meters long" instead of
annulling and rescinding the sale as called for under the circumstances; and
(3) in ordering the partition of the property described in par. 2 of the complaint among the heirs of
Basilia Garcia, where partition is not warranted considering that there is still pending before the
same court a separate action for partition of the same property filed by Concepcion Villanueva
against plaintiff-petitioners.
Art. 1620 of the New Civil Code provides:
A co-owner of a thing may exercise the right of redemption in case the shares of all
the other co-owners or of any of them, are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they may
only do so in proportion to the share they may respectively have in the thing owned
in common.
It is not disputed that co-ownership exists but the lower court disallowed redemption because it
considered the vendee, Erlinda Vallangca, a co-heir, being married to Concepcion Villanueva, and
the conveyance was held valid since it was in favor of the conjugal partnership of the spouses in the
absence of any statement that it is paraphernal in character. Within the meaning of Art. 1620, the
term "third person" or "stranger" refers to all persons who are not heirs in succession, and by heirs
are meant only those who are called either by will or the law to succeed the deceased and who
actually succeeds. In short, a third person is any one who is not a co-owner.
4
The vendee is related
by affinity to the deceased by reason of her marriage to one of the heirs and being married to Concepcion
does not entitle the vendee to inherit or succeed in her own right. She is not an heir of Basilia Garcia nor
included in the "family relations" of spouses Macario and Basilia as envisioned in Art. 217 of the Civil
Code.
Art. 217. Family relations shall in lude those:
(1) Between Husband and wife;
(2) Between parent and child;
(3) Among other ascendants and their descendants;
(4) Among brothers and sisters.
The co-owners should therefore be allowed to exercise their right to redeem the property sold to
Erlinda Vallangca. To deny petitioners the right of redemption recognized in Art. 1620 of the Civil
Code is to defeat the purpose of minimizing co-ownership and to contravene the public policy in this
regard. Moreover, it would result in disallowing the petitioners a way out of what, in the words of
Manresa, "might be a disagreeable or inconvenient association into which they have been
thrust."
5
Respondent seller Macario, as co-owner and before partition, has the right to freely sell and
dispose of his undivided interest or his Ideal share but not a divided part and one with boundaries as what
was done in the case at bar. It is an inherent and peculiar feature of co-ownership that although the co-
owners may have unequal shares in the common property quantitatively speaking, each co-owner has
the same right in a qualitative sense as any one of the other co-owners. In other words, every co-owner is
the owner of the whole and over the whole, he exercises the right of dominion, but he is at the same time
the owner of a portion which is truly abstract because until division is effected, such portion is not
correctly determined.
6

It appearing that a separate action for partition of the subject lot is still pending before the CFI of
Cagayan, the trial court's order of partition is, therefore, uncalled for.
WHEREFORE, the petition is hereby GRANTED and the decision dated July 14, 1970 of the then
CFI of Cagayan, Br. II, is accordingly REVERSED. Costs against private respondents.
SO ORDERED.
Concepcion, Jr., Abad Santos, Escolin and Alampay, JJ., concur.


Separate Opinions

AQUINO, J ., dissenting:
This is an intra-family litigation over 82.5 square meters of land. The spouses Macario K. Villanueva
and Basilia Garcia owned a lot with an area of 165 square meters located on President Quezon
Street, Aparri, Cagayan. Basilia died in 1944 survived by Macario and their five children named
Valentina, Olimpia, Angel, Antonio and Concepcion (a male person), the husband of Erlinda V.
Villangca.
The five children each owned a 1/10 share of that same lot while Macario owned thereof as his
conjugal share or 82,5 square meters. Note that north of the lot is the lot of Severino Feri,
Valentina's husband. On 3/4 of the lot stands a house of strong materials occupied by Valentina.
Macario claims that he is the owner of the house because after liberation he bought a house for
P500 and transferred to the lot (6 tsn Jan. 16, 1970). On the other hand, the trial court found that it is
owned by Valentina (p. 64, Rollo). Macario admits in his letter, Exhibit D.
On May 13, 1964 Macario (he is an insurance under-writer and was 79 in 1970 when he testified)
sold for P1,1 00 to Erlinda, the wife of his son Concepcion, his conjugal share in said lot but he
made the mistake of selling "the western side of the lot". He should have sold only his Ideal
proindiviso share. He had to sell because he had to pay one Timbang the mortgage debt secured
by the lot (4 tsn Jan. 16, 1970; p. 35, Rollo).
Four years after the sale, or on October 17, 1968, the four children sued their father brother and
sister-in-law for rescision of the sale and for redemption. The alleged that there was no written notice
to them of the sale, that they learned of it only in September 1968 and that the house on the lot was
valued at P7,000. They consigned the redemption price of P1,100.
Macario answered the complaint without Counsel's assistance. He stated therein that to avoid
trouble and quarelling among the members of his family he would like to cancel the sale since
Erlinda could not buy Valentina's house, to sell his share to Valentina and to return the P1,100 to
Erlinda (Exh. C. pp. 32-33, Rollo).
That answer should have terminated the case. But later a motion to dismiss and an answer were
filed by Erlinda, Concepcion and Macario. They insisted on the validity of the sale to Erlinda.
Valentina filed another case, Civil Case No. 1501-A, for partition.
When the trial judge categorically asked Macario what was his proposition about the case, he said
that it was his desire that his son Concepcion should stay on the disputed lot because he had no lot
on which to build his house (9-10 tsn Jan. 16, 1970).
Judge Florendo in his decision dated July 14, 1970 declared Erlinda the owner of the portion
bought by her after ordering the reformation of the deed of sale to make it appear that an Ideal
share was bought by her and ordering the return of the P1,100 to Valentina. Judge Florendo also
ordered partition of the lot. Valentina and her brothers and sister appealed to this Court under
Republic Act No. 5440.
Macario created in this case a big legal problem for a small property. That problem would not have
arisen had he been properly legally advised. Instead of selling his proindiviso) share or 82.5
square meters to his son Concepcion, a co-owner to the extent of 1/06 or 16.5 square meters, he
chose to sell it to his daughter-in-law, Erlinda, thus provoking the issue of whether Erlinda is a third-
person with respect to the co-owners.
Had he sold his 11/2 share to his son Concepcion, a co-owner, there would be no question about the
sale to a "third person". The right of redemption does not exist with respect to the vendee-co-owner.
The Civil Code provides:
ART. 1620. A co-owner of a thing may exercise the right of redemption in case the
shares of all the other co-owners or of any of them, are sold to a third person. ...
(1522a)
ART. 1088. Should any of the heirs sell his hereditary rights to a (stranger) before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser
by reimbursing him for the price of the sale, provided they do so within the period of
one month from the time they were notified in writing of the sale by the vendor.
(1067a)
Note that the "third person" in article 1620 is extrano (stranger) in the Spanish original of article
1522, not "tercero" which is the Spanish for "third person".
Manresa, commenting on article 1067, now article 1088, observes, that "el marido de una heredera"
is a stranger (7 Codigo Civil Espanol, 7th Ed., 1955, p. 812).
I am of the opinion that no right of redemption exists in favor of Erlinda's sisters-in-law and brothers-
in-law because the sale was made to the (conjugal partnership of Erlinda and Concepcion), a co-
owner. The sale made Concepcion and Erlinda the co-owners of 6/10 or 3/5 of the 165-square-
meter lot. We have to be realistic and pragmatic in this case.
Even now, Macario could himself revoke or rectify the sale and resell his share to Concepcion.
Castan Tobenas says that an "extrano" is a person who is not a co-owner. Literally, Erlinda is not a
co-owner but the unblinkable fact is that she is married to a co-owner and the portion sold became
her conjugal property and that of her husband. They in turn are co-owners of that conjugal 1/2
portion.
The view that Erlinda is not a third person with respect to the co-ownership is supported by the ruling
in Saclolo and Pascual vs. Madlangsakay and Court of Agrarian Relations, 106 Phil. 1038. It was
held in that case:
Under legal principles, by the contract of marriage, a man and woman enter a joint
life, acting, living, and working as one, whether under the common law or under the
civil upon marriage the husband and the wife become one single, moral, spritual and
social being, not only for purposes of procreation for the purpose of mutual help and
protection, physically, morally and materially. There is between them a full and
complete community existence.
Castan Tobenas says that "el matrimonio es el acto solemne por medio del cual el hombre y la
mujer constituyen entre si una union legal para la plena y perpetua comunidad de existencia".
Justice Labrador says that "if there is unity and community of existence between husband and wife,
then the husband may not be considered as a being distinct and different from the wife."
Hence, in the Saclolo case it was ruled that for purposes of the Agricultural Tenancy Law, Republic
Act No. 1199, where the wife sought to eject a tenant from her paraphernal land on the ground that
her husband, who was jobless, would work on the land, the tenant may be ejected although the law
provides that the landowner may eject the tenant only when he will personally cultivate his land.
The unity of husband and wife is patent in this case. Plaintiffs Valentina and Olimpia had to bring this
case with the assistance of their husbands against Erlinda and her husband, Concepcion.
The majority opinion relies on Basa vs. Aguilar, 117 SCRA 128 where one-half of a parcel of land,
with an area of 32,383 square meters, was owned proindiviso by Olimpia, Arsenio, Nemesio,
Ricardo, Atanacia Juliana and Feliciano, surnamed Basa, and the other half was owned proindiviso
by the spouses Genaro Puyat and Brigida Mesina.
The Puyat's sold their undivided share to their son-in-law, Primo Tiongson, who was married to
their daughter Macaria It was held that the Basas had the right to redeem the share sold to
Tiongson who was considered a third person with respect to the co-ownership inspite of the fact that
he was a son-in-law of the two co-owners.
The instant case is different from the Basa case because the vendee herein is the wife of a co-owner
Concepcion, who owns a 1/10 (proindiviso) share of the disputed lot.
What is the just solution of this case? To a fair-minded person, the judicious solution is to award the
lot to Valentina whose house is built on 3/4 of the lot. The P1,100 deposited by her in payment of the
(proindiviso) share of her father should be paid to Erlinda. This is in accordance with the original
answer of Macario (Exh. C) which should be regarded as binding on him.
The second case filed by Valentina, Civil Case No. 1501-A, should be consolidated with the instant
case. In the two cases the trial judge should determine what amount at current prices should be paid
by Valentina for the 1/10 share of Concepcion and the 1/10 share of each of the other children. This
solution should establish peace among the five children.


Separate Opinions
AQUINO, J ., dissenting:
This is an intra-family litigation over 82.5 square meters of land. The spouses Macario K. Villanueva
and Basilia Garcia owned a lot with an area of 165 square meters located on President Quezon
Street, Aparri, Cagayan. Basilia died in 1944 survived by Macario and their five children named
Valentina, Olimpia, Angel, Antonio and Concepcion (a male person), the husband of Erlinda V.
Villangca.
The five children each owned a 1/10 share of that same lot while Macario owned thereof as his
conjugal share or 82,5 square meters. Note that north of the lot is the lot of Severino Feri,
Valentina's husband. On 3/4 of the lot stands a house of strong materials occupied by Valentina.
Macario claims that he is the owner of the house because after liberation he bought a house for
P500 and transferred to the lot (6 tsn Jan. 16, 1970). On the other hand, the trial court found that it is
owned by Valentina (p. 64, Rollo). Macario admits in his letter, Exhibit D.
On May 13, 1964 Macario (he is an insurance under-writer and was 79 in 1970 when he testified)
sold for P1,1 00 to Erlinda, the wife of his son Concepcion, his conjugal share in said lot but he
made the mistake of selling "the western side of the lot". He should have sold only his Ideal
proindiviso share. He had to sell because he had to pay one Timbang the mortgage debt secured
by the lot (4 tsn Jan. 16, 1970; p. 35, Rollo).
Four years after the sale, or on October 17, 1968, the four children sued their father brother and
sister-in-law for rescision of the sale and for redemption. The alleged that there was no written notice
to them of the sale, that they learned of it only in September 1968 and that the house on the lot was
valued at P7,000. They consigned the redemption price of P1,100.
Macario answered the complaint without Counsel's assistance. He stated therein that to avoid
trouble and quarelling among the members of his family he would like to cancel the sale since
Erlinda could not buy Valentina's house, to sell his share to Valentina and to return the P1,100 to
Erlinda (Exh. C. pp. 32-33, Rollo).
That answer should have terminated the case. But later a motion to dismiss and an answer were
filed by Erlinda, Concepcion and Macario. They insisted on the validity of the sale to Erlinda.
Valentina filed another case, Civil Case No. 1501-A, for partition.
When the trial judge categorically asked Macario what was his proposition about the case, he said
that it was his desire that his son Concepcion should stay on the disputed lot because he had no lot
on which to build his house (9-10 tsn Jan. 16, 1970).
Judge Florendo in his decision dated July 14, 1970 declared Erlinda the owner of the portion
bought by her after ordering the reformation of the deed of sale to make it appear that an Ideal
share was bought by her and ordering the return of the P1,100 to Valentina. Judge Florendo also
ordered partition of the lot. Valentina and her brothers and sister appealed to this Court under
Republic Act No. 5440.
Macario created in this case a big legal problem for a small property. That problem would not have
arisen had he been properly legally advised. Instead of selling his proindiviso) share or 82.5
square meters to his son Concepcion, a co-owner to the extent of 1/06 or 16.5 square meters, he
chose to sell it to his daughter-in-law, Erlinda, thus provoking the issue of whether Erlinda is a third-
person with respect to the co-owners.
Had he sold his 11/2 share to his son Concepcion, a co-owner, there would be no question about the
sale to a "third person". The right of redemption does not exist with respect to the vendee-co-owner.
The Civil Code provides:
ART. 1620. A co-owner of a thing may exercise the right of redemption in case the
shares of all the other co-owners or of any of them, are sold to a third person. ...
(1522a)
ART. 1088. Should any of the heirs sell his hereditary rights to a (stranger) before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser
by reimbursing him for the price of the sale, provided they do so within the period of
one month from the time they were notified in writing of the sale by the vendor.
(1067a)
Note that the "third person" in article 1620 is extrano (stranger) in the Spanish original of article
1522, not "tercero" which is the Spanish for "third person".
Manresa, commenting on article 1067, now article 1088, observes, that "el marido de una heredera"
is a stranger (7 Codigo Civil Espanol, 7th Ed., 1955, p. 812).
I am of the opinion that no right of redemption exists in favor of Erlinda's sisters-in-law and brothers-
in-law because the sale was made to the (conjugal partnership of Erlinda and Concepcion), a co-
owner. The sale made Concepcion and Erlinda the co-owners of 6/10 or 3/5 of the 165-square-
meter lot. We have to be realistic and pragmatic in this case.
Even now, Macario could himself revoke or rectify the sale and resell his share to Concepcion.
Castan Tobenas says that an "extrano" is a person who is not a co-owner. Literally, Erlinda is not a
co-owner but the unblinkable fact is that she is married to a co-owner and the portion sold became
her conjugal property and that of her husband. They in turn are co-owners of that conjugal 1/2
portion.
The view that Erlinda is not a third person with respect to the co-ownership is supported by the ruling
in Saclolo and Pascual vs. Madlangsakay and Court of Agrarian Relations, 106 Phil. 1038. It was
held in that case:
Under legal principles, by the contract of marriage, a man and woman enter a joint
life, acting, living, and working as one, whether under the common law or under the
civil upon marriage the husband and the wife become one single, moral, spritual and
social being, not only for purposes of procreation for the purpose of mutual help and
protection, physically, morally and materially. There is between them a full and
complete community existence.
Castan Tobenas says that "el matrimonio es el acto solemne por medio del cual el hombre y la
mujer constituyen entre si una union legal para la plena y perpetua comunidad de existencia".
Justice Labrador says that "if there is unity and community of existence between husband and wife,
then the husband may not be considered as a being distinct and different from the wife."
Hence, in the Saclolo case it was ruled that for purposes of the Agricultural Tenancy Law, Republic
Act No. 1199, where the wife sought to eject a tenant from her paraphernal land on the ground that
her husband, who was jobless, would work on the land, the tenant may be ejected although the law
provides that the landowner may eject the tenant only when he will personally cultivate his land.
The unity of husband and wife is patent in this case. Plaintiffs Valentina and Olimpia had to bring this
case with the assistance of their husbands against Erlinda and her husband, Concepcion.
The majority opinion relies on Basa vs. Aguilar, 117 SCRA 128 where one-half of a parcel of land,
with an area of 32,383 square meters, was owned proindiviso by Olimpia, Arsenio, Nemesio,
Ricardo, Atanacia Juliana and Feliciano, surnamed Basa, and the other half was owned proindiviso
by the spouses Genaro Puyat and Brigida Mesina.
The Puyat's sold their undivided share to their son-in-law, Primo Tiongson, who was married to
their daughter Macaria It was held that the Basas had the right to redeem the share sold to
Tiongson who was considered a third person with respect to the co-ownership inspite of the fact that
he was a son-in-law of the two co-owners.
The instant case is different from the Basa case because the vendee herein is the wife of a co-owner
Concepcion, who owns a 1/10 (proindiviso) share of the disputed lot.
What is the just solution of this case? To a fair-minded person, the judicious solution is to award the
lot to Valentina whose house is built on 3/4 of the lot. The P1,100 deposited by her in payment of the
(proindiviso) share of her father should be paid to Erlinda. This is in accordance with the original
answer of Macario (Exh. C) which should be regarded as binding on him.
The second case filed by Valentina, Civil Case No. 1501-A, should be consolidated with the instant
case. In the two cases the trial judge should determine what amount at current prices should be paid
by Valentina for the 1/10 share of Concepcion and the 1/10 share of each of the other children. This
solution should establish peace among the five children.

CASE #77
November 4, 1916
G.R. No. 10432
JULIAN H. DEL PILAR, plaintiff-appellant,
vs.
MANUEL CATINDIG, defendant-appellee.
Santos and Tomacruz for appellant.
No appearance for appellee.
ARAULLO, J.:
The plaintiff in these proceedings, relying upon the right of legal redemption by
adjacent owners, provided for in article 1523 of the Civil Code, brought suit against
the defendant in the justice of the peace court of the municipality of Bulacan, of the
province of the same name, and prayed for judgment in his favor and against the
defendant, declaring him to be surrogated in place of the latter in the ownership of a
parcel of land which the defendant had recently acquired from a woman named Maria
Cornelio, in exchange for one of his own. After a hearing in the justice of the peace
court judgment was rendered in favor of the plaintiff, from which judgment the
defendant appealed to the Court of First Instance of the province. There the plaintiff
filed a new complaint in which, after describing both the land acquired by the
defendant in exchange for that of the said Maria Cornelio and the sum of P21, and his
own land abutting in that of the defendant so acquired by the latter, prayed the court to
render judgment by declaring him, the plaintiff, to be entitled to the legal redemption
of the property described in the complaint and acquired by the defendant from Maria
Cornelio as aforestated; and that the court order the defendant to deliver this property
to the plaintiff, on payment of the sum of P21, the value of the property or, at most,
the sum of P57, the value of the defendant's land that was exchanged with Maria
Cornelio.
The defendant in his answer denied each and all of the facts contained in the
complaint and in special defense alleged that the plaintiff's lands that adjoined his own
were larger than the defendant's and that the land in question afforded the only means
of ingress through which work animals could reach the defendant's land, if the
plaintiff's lands were excluded. The defendant therefore prayed the court to absolve
him from the complaint, with the costs against the plaintiff.
The parties stipulated in writing to submit the case to the Court of First Instance as
though it had been originally filed before the same, in view of the fact that, according
to the rule laid down by the Supreme Court, the justice of the peace court of Bulacan
which first took cognizance thereof had no jurisdiction in the matter. After trial and
the introduction of evidence in the said Court of First Instance, judgment was
rendered on August 6, 1914, dismissing the complaint with the costs against the
plaintiff. From that judgment the plaintiff appealed, with the right to have the
evidence reviewed, and forwarded to this Supreme Court the proper bill of exceptions
in which he alleged for the purpose of his appeal that the lower court erred:
First. In holding that the appellant had not proven his right to acquire the land
in question, but that his sole purpose appeared to be to molest the appellee.
Second. In holding that the appellee acquired the land in question in order that
it might serve as a passage way for his stock to his other land that was
surrounded by those of the appellant, and in considering this fact as the basis of
the judgment. Third. In not holding the right of legal redemption of adjacent
owners to lie in the appellant, and in not recognizing the latter's right of
subrogation in place of the appellee with regard to the land in question, by
payment of either of the sums mentioned in the complaint.
Article 1521 of the Civil Code provides:
Legal redemption is the right to be subrogated, with the same conditions
stipulated in the contract, in the place of the person who acquires a thing by
purchase or in payment of a debt.
An article 1523 of the same Code prescribes:
The owners of the adjacent lands shall also have the right of redemption when
the sale of a rural estate is involved the area of which does not exceed one
hectare.
The right referred to in the preceding paragraph is not applicable to adjacent
lands which are divided by brooks, drains, ravines, roads, and other apparent
easements for the benefit of other estates.
If two or more adjacent owners should make use of the redemption at the same
time, the one who is owner of the adjacent land of lesser area shall be preferred;
and, should both be equal in area, the person who first requested it.
Manresa, in his noted work Commentaries on the Civil Code, in treating of the said
article 1523 (vol. 10, p. 358, 2 d ed.) says as follows:
This right being limited in scope to rural lands not exceeding one hectare in
extent, it is seen that the intention of the Code in this respect is solely to favor
the development of the ownership of land and agricultural interests .An estate
of not more than a hectare in area does not, as a general rule, produce enough to
keep one family; its cultivation can not be accomplished economically, as the
agricultural implements used have to be brought in across lands belonging to
other owners, and the same may be said with regard to the gathering and
transportation of the produce .All these difficulties disappear if, on the sale of
the estate, it is purchased by one of the adjacent owners, whereby the public
interests is favored, because the production increases, the private interests of
the redemptioner are respected and no ostensible harm is occasioned either the
vendor or the purchaser.
x x x x x x x x x
The purpose of this article, as stated by the Code Commission in the revised
edition of the Civil Code, was to furnish with the course of time some remedy
for the excessive subdivision of real estate which offers an insuperable obstacle
to the development of wealth.
As may be seen, the object of the lawmaker in allowing the redemption by adjacent
owners is to prevent a rural estate, adjacent to that belonging to another owner or
other owners and the area of which does not exceed one hectare, from passing into the
hands of a person other than some one of the adjacent owners so that the property of
these latter would be divide without benefit to the public weal and perhaps to the
prejudice of the adjacent owners themselves who are interested in preserving the
integrity of their respective properties and in using the alienated estate for the
improvement and development of their own lands.
The right of redemption by adjacent owners cannot be exercised by any of these latter
among themselves, but only by them against a stranger who acquires from any one of
them, by purchase or gift, in payment, or by any other title for value, a rural estate of
the area fixed by law. The purpose of the right of action granted in such a case to the
redemptioner (in connection with the right provided for in the articles 1521 and 1523
of the Civil Code, above transcribed, to subrogate himself, under the same conditions
stipulated in the contract, in place of the person who acquired the property by any of
the means mentioned) is to give preference to any of the owners of the adjacent lands
as against the purchaser (that is, against the third person who, not being an adjacent
owner, acquired the property) in order that he may have and hold the land under the
same conditions as those stipulated in the respective contract.
The supreme court of Spain made an explicit declaration in that sense, in its decisions
of November 26, 1895, December 4, 1896, and March 8, 1901.
This last decision was rendered in a case in which the plaintiff, exercising the right of
legal redemption, alleged that he was the owner of one celemin of land which on the
north adjoined a piece of land of an approximate area of one fanega, less than one
hectare, which had belonged to a woman named Juana Pea Romero, and which had
been sold to one Zacarias Cuerda. The plaintiff prayed the court to hold that he was
entitled to redeem the said land and to order Cuerda to execute a deed of conveyance
of all his rights in the property to the plaintiff. Cuerda opposed the plaintiff's petition,
alleging that it was evident that the right of legal redemption could be availed of only
by the adjacent owners, when the sale thereof had been made to a person who had no
property adjoining the land so alienated, and that he was the owner of a piece of land
which on the north was coterminous with the property sought to be redeemed. The
civil branch of the Audiencia of Caceres rendered judgment affirming that of the
lower court and allowing the redemption prayed for in the complaint; whereupon the
plaintiff filed an appeal in cessation before the supreme court and alleged that article
1523 of the Civil Code had been violated, as well as the rule laid down in the two first
cited decisions of the same court pursuant to which a right of action for legal
redemption lies only against strangers who buy the property sought to be redeemed,
but not against another adjacent owner who has the same interest as the plaintiff in the
consolidation of the scattered holdings and in the disappearance of the small parcels
of property. In deciding that case the supreme court said:
Legal redemption can only be enforced against a stranger who buys the
property sought to be redeemed and not against another adjacent owner who
has the same interest.
As the defendant in the case at bar is the owner of the land abutting upon that sought
to be redeemed by the plaintiff and is also one of the adjacent owners of this same
land, it is evident that the plaintiff has no right whatever in the said property and that
the action brought by him against the defendant is improper.
For the foregoing reasons, we affirm the judgment of dismissal, appealed from, with
the costs of this instance against the appellant. So ordered.
Torres, Johnson, Carson, Moreland and Trent, JJ., concur.


CASE #78
G.R. No. L-21677 June 29, 1972
ANTONIO G. DE SANTOS, petitioner-appellant, vs. CITY OF
MANILA and ARELLANO UNIVERSITY, INC., Respondents-
Appellees.
De Santos & Delfino for petitioner-appellant.
E. Voltaire Garcia for respondents-appellees.
MAKASIAR, J.:
Petitioner-appellant seeks the review by certiorari of a decision
dated July 11, 1963 of the Court of Appeals, in CA-G.R. No. 29354-
R, which affirmed that of the Court of First Instance of Manila in
Civil Case No. 39730.chanroblesvi rtualawlibrarychanrobles virtual law li brary
The facts as found by the appellate court are as follows:
On October 1, 1958, a contract of exchange was made and entered
into by and between the City of Manila and the Arellano University,
Inc., in accordance with, and by virtue of, Resolution No. 442 of the
Municipal Board of Manila, adopted on August 15, 1958, and
approved by the City Mayor on August 22, 1958, whereby five
parcels of land of the City of Manila (Lots 1, 2, 3, 4 and 5, Psu-
167195) containing an aggregate area of 2458.3 square meters,
more or less, were exchanged for three parcels of land of the
Arellano University, Inc. (Lots 4-A, 9-A, and 10-A, Psd-53347)
containing an aggregate area of 2171.4 square meters, more or
less, which were needed for the construction of the Azcarraga (now
Claro M. Recto) Extension.chanroblesvirtualawli brarychanrobles vi rtual law library
On account of said contract of exchange, (the present) action was
brought on March 25, 1959, by Antonio G. de Santos, plaintiff,
against the City of Manila and the Arellano University, Inc.,
defendants, (1) to declare the said contract of exchange null and
void insofar as Lot No. 1 of Psu-167195 is concerned; (2) in the
event that the validity of said contract is sustained, to declare Lot 1
subject to plaintiff's right of redemption within 30 days from the
written notice of such exchange; and (3) in the event that said Lot 1
be declared not to belong to the City of Manila, to enjoin the said
City, "in the event that it finally acquires the aforesaid property, to
respect plaintiff's right of preemption."chanrobles vi rtual law li brary
Defendant University filed answer with counterclaim for P5,000.00
"for services of counsel to protect its interests and defend this suit
against the unfounded complaint of plaintiff."chanrobles vi rtual law li brary
Defendant City also filed answer, alleging that it is the owner of the
lot in question, Lot No. 1 of Psu-167195, and that plaintiff has no
preferential or better right than defendant Arellano University to
acquire said lot by preemption, legal redemption, sale, exchange or
other form of acquisition.chanroblesvirtualawli brarychanrobles vi rtual law library
The lot under controversy - Lot No. 1 Psu-167195 - contains 221.50
square meters. It was a part of the partially dried bed of the Estero
de San Miguel or Sampaloc, and is situated south of Lot No. 4, Block
2646, Manila Cadastre, which contains an area of 1460 square
meters and which was acquired by plaintiff on January 31, 1958
from Enrique C. Lopez (Exh. F). It also adjoins the properties
belonging to the Arellano University, Inc.chanroblesvirtualawli brarychanrobles vi rtual law library
By letter of May 14, 1957, the City of Manila advised the Arellano
University, Inc., that about 2,400 square meters of its site on
Legarda Street were needed by the City for the construction of
Azcarraga extension. This letter was answered on May 21, 1957,
with the proposition that in exchange for said 2,400 square meters,
the City cede to the University the esteros adjoining the Arellano
site, on the basis of 2 square meters of estero (filled) for every
square meter of the Arellano land, or in case of unfilled esteros, on
the basis of 3 to 1 (Exh. 2). The negotiations culminated in the
passage of the aforementioned Resolution No. 442 followed by the
execution of the contract of exchange sought to be annulled.chanroblesvirtualawl ibrarychanrobles vi rtual law li brary
Upon the other hand, Enrique C. Lopez, predecessor-in- interest of
plaintiff Antonio G. de Santos, having been advised that his
property, Lot 4, Block 2646, would be affected by the widening of
Legarda St., Sampaloc, and that the necessary area (56 sq. m.)
would be expropriated, wrote the City Engineer under date of
August 8, 1957, proposing that the required area "be exchanged
with the City property back of my same Lot 4, Bloc 2646 ... The City
property at the back of my lot, I am referring to, is at present a part
of the Estero de San Miguel" (Exh. E). This letter of Mr. Lopez was
coursed through official channels, and the City Appraisal Committee
stated that the exchange of the lot of Mr. Enrique C. Lopez affected
by the widening of Legarda St., with the lot (around 190 sq. m.)
formerly a part of the abandoned estero bed "may be made on the
basis of meter for meter, the excess area in favor of the City to be
paid for at the rate of P45.00 per square meter" (Exh. E-3). The
papers were then forwarded to the City Mayor by the City Engineer
per indorsement of April 15, 1958 (Exh. E-6). Meanwhile, on
January 31, 1958, the aforesaid Lot 4, Block 2646, Manila Cadastre,
was exchanged by Mr. Enrique C. Lopez for 6 parcels of land
situated in Jose Abad Santos belonging to the herein plaintiff, a
copy of the deed of exchange being Exhibit F. By letter dated
February 25, 1959 (Exh. J-1), the City Mayor informed plaintiff, in
effect, that his Office approved an indorsement of the Officer in
charge of the Department of Engineering and Public Works of the
City (Exb. J-2) wherein it was recommended that "action on the
claim of Dr. Antonio Santos as successor-in-interest of Mr. Lopez be
held in abeyance," for the reasons stated therein, to wit:
"Azcarraga Extension was planned long before the war. It is
considered as a major thoroughfare to bypass Legarda. After the
war, with the creation of the National Planning Commission,
Azcarraga Extension was again incorporated in their plans so that
the opening of Azcarraga Extension from Mendiola to the Rotonda is
being given great importance. Azcarraga Extension passes thru the
property of the Arellano University and the San Beda College on
which we have an expropriation proceedings against the College.
The expropriation case is now in court and the chances are great
that we will win the case.chanroblesvi rtualawlibrarychanrobles virtual law li brary
"There were plans before to widen Legarda to relieve traffic on this
street, but in view of the tremendous cost of expropriation involved
and in view of the proposed opening of the Azcarraga Extension,
negotiations for the widening of Legarda Street even on a piece-
meal basis were suspended temporarily.chanroblesvi rtualawlibrarychanrobles virtual law library
"In view of the above, any exchange now involving the widening of
Legarda Street with any property that the City has, should be held
in abeyance. On the other hand, efforts should be concentrated on
the acquisition of properties along Azcarraga Extension because of
its prime importance for lessening traffic on Legarda without
widening it."
After hearing, the trial court on March 7, 1961 rendered judgment
for the defendants holding that plaintiff has no right to exercise any
right of pre-emption or redemption over the lot in question; denying
the alternative cause of action for annulment of the deed of
exchange on the ground that such an issue cannot be raised by
plaintiff, who is not a proper party in interest; dismissing the
complaint; and directing plaintiff to pay defendant Arellano
University the sum of P5,000.00 as attorney's fees, with costs
against the plaintiff (Annex "E", pp. 67-76, ROA).chanroblesvi rtualawlibrarychanrobles vi rtual law library
On appeal by plaintiff, the Court of Appeals affirmed on July 11,
1963 the above decision of the trial court (Annex "A", pp. 24-32,
rec.).chanroblesvi rtualawlibrarychanrobles virtual law l ibrary
Hence, this present petition for review by certiorari.chanroblesvirtualawlibrarychanrobles vi rtual law li brary
The assignment of errors posed by petitioner-appellant in his brief
boils down to two issues: (1) whether or not petitioner-appellant
has any right of pre-emption or redemption over Lot No. 1 of Psu-
167195, or, as an alternative cause of action, to seek the
annulment of the deed of exchange executed by and between
respondents-appellees; and (2) whether or not the award of
P5,000.00 as attorney's fees in favor of Arellano University is
justified.chanroblesvirtualawl ibrarychanrobles vi rtual law library
Petitioner-appellant has no right to pre-empt or redeem the lot in
question as adjoining owner under the pertinent provision of law on
the matter, Article 1622 of the new Civil Code, thus:
ART. 1622. Whenever a piece of urban land is so small and so
situated that a major portion thereof cannot be used for any
practical purpose within a reasonable time, having been bought
merely for speculation, is about to be re-sold, the owner of any
adjoining land has a right of pre-emption at a reasonable price.chanroblesvi rtualawlibrarychanrobles virtual l aw library
If the re-sale has been perfected, the owner of the adjoining land
shall have a right of redemption, also at a reasonable price.chanroblesvirtualawli brarychanrobles vi rtual law library
When two or more owners of adjoining lands wish to exercise the
right of pre-emption or redemption, the owner whose intended use
of the land in question appears best justified shall be preferred.
The aforequoted provision grants to the adjacent owner the right of
pre-emption under paragraph one, if the urban land is about to
be re-sold, and the right of redemption under paragraph two, if the
re-sale has been perfected. The exercise of either right, however, is
premised on the existence of two conditions, namely: (1) the piece
of urban land is so small that it cannot be used for any practical
purpose within a reasonable time; and (2) such small urban land
was bought merely for speculation.
1
chanrobles virtual law l ibrary
In the instant case, petitioner-appellant had neither alleged in his
complaint nor proved, either that Lot No. 1 of Psu-167195 "is so
small and so situated that a major portion thereof cannot be used
for any practical purpose;" or that it has "been bought merely for
speculation;" or that it "is about to be re-sold." On the contrary, the
Court of Appeals found that Lot No. 1 is a portion of a partially dried
bed of Estero de San Miguel or Sampaloc, which finding of fact is
conclusive. The City of Manila did not acquire it by purchase. The
Court of Appeals likewise determined that said Lot No. 1 is also
adjacent to the lots of the defendant-appellee University, which
determination is beyond review by US. It is not disputed that the
aforesaid lot in controversy consists of 221.50 square meters, more
or less, an area bigger than the average size of lots in Manila as
found by the trial court. Besides, it is alleged by respondent-
appellee Arellano University that, as an educational institution
whose present site is not enough for its needs, it can devote said
parcel of land to serve public interest (Annex "B", p. 58, ROA),
which intended use entitles the University to preference under the
last paragraph of Article 1622 aforecited. These facts alone would
be sufficient to negate any claim that the area of the controverted
urban lot is so small and so situated that a major portion thereof
may not be used for any practical purpose within a reasonable time.
Respondent-appellee City of Manila, as owner, exchanged the
disputed lot and other lots belonging to it, with those of respondent-
appellee Arellano University, because the former needed portions of
properties of the latter for the Azcarraga (now Claro M. Recto)
Street extension; and such an exchange would not necessitate
disbursements of funds by respondent-appellee City of Manila. And
it has not been alleged nor shown, either, that respondent-appellee
City of Manila had the intention then to sell the said
property.
2
Consequently, petitioner-appellant is not entitled to the
benefits of Article 1622 abovecited.chanroblesvi rtualawlibrarychanrobles virtual law l ibrary
Petitioner-appellant contends that he is entitled to preempt or to
redeem Lot No. 1 of Psu-167195 under precedents and established
policy of respondent-appellee City of Manila. The latter, however,
maintains that said alleged precedents and policy are at most only
recommendatory to its Municipal Board. At any rate, all that
petitioner-appellant presented on this point were communications
between City of Manila officials and his predecessor-in-interest,
Enrique Lopez, regarding the latter's proposal to exchange his lot
which may be affected by the widening of Legarda Street with City
property, a part of the Estero de San Miguel which includes the
controverted lot. If any right, therefore were at all acquired by
petitioner-appellant from Enrique Lopez, it was but the right to
pursue the latter's claim to its legitimate end. However, as stated in
the portion of appellate court's decision aforequoted, action on this
matter was held in abeyance, as the extension of Azcarraga Street
was given priority over the widening of Legarda Street. It, thus,
becomes obvious that the basis of petitioner-appellant's claim failed
to materialize. On the other hand, negotiations between
respondent-appellees, which ante-dated the claims of Enrique Lopez
and petitioner-appellant, were carried out successfully and
culminated in the passage of Resolution No. 442 of the Municipal
Board of respondent-appellee City of Manila followed by the
execution of the contract of exchange between respondents-
appellees. As a necessary consequence, the nebulous right of pre-
emption or redemption of petitioner-appellant completely
vanished.chanroblesvirtualawli brarychanrobles vi rtual law library
A person, who is not a party obliged principally or subsidiarily under
a contract, may exercise an action for nullity of the contract if he is
prejudiced in his rights with respect to one of the contracting
parties, and can show detriment which would positively result to
him from the contract in which he had no intervention.
3
chanrobles virtual law li brary
The said contract of exchange is not detrimental to the right or
interest of petitioner-appellant; because he has neither the right of
pre-emption nor redemption over the disputed lot. Petitioner-
appellant, therefore, cannot legally seek the annulment of said deed
of exchange.chanroblesvi rtualawlibrary chanrobles virtual law l ibrary
Petitioner-appellant contests the award of attorney's fees on the
ground that it is not sound policy to place a penalty on the right to
litigate. However, the award of attorney's fees is a matter
essentially discretionary with the trial court. Paragraph 4 of Article
2208, Civil Code, authorizes such an award, since the instant action
is clearly unfounded, and no abuse of discretion having been shown,
the award should not be disturbed.
4
chanrobles virtual law l ibrary
WHEREFORE, the appealed decision is hereby affirmed, and the
appeal is hereby dismissed, with costs against petitioner-appellant.
So ordered.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro,
Fernando, Teehankee, Barredo and Antonio, JJ., concur.

CASE #80
EN BANC

[G.R. No. L-28317. March 31, 1971.]

SANTIAGO ORTEGA, Plaintiff-Appellant, v. ANDRES ORCINE and DOROTEO ESPLANA,Defendants-
Appellees.

German G. Vilgera, for Plaintiff-Appellant.

Reyes & Dy-Liacco for Defendants-Appellees.


SYLLABUS


1. CIVIL LAW; CIVIL CODE; SPECIAL CONTRACTS; SALE; EXTINGUISHMENT; LEGAL REDEMPTION;
ADJOINING URBAN LAND. This Court has already emphasized inprevious cases, that an owner of urban
land may not redeem an adjoining urban property where he does not allege in his complaint, much less
prove at the trial, that the latter is so small and so situated that a major portion thereof cannot be used for
any practical purpose within a reasonable time, having been bought merely for speculation It is evident that
the purpose of the new Civil Code in allowing redemption of adjoining urban land is to discourage
speculation in real estate and the consequent aggravation of the housing problems in centers of population.

2. ID.; ID.; ID.; ID.; ID.; ID.; ART. 1622 NOT APPLICABLE IN CASE AT BAR Considering that the land
which appellant seeks to redeem is 4,452 square meters in area, which is far from being "so small and so
situated that a major portion thereof cannot be used for any practical purpose" for quite the contrary, it has
been made a subdivision, and also that it cannot be said that appellee Esplana bought the same "merely for
speculation", since in less than eight months, from March 27, 1965 when he bought it, to December 7, 1965
when the present complaint was filed, he had developed the same into a subdivision for re-sale, which
shows that he must have had that definite purpose in mind in buying the same, it is Our holding that
appellant cannot invoke Article 1622 of the Civil Code, We cannot hold that such purpose is speculative.

3. STATUTORY CONSTRUCTION; "URBAN" LAND DEFINED CASE AT BAR. It is clear to Us that the term
urban in Art 1622 does not necessarily refer to the nature of the land itself sought to be redeemed nor to
the purpose to which it is somehow devoted, but to the character of the community or vicinity in which it is
found. In this sense, even if the land is somehow dedicated to agriculture, it is still urban, in contemplation
of this law, if it is located within the center of population or the more or less populated portion of a city or
town. In the case at bar, in view of the facts that: (1) the land of appellant is a school site and (2) the one
in question has been filled with earth, developed and subdivided into small lots for residential purposes, it is
quite safe to conclude that both lands are in the population section of the town and are accordingly urban.


D E C I S I O N


BARREDO, J.:


Appeal from the decision of the Court of First Instance of Camarines Sur dismissing its civil Case No. 6043
an action filed therein by herein appellant Santiago Ortega, owner of a parcel of land in Iriga, Camarines Sur
occupied and used as school site by the Saint Anthony Academy, against herein appellees Andres Orcine and
Doroteo Esplana, for the purpose of enforcing an alleged right of legal redemption under Article 1622 of the
Civil Code over an adjoining 4,452-square-meter parcel of land.

The appealed decision is one practically on the pleadings as may be gleaned from the following pertinent
portions thereof:jgc:chanrobles. com.ph

"This case was instituted by plaintiff to enable him to redeem the property sold by defendant Andres Orcine
to his codefendant Doroteo Esplana.

"Originally plaintiffs complaint was based on Art. 1621, New Civil Code. Motion to dismiss was timely
presented by the defendants, opposed by the plaintiff, and this Court resolving said motion to dismiss,
issued an order dated March 3, 1966, which, among others, stated as follows:chanrob1es vi rtual 1aw library
x x x


From the aforesaid decision it is indeed clear that the right of legal redemption can be availed of only by
adjoining owner if the two adjacent lands are both rural. The absence, however, of an allegation to that
effect in the complaint will only amount to a vagueness or uncertainty of the complaint which will entitle the
defendant to ask for a bill of particulars but not to an outright dismissal of the case.

. . . The best that the plaintiff can do is to file a complaint against the defendant vendor to compel the latter
to notify him in writing of the sale of his land.

"It was because of that order that on March 8, 1966, defendants filed their motion for Bill of Particulars or
Motion for Clarification (p. 20, Records), and this Court in its order dated April 21, 1966, ordered the
plaintiff.

To be specific in his pleading as to whether or his land which adjoins that upon which he wishes to exercise
the legal right of redemption is also rural, within 10 days from receipt of this order. (p. 27, Records)

"Plaintiff obviously in obedience to the above order of Court, presented on April 28, 1966, an Amended
Complaint (pp. 28-32, Records) the most notable change in it is that plaintiff seeks now to exercise his
alleged right of legal redemption under Article 1622, (Objection to Motion to Dismiss Amended Complaint,
pp. 39-40, Records) instead of Article 1621, New Civil Code, as was his intention in the original complaint.

"Defendant presented again a motion to dismiss the amended complaint on exactly the same grounds as the
former motion to dismiss, which likewise, was denied by this Court in its order dated June 21, 1966 (pp. 45-
46, Records). Motion for reconsideration was equally denied by order of this Court dated July 25, 1966 (p.
52, Records).

"All the above proceedings were had under then presiding Judge Jose Surtida of this Court, and all the
resolutions above adverted to were made by him.

"A pre-trial was had in the case. This time under a different Judge Judge de la Cruz. In the order of this
Court dated December 8, 1966, Judge de la Cruz gave the defendants ten days to file a motion to dismiss
which the defendants did on December 15, 1966, and was just a reiteration of the reasons and arguments
urged on this Court in the previous motions to dismiss, and was also denied by this Court per order dated
January 4, 1967 (p. 1, records).

"Such was the situation of this case when the undersigned presiding Judge of this Court took over.

"This Court believes that based on the pleadings submitted in this case by both parties, the case can be
decided on the merits. The parties and their respective counsels felt the same, that is why they agreed to
have the case set for Oral arguments before this Court and after such argument, the same shall be
submitted for decision, and no other proceedings shall be taken on the case. (order dated July 13, 1967, pp.
83-84, Records)

"There is no dispute that the land sold to the defendant Esplana on March 27, 1965, for P10,000.00 by his
co-defendant Orcine was a ricefield, an agricultural land (rural); that after the same was sold, defendant
Esplana had it filled with earth and then had it subdivided into small lots for residential purposes. The land
has then ceased to be rural, and is now urban land. Likewise, the land owned by the plaintiff is adjacent to
the land in question, not separated by a creek, drain, ravines, road and apparent servitude for the benefit of
other estates, was formerly an agricultural land (rural) but at the time of the sale made by Orcine to Esplana
on March 27, 1965, the same was already urban, and in fact, was and is being used and occupied as school
site of St. Anthony Academy, a private school."cralaw virtua1aw l ibrary

Reversal of the dismissal is now sought by appellant upon the claim that:jgc:chanrobles.com.ph

"I. THE LOWER COURT ERRED IN HOLDING THAT DESPITE THE CONVERSION BY APPELLEE DOROTEO
ESPLANA OF THE LAND IN QUESTION FROM RURAL TO URBAN LAND APPELLANT IS NOT ENTITLED TO THE
RIGHT OF REDEMPTION OR PRE-EMPTION UNDER ARTICLE 1622 OF THE CIVIL CODE.

"II. THE LOWER COURT ERRED IN HOLDING THAT APPELLEE DOROTEO ESPLANA DID NOT PURCHASE THE
LAND IN QUESTION FOR SPECULATIVE PURPOSE.

"III. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT IS NOT ENTITLED TO WRITTEN NOTICE AS
PROVIDED FOR UNDER ARTICLE 1623 OF THE NEW CIVIL CODE."cralaw virtua1aw library

The provisions of law involved by appellant read as follows:jgc:chanrobles.com.ph

"ART. 1622. Whenever a piece of urban land which is so small and so situated that a major portion thereof
cannot be used for any practical purpose within a reasonable time, having been bought merely for
speculation, is about to be re-sold, the owner of any adjoining land has a right of pre-emption at a
reasonable price.

"If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a
reasonable price.

"When two or more owners of adjoining lands wish to exercise the right of pre-emption or redemption, the
owner whose intended use of the land in question appears best justified shall be preferred."cralaw vi rtua1aw library

Appellant contends under his first assignment of error that under Article 1622, above-quoted, he has the
right of legal redemption over the land in question, since, it is not disputed that he is the owner of the urban
property adjoining said land on the North and the latter had already been converted into urban land by
appellee Esplana at the time he (appellant) exercised his light, hence the lower court erred in holding that
he is not entitled to such right on the ground, stated by His Honor, that the time of the sale of the said land
by Orcine to Esplana on March 27, 1965, the land sought to be redeemed and his land were not of the same
kind that of appellant being urban land while that of appellees rural. In essence, the position of appellant
is that what governs for purposes of the redemption provided for in the law is the nature or character of the
adjoining land at the time redemption is actually sought and not at the time of its sale to the person from
whom redemption is asked.

We believe it is idle to rule in this case on appellants contention. The legal issue he raises involves many
aspects which do not appear to have been dealt with by the parties whether in their pleadings here or in the
court below and without which it is not possible to resolve properly the point in question. Indeed, even the
question alone of what is rural and what is urban land is itself one that is not easy to resolve. Even under
Article 1523 of the Spanish Civil Code which, incidentally, referred to rural land only, the Spanish authorities
preferred to make the needed classification only on a case to case basis. 1 This, notwithstanding that it was
clear to them that the reason underlying the provision is to encourage better development and utilization of
agricultural lands. According to Manresa:jgc:chanrobles. com.ph

"Limitado dicho derecho a las fincas rsticas, cuya cabida no exceda de una hect rea, es visto que el espiritu
del Cdigo no es otro que favorecer el desarrollo de la propiedad territorial y de los intereses de la
agricultura. Una finca, cuya cabida no excede de una hect rea, no produce, por regla general, lo suficiente
para mantener a una familia: su cultivo teniendo que transportar por entre heredades ajenas los
instrumentos de labranza, no se hace en condiciones economicas; lo mismo puede decirse de la saca y
transporte de los frutos. Todas estas dificultades desaparecen, si al venderse la finca, la compra un
propietario que tenga tierras colindantes: se favorece de este modo el inters pblico, porque la produccin
aumenta, se atiende al inters privado del retrayente y no es de apreciar ningn ostensible perjuicio para el
vendedor ni para el comprador." (10 Manresa, Codigo Civil Espaol, 328.)

which reasoning was echoed by Justice Romualdez in Cortes v. Flores, 2 thus:jgc:chanrobles.com.ph

"Hallamos acertado este criterio. La intencin de la ley al conceder este retracto es proteger la agricultura,
haciendo que los terrenos agricolas pequeos se unan a sus colindantes bajo un solo dueo para su mejor
expletacin. Si el terreno colindante con el que se trata de retraer no es agricola, entonces es vano el
retracto, no responde al propsito de la lev.

"Est ajustada a este precepto dice el Tribunal Supremo de Espaa en su fallo de 12 de marzo de 1902, la
sentencia que desestima la demanda de retracto. cuando las dos o una sola de las fincas, son urbanas."

On the assumption then that the land in question is rural or that in legal contemplation it continued to be
such even after it was developed, for purposes of determining appellants right of redemption, it is obvious
that since appellants land is admittedly urban, the redemption sought cannot be allowed because it would
not be in line with the above-discussed purposes of redemption of rural land contemplated in Article 1621 of
the present Civil Code. Incidentally, this provision which is substantially Article 1523 of the Spanish Civil
Code above-mentioned, was the one firstly invoked by appellant in the trial court. Hence, the above ruling in
Cortes v. Flores is applicable to this case.

On the other hand, even on the assumption that the land in controversy is urban, still Article 1622 of the
present Civil Code which is not invoked by appellant does not support his case. This Court has already
emphasized in previous cases, 3 that an owner of urban land may not redeem an adjoining urban property
where he does not allege in his complaint, much less prove at the trial, that the latter is so small and so
situated that a major portion thereof cannot be used for any practical purpose within a reasonable time,
having been bought merely for speculation. In Soriente v. Court of Appeals, 4 We held:jgc:chanrobles. com.ph

"Said Article 1622 reads:chanrob1es vi rtual 1aw library

Whenever a piece of urban land which is so small and so situated that a major portion thereof cannot be
used for any practical purpose within a reasonable time, having been bought merely for speculation, is about
to be re-sold, the owner of any adjoining land has a right of pre-emption at a reasonable price. (Emphasis
supplied.)

"This provision is not in point. It has been neither proved nor alleged, either that the land purchased by
appellant from Lamberto Reyes is so small and so situated that a major portion thereof cannot be used for
any practical purpose, or that it has been bought merely for speculation, or, even, that it is about to be
resold. Besides, it is alleged in appellants answer that the land sought to be redeemed by plaintiff is . . .
sufficiently big in area and so situated that the major portion or the whole thereof can serve comfortably as
workshop and storage of machineries and equipments which defendant is putting up in the exercise and
furtherance of his profession as professional mechanical engineer and associate electrical engineer; that in
fact a portion of said lot is actually used for residential purposes . . .; and that defendant has no intention
now or in the future to dispose of or sell the property subject matter of the present action to any person . .
.. What is more, appellee does not context appellants evidence on these allegations. Hence, the first two
assignments of error are well taken."cralaw virtua1aw library

It may be mentioned here that the right of redemption of adjoining urban land did not exist in the Spanish
Civil Code, which confined itself to the redemption of rural lands. It was introduced here only by the new
Civil Code. Whereas, as already observed, the objective of the right of redemption of adjoining rural land
under the old code, as adopted in the new Civil Code, is to encourage the maximum development and
utilization of agricultural lands, it is evident that the purpose of the new Civil Code in allowing redemption of
adjoining urban land is to discourage speculation in real estate and the consequent aggravation of the
housing problems in centers of population. As a matter of fact, having in view this legislative purpose, We
are of the opinion that whatever difficulty may exist in determining if a land is rural for the proper
application of Article 1621, as previously noted to be the view of Spanish authorities, no such problem arises
in regard to the urban lands contemplated in Article 1622 of the Code. It is clear to Us that the term urban
in this provision does not necessarily refer to the nature of the land itself sought to be redeemed nor to the
purpose to which it is somehow devoted, but to the character of the community or vicinity in which it is
found. In this sense, even if the land is somehow dedicated to agriculture, it is still urban, in contemplation
of this law, if it is located within the center of population or the more or less populated portion of a city or
town. 5

In the case at bar, appellant himself submits that the land in question should be considered as urban.
Actually, the facts on record do not sufficiently show where it is situated. In view, however, of the facts that:
(1) the land of appellant is a school site and (2) the one in question has been filled with earth, developed
and subdivided into small lots for residential purposes, it is quite safe to conclude that both lands are in the
populated section of the town and are accordingly urban.

Now, considering that the land which appellant seeks to redeem is 4,452 square meters in area, which is far
from being "so small and so situated that a major portion thereof cannot be used for any practical purpose"
for quite the contrary, it has been made a subdivision, and also that it cannot be said that appellee Esplana
bought the same "merely for speculations" since in less than eight months, from March 27, 1965 when he
bought it, to December 7, 1965 when the present complaint was filed, he had developed the same into a
subdivision for re-sale, which shows that he must have had definite purpose in mind in buying the same, it
is Our holding that appellant cannot invoke Article 1622 of the Civil Code. We cannot hold that such purpose
is speculative. As appellees aptly point out, according to Websters International Dictionary to speculate
means:jgc:chanrobles.com.ph

"To enter into a business transaction or venture from which the profits or return are conjectural because the
undertaking is outside of the ordinary course of business to purchase or sell with the expectation of profiting
by anticipated, but conjectural, fluctuations in price; often in a somewhat depreciative sense, to engage in
harardous business transaction for the chance of an unusually large profit; as to speculate in coffee, in sugar
or in bank stock." (2nd Edition p. 2417, Websters International Dictionary.)

Consequently, all of appellants assignments of error must be as they are hereby overruled.

WHEREFORE, the decision appealed from is affirmed, with costs against Appellant.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Villamor and
Makasiar, JJ., concur.
Endnotes:


1. Manresa, Codigo Civil Espaol, pp. 328-329.

2. 47 Jurisprudencia Filipina, 1048, 1049.

3. De la Cruz v. Cruz, Et Al., L-27759, April 17, 1970.: SCRA 307, 311; Soriente v. Court of Appeals, Et Al.,
L-17343 Aug. 31, 1963, 8 SCRA 780, 755.

4. Supra.

5. In this connection, it may be noted that despite Manresas comment that it is not very easy to make the
correct classification of rural land under Article 1523 of the Spanish Civil Code, he nevertheless mentions
decisions of the Supreme Court of Spain indicating broad criteria, at least, in determining the question
thus:jgc:chanrobles. com.ph

"Jurisprudencia En las sentencias de 26 de November de 1895, 12 de Marzo de 1902 y 18 de Julio de
1903, el Tribunal Sopremo muestra su criterio acerca de lo que debe entenderse por fincas rusticas,
exigiendo que sean tierras destinadas a la explotacion agricola, y negando esa consideracion a las huestas y
hardines anejos a edificios sitos dentro de poblado, y a los terrenos destinados al aprovechamiento de aguas
medicinales.

"Extremando este mismo criterio, la de 14 de Diciembre de 1905 conceptua como fincas urbanas, que
caresen de las condiciones que el legislador tubo presentes al establicer el retracto de aledaos, las fincas
inmediatas a poblacion, de la que unicamente las separa un estretcho camino, por ser utilizadas facilmente
como huertos accessorios de las casas." (10 Manresa, Codigo Civil Espaol, p. 332.)


CASE #81
[G.R. No. 137677. May 31, 2000]
ADALIA B. FRANCISCO, petitioner, vs. ZENAIDA F. BOISER, respondent.
D E C I S I O N
MENDOZA, J .:
This is a petition for review of the decision of the Court of Appeals in CA-G.R. CV No.
55518 which affirmed in toto the decision of the Regional Trial Court, Branch 122,
Caloocan City, dismissing petitioners complaint for redemption of property against
respondent. Sdaad
The facts are as follows:
Petitioner Adalia B. Francisco and three of her sisters, Ester, Elizabeth and Adeluisa,
were co-owners of four parcels of registered lands
[1]
on which stands the Ten
Commandments Building at 689 Rizal Avenue Extension, Caloocan City. On August 6,
1979, they sold 1/5 of their undivided share in the subject parcels of land to their
mother, Adela Blas, for P10,000.00, thus making the latter a co-owner of said real
property to the extent of the share sold. Sdaamiso
On August 8, 1986, without the knowledge of the other co-owners, Adela Blas sold her
1/5 share for P10,000.00 to respondent Zenaida Boiser who is another sister of
petitioner.
On August 5, 1992, petitioner received summons, with a copy of the complaint in Civil
Case No. 15510, filed by respondent demanding her share in the rentals being collected
by petitioner from the tenants of the building. Petitioner then informed respondent that
she was exercising her right of redemption as a co-owner of the subject property. On
August 12, 1992, she deposited the amount of P10,000.00 as redemption price with the
Clerk of Court. This move to redeem the property was interposed as a permissive
counterclaim in Civil Case No. 15510. However, said case was dismissed after
respondent was declared non-suited with the result that petitioners counterclaim was
likewise dismissed. Scncm
On September 14, 1995, petitioner instituted Civil Case No. C-17055 before the
Regional Trial Court in Caloocan City. She alleged that the 30-day period for
redemption under Art. 1623 of the Civil Code had not begun to run against her since the
vendor, Adela Blas, never informed her and the other owners about the sale to
respondent. She learned about the sale only on August 5, 1992, after she received the
summons in Civil Case No. 15510, together with the complaint. Ncmmis
Respondent, on the other hand, contended that petitioner knew about the sale as early
as May 30, 1992, because, on that date, she wrote petitioner a letter
[2]
informing the
latter about the sale, with a demand that the rentals corresponding to her 1/5 share of
the subject property be remitted to her. Said letter was sent with a copy of the Deed of
Sale
[3]
between respondent and Adela Blas. On the same date, letters
[4]
were likewise
sent by respondent to the tenants of the building, namely, Seiko Service Center and
Glitters Corporation, informing them of the sale and requesting that, thenceforth, they
pay 1/5 of the monthly rentals to respondent. That petitioner received these letters is
proved by the fact that on June 8, 1992, she wrote
[5]
the buildings tenants advising them
to disregard respondents request and continue paying full rentals directly to her. Ncm
On August 19, 1996, the trial court dismissed petitioners complaint for legal
redemption. It ruled that Art. 1623 does not prescribe any particular form of notifying co-
owners about a sale of property owned in common to enable them to exercise their right
of legal redemption.
[6]
While no written notice was given by the vendor, Adela Blas, to
petitioner or the other owners, petitioner herself admitted that she had received
respondents letter of May 30, 1992 and was in fact furnished a copy of the deed
evidencing such sale.
[7]
The trial court considered the letter sent by respondent to
petitioner with a copy of the deed of sale as substantial compliance with the required
written notice under Art. 1623 of the New Civil Code.
[8]
Consequently, the 30-day period
of redemption should be counted not from August 5, 1992, when petitioner received
summons in Civil Case No. 15510, but at the latest, from June 8, 1992, the date
petitioner wrote the tenants of the building advising them to continue paying rentals in
full to her. Petitioner failed to redeem the property within that period.
Petitioner brought the matter to the Court of Appeals, which, on October 26, 1998,
affirmed the decision of the Regional Trial Court. She moved for reconsideration, but
her motion was denied by the appellate court on February 16, 1999. Hence, this
petition.
The sole issue presented in this appeal is whether the letter of May 30, 1992 sent by
respondent to petitioner notifying her of the sale on August 8, 1986 of Adela Blas 1/5
share of the property to respondent, containing a copy of the deed evidencing such
sale, can be considered sufficient as compliance with the notice requirement of Art.
1623 for the purpose of legal redemption. The trial court and the Court of Appeals relied
on the ruling in Distrito v. Court of Appeals
[9]
that Art. 1623 does not prescribe any
particular form of written notice, nor any distinctive method for notifying the
redemptioner. They also invoked the rulings in De Conejero v. Court of
Appeals
[10]
and Badillo v. Ferrer
[11]
that furnishing the redemptioner with a copy of the
deed of sale is equivalent to giving him the written notice required by law. Oldmiso
On the other hand, petitioner points out that the cited cases are not relevant because
the present case does not concern the particular form in which notice must be given.
Rather, the issue here is whether a notice sent by the vendee may be given in lieu of
that required to be given by the vendor or prospective vendor.
[12]

Art. 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be exercised except
within thirty days from the notice in writing by the prospective vendor, or
by the vendor, as the case maybe. The deed of sale shall not be recorded
in the Registry of Property, unless accompanied by an affidavit of the
vendor that he has given written notice thereof to all possible
redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
In ruling that the notice given by the vendee was sufficient, the appellate court cited the
case of Etcuban v. Court of Appeals
[13]
in which it was held:
Petitioner contends that vendors (his co-heirs) should be the ones to give
him written notice and not the vendees (defendants or private respondent
herein) citing the case of Butte vs. Manuel Uy & Sons, Inc., 4 SCRA 526.
Such contention is of no moment. While it is true that written notice is
required by the law (Art. 1623), it is equally true that the same "Art. 1623
does not prescribe any particular form of notice, nor any distinctive
method for notifying the redemptioner." So long, therefore, as the latter is
informed in writing of the sale and the particulars thereof, the 30 days for
redemption start running, and the redemptioner has no real cause to
complain. (De Conejero et al v. Court of Appeals, et al., 16 SCRA 775). In
the Conejero case, we ruled that the furnishing of a copy of the disputed
deed of sale to the redemptioner was equivalent to the giving of written
notice required by law in "a more authentic manner than any other writing
could have done," and that We cannot adopt a stand of having to sacrifice
substance to technicality. More so in the case at bar, where the vendors or
co-owners of petitioner stated under oath in the deeds of sale that notice
of sale had been given to prospective redemptioners in accordance with
Art. 1623 of the Civil Code. "A sworn statement or clause in a deed of sale
to the effect that a written notice of sale was given to possible
redemptioners or co-owners might be used to determine whether an offer
to redeem was made on or out of time, or whether there was substantial
compliance with the requirement of said Art. 1623."
[14]

In Etcuban, notice to the co-owners of the sale of the share of one of them was given by
the vendees through their counterclaim in the action for legal redemption. Despite the
apparent meaning of Art. 1623, it was held in that case that it was "of no moment" that
the notice of sale was given not by the vendor but by the vendees. "So long as the [co-
owner] is informed in writing of the sale and the particulars thereof, the 30 days for
redemption start running, and the redemptioner has no cause to complain," so it was
held. The contrary doctrine of Butte v. Manuel Uy and Sons, Inc.
[15]
was thus
overruled sub silencio.
However, in the later case of Salatandol v. Retes,
[16]
decided a year after
the Etcuban case, the Court expressly affirmed the ruling in Butte that the notice
required by Art. 1623 must be given by the vendor. In Salatandol, the notice given to the
redemptioner by the Register of Deeds of the province where the subject land was
situated was held to be insuffucient. Resolving the issue of whether such notice was
equivalent to the notice from the vendor required under Art. 1623, this Court stated:
The appeal is impressed with merit. In Butte vs. Manuel Uy and Sons,
Inc., the Court ruled that Art. 1623 of the Civil Code clearly and expressly
prescribes that the thirty (30) days for making the pre-emption or
redemption are to be counted from notice in writing by the vendor. The
Court said:
" x x x The test of Article 1623 clearly and expressly prescribes that the
thirty days for making the redemption are to be counted from notice in
writing by the vendor. Under the old law (Civil Code of 1889, Art. 1524), it
was immaterial who gave the notice; so long as the redeeming co-owner
learned of the alienation in favor of the stranger, the redemption period
began to run. It is thus apparent that the Philippine legislature in Article
1623 deliberately selected a particular method of giving notice, and that
method must be deemed exclusive (39 Am. Jur., 237; Payne vs. State, 12
S.W. (2d) (528). As ruled in Wampher vs. Lecompte, 150 Atl. 458 (affd. in
75 Law Ed. [U.S.] 275)
Why these provisions were inserted in the statute we are not
informed, but we may assume until the contrary is shown, that a
state of facts in respect thereto existed, which warranted the
legislature in so legislating.
"The reasons for requiring that the notice should be given by the seller,
and not by the buyer, are easily divined. The seller of an undivided interest
is in the best position to know who are his co-owners that under the law
must be notified of the sale. Also, the notice by the seller removes all
doubts as to fact of the sale, its perfection, and its validity, the notice being
a reaffirmation thereof; so that that party notified need not entertain doubt
that the seller may still contest the alienation. This assurance would not
exist if the notice should be given by the buyer."
In the case at bar, the plaintiffs have not been furnished any written notice
of sale or a copy thereof by Eufemia Omole, the vendor. Said plaintiffs
right to exercise the legal right of preemption or redemption, given to a co-
owner when any one of the other co-owners sells his share in the thing
owned in common to a third person, as provided for in Article 1623 of the
Civil Code, has not yet accrued.
There was thus a return to the doctrine laid down in Butte. That ruling is sound. In the
first place, reversion to the ruling in Butte is proper. Art. 1623 of the Civil Code is clear
in requiring that the written notification should come from the vendor or prospective
vendor, not from any other person. There is, therefore, no room for construction.
Indeed, the principal difference between Art. 1524 of the former Civil Code and Art.
1623 of the present one is that the former did not specify who must give the notice,
whereas the present one expressly says the notice must be given by the vendor. Effect
must be given to this change in statutory language. Manikan
In the second place, it makes sense to require that the notice required in Art. 1623 be
given by the vendor and by nobody else. As explained by this Court through Justice
J.B.L. Reyes in Butte, the vendor of an undivided interest is in the best position to know
who are his co-owners who under the law must be notified of the sale. It is likewise the
notification from the seller, not from anyone else, which can remove all doubts as to the
fact of the sale, its perfection, and its validity, for in a contract of sale, the seller is in the
best position to confirm whether consent to the essential obligation of selling the
property and transferring ownership thereof to the vendee has been given. Maniks
Now, it is clear that by not immediately notifying the co-owner, a vendor can delay or
even effectively prevent the meaningful exercise of the right of redemption. In the
present case, for instance, the sale took place in 1986, but it was kept secret until 1992
when vendee (herein respondent) needed to notify petitioner about the sale to demand
1/5 rentals from the property sold. Compared to serious prejudice to petitioners right of
legal redemption, the only adverse effect to vendor Adela Blas and respondent-vendee
is that the sale could not be registered. It is non-binding, only insofar as third persons
are concerned.
[17]
It is, therefore, unjust when the subject sale has already been
established before both lower courts and now, before this Court, to further delay
petitioners exercise of her right of legal redemption by requiring that notice be given by
the vendor before petitioner can exercise her right. For this reason, we rule that the
receipt by petitioner of summons in Civil Case No. 15510 on August 5, 1992 constitutes
actual knowledge on the basis of which petitioner may now exercise her right of
redemption within 30 days from finality of this decision. Manikx
Our ruling is not without precedent. In Alonzo v. Intermediate Appellate Court,
[18]
we
dispensed with the need for written notification considering that the redemptioners lived
on the same lot on which the purchaser lived and were thus deemed to have actual
knowledge of the sales. We stated that the 30-day period of redemption started, not
from the date of the sales in 1963 and 1964, but sometime between those years and
1976, when the first complaint for redemption was actually filed. For 13 years, however,
none of the co-heirs moved to redeem the property. We thus ruled that the right of
redemption had already been extinguished because the period for its exercise had
already expired. Nexold
In the present case, as previously discussed, receipt by petitioner of summons in Civil
Case No. 15510 on August 5, 1992 amounted to actual knowledge of the sale from
which the 30-day period of redemption commenced to run. Petitioner had until
September 4, 1992 within which to exercise her right of legal redemption, but on August
12, 1992 she deposited the P10,000.00 redemption price. As petitioners exercise of
said right was timely, the same should be given effect. Miso
WHEREFORE, in view of the foregoing, the petition is GRANTED and the decision of
the Court of Appeals is REVERSED and the Regional Trial Court, Branch 122,
Caloocan City is ordered to effect petitioners exercise of her right of legal redemption in
Civil Case No. C-17055. Sppedjo
SO ORDERED.


CASE #82
G.R. No. 72873 May 28, 1987
CARLOS ALONZO and CASIMIRA ALONZO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and TECLA PADUA, respondents.
Perpetuo L.B. Alonzo for petitioners.
Luis R. Reyes for private respondent.

CRUZ, J .:
The question is sometimes asked, in serious inquiry or in curious conjecture, whether we are a court
of law or a court of justice. Do we apply the law even if it is unjust or do we administer justice even
against the law? Thus queried, we do not equivocate. The answer is that we do neither because we
are a court both of law and of justice. We apply the law with justice for that is our mission and
purpose in the scheme of our Republic. This case is an illustration.
Five brothers and sisters inherited in equal pro indiviso shares a parcel of land registered in 'the
name of their deceased parents under OCT No. 10977 of the Registry of Deeds of Tarlac. 1
On March 15, 1963, one of them, Celestino Padua, transferred his undivided share of the herein
petitioners for the sum of P550.00 by way of absolute sale.
2
One year later, on April 22, 1964,
Eustaquia Padua, his sister, sold her own share to the same vendees, in an instrument denominated
"Con Pacto de Retro Sale," for the sum of P 440.00.
3

By virtue of such agreements, the petitioners occupied, after the said sales, an area corresponding
to two-fifths of the said lot, representing the portions sold to them. The vendees subsequently
enclosed the same with a fence. In 1975, with their consent, their son Eduardo Alonzo and his wife
built a semi-concrete house on a part of the enclosed area.
4

On February 25, 1976, Mariano Padua, one of the five coheirs, sought to redeem the area sold to
the spouses Alonzo, but his complaint was dismissed when it appeared that he was an American
citizen .
5
On May 27, 1977, however, Tecla Padua, another co-heir, filed her own complaint invoking the
same right of redemption claimed by her brother.
6

The trial court * also dismiss this complaint, now on the ground that the right had lapsed, not having been exercised within thirty days
from notice of the sales in 1963 and 1964. Although there was no written notice, it was held that actual knowledge of the sales by the co-
heirs satisfied the requirement of the law.
7

In truth, such actual notice as acquired by the co-heirs cannot be plausibly denied. The other co-
heirs, including Tecla Padua, lived on the same lot, which consisted of only 604 square meters,
including the portions sold to the petitioners .
8
Eustaquia herself, who had sold her portion, was staying
in the same house with her sister Tecla, who later claimed redemption petition.
9
Moreover, the petitioners
and the private respondents were close friends and neighbors whose children went to school together. 10
It is highly improbable that the other co-heirs were unaware of the sales and that they thought, as
they alleged, that the area occupied by the petitioners had merely been mortgaged by Celestino and
Eustaquia. In the circumstances just narrated, it was impossible for Tecla not to know that the area
occupied by the petitioners had been purchased by them from the other. co-heirs. Especially
significant was the erection thereon of the permanent semi-concrete structure by the petitioners' son,
which was done without objection on her part or of any of the other co-heirs.
The only real question in this case, therefore, is the correct interpretation and application of the
pertinent law as invoked, interestingly enough, by both the petitioners and the private respondents.
This is Article 1088 of the Civil Code, providing as follows:
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser
by reimbursing him for the price of the sale, provided they do so within the period of
one month from the time they were notified in writing of the sale by the vendor.
In reversing the trial court, the respondent court ** declared that the notice required by the said article was written notice
and that actual notice would not suffice as a substitute. Citing the same case of De Conejero v. Court of Appeals 11 applied by the trial court,
the respondent court held that that decision, interpreting a like rule in Article 1623, stressed the need for written notice although no particular
form was required.
Thus, according to Justice J.B.L. Reyes, who was the ponente of the Court, furnishing the co-heirs
with a copy of the deed of sale of the property subject to redemption would satisfy the requirement
for written notice. "So long, therefore, as the latter (i.e., the redemptioner) is informed in writing of the
sale and the particulars thereof," he declared, "the thirty days for redemption start running. "
In the earlier decision of Butte v. UY, 12 " the Court, speaking through the same learned jurist, emphasized that the written
notice should be given by the vendor and not the vendees, conformably to a similar requirement under Article 1623, reading as follows:
Art. 1623. The right of legal pre-emption or redemption shall not be exercised except
within thirty days from the notice in writing by the prospective vendor, or by the
vendors, as the case may be. The deed of sale shall not be recorded in the Registry
of Property, unless accompanied by an affidavit of the vendor that he has given
written notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of the adjoining owners.
As "it is thus apparent that the Philippine legislature in Article 1623 deliberately selected a particular
method of giving notice, and that notice must be deemed exclusive," the Court held that notice given
by the vendees and not the vendor would not toll the running of the 30-day period.
The petition before us appears to be an illustration of the Holmes dictum that "hard cases make bad
laws" as the petitioners obviously cannot argue against the fact that there was really no written
notice given by the vendors to their co-heirs. Strictly applied and interpreted, Article 1088 can lead to
only one conclusion, to wit, that in view of such deficiency, the 30 day period for redemption had not
begun to run, much less expired in 1977.
But as has also been aptly observed, we test a law by its results; and likewise, we may add, by its
purposes. It is a cardinal rule that, in seeking the meaning of the law, the first concern of the judge
should be to discover in its provisions the in tent of the lawmaker. Unquestionably, the law should
never be interpreted in such a way as to cause injustice as this is never within the legislative intent.
An indispensable part of that intent, in fact, for we presume the good motives of the legislature, is
to render justice.
Thus, we interpret and apply the law not independently of but in consonance with justice. Law and
justice are inseparable, and we must keep them so. To be sure, there are some laws that, while
generally valid, may seem arbitrary when applied in a particular case because of its peculiar
circumstances. In such a situation, we are not bound, because only of our nature and functions, to
apply them just the same, in slavish obedience to their language. What we do instead is find a
balance between the word and the will, that justice may be done even as the law is obeyed.
As judges, we are not automatons. We do not and must not unfeelingly apply the law as it is worded,
yielding like robots to the literal command without regard to its cause and consequence. "Courts are
apt to err by sticking too closely to the words of a law," so we are warned, by Justice Holmes again,
"where these words import a policy that goes beyond them." 13 While we admittedly may not legislate, we
nevertheless have the power to interpret the law in such a way as to reflect the will of the legislature. While we may not read into the law a
purpose that is not there, we nevertheless have the right to read out of it the reason for its enactment. In doing so, we defer not to "the letter
that killeth" but to "the spirit that vivifieth," to give effect to the law maker's will.
The spirit, rather than the letter of a statute determines its construction, hence, a
statute must be read according to its spirit or intent. For what is within the spirit is
within the letter but although it is not within the letter thereof, and that which is within
the letter but not within the spirit is not within the statute. Stated differently, a thing
which is within the intent of the lawmaker is as much within the statute as if within the
letter; and a thing which is within the letter of the statute is not within the statute
unless within the intent of the lawmakers. 14
In requiring written notice, Article 1088 seeks to ensure that the redemptioner is properly notified of the sale and to
indicate the date of such notice as the starting time of the 30-day period of redemption. Considering the shortness of
the period, it is really necessary, as a general rule, to pinpoint the precise date it is supposed to begin, to obviate any
problem of alleged delays, sometimes consisting of only a day or two.
The instant case presents no such problem because the right of redemption was invoked
not days but years after the sales were made in 1963 and 1964. The complaint was filed by Tecla
Padua in 1977, thirteen years after the first sale and fourteen years after the second sale. The delay
invoked by the petitioners extends to more than a decade, assuming of course that there was a valid
notice that tolled the running of the period of redemption.
Was there a valid notice? Granting that the law requires the notice to be written, would such notice
be necessary in this case? Assuming there was a valid notice although it was not in writing. would
there be any question that the 30-day period for redemption had expired long before the complaint
was filed in 1977?
In the face of the established facts, we cannot accept the private respondents' pretense that they
were unaware of the sales made by their brother and sister in 1963 and 1964. By requiring written
proof of such notice, we would be closing our eyes to the obvious truth in favor of their palpably false
claim of ignorance, thus exalting the letter of the law over its purpose. The purpose is clear enough:
to make sure that the redemptioners are duly notified. We are satisfied that in this case the other
brothers and sisters were actually informed, although not in writing, of the sales made in 1963 and
1964, and that such notice was sufficient.
Now, when did the 30-day period of redemption begin?
While we do not here declare that this period started from the dates of such sales in 1963 and 1964,
we do say that sometime between those years and 1976, when the first complaint for redemption
was filed, the other co-heirs were actually informed of the sale and that thereafter the 30-day period
started running and ultimately expired. This could have happened any time during the interval of
thirteen years, when none of the co-heirs made a move to redeem the properties sold. By 1977, in
other words, when Tecla Padua filed her complaint, the right of redemption had already been
extinguished because the period for its exercise had already expired.
The following doctrine is also worth noting:
While the general rule is, that to charge a party with laches in the assertion of an
alleged right it is essential that he should have knowledge of the facts upon which he
bases his claim, yet if the circumstances were such as should have induced inquiry,
and the means of ascertaining the truth were readily available upon inquiry, but the
party neglects to make it, he will be chargeable with laches, the same as if he had
known the facts. 15
It was the perfectly natural thing for the co-heirs to wonder why the spouses Alonzo, who were not
among them, should enclose a portion of the inherited lot and build thereon a house of strong
materials. This definitely was not the act of a temporary possessor or a mere mortgagee. This
certainly looked like an act of ownership. Yet, given this unseemly situation, none of the co-heirs saw
fit to object or at least inquire, to ascertain the facts, which were readily available. It took all
of thirteen years before one of them chose to claim the right of redemption, but then it was already
too late.
We realize that in arriving at our conclusion today, we are deviating from the strict letter of the law,
which the respondent court understandably applied pursuant to existing jurisprudence. The said
court acted properly as it had no competence to reverse the doctrines laid down by this Court in the
above-cited cases. In fact, and this should be clearly stressed, we ourselves are not abandoning the
De Conejero and Buttle doctrines. What we are doing simply is adopting an exception to the general
rule, in view of the peculiar circumstances of this case.
The co-heirs in this case were undeniably informed of the sales although no notice in writing was
given them. And there is no doubt either that the 30-day period began and ended during the 14
years between the sales in question and the filing of the complaint for redemption in 1977, without
the co-heirs exercising their right of redemption. These are the justifications for this exception.
More than twenty centuries ago, Justinian defined justice "as the constant and perpetual wish to
render every one his due." 16 That wish continues to motivate this Court when it assesses the facts and the law in every case
brought to it for decision. Justice is always an essential ingredient of its decisions. Thus when the facts warrants, we interpret the law in a
way that will render justice, presuming that it was the intention of the lawmaker, to begin with, that the law be dispensed with justice. So we
have done in this case.
WHEREFORE, the petition is granted. The decision of the respondent court is REVERSED and that
of the trial court is reinstated, without any pronouncement as to costs. It is so ordered.
Teehankee, C.J., Yap, Narvasa, Melencio-Herrera Gutierrez, Jr., Paras, Gancayco, Padilla, Bidin,
Sarmiento and Cortes, JJ., concur.
Fernan and Feliciano, JJ., are on leave.

CASE #83
CLARITA P. HERMOSO and VICTORIA P. HERMOSO, petitioners,
vs. COURT OF APPEALS, SPOUSES CEFERINO C. PALAGANAS,
AZUCENA R. PALAGANAS and DR. AMANDA C.
PALAGANAS, respondents.
D E C I S I O N
MARTINEZ, J .:
This petition seeks the review of the decision dated July 24, 1992
[1]
of the Court of appeals
which reversed the decision dated February 15, 1990 of the Regional Trial Court of Bulacan in
an action for legal redemption instituted by the petitioners against the private respondents. The
motion for reconsideration of petitioners was likewise denied by the respondent court in its
resolution dated December 22, 1992.
[2]

There is not much dispute about the background facts, thus we quote with favor the factual
antecedents as summarized by the Court of Appeals, to wit:
Emilio Hermoso, now dceased, and plaintiff Clarita Hermoso were husband and wife
whose union was blessed with the following children: Rogelio, Victoria (another
plaintiff-appellee), Agustinito and Danilo Ciriaco, all surnamed Hermoso (the latter
two being third party defendants-appellees). Emilio Hermoso died on June 22, 1957,
leaving as his surviving heirs, his wife Clarita, and the four above-named
children. Among the properties left by Emilio Hermoso is an undivided one-third
portion of a parcel of land, the whole of which consisting of 7,842 square meters,
more or less, is now covered by OCT No. 0-1054 (M) issued in 1983, situated at
Calvario, Meycauayan, Bulacan.
The property was originally owned by Agrifina Francia and the ownership thereof
was transmitted upon her death to her three (3) children, to wit: Isidro, Consolacion,
and Emilio (herein appellees predecessor-in-interest) in the proportion of one-third
(1/3) each. Consolacion Hermoso, married to Manuel Cruz, later bought the one-third
(1/3) undivided share of her brother, Isidro Hermoso. Thus, as indicated in OCT No.
0-1054 (M), Consolacion Hermoso owns two-thirds (2/3) thereof and the remaining
one-third (1/3) is in the name of the Heirs of Emilio Hermoso [Exhibit A].
On May 29, 1974, the Heirs of Emilio Hermoso executed a duly notarized
'Agreement Exh. 1-A], the pertinent portion of which reads, as follows:
2. That it is hereby agreed that for the convenience of all parties the following shall
be observed in the partition of the above-mentioned properties: that the share of
CLARITA P. CARIN shall in all cases be adjacent to the properties adjudicated to
CONSOLACION HERMOSO CRUZ; then following by the shares pertaining to
DANILO CIRIACO HERMOSO, VICTORINA P. HERMOSO, ROGELIO P.
HERMOSO and AGUSTINITO P. HERMOSO,
respectively, except in the partition of the parcel of land situated in Calvario, Mey
cauayan, Bulacan, which is the subject of the DEED OF EXCHANGE above-
mentioned, in which case the share pertaining to CLARI TA P. CARI N shall be
adjacent to the stonewall that segregates the share of CONSOLACI ON HERMOSO
CRUZ, then followed by the shares pertaining to ROGELIO P. HERMOSO,
DANI LO CI RI ANO HERMOSO, VI CTORI NA P. HERMOSO, and AGUSTINI TO
P. HERMOSO, at the extreme end, respectively [Emphasis and underscoring Ours]
Sometime in July, 1979, third party defendants-appellees Agustinito hermoso and
Danilo Hermoso (Hermoso brothers for brevity) offered to sell their respective
shares to the land in dispute to one Benjamin Palaganas, brother of appellees Ceferino
Palaganas and Amanda Palaganas, who are old family acquaintances of the Hermosos
since the lifetime of their late landlord, Don Marcos Hermoso.
Upon being shown a copy of the duly notarized Agreement [Exh. 1-A], Ben
Palaganas, together with the Hermoso brothers, approached Atty. Ireneo E. Guardiano
concerning the preparation of a contract of sale, with the latter noting that the shares
offered for sale are separated by the share of Victoria Hermoso; hence, it would be
more feasible for Danilo Ciriaco to execute a deed of exchange with his sister,
Victoria [TSN, 29 October 1986, p. 8]. A Deed if Exchange [Exh. 11] was
thereafter drawn and signed by Danilo Ciriaco Hermoso but the same was not
however signed by Victoria Hermoso.
Nonetheless, this transaction did no materialize for the reasons that Clarita Carin
subsequently offered to redeem the shares sold by her children by returning the
amount already received by her son, Agustinito. By reason of their good relations and
it appearing that the sale was made without the knowledge and consent of Clarita
Carin, Ben Palaganas accepted the offer without suspiration.
In the month of October of the same year, Agustinito, then reviewing for the Bar
Examinations, and Danilo, in dire need of money, for the second time offered to sell
their respective shares to Ben Palaganas who acted for and in behalf of his brother,
Dr. Ceferino Palaganas, and sister, Dr. Amanda Palaganas (Palaganases, for brevity),
this time giving assurance that their mother (Clarita Carin) had already consented to
the transaction and that they could convince their sister, Victoria, to finally agree to an
exchange of shares with Danilo. Elated with this development, the Palaganases even
offered a higher price [P500,000.00] for the sale.
Thus, with these assurances, the parties executed on January 30, 1980 a duly
notarized Deed of Absolute Sale Over Two Undivided Shares To A Parcel of Land
(Annex B,' Plaintiffs-Appellees; Exhibit 2, Appellants) with the Hermoso brothers
receiving P300,000.00 upon the execution of the contract, P100,000.00 to be paid
upon the eviction of the squatters/tenants thereon, and the balance of P100,000.00 to
be paid upon the issuance of title in the name of the vendees.
Upon the commencement of the present action (October 8, 1984), the Hermoso
brothers have already received a total amount of P401,500.00 with the last condition--
-transfer of title---not having been yet fulfilled.
Contrary to the assurances made by the Hermoso brothers, plaintiffs-appellees
allegedly came to have known of the transation only sometime between May, 1983
and January, 1984 (Complaint, par. 8 in relation to TSN, 21 Nov. 1984, p. 32, Victoria
Hermoso). Thereafter, plaintiffs-appellees allegedly made arrangements to negotiate
for the redemption of the shares sold by the Hermoso brothers. This time, however,
the Palaganases were not so open to the idea of the offered repurchase for the value of
the property in dispute had considerably increased and that they have already set
foothold on said property by reason of their investments and the plans made for its
development. Furthermore, they relied upon the assurances made by the Hermoso
brothers that the transaction is known to Clarita Carin and Victoria Hermoso.
[3]

Consequently, considering the adamant refusal of the private respondents to resell the
disputed lots, petitioners on October 8, 1984 filed a complaint for legal redemption before the
Regional Trial Court of Bulacan, Branch 7, Malolos, with prayer for the issuance of a writ of
preliminary injunction to enjoin defendants third-party plaintiffs from proceeding with the
construction of the building thereon. The trial court issued the writ prayed for. After trial on the
merits, the court a quo issued its decision dated February 15, 1990, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants and third-party defendants as follows:
1. Ordering the defendants to allow the redemption of the shares sold to them by their vendors,
the third party defendants herein, and upon payment of the amount of Four Hundred One
Thousand Five Hundred (P401,500.00) Pesos, to surrender the possession of the portion of
the land covered by OCT No.0-1054 (N), together with whatever improvement they have
constructed on the property, to the plaintiffs;
2. Ordering the defendants to pay the plaintiffs, the amount of Twenty Thousand (P20,000.00)
Pesos by way of actual damages to cover the transportation expenses of the plaintiffs from
Cebu to Malolos and back and also attorneys fees in the amount of Fifteen Thousand
(P15,000.00) Pesos which plaintiffs have paid or are bound to pay their counsel;
3. Ordering the third party defendants to pay the defendants, damages by way of legal interest
in the amount computed at the rate of twelve (12%) per cent of the P401,500.00 which shall
commence from the date of the filing of the complaint on October 8, 1984 until the said
amount of P401,500.00 shall have been completely paid to the defendants by the said
plaintiffs.
Costs against the defendants.
[4]

On appeal, the issues were simplified by the respondent court as follows:
1. Whether or not the property in dispute is still co-owned or has actually been partitioned
thereby terminating the co-ownership;
2. If otherwise, whether or not the plaintiffs-appellees could still exercise the rights of
redemption.
The respondent court disagreed with the findings of the trial court and was of the view that
laws and jurisprudence favor the appellants, hence we reverse. The dispositive portion of the
appellate courts decision reads:
WHEREFORE, premises considered, the judgment appealed from is hereby
REVERSED, and a new one is entered dismissing the Complaint and ordering Third-
Party Defendants to pay on the Third Party Complaint, the Third Party Plaintiffs the
amount of P10,000.00 by way of attorneys fees.
The parties shall bear their respective costs.
[5]

In this petition for review, Clarita P. Hermoso, now Clarita Carin after her remarriage, and
her daughter Victoria P. Hermoso, raise the following grounds:
I.
THE RESPONDENT COURT ERRED IN NOT AGREEING WITH THE
HOLDING OF THE TRIAL COURT THAT THE AGREEMENT, MARKED AS
EXHIBIT 1-A, IS NOT A DEED OF PARTITION BUT IS A MERE SCHEME AS
TO HOW TO PARTITION THE PROPERTY IN QUESTION WHICH IS
TEMPORARY IN CHARACTER AND SUBJECT TO CHANGE AT ANY TIME
AND IS NULL AND VOID AS FAR AS PETITIONER VICTORIA P. HERMOSO
IS CONCERNED BECAUSE SHE WAS STILL A MINOR WHEN SAID
AGREEMENT WAS EXECUTED AND HER CO-PETITIONER CLARITA P.
HERMOSO HAD NO AUTHORITY TO SIGN SAID AGREEMENT IN HER
BEHALF;
II.
THE RESPONDENT COURT ERRD IN NOT HOLDING THAT THE PROPERTY
IN QUESTION WAS STILL UNDIVIDED AND WAS STILL UNDER CO-
OWNERSHIP DESPITE THE EXECUTION OF THE AGREEMENT MARKED AS
EXHIBIT 1-A BECAUSE CONSOLACION HERMOSO, CO-OWNER OF 2/3 OF
SAID PROPERTY, WAS NOT A PARTY TO SAID AGREEMENT;
III.
THE RESPONDENT COURT ERRED IN COUNTING THE DATE WHEN THE RIGHT OF
REDEMPTION SHOULD BE EXERCISED FROM THE TIME THE PETITIONERS MADE A
FORMAL OFFER TO REDEEM INSTEAD OF FROM THE TIME THE PETITIONERS
STARTED NEGOTIATING FOR THE REDEMPTION OF THE TWO UNDIVIDED
SHARES AFTER THEY WERE CERTAIN THAT SAID UNDIVIDED SHARES WERE
SOLD TO THE PRIVATE RESPONDENTS.
[6]

The trial and appellate courts disagreed as to the interpretation to be given to the agreements
and contracts and to the notice of sale involved in this case.
In the trial court, petitioners posited the theory that the disputed land is still under co-
ownership. On the basis of the same documentary evidence, the private respondents contend that
what the two brothers sold was already definite since partition had already been effected.
The first two (2) grounds for this petition refer to the nature of the land sold to the
respondents. The question is: Was it still under co-ownership or had it already been partitioned
and divided among the co-owners?
In finding that the parcel of land covered and described in OCT No. 0-1054 (M) had not
been divided or partitioned among the co-owners, the trial court said:
In fact, there is no division yet between the spouses, Manuel Cruz and Consolacion
Hermoso Cruz on one hand and the Heirs of Emilio Hermoso on the other. This fact
of co-ownership is easily discernible in the title itself which has not yet been
cancelled, and therefore still susbsisting.
Therefore, it is ordered by the Court that said land be registered in accordance with
the provisions of the Land Registration Act, as amended, in the name of said spouses,
Manuel C. Cruz and Consolacion Hermoso; and heirs of Emilio Hermoso, namely:
Clarita Pajo, Victoria Hermoso, Rogelio Hermoso, Agustinito Hermoso, and Danilo
Hermoso as their exclusive property, --'
The documents relating to the shares of the third party defendants readily show this
fact of co-ownership. Thus, in the untitled instrument introduced by the defendants
marked as Exhibit 3 which is an agreement to sell purportedly bearing the date
October 10, 1979 signed by the Hermoso brothers, Agustinito and Danilo and stating
how the P500,000.00 consideration of the sale shall be paid, what was referred to have
been sold were the shares, rights and interests over the land of the said vendors. This
document states, among others:
That we have agreed to sell, transfer and convey unto spouses Dr. Ceferino C.
Palaganas and Azucena R. Palaganas, both of legal age, Filipinos and with residence
and postal address at Baga, Meycauayan, Bulacan all our shares, rights and interests
over the above-desribed parcel of land free from all liens and encumbrances under the
following terms and conditions x x x Cf.Exhibit 3, def., underlining supplied.
The document signed by the two brothers on January 30, 1980 was obviously
prepared at the instance of Ben Palaganas. Acknowledged before Notary Public
Irineo Guardiano whose advice was sought by Ben Palaganas, its title is immediately
revealing, as it is titled Deed of Absolute Sale Over Two Undivided Shares to a
Parcel of Land Cf. Exhibit C, pl., Exhibit 2, def., underlining supplied. It is also
stated in this document that what was sold by the Hermoso brothers were shares,
rights and interests over the above-described parcel of land (which obviously refers
to the land in question).
It is significant to note that in the deed of sale marked as Exhibit 2, defendant, the
area of the shares of the vendors, the Hermoso brothers were not specified. What was
mentioned on the matter of area is that of the whole parcel which is 7,829 square
meters. If there was a partition or separation of the portions of the whole land assigned to
the owners named in the title, the parcels conveyed could have been described with their
specified metes and bounds.
There was no subdivision plan presented by the defendants. In fact, there was none as yet
executed by a duly licensed geodetic engineer on that registered land. Ben Palaganas who was
then dealing with the Hermoso brothers, the named vendors in the document, is a highly
educated man. As he had testified, he is an accountant by profession and he had served as head
of a department of the Central Bank until his retirement from the government. In the opinion of
this court, he knew all along that what he or his principals were buying at the time were the
undivided shares, participation and interests of the vendors to the land. His claim later in court
that the shares of the vendors could already be identified and separated is difficult to believe. If
his claim were true, Ben Palaganas with his experience and educational background could have
easily managed to executed the proper document as a basis of an ultimate issuance of title in the
name of the vendees. The document which he relied upon which is Exhibit 1-A as the basis for
his conclusion that the Hermoso brothers were selling definite parcels of land is belied by the
recitals of the documents he himself introduced to the court, viz. Exhibits 2 and 3. The
document, Exhibit 1-A, if at all, could at best be considered as a scheme how the land could be
divided in the future among the heirs of Emilio Hermoso. Temporary in nature and subject to
the conformity of the 2 sets of co-owners to the land, the spouses Manuel Cruz and Consolacion
Hermoso Cruz had not participated in its execution. As it was, there was no sound basis for Ben
Palaganas or his principals to have assumed that Exhibit 1-A could be enforced against the
spouses Manuel Cruz and Consolacion Cruz and other third persons.
[7]

In overturning the aforequoted opinion of the trial court, the respondent court said that:
In ascertaining whether the community still subsists, or that it had already been
extinguished by partition among the co-owners, it is not a mandatory requirement that
the property co-owned had been determined with unmistakable definiteness and
clarity, as where the property has been given a technical description after proper
geodetic survey; it is only required that the shares are properly determinable and the
proper arrangements thereof identifiable, as when nothing is left for the co-owners to
do but to actually occupy the portion pertaining to their share without any dispute
arising over the extent of their respective shares and the respective position of the
parcels they are entitled to occupy.
Although OCT No. 0-1054 (M) reveals on its face the existence of co-ownership
between Consolacion Hermoso-Cruz and the Heirs of Emilio Hermoso, the fact that
the shares are separated by a stonewall (Cf. Exh. 1-A) unmistakably reveals the
determinate or determinable character of the property described under said certificate
of title.
The court a quo subscribed to the theory that Exhibit 1-A is merely a scheme [of] how the land
could be divided in the future among the heirs of Emilio Hermoso. (g.v., Decision, p. 5) Be that
as it may, there is nothing more left to be done but the actual subdivision of the property by a
duly licensed geodetic engineer prior to the actual titling of their respective shares. The
corresponding shares of each of the heirs of Emilio Hermoso is not in dispute---one fifth each;
and their proper respective arrangements, one after another, had likewise been included under
Exhibit 1-A.
[8]

We agree with the trial courts findings that the records show co-ownership of undivided
property instead of definite portions of land having been assigned and separately owned by each
of the co-owners.
It should be stressed that it was Ben Palaganas, the vendee, who prepared the Deed of
Sale. The private respondents never had a hand in the preparation of the document, even if the
purchase was made in their behalf. The document states that it is a Deed of Absolute Sale Over
Two Undivided Shares to a Parcel of Land.
[9]
Ben Palaganas who prepared the deed of sale,
knew and intended that the transaction was over Two Undivided Shares of land. After all, as
observed by the trial court, Ben Palaganas was an accountant and was, prior to retirement from
government service, the head of a department in the Central Bank. Again, we quote the trial
court on this point, thus:
"In the opinion of this court, he knew all along that what he or his principals were
buying at the time were the undivided shares, participation and interests of the
vendors to the land. His claim later in court that the shares of the vendors could
already be identified and segregated is difficult to believe. If his claim were true, Ben
Palaganas with his experience and educational background could have easily managed
to execute the proper document as a basis of an ultimate issuance of title in the name
of the vendees. The document which he relied upon which is Exhibit 1-A as the basis
for his conclusion that the Hermoso brothers were selling definite parcels of land is
belied by the recitals of the documents he himself introduced to the court, viz.,
Exhibits 2 and 3.
[10]

Ben Palaganas understanding and interpretation must necessarily prevail over that of the
private respondents who were not present during the transaction and whose claims are colored
by self-interest. In fact, the same document refers to the brothers as co-owners of undivided
shares in the disputed property.
[11]

It is plain from the deed of sale of two undivided shares that the absence of a clear partition
among the heirs of Emilio Hermoso complemented the similar absence of a division of properties
between the heirs and their aunt Consolacion Hermoso Cruz.. Two of the heirs were selling
shares of undivided property which in turn was also an undivided portion of a much larger
undivided inheritance.
The alleged documents of exchange presented by the respondents to show a partition with
Consolacion would, to our mind, fall under the same category as the 1994 Agreement among
the heirs of Emilio Hermoso, as we shall hereinafter discuss.
The allegation about Consolacion having segregated and having given her 2/3 share of the
inheritance viz-a-viz the 1/3 share of the heirs of Emilio Hermoso is belied by the letter sent by
husband Manuel Cruz in August 1981 to the Register of Deeds of Bulacan which intimated his
desire to buy the property of his-co-owners in his capacity as such.
[12]
The spouses Cruz wanted
to buy properties which they heard had been alienated by their co-owners.
The absence of a deed of partition between Consolacion on the one hand, and the heirs of
Emilio on the other, is bolstered by the fact that the registered ownership is that of the original
owner over the entire property.
The deed of sale executed by the Hermoso brothers on January 30, 1980, referred to
undivided shares. Prior to the execution of this document, the Hermoso brothers were parties to
a non-notarized certification dated October 10, 1979,
[13]
acknowledging the receipt of P25,000.00
from the respondents, and wherein they were described as co-owners with the petitioners.
[14]

The second paragraph of the certification states that We have agreed to sell, transfer and
convey unto the spouses Dr. Ceferino C. Palaganas and Azucena R. Palaganas x x x all our
shares, rights and interests over the above-described parcel of land x x x.
[15]
Note that the
vendors who have described themselves as co-owners agreed merely to sell their shares, rights
and interests over the land. They were not selling but were agreeing to sell. They did not
sell a specific portion of land but sold shares, rights and interests. It is to be further noted that
as late as 1979 and 1980, Ben Palaganas and the Hermoso brothers, the parties to the deeds of
sale, were in complete agreement that there was co-ownership.
The basis for the opinion of the respondent court that the co-ownership had been terminated
and the property was subdivided is the document dated May 24, 1974 denominated
Agreement, executed by the heirs of Emilio Hermoso. The pertinent portion of the agreement,
which has been earlier cited and for emphasis, is reproduced hereunder runs as follows:
2. That it is hereby agreed that for the convenience of all parties the following shall
be observed in the partition of the above-mentioned properties: that the share of
CLARITA P. CARIN shall in all cases be adjacent to the properties adjudicated to
CONSOLACION HERMOSO CRUZ; then followed by the shares pertaining to
DANILO CIRIACO HERMOSO, VICTORINA P. HERMOSO, ROGELIO P.
HERMOSO and AGUSTINITO P. HERMOSO,
respectively, except in the partition of the parcel of
land situated in Calvario, Meycauayan, Bulacan, which is the subject of the DEED OF
EXCHANGE above-mentioned, in which case the share pertaining to CLARITA P.
CARIN shall be adjacent to the stonewall that segregates the share of
CONSOLACION HERMOSO CRUZ, then followed by the shares pertaining to
ROGELIO P. HERMOSO, DANILO CIRIACO HERMOSO, VICTORINIA P.
HERMOSO, and AGUSTINITO P. HERMOSO, at the extreme end, respectively.
We agree with the trial court that this Agreement was merely a scheme as to how the land
would be subdivided in the future among the heirs. The owner of two-thirds (2/3) of the
property, Consolacion Hermoso, was not a party to the agreement. As a majority owner of the
undivided property, she should have demanded and insisted on getting the particular portions
which the respondent court ruled had already been segregated in favor of the two vendors-
brothers. The agreement among the heirs of Emilio Hermoso as to shares following one another
in a specific order cannot be binding on the co-owner who owns 2/3 of the entire parcel but who
was not a signatory or party to the document.
The reference to a stonewall separating the shares of Consolacion Hermoso Cruz from the
share of Clarita Carin and the use thereof as reference point should not be taken to mean that
thereby a partition was effected among the heirs. The statement of the heirs of Emilio Hermoso
that the 2/3 portion of the co-owner in relation to the heirs of Emilio shall be adjacent to that of
Clarita Carin followed by the shares of Rogelio, Danilo, Victorina and Agustinito is a statement
of a desire on how the land should be subdivided. It cannot be said that it is a kind of division or
partition of property which clearly terminates co-ownership. The statement of Agustinito of an
assignment of shares cited by the respondent court was more of an expression on how a future
partition should be effected. In fact, the word positions was used in addition to shares.
The documents evidencing the deed of sale more authoritative in determining the existence
of co-ownership. The May 29, 1974 Agreement could not have been a partition or division of
co-owned properties because five and six years later, as can be gleaned from the October 10,
1979 certification and from the January 13, 1980 Deed of Sale Over Two Undivided Shares To
A Parcel of Land, both Ben Palaganas who prepared the documents as vendee, and the brothers
Agustinito and Danilo who signed as vendors, were definite about the property being under co-
ownership. As late as August, 1981, Manuel Cruz, the husband of Consolacion, described the
parties as co-owners.
The private respondents, to buttress their stance that the standards of concrete
determinability and identifiability have been met in the case at bar, cited the case of De la Cruz
v. Cruz.
[16]
We have read the case, regrettably the standards are not present. In De la Cruz, the
northern half of the property was assigned to the plaintiff and the southern half to the
defendant. In which case, such a division is concrete and definite, which is not so in this
case. Here, the majority co-owner, Consolocion Hermoso, was not even consulted and the
mention of names following one another was apparently only a statement of who are the co-
owners-heirs. It was not a formal division or partition of the bigger property still to be validly
partitioned with Consolacion, owner of two-thirds (2/3) and later, among the co-heirs who
owned the remaining one-third (1/3). It is only a statement of a future action to be taken. We,
therefore, rule that the lot in question is still undivided property owned in common by the co-
heirs.
The second issue herein refers to the timeliness of exercising the right of legal
redemption. The petitioners question the respondent courts ruling that the right had already
prescribed when they exercised legal redemption.
The law apropos to this case is Article 1623 of the Civil Code, which provides:
Art. 1623. The right of legal pre-emption or redemption shall not be exercised except
within thirty days from the notice in writing by the prospective vendor, or by the
vendor, as the case may be. The deed of sale shall not be recorded in the Registry of
Property, unless accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
An identical provision governing co-heirs is found in Article 1088 of the Civil Code, quoted
hereunder:
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the
partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by
reimbursing him for the price of the sale, provided they do so within the period of one
month from the time they were notified in writing of the sale by the vendor.
It is to be noted that Article 1623 stresses the need for notice in writing in three other species
of legal redemption namely: (1) redemption in a case where the share of all the other co-owners
or any of them are sold to a third person;
[17]
(2) redemption by owners of adjoining lands when a
piece of rural land not exceeding one hectare in area is alienated;
[18]
and (3) redemption by
owners of adjoining lands in the sale of a piece of an urban land so small and so situated that the
portion thereof cannot be used for any practical purpose within a reasonable time, having been
bought merely for speculation.
[19]

In all the above-cited provisions of law, the interpretation thereof always tilts in favor of the
redemptioner and against the vendee. The purpose is to reduce the number of participants until
the community is terminated, being a hindrance to the development and better administration of
the property.
[20]
Thus, we agree with the trial court when it said:
The purpose of Article 1067 (of the old Civil Code, now Article 1088 of the present
Civil Code) is to keep strangers to the family out of a joint ownership, if, as is often
the case, the presence of outsiders be undesirable and the other heir or heirs be willing
and in a position to repurchase the share sold (De Jesus vs. Manlapus, 81 Phil.
144). While there should no question that an heir may dispose his right before
partition (Rivero vs. Serrano (CA) 46 O.G. 642; Wenceslao vs. Calimon, 46 Phil. 906;
Hernaez vs. Hernaez, 32 Phil. 214), a co-heir would have had to pay only the price for
which the vendee acquired it (Hernaez vs. Hernaez, Ibid.).
[21]

It is a one-way street. It is always in favor of the redemptioner since he can compel the
vendee to sell to him but he cannot be compelled by the vendee to buy the alienated property.
In this case, the land has not been validly partitioned between Consolacion Hermoso, who
owns 2/3 and the heirs of Emilio Hermoso who own 1/3 regardless of the sentiments of
Consolacion on the land in dispute may later have been. There has been no subsequent
distribution among the co-heirs of their specific shares. But even granting that the heirs divided
the properties owned in common in the May 29, 1974 Agreement, the right of legal redemption
under Article 1620 of the Code, would still subsist in their capacity as co-owners. For, if a co-
owner has offered to redeem the land within the period fixed by law, he has complied with the
law. He may bring the action to enforce the redemption after every offer has been rejected. This
is exactly the situation in this case.
The respondent court found that the petitioners already had notice of the sale in January
1984. Considering that the letter,
[22]
coursed through Atty. Sandico, offering to redeem the
property was made only in September 1984, the appellate court was of the view that the action to
enforce redemption had prescribed. A perusal of the record, however, shows that after Ben
Palaganas had confirmed the transaction, the petitioners confronted the two brothers who were
compelled to admit they have sold their shares. The vendor-brothers never took the initiative of
informing their co-heirs in writing that they have alienated their shares. As found by the trial
court, the petitioners immediately started negotiations with Ben Palaganas to redeem the
alienated share. At this time, the payment for the shares had not yet been completed neither by
Ben Palaganas nor by the private respondents.
The observation of the trial court on this issue is enlightening, thus:
It is evident from the evidence in the record that the vendors, i.e., the Hermoso
brothers, Agustinito and Danilo had not notified in writing or even verbally their co-
heirs which include the plaintiffs herein before or during the execution of the sale of
their shares to Ben Palaganas or the defendants. The transaction of these two brothers
had with Ben Palaganas was kept out of the knowledge of their mother and sister, the
plaintiffs herein. Their need for funds must have been urgent and it was obvious that
their mother if advised what they intended to do with the land could have objected to
it. This reaction from the plaintiffs was easily expected because when Agustinito
Hermoso sold his share to Ben Palaganas in July 1979, the same was aborted by the
plaintiff, Clarita Carin. On this regard, Agustinito Hermoso, one of the two third
party defendants testified:
Q - Did you inform your mother and sister about the sale of these properties?
A - During that time?
Q - Yes.
A - I did not.
x x x x x x x x x
ATTY. GARCIA:
Q - Do you know when, for the first time, did your mother and your sister came to know of this
sale?
A - Personally, I do not know when they came upon that knowledge.
(TSN, 5-22-86, pp. 10-11)
ATTY. HERMOSO:
Q - Did you ever consult your mother or your sister of your desire to sell the property?
A - No, sir.
Q - Why not?
A - Because I personally believe that what we were selling then were but our right to the said
property.
Q - How about your brother Danilo Hermoso, did he inform your mother and sister about the sale of
the property?
x x x x x x x x x
A - Danilo Hermoso, my brother, told me that he did not inform our mother and our sister about his
desire to sell his share on the property.
(TSN, 5-21-87, pp. 12-13 &15)
ATTY. OSORIO:
Q - How about the second sale which included the share of your brother?
A - No, we did not inform our mother regarding our desire to sell our respective properties, sir.
Article 1088 of the Civil Code is applicable in the instant case. But whether it is
under this article 1623 of same Code, the period of 30 days has not began to run.
When the plaintiffs had become certain after Ben Palaganas had confirmed the transaction that
there was such a sale covering the shares of the third party defendants (tsn, 6-19-86, pp. 20-21)
sometime in 1984, the vendors had to admit to the herein plaintiffs the fact of sale. Plaintiffs
immediately started negotiations with Ben Palaganas to redeem the shares sold by the
vendors. Ben Palaganas or the defendants after all, had not completely paid the whole
consideration of the sale by that time. Ben Palaganas did not want to give money anymore to the
vendors as the amounts already paid ad amounted to P401,500.00 (see footnote of Ben Palaganas
in Exhibit 10). The several payments made to the vendors are evidenced by Exhibits 3, 4, 5, 6, 7,
8, 9 and 10. Ben Palaganas acting for himself or for the defendants refused the offers of the
plaintiffs to redeem the land, claiming that the rights to the land of his principals to the vendors
shares to the land was already established. The formal demand to redeem was sent by the
plaintiffs through counsel to the defendants (Exhibit B, p. 203, record). Still the defendants did
not respondent accordingly. They had instead constructed a building within the land covered by
the title and in a place therein, relying on the temporary scheme of partition marked as Exhibit 1-
a. To the plaintiffs, there was no other recourse except to go to court. And they did by filing this
complaint on October 4, 1984 with the court.
[23]

Ben Palaganas confirmed the offer to redeem. When questioned why the private
respondents agreed to the return of the sold shares in 1979 but refused to do so in 1980, this
witness waxed sentimental and gave a lengthy narration of the debt of gratitude his family owed
to the Hermoso family. Ben Palaganas related that the patriarch Marcos Hermoso allowed the
Palaganas clan to build their house on his land and to stay there for 27 years without paying
rent. And, when three sons and one daughter of the Palaganases were in medical school, and the
family ran out of funds, Marcos Hermoso extended financial assistance without interest and
payable only when the Palaganases could afford to pay. Out of respect for the Hermoso family,
Ben Palaganas related, the private respondents agreed to the cancellation of the 1979
sale. However, in 1984 when the offer to redeem the share sold in 1980 was made, the
Palaganas clan no longer wanted to resell the property. Considering that over the intervening
years, they had paid on a piecemeal basis the amount of P400,000.00 to the two brothers and out
of self-respect refused to agree to the redemption. But since the property purchased had
already increased in value not only self-respect but apparently self-interest had entered the
picture.
It was error for the respondent court to rule that the right of the petitioner to redeem the
alienated share had long proscribed. This finding fails to take into account that the period of
legal redemption is not a prescriptive period. It is a condition precedent to the exercise of the
right of redemption. It is a period set by law to restrict the right of the person exercising the right
of legal redemption.
[24]
It is not one of prescription.
The written notice required by Article 1623 of the Civil Code was enacted to remove all
doubts and uncertainty that the alienation may not be definite.
[25]
The co-owners must know with
certainty the circumstances of the sale by his co-owners and the terms and the validity of the
alienation. Only after said knowledge is the co-owner required to exercise the right of
redemption given to him by law.
While the law requires that the notice must be in writing, it does not state any particular
form thereof, so long as the reasons for a written notice are present. The records of the case
show that the sale of the brothers share was deliberately hidden from the petitioners. For
sometime after the sale, the petitioners were ignorant about its execution. When they somehow
heard rumors about it, they had to take one step after another to find out if the information was
true.
It is to be noted that in the case at bar, not only were the petitioners intentionally kept in the
dark for several years but even after knowledge of the act of the two brothers, they still had
difficulty in ascertaining and confirming its veracity. Far from giving the notice required by law
or giving information on the history and details of the sale, Agustinito and Danilo gave the
petitioners the run-around until the brothers were practically forced to admit it and the petitioners
immediately went to see Ben Palaganas. In their dialogue with Ben Palaganas, petitioners
offered to redeem the property, but this time, unlike the first, the offer was rejected.
When the petitioners offered to redeem within the period fixed by law, they complied with
the condition precedent to the exercise of their right. The filing of an action to enforce the
redemption is not the determining point in time. in Conejero, supra, this Court ruled that a
consignation of the tendered price is not necessary as long as a valid tender is
present.
[26]
However, the offer to redeem is indispensable. Considering the indignation and the
wrath of the petitioners directed at the two brother for their acts of alienating an undivided
portion of the property, despite the earlier redemption of the sale sold in 1979, there can be no
question about the willingness and capability of the petitioners to buy back the shares sold in
1980.
In applying Article 1623 of the Civil Code on the exercise of legal redemption to certain
facts, the interpretation must be in favor of justice and equity.
[27]
This Court explained x x
x. We test a law by its result. A law should not be interpreted so as not to cause an injustice x x
x. There are laws which are generally valid but may seem arbitrary when applied in a particular
case because of its peculiar circumstances. We are not bound to apply them in slavish obedience
to their language.
Whether it is the vendees who will prevail as in the Alonzo doctrine, or the redemptioners as
in this case, the righting of justice is the key to the resolution of the issues.
The standards and conditions of legal redemption provided under Article 1623 of the Civil
Code have not been met in this petition. Furthermore, there is the fact that justice and equity, as
the law provides, are also on the side of the petitioners. As we said, the righting of an injustice is
the key to the resolution of this case and thus would be the end result of our decision.
The two brothers, Agustinito and Danilo Hermoso, were still students when they sold their
shares in their inheritance. In 1979, Agustinito was already a graduating student of
law. According to the trial court, it was sometime in October of that year, he and his younger
brother Danilo separately needed cash which they could not easily secure from their mother,
Clarita Carin, one of the plaintiffs herein.
[28]
However, if they were strapped of cash,
considering that their allowances were insufficient for their needs, they could have pleaded with
their mother for additional funds instead of selling the still undivided property without her
knowledge and against her known will. They knew that their mother was against the very idea of
selling a portion of the undivided property considering that Consolacion Hermoso cancelled the
prior sale made by them in July 1979 by redeeming the property. From the records, one gets the
impression that the two brothers, Agustinito and Danilo, were irresponsible and self centered,
failing to consider the wishes of their mother.
Ben Palaganas, who represented the respondents in a transaction, admitted a debt of
gratitude to the Hermoso family. Yet, apparently he took advantage of the situation. Through
several years he doled out funds in installments to the two brothers in partial payment of the
disputed property until the indebtedness had reached an amount that Agustinito and Danilo had
no other recourse but to sell their inheritance and practically compelled them to execute the deed
of sale in dispute.
Again, we reiterate the salient fact that Clarita Carin, their mother, and Victoria Hermoso,
their sister, were kept in the dark about the sale. Considering the factual background of this case,
the honorable and expected step for the Palaganas was to inform the petitioners about the action
taken by Agustinito and Danilo. Instead, as the record reveals the parties to the sale concealed
the transaction from petitioners for four (4) years. It was only after hearing rumors about the sale
when petitioners started to investigate and search for evidence to confirm their hearsay
knowledge about the transaction. Even then, the two brother and the Palaganas gave them a hard
time.
The Palaganas clan knew all along the strong feelings of the petitioners against the
alienation of share in the still undivided property. This was their second attempt to buy the
property. As a matter of fact, they knew that in 1979 when the land was first sold, the petitioner
immediately took steps to cancel the sale upon discovery thereof. In 1980, the private
respondents and Ben Palaganas still did what the petitioners vigorously opposed and did not
want to happen. They also hid the sale from the petitioners until confronted with facts that they
could no longer hide or deny. The impressions of the trial judge is worth quoting hereunder thus:
It is obvious that the acts of Ben Palaganas or his principals would be considered as
done in bad faith. Ben Palaganas should not be allowed to say that he had relied
merely on the impressions given by the vendors, the Hermoso brothers. Aside from
what was obvious in the documents executed by the Hermoso brothers, he should
have inquired or verified said impressions made by the vendors from the plaintiffs or
any of the co-owners to the property. The evidence in the record shows that it was
their intense desire to own a property in the place where the land is located because of
the business potentials thereat stated herein above. They did not exercise the
diligence of a good father of a family because they did not want to, what with their
experience with the first transaction affecting the share of the third party defendant,
Agustinito Hermoso which took place only in July, 1979 a few months earlier to the
transaction in question.
[29]

There can be no doubt that the Palaganas clan were in bad faith at the time they bought the
disputed property from the Hermoso brothers. We cannot thus close our eyes to the injustice
which would befall the petitioners considering that this is not the first time that they have
expressed their desire to redeem the property sold by the Hermoso brothers. Under the
circumstances, it is just and equitable to rule in favor of the exercise of legal redemption.
WHEREFORE, the assailed decision of the Court of Appeals should be, as it is hereby,
REVERSED and SET ASIDE. The decision of the Regional Trial Court dated February 15,
1990 is hereby REINSTATED.
SO ORDERED.

CASE #84
G.R. No. L-30150 August 31, 1971
NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, petitioner,
vs.
HONORABLE WALFRIDO DE LOS ANGELES, in his capacity as Judge of the Court of First
Instance of Rizal, Branch IV (Quezon City), THE SPOUSES BASILISA ROQUE and
FRANCISCO BAUTISTA; LEONILA SANCHEZ and BENJAMIN N. BONUS; AURORA SANCHEZ
and BONIFACIO EUGENIO; CARMELITA SANCHEZ and FRANCISCO IGNACIO; BIENVENIDO
SANCHEZ, LEONARDO SANCHEZ, ROQUE VILLAGE SUBDIVISION and THE REGISTER OF
DEEDS OF QUEZON City, respondents.
Carreon, Taada and Taada for petitioner.
Eliseo M. Tenza and Nestor Fernandez, for private respondents.

CASTRO, J .:
By the instant petition for certiorari and mandamus with preliminary injunction, the petitioner National
Investment and Development Corporation (hereinafter referred to as the NIDC) impugns three
orders issued by the respondent Court of First Instance of Rizal in civil case Q-8407, namely, (1) an
order dated May 28, 1968 dismissing the appeal of the NIDC from that court's order dated March 31,
1967 which directed the cancellation of the annotation, on several certificates of title involved in the
said case, of the assignment of mortgage rights made by the Philippine Commercial and Industrial
Bank (hereinafter referred to as the PCIB), a defendant in the said civil case, in favor of the NIDC,
the respondent Judge stating that since the NIDC had not been properly substituted for PCIB and
latter had failed to perfect an appeal from the order of March 31, 1967, therefore, the appeal which
was taken by the NIDC was ineffective, and moreover filed out of time; (2) an order dated November
9, 1968 directing the NIDC to surrender to the Register of Deeds of Quezon City the certificates of
title over parcels of land involved in the said civil case which the lower court, in a judgment rendered
therein which had already become final and executory, ordered reconveyed to the herein private
respondents (the spouses Basilisa Roque and Francisco Bautista, Leonila Sanchez and Benjamin N.
Bonus, Aurora Sanchez and Bonifacio Eugenio, Carmelita Sanchez and Francisco Ignacio,
Bienvenido Sanchez, Leonardo Sanchez and Roque Village Subdivision), plaintiffs in the case
below, subject, however, to the mortgage executed in favor of the PCIB by the defendant therein,
Araceli W. Vda. de Del Rosario; and (3) an order dated January 27, 1969 declaring as cancelled and
null and void the certificates of title involved in the mentioned civil case which were then held by the
NIDC, for failure of the latter to comply with the respondent Judge's order of November 9, 1968
requiring the NIDC to surrender the said title certificates to the Register of Deeds of Quezon City.
1

The essential facts are undisputed.
Sometime in July, 1963 the private respondents herein sold several lots registered in their names to
Araceli W. Vda. de Del Rosario who, after securing registration of the said lots in her name,
mortgaged them to the PCIB. Del Rosario failed to complete payment of the purchase price agreed
upon, for which reason, on November 17, 1964, the herein private respondents filed a complaint
against her and the PCIB for reconveyance to them of the said lots or rescission of the contracts of
sale executed thereon and the cancellation of the mortgages held by the PCIB.
On January 25, 1965 the court a quo rendered summary judgment directing the rescission of the
contracts of sale adverted to above and the reconveyance of the lots in dispute covered by TCTs
70809, 70813, 70814 and 76401 to 76472. The rescission of the purchase contracts on the lots was,
however, declared to be without prejudice to the rights of the PCIB thereon which was adjudged as
mortgaged in good faith. The lower court reserved for a separate hearing the parties' respective
claims for damages.
This decision of the trial court was appealed to this Court by del Rosario in
L-24873. The appeal was, however, dismissed on September 23, 1966 because it was taken out of
time. No appeal was interposed by the private respondents herein with respect to the portion of the
lower court's decision in favor of the PCIB.
On June 16, 1965 the PCIB foreclosed its mortgage on the lots covered by TCTs 70809, 70813 and
70814. At the auction sale, it appeared as the highest bidder; on December 2, 1965 the certificate of
sale issued in its favor was duly registered.
On May 4, 1966 the PCIB assigned its mortgage rights over the lots covered by TCTs 70809, 70813,
70814 and 76401 to 76472 to the NIDC, as well as its rights as highest bidder for the lots covered by
the first three titles mentioned. This assignment was duly inscribed and annotated at the back of the
certificates of the title concerned on May 16, 1966.
On November 16, 1966 the private respondents filed with the trial court, in the same civil case Q-
8407, a motion to cancel time encumbrance held by the NIDC appearing at the back of TCTs 76401
to 76472 and 70809. The private respondents alleged in their motion that del Rosario had negotiated
a loan with the NIDC by virtue of which the latter assumed the payment of, and did pay, del
Rosario's mortgage indebtedness to the PCIB. For this reason, and for the further reason that there
was no privity of contract between them and del Rosario and the PCIB concerning the said
indebtedness, the private respondents maintained that the mortgage lien of the PCIB over the lots
subject of their motion was thereby discharged. They further argued that the mortgage lien has been
extinguished because when it assumed payment of the indebtedness of del Rosario to the PCIB, the
NIDC was aware of the respondents' claim over the lots in question which was annotated at the back
of the certificates of title in dispute. Lastly, the respondents contended that their claim is superior to
that of the NIDC under the provisions of articles 2242(2) and 2243 of the new Civil Code. The
respondents served a copy of this motion on the NIDC.
On November 19, 1966, at the hearing on the above motion, the NIDC, through counsel, having
been notified thereof, entered its appearance. The respondent Judge at the said hearing gave the
NIDC opportunity to file its written opposition to the motion.
On December 20, 1966 the NIDC filed its written opposition, claiming that it merely stepped into the
shoes of the PCIB as an assignee and that the private respondents must respect its rights as such
assignee in the same manner that they would respect the rights of the PCIB the adjudication
regarding which, it was alleged, had already long become final when they were acquired by the
NIDC, citing article 1625 of the new Civil Code.
On January 5, 1967 the private respondents filed a rejoinder to the above opposition, furnishing the
NIDC a copy of the same.
On March 31, 1967 the respondent Judge issued an order granting the private respondents' motion
to cancel the encumbrance of the NIDC from the certificates of title in dispute, reasoning as follows:
... There is no question that the deed of assignment in question is valid between the
defendant Bank and the National Investment & Development Corporation. But this
Court, however, is not inclined to sustain incumbrancer's view; first, it should have
submitted the deed of assignment for approval of the Court knowing that the subject-
matter of the said deed of assignment is in custodia legis, and so that the consent of
all the parties plaintiffs could be taken; second, the payment of the mortgage debt of
defendant Del Rosario by the National Investment & Development Corporation to the
PCI Bank extinguished the plaintiff's obligation to respect the mortgage lien of the
PCI Bank; and third, the NIDC could ask for reimbursement of its expenses and the
amount it has paid to the PCI Bank from defendant Del Rosario. Moreover, it is more
on equity and justice as well as in law that the incumbrancer should not enforce its
rights against the plaintiffs who, in the first place; were not benefited by the mortgage
debt incurred by defendant Del Rosario.
A copy of this order was, however, not furnished the NIDC, although the PCIB was served a copy
thereof.
On April 22, 1967 the respondent Judge issued another order directing the NIDC to surrender the
certificates of title in dispute to the Register of Deeds of Quezon City in order that its order of March
31, 1967 could be implemented. The NIDC filed a motion for reconsideration on the ground that the
issuance of the order was premature for it had not yet received a copy of the court's order of March
31, 1967. The private respondents opposed the said motion.
On September 19, 1967 the NIDC received a copy of the respondent court's order dated March 31,
1967. The NIDC then filed, on October 16, 1967, or 27 days from its receipt of the said order, a
motion for reconsideration thereof. On January 8, 1968 the NIDC received another order from the
respondent court dated December 29, 1967 denying its motion for reconsideration "for lack of merit."
On January, 9 1968 the NIDC filed with the court below a notice of appeal on "purely questions of
law" from the order of March 31, 1967 and an appeal bond; on January 11, 1968 it filed its record on
appeal.
On February 7, 1968 the private respondents filed with the lower court a motion to dismiss the
appeal of the NIDC stating (a) that the appeal was filed out of time since the PCIB did not appeal
from the appealed order and the NIDC had not been properly substituted for the PCIB as a party in
the case (citing section 20, Rule 3 of the Rules of Court and Oria Hermanos vs. Gutierrez
Hermanos, 52 Phil. 156 [1928] and Feltalino vs. Sanz , 44 Phil. [1923]); and (b) that the appeal is
frivolous and dilatory because the trial court's decision ordering reconveyance to the private
respondents of the lots in dispute by del Rosario had long become final and executory. The NIDC
opposed this motion, contending that it had acquired the necessary personality in civil case Q-8407
by virtue of the respondents' and the lower court's recognition thereof.
On May 28, 1968 the respondent Judge issued an order dismissing the appeal interposed by the
NIDC for reasons substantially identical to those adduced by the private respondents in their motion
to dismiss the appeal.
On July 3, 1968 the NIDC filed a motion for reconsideration of the dismissal of its appeal. This
motion was denied on December 18, 1968.
Meanwhile, on September 12, 1968, the NIDC received a copy of a petition of the private
respondents to declare TCTs 70809, 70813, 70814 and 76401 to 76472 null and void for failure of
the NIDC to surrender the certificates of title in question to the Register of Deeds of Quezon City "in
order that the deeds of reconveyance executed by the Clerk of Court and orders of this Honorable
Court may be given due course for registration ..."
The NIDC opposed this petition, alleging that to grant it will amount to enforcement of the lower
court's order of March 31, 1967 which had not yet become final and executory as the NIDC had
appealed within the prescribed period. It was also pointed out by the NIDC that its motion for
reconsideration of the order dismissing its appeal had not as yet been resolved.
On November 9, 1968 the respondent Judge issued another order requiring the NIDC to surrender
the certificates of title in dispute to the Register of Deeds of Quezon City within five days, otherwise
the said certificates would be declared null and void. The NIDC filed a motion for reconsideration of
this order on the ground that its motion for reconsideration of the order dismissing its appeal had not
up to that time been resolved.
On January 27, 1969, the NIDC received a copy of a "Manifestation" dated January 21, 1969
wherein the private respondents prayed for the cancellation of the mentioned certificates of title on
the ground that the NIDC had already received a copy of the order of the respondent Judge dated
December 18, 1968 denying the motion for reconsideration of the NIDC dated November 19, 1968. It
turned out, however (as explained by the NIDC in one of its pleadings filed with this Court), that
while the NIDC did receive on January 13, 1969 the said order dated December 18, 1968, the same
was overlooked because the copy of the said order sent by the respondent Judge was stapled
beneath two other orders also dated December 18, 1968. One of these orders which was stapled on
top of the others, was in connection with another case (civil case 10636) involving the same parties
herein. According to the NIDC, it was thought that the papers stapled beneath were mere copies of
the order in the said civil case. The third order, similarly dated, was an order denying the NIDC's
motion for reconsideration of the respondent Judge's order dismissing its appeal from the order of
March 31, 1967.
On January 30, 1969 the counsel of the NIDC went to the lower court to inquire if it had already
acted upon the said "Manifestation"; and there and then he was served a copy of an order dated
January 27, 1969, declaring TCTs 70809, 70813, 70814 and 76401 to 76472 null and void and
cancelled.
The submission of the parties for resolution by this Court involves mainly the question of whether the
petitioner has legal personality to appeal the order a quo dated March 31, 1967. If the answer be in
the affirmative, then the order of the respondent Judge dismissing the appeal and all subsequent
orders adverse to the petitioner will not avail the private respondents any.
We do not think, however, that this is the real issue that should first be resolved in order to bundle
properly the contending claims of the parties. Of basic crucial importance, in our opinion, is an
inquiry into, and resolution of, whether, in the first place, the lower court had jurisdiction to entertain
the motion of the private respondents that led to the issuance of the order of March 31, 1967.
Obviously, it will not be necessary to resolve the question posited by the parties if, from the facts
which the instant petition opened for inquiry by this Court, it will be determined that the lower court
was devoid of jurisdiction to take cognizance of the mentioned motion of the private respondents.
After a painstaking study of the matter, we reach the view and we so hold that the respondent
Judge's assumption of jurisdiction over the private respondents' motion that led to the order of March
31, 1967 dismissing the appeal of the NIDC, is completely devoid of legal authority. The judgment of
the court a quo in civil case Q-8407, on the matter of the recognition of the mortgage rights of the
PCIB over the lots in question, had already become final and executory when the said bank
assigned its rights to the NIDC. It had, in fact, foreclosed its mortgage rights over some of the lots
and had purchased them at an auction sale before it executed the deed of assignment to the NIDC.
Such being the case, the lower court no longer had jurisdiction in the said case to resolve, by a mere
motion therein, issues having to do with the disposition made by the PCIB of its rights over the lots in
question, which rights were then no longer in litigation as they had been adjudged with finality.
An independent action, or any other appropriate remedy, securing to all the real parties in interest
the proceses and due opportunities afforded by the Rules of Court will be of the essence if the
private respondents, as the judicially declared owners of the lots in question by final judgment prior
to the present controversy, believe that they have a right of action to cause the extinguishment by
judicial fiat of the mortgage constituted over those lots on account of the assignment by the
mortgagee and/or purchaser at public auction of its rights to the parcels in question.
The necessity for such an independent action or other appropriate remedy becomes more patent, as
a matter of due process, when it is considered that the NIDC, as assignee after a final adjudication
of the rights of the PCIB over the said lots, will be the real party to be affected directly by any action
which the private respondents will commence whose object is to render inutile the legal efficacy of
the PCIB's assignment of its rights thereon. In such an action, the NIDC will clearly be an
indispensable party, which it will be the duty of the private respondent to include as a party in the
case, otherwise, it will not be bound by any adjudication which will adversely affect its rights over the
lots in dispute.
It would appear, however, from the facts admitted by the parties, that a valid assignment, binding
upon the private respondents, has been made by the PCIB to the NIDC of its mortgage rights as well
as its rights as purchaser of the lots in question. There does not appear to be anything in our
statutes or jurisprudence which prohibits a creditor without the consent of the debtor from making an
assignment of his credit and the rights accessory thereto; and, certainly, an assignment of credit and
its accessory rights does not at all obliterate the obligation of the debtor to pay, but merely puts the
assignee in the place of his assignor. Indeed, article 1634 of the new Civil Code definitely recognizes
the likelihood that credits and other incorporeal rights in litigation may be assignedpendente lite, and,
in such event, provides that the debtor may extinguish his obligation by making appropriate
reimbursement to the assignee.
2
In other words, an assignment of credit pendente lite, contrary to the
respondent Judge's opinion of March 31, 1967, under which it was construed that the mortgage rights and
rights as purchaser of the PCIB over the lots in question were still in custodia legis at the time of their
assignment to the NIDC, does not extinguish the credit or accessory rights assigned, but simply changes
the bag into which the debtor must empty his money in payment.
ACCORDINGLY, the order of the court a quo dated March 31, 1967, and its subsequent orders
dated May 28, 1968, November 9, 1968 and January 27, 1969, and all related orders are hereby
declared null and void and without legal effect, for having been issued without jurisdiction. The
preliminary injunction issued by this Court on March 11, 1970 is hereby made permanent. No
pronouncement as to costs.

CASE #85
G.R. No. L-49120 June 30, 1988
ESTATE OF GEORGE LITTON, petitioner,
vs.
CIRIACO B. MENDOZA and COURT OF APPEALS, respondents.
Ruben G. Bala for respondent Mendoza.

GANCAYCO, J .:
This petition for review presents two (2) main issues, to wit: (1) Can a plaintiff in a case, who had
previously assigned in favor of his creditor his litigated credit in said case, by a deed of assignment
which was duly submitted to the court, validly enter into a compromise agreement thereafter
releasing the defendant therein from his claim without notice to his assignee? and (2) Will such
previous knowledge on the part of the defendant of the assignment made by the plaintiff estop said
defendant from invoking said compromise as a ground for dismissal of the action against him?
The present case stemmed from Civil Case No. Q-8303
1
entitled "Alfonso Tan vs. Ciriaco B.
Mendoza," an action for the collection of a sum of money representing the value of two (2) checks which
plaintiff Tan claims to have been delivered to him by defendant Mendoza, private respondent herein, by
way of guaranty with a commission.
The record discloses that the Bernal spouses
2
are engaged in the manufacture of embroidery,
garments and cotton materials. Sometime in September 1963, C.B.M. Products,
3
with Mendoza as
president, offered to sell to the Bernals textile cotton materials and, for this purpose, Mendoza introduced
the Bernals to Alfonso Tan. Thus, the Bernals purchased on credit from Tan some cotton materials worth
P 80,796.62, payment of which was guaranteed by Mendoza. Thereupon, Tan delivered the said cotton
materials to the Bernals. In view of the said arrangement, on November 1963, C.B.M. Products, through
Mendoza, asked and received from the Bernals PBTC Check No. 626405 for P 80,796.62 dated February
20, 1964 with the understanding that the said check will remain in the possession of Mendoza until the
cotton materials are finally manufactured into garments after which time Mendoza will sell the finished
products for the Bernals. Meanwhile, the said check matured without having been cashed and Mendoza
demanded the issuance of another check
4
in the same amount without a date.
On the other hand, on February 28, 1964, defendant Mendoza issued two (2) PNB checks
5
in favor
of Tan in the total amount of P 80,796.62. He informed the Bernals of the same and told them that they
are indebted to him and asked the latter to sign an instrument whereby Mendoza assigned the said
amount to Insular Products Inc. Tan had the two checks issued by Mendoza discounted in a bank.
However, the said checks were later returned to Tan with the words stamped "stop payment" which
appears to have been ordered by Mendoza for failure of the Bernals to deposit sufficient funds for the
check that the Bernals issued in favor of Mendoza.
Hence, as adverted to above, Tan brought an action against Mendoza docketed as Civil Case No.
Q-8303
6
while the Bernals brought an action for interpleader docketed as Civil Case No. 56850
7
for not
knowing whom to pay. While both actions were pending resolution by the trial court, on March 20, 1966,
Tan assigned in favor of George Litton, Sr. his litigatious credit * in Civil Case No. 56850 against Mendoza, duly
submitted to the court, with notice to the parties.
8
The deed of assignment was framed in the following tenor:
DEED OF ASSIGNMENT
I, ALFONSO TAN, of age, Chinese, married to UY CHAY UA, residing at No. 6
Kanlaon, Quezon City, doing business under the name and style ALTA
COMMERCIAL by way of securing or guaranteeing my obligation to Mr. GEORGE
LITTON, SR., do by these presents CEDE, ASSIGN, TRANSFER AND CONVEY
unto the said Mr. GEORGE LITTON, SR., my claim against C.B.M. Products, Inc.,
personally guaranteed by Mr. Ciriaco B. Mendoza, in the amount of Eighty-Thousand
Seven Hundred Ninety Six Pesos and Sixty-two centavos (P 80,796.62) the balance
of which, in principal, and excluding, interests, costs, damages and attorney's fees
now stands at P 76,000.00, P 4,796.62, having already been received by the
assignor on December 23, 1965, pursuant to the order of the court in Civil CaseNo.
56850, C.F.I., Manila, authorizing Alfonso Tan to withdraw the amount of P 4,796.62
then on deposit with the court. All rights, and interests in said net amount, plus
interests and costs, and less attorney's fees, in case the amount allowed therefor be
less than the amounts claimed in the relief in Civil Case 56850 (C.F.I., Manila) and
Q-8503 (C.F.I., Quezon City) are by these presents covered by this assignment.
I further undertake to hold in trust any and all amounts which may hereafter be
realized from the aforementioned cases for the ASSIGNEE, Mr. GEORGE LITTON,
SR., and to turn over to him such amounts in application to my liability to him, as his
interest may then show, and I further undertake to cooperate towards the successful
prosecution of the aforementioned cases making available myself, as witness or
otherwise, as well as any and all documents thereto appertaining. ...
9

After due trial, the lower court ruled that the said PNB checks were issued by Mendoza in favor of
Tan for a commission in the sum of P 4,847.79 and held Mendoza liable as a drawer whose liability
is primary and not merely as an indorser and thus directed Mendoza to pay Tan the sum of P
76,000.00, the sum still due, plus damages and attorney's fees.
10

Mendoza seasonably filed an appeal with the Court of Appeals, dockted as C.A. G.R. No. 41900-R,
arguing in the main that his liability is one of an accommodation party and not as a drawer.
On January 27, 1977, the Court of Appeals rendered a decision affirming in toto the decision of the
lower court.
11

Meanwhile, on February 2, 1971, pending the resolution of the said appeal, Mendoza entered into a
compromise agreement with Tan wherein the latter acknowledged that all his claims against
Mendoza had been settled and that by reason of said settlement both parties mutually waive,
release and quit whatever claim, right or cause of action one may have against the other, with a
provision that the said compromise agreement shall not in any way affect the right of Tan to enforce
by appropriate action his claims against the Bernal spouses.
12

On February 25, 1977, Mendoza filed a motion for reconsideration praying that the decision of
January 27, 1977 be set aside, principally anchored upon the ground that a compromise agreement
was entered into between him and Tan which in effect released Mendoza from liability. Tan filed an
opposition to this motion claiming that the compromise agreement is null and void as he was not
properly represented by his counsel of record Atty. Quiogue, and was instead represented by a
certain Atty. Laberinto, and principally because of the deed of assignment that he executed in favor
of George Litton, Sr. alleging that with such, he has no more right to alienate said credit.
While the case was still pending reconsideration by the respondent court, Tan, the assignor, died
leaving no properties whatever to satisfy the claim of the estate of the late George Litton, Sr.
In its Resolution dated August 30, 1977,
13
the respondent court set aside its decision and approved the
compromise agreement.
As to the first ground invoked by Tan, now deceased, the respondent court ruled that the non-
intervention of Tan's counsel of record in the compromise agreement does not affect the validity of
the settlement on the ground that the client had an undoubted right to compromise a suit without the
intervention of his lawyer, citing Aro vs. Nanawa.
14

As to the second ground, respondent court ruled as follows:
... it is relevant to note that Paragraph 1of the deed of assignment states that the
cession,assignment, transfer, bond conveyance by Alfonso Tan was only by way of
securing, or guaranteeing his obligation to GEORGE LITTON, SR.
Hence, Alfonso Tan retained possession and dominion of the credit (Par. 2, Art.
2085, Civil Code).
"Even considered as a litigations credit," which indeed characterized the claims
herein of Alfonso Tan, such credit may be validly alienated by Tan (Art. 1634. Civil
Code).
Such alienation is subject to the remedies of Litton under Article 6 of the Civil Code,
whereby the waiver, release, or quit-claim made by plaintiff-appellee Alfonso Tan in
favor of defendant-appellant Ciriaco B. Mendoza, if proven prejudicial to George
Litton, Sr. as assignee under the deed of assignment, may entitle Litton to pursue his
remedies against Tan.
The alienation of a litigatious credit is further subject to the debtor's right of
redemption under Article 1634 of the Civil Code.
As mentioned earlier, the assignor Tan died pending resolution of the motion for reconsideration.
The estate of George Litton, Sr., petitioner herein, as represented by James Litton, son of George
Litton, Sr. and administrator
15
of the former's estate, is now appealing the said resolution to this Court as
assignee of the amount sued in Civil Case No. Q-8303, in relation to Civil Case No. 56850.
Before resolving the main issues aforementioned, the question of legal personality of herein
petitioner to bring the instant petition for review, must be resolved.
As a rule, the parties in an appeal through a review on certiorari are the same original parties to the
case.
16
If after the rendition of judgment the original party dies, he should be substituted by his
successor-in-interest. In this case, it is not disputed that no proper substitution of parties was done. This
notwithstanding, the Court so holds that the same cannot and will not materially affect the legal right of
herein petitioner in instituting the instant petition in view of the tenor of the deed of assignment,
particularly paragraph two thereof
17
wherein the assignor, Tan, assumed the responsibility to prosecute
the case and to turn over to the assignee whatever amounts may be realized in the prosecution of the
suit.
We note that private respondent moved for the dismissal of the appeal without notifying the estate of
George Litton, Sr. whereas the former was fully aware of the fact that the said estate is an assignee
of Tan's right in the case litigated.
18
Hence, if herein petitioner failed to observe the proper substitution
of parties when Alfonso Tan died during the pendency of private respondent's motion for reconsideration,
no one is to blame but private respondent himself. Moreover, the right of the petitioner to bring the
present petition is well within the concept of a real party-in-interest in the subject matter of the action.
Well-settled is the rule that a real party-in-interest is a party entitled to the avails of the suit or the party
who would be injured by the judgment.
19
We see the petitioner well within the latter category.
Hence, as the assignee and successor-in-interest of Tan, petitioner has the personality to bring this
petition in substitution of Tan.
Now, the resolution of the main issues.
The purpose of a compromise being to replace and terminate controverted claims,
20
courts
encourage the same. A compromise once approved by final order of the court has the force of res
judicata between parties and should not be disturbed except for vices of consent or forgery.
21

In this case, petitioner seeks to set aside the said compromise on the ground that previous thereto,
Tan executed a deed of assignment in favor of George Litton, Sr. involving the same litigated credit.
We rule for the petitioner. The fact that the deed of assignment was done by way of securing or
guaranteeing Tan's obligation in favor of George Litton, Sr., as observed by the appellate court, will
not in any way alter the resolution on the matter. The validity of the guaranty or pledge in favor of
Litton has not been questioned. Our examination of the deed of assignment shows that it fulfills the
requisites of a valid pledge or mortgage.
22
Although it is true that Tan may validly alienate the litigatious
credit as ruled by the appellate court, citing Article 1634 of the Civil Code, said provision should not be
taken to mean as a grant of an absolute right on the part of the assignor Tan to indiscriminately dispose
of the thing or the right given as security. The Court rules that the said provision should be read in
consonance with Article 2097 of the same code.
23
Although the pledgee or the assignee, Litton, Sr. did
not ipso factobecome the creditor of private respondent Mendoza, the pledge being valid, the incorporeal
right assigned by Tan in favor of the former can only be alienated by the latter with due notice to and
consent of Litton, Sr. or his duly authorized representative. To allow the assignor to dispose of or alienate
the security without notice and consent of the assignee will render nugatory the very purpose of a pledge
or an assignment of credit.
Moreover, under Article 1634,
24
the debtor has a corresponding obligation to reimburse the assignee,
Litton, Sr. for the price he paid or for the value given as consideration for the deed of assignment. Failing
in this, the alienation of the litigated credit made by Tan in favor of private respondent by way of a
compromise agreement does not bind the assignee, petitioner herein.
Indeed, a painstaking review of the record of the case reveals that private respondent has, from the
very beginning, been fully aware of the deed of assignment executed by Tan in favor of Litton, Sr. as
said deed was duly submitted to Branch XI of the then Court of First Instance of Manila in Civil Case
No. 56850 (in relation to Civil Case No. Q-8303) where C.B.M. Products is one of the defendants
and the parties were notified through their counsel.
25
As earlier mentioned, private respondent herein
is the president of C.B.M. Products, hence, his contention that he is not aware of the said deed of
assignment deserves scant consideration from the Court. Petitioner pointed out at the same time that
private respondent together with his counsel were served with a copy of the deed of assignment which
allegation remains uncontroverted. Having such knowledge thereof, private respondent is estopped from
entering into a compromise agreement involving the same litigated credit without notice to and consent of
the assignee, petitioner herein. More so, in the light of the fact that no reimbursement has ever been
made in favor of the assignee as required under Article 1634. Private respondent acted in bad faith and in
connivance with assignor Tan so as to defraud the petitioner in entering into the compromise agreement.
WHEREFORE, the petition is GRANTED. The assailed resolution of the respondent court dated
August 30,1977 is hereby SET ASIDE, the said compromise agreement being null and void, and a
new one is hereby rendered reinstating its decision dated January 27, 1977, affirming in toto the
decision of the lower court. This decision is immediately executory. No motion for extension of time
to file a motion for reconsideration will be granted.
SO ORDERED.

CASE #86
G.R. No. L-1786 September 27, 1949
JOAQUIN HERRERIAS, petitioner,
vs.
ROQUE JAVELLANA, respondent.
Antonio Gonzales for petitioner.
Ezpeleta and Ezpeleta for respondent.
TUASON, J .:
This was an action on a promissory note for P26,400 with 12% interest per annum, signed on
August 24, 1945, and payable in ten days. Defendant resisted the action alleging that the note sued
upon represents the total value of 125 sacks of brown sugar having a total weight of 7,590 kilos,
which plaintiff sold on credit to defendant, and that under Executive Order No. 62 then in force, the
price stipulated was in excess of that fixed in said Executive Order, namely, P0.50 a kilo. The sale
was consequently null and void, it is contended.
The Court of Appeals, from whose decision the case was elevated to this Court on certiorari, found
the plaintiff's version is, according to the court, as follows:
Prior to August 24, 1945, the plaintiff and the defendant had an understanding whereby he
(plaintiff) was to deliver sugar to the defendant on the condition that the latter was to give the
former 50 bottles of whiskey for every picul of sugar. On the aforementioned date, the
plaintiff delivered 120 piculs of sugar to the defendant (Exhibit 1) but as the defendant had
no whiskey at the time he proposed to the plaintiff that he signed a promissory note for the
value of the whiskey that he was to give the plaintiff in exchange for the latter's sugar. The
prevailing price of whiskey then was P5 a bottle but the defendant bargained at P4.40. So
instead of executing a promissory note for P30,000 which was the value of 6,000 bottles of
whiskey in exchange for the 120 piculs of sugar delivered by the plaintiff, he executed a note
for P24,400, Exhibit A.
In view of these findings, which in substance are also the findings of the Court of First Instance of
Manila, the Court of Appeals affirmed the appealed decision, sentencing defendant to pay the
plaintiff the value of the note with interest at 12% per annum from the 3rd of September, 1945, until
fully paid, plus another amount equal to 20% of the amount indebted as attorney's fees, and the
costs.
The sole question presented before us is whether, upon the facts set out above, the execution of the
note in question violated the provisions of Executive Order No. 62. The answer to this would be in
the affirmative if we were to consider the note as payment for the sugar.
But this was not the case. If the contract between the parties was not one of purchase and sale but
one of barter, as both the Court of First Instance and the Court of Appeals held, then the
consideration for the sugar was not cash but 6,000 bottles of whiskey, and the note was executed in
consideration for the liquor. The transaction did not then fall within the provisions of the Executive
Order above cited. This Executive Order contemplated sales payable in cash. The legality of the
deal would not, we take it, be challenged had the defendant actually delivered the promised whiskey
to the plaintiff and the plaintiff had sold it afterward to the defendant or other persons at a figure
higher than what the sugar would bring at the official quotation. Yet the only difference between such
state of facts and what actually happened is that in the latter case the whiskey did not physically
change hands. Juridicial status and relations and legal concepts are not altered by a factual
alteration so light and unsubstantial.
Being in derogation of natural or common law rights, Executive Order No. 62 must be construed
strictly, barring collusions to evade its provisions. There is no indications that the form of contract
used by the parties was conceived as a cloak to circumvent the law. On the contrary, there is
positive indication that the transaction wasbona fide and fair; the defendant, it appears from his
cross-complaint, was a manufacturer of and dealer in whiskey on a large scale. As such
manufacturer, he needed large quantities of brown sugar to carry on his business.
The Court of Appeals correctly applied the law to the facts. Its decision is affirmed, with costs.
Moran, C. J., Ozaeta, Feria, Paras, Bengzon, Padilla, Montemayor, Reyes and Torres, JJ., concur.

CASE #87
G.R. No. L-44428 September 30, 1977
AVELINO BALURAN, petitioner,
vs.
HON. RICARDO Y. NAVARRO, Presiding Judge, Court of First Instance of Ilocos Norte,
Branch I and ANTONIO OBEDENCIO, respondents.
Alipio V. Flores for petitioner.
Rafael B. Ruiz for private respondent.

MUOZ PALMA, J .:
Spouses Domingo Paraiso and Fidela Q. Paraiso were the owners of a residential lot of around 480
square meters located in Sarrat, Ilocos Norte. On or about February 2, 1964, the Paraisos executed
an agreement entitled "BARTER" whereby as party of the first part they agreed to "barter and
exchange" with spouses Avelino and Benilda Baluran their residential lot with the latter's unirrigated
riceland situated in Sarrat, Ilocos Norte, of approximately 223 square meters without any permanent
improvements, under the following conditions:
1. That both the Party of the First Part and the Party of the Second Part shall enjoy
the material possession of their respective properties; the Party of the First Part shall
reap the fruits of the unirrigated riceland and the Party of the Second Part shall have
a right to build his own house in the residential lot.
2. Nevertheless, in the event any of the children of Natividad P. Obencio, daughter of
the First Part, shall choose to reside in this municipality and build his own house in
the residential lot, the Party of the Second Part shall be obliged to return the lot such
children with damages to be incurred.
3. That neither the Party of the First Part nor the Party of the Second Part shall
encumber, alienate or dispose of in any manner their respective properties as
bartered without the consent of the other.
4. That inasmuch as the bartered properties are not yet accordance with Act No. 496
or under the Spanish Mortgage Law, they finally agreed and covenant that this deed
be registered in the Office of the Register of Deeds of Ilocos Norte pursuant to the
provisions of Act No. 3344 as amended. (p. 28, rollo)
On May 6, 1975 Antonio Obendencio filed with the Court of First Instance of Ilocos Norte the present
complaint to recover the above-mentioned residential lot from Avelino Baluran claiming that he is the
rightful owner of said residential lot having acquired the same from his mother, Natividad Paraiso
Obedencio, and that he needed the property for Purposes Of constructing his house thereon
inasmuch as he had taken residence in his native town, Sarrat. Obedencio accordingly prayed that
he be declared owner of the residential lot and that defendant Baluran be ordered to vacate the
same forfeiting his (Obedencio) favor the improvements defendant Baluran had built in bad faith.
1

Answering the complaint, Avelino Baluran alleged inter alia (1) that the "barter agreement"
transferred to him the ownership of the residential lot in exchange for the unirrigated riceland
conveyed to plaintiff's Predecessor-in-interest, Natividad Obedencio, who in fact is still in On thereof,
and (2) that the plaintiff's cause of action if any had prescribed.
2

At the pre-trial, the parties agreed to submit the case for decision on the basis of their stipulation of
facts. It was likewise admitted that the aforementioned residential lot was donated on October 4,
1974 by Natividad Obedencio to her son Antonio Obedencio, and that since the execution of the
agreement of February 2, 1964 Avelino Baluran was in possession of the residential lot, paid the
taxes of the property, and constructed a house thereon with an value of P250.00.
3
On November 8,
1975, the trial Judge Ricardo Y. Navarro rendered a decision the dispositive portion of which reads as
follows:
Consequently, the plaintiff is hereby declared owner of the question, the defendant is
hereby ordered to vacate the same with costs against defendant.
Avelino Baluran to whom We shall refer as petitioner, now seeks a review of that decision under the
following assignment of errors:
I The lower Court erred in holding that the barter agreement did not transfer
ownership of the lot in suit to the petitioner.
II The lower Court erred in not holding that the right to re-barter or re- exchange of
respondent Antonio Obedencio had been barred by the statute of limitation. (p. 14,
Ibid.)
The resolution of this appeal revolves on the nature of the undertaking contract of February 2, 1964
which is entitled "Barter Agreement."
It is a settled rule that to determine the nature of a contract courts are not bound by the name or title
given to it by the contracting parties.
4
This Court has held that contracts are not what the parties may
see fit to call them but what they really are as determined by the principles of law.
5
Thus, in the instant
case, the use of the, term "barter" in describing the agreement of February 2, 1964, is not controlling. The
stipulations in said document are clear enough to indicate that there was no intention at all on the part of
the signatories thereto to convey the ownership of their respective properties; all that was intended, and it
was so provided in the agreement, was to transfer the material possession thereof. (condition No. 1, see
page I of this Decision) In fact, under condition No. 3 of the agreement, the parties retained the right to
alienate their respective properties which right is an element of ownership.
With the material ion being the only one transferred, all that the parties acquired was the right of
usufruct which in essence is the right to enjoy the Property of another.
6
Under the document in
question, spouses Paraiso would harvest the crop of the unirrigated riceland while the other party, Avelino
Baluran, could build a house on the residential lot, subject, however, to the condition, that when any of
the children of Natividad Paraiso Obedencio, daughter of spouses Paraiso, shall choose to reside in the
municipality and build his house on the residential lot, Avelino Baluran shall be obliged to return the lot to
said children "With damages to be incurred." (Condition No. 2 of the Agreement) Thus, the mutual
agreement each party enjoying "material possession" of the other's property was subject to a
resolutory condition the happening of which would terminate the right of possession and use.
A resolutory condition is one which extinguishes rights and obligations already existing.
7
The right of
"material possession" granted in the agreement of February 2, 1964, ends if and when any of the children
of Natividad Paraiso, Obedencio (daughter of spouses Paraiso, Party of the First Part) would reside in the
municipality and build his house on the property. Inasmuch as the condition opposed is not dependent
solely on the will of one of the parties to the contract the spouses Paraiso but is Part dependent on
the will of third persons Natividad Obedencio and any of her children the same is valid.
8

When there is nothing contrary to law, morals, and good customs Or Public Policy in the stipulations
of a contract, the agreement constitutes the law between the parties and the latter are bound by the
terms thereof.
9

Art. 1306 of the Civil Code states:
Art. 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law,
Morals, good customs, public order, or public policy.
Contracts which are the private laws of the contracting parties, should be fulfilled
according to the literal sense of their stipulations, if their terms are clear and leave no
room for doubt as to the intention of the contracting parties, for contracts are
obligatory, no matter what their form may be, whenever the essential requisites for
their validity are present. (Philippine American General Insurance Co., Inc. vs. Mutuc,
61 SCRA 22)
The trial court therefore correctly adjudged that Antonio Obedencio is entitled to recover the
possession of the residential lot Pursuant to the agreement of February 2, 1964.
Petitioner submits under the second assigned error that the causa, of action if any of respondent
Obedencio had Prescribed after the lapse of four years from the date of execution of the document
of February 2, 1964. It is argued that the remedy of plaintiff, now respondent, Was to ask for re-
barter or re-exchange of the properties subject of the agreement which could be exercised only
within four years from the date of the contract under Art. 1606 of the Civil Code.
The submission of petitioner is untenable. Art. 1606 of the Civil Code refers to conventional
redemption which petitioner would want to apply to the present situation. However, as We stated
above, the agreement of the parties of February 2, 1964, is not one of barter, exchange or even sale
with right to repurchase, but is one of or akin the other is the use or material ion or enjoyment of
each other's real property.
Usufruct may be constituted by the parties for any period of time and under such conditions as they
may deem convenient and beneficial subject to the provisions of the Civil Code, Book II, Title VI
on Usufruct. The manner of terminating or extinguishing the right of usufruct is primarily determined
by the stipulations of the parties which in this case now before Us is the happening of the event
agreed upon. Necessarily, the plaintiff or respondent Obedencio could not demand for the recovery
of possession of the residential lot in question, not until he acquired that right from his mother,
Natividad Obedencio, and which he did acquire when his mother donated to him the residential lot
on October 4, 1974. Even if We were to go along with petitioner in his argument that the fulfillment of
the condition cannot be left to an indefinite, uncertain period, nonetheless, in the case at bar, the
respondent, in whose favor the resolutory condition was constituted, took immediate steps to
terminate the right of petitioner herein to the use of the lot. Obedencio's present complaint was filed
in May of 1975, barely several months after the property was donated to him.
One last point raised by petitioner is his alleged right to recover damages under the agreement of
February 2, 1964. In the absence of evidence, considering that the parties agreed to submit the case
for decision on a stipulation of facts, We have no basis for awarding damages to petitioner.
However, We apply Art. 579 of the Civil Code and hold that petitioner will not forfeit the improvement
he built on the lot but may remove the same without causing damage to the property.
Art. 579. The usufructuary may make on the property held in usufruct such useful
improvements or expenses for mere pleasure as he may deem proper, provided he
does not alter its form or substance; but he shall have no right to be indemnified
therefor. He may, however. He may, however, removed such improvements, should
it be possible to do so without damage to the property.(Emphasis supplied)
Finally, We cannot close this case without touching on the unirrigated riceland which admittedly is in
the possession of Natividad Obedencio.
In view of our ruling that the "barter agreement" of February 2, 1964, did not transfer the ownership
of the respective properties mentioned therein, it follows that petitioner Baluran remains the owner of
the unirrigated riceland and is now entitled to its Possession. With the happening of the resolutory
condition provided for in the agreement, the right of usufruct of the parties is extinguished and each
is entitled to a return of his property. it is true that Natividad Obedencio who is now in possession of
the property and who has been made a party to this case cannot be ordered in this proceeding to
surrender the riceland. But inasmuch as reciprocal rights and obligations have arisen between the
parties to the so-called "barter agreement", We hold that the parties and for their successors-in-
interest are duty bound to effect a simultaneous transfer of the respective properties if substance at
justice is to be effected.
WHEREFORE, Judgment is hereby rendered: 1) declaring the petitioner Avelino Baluran and
respondent Antonio Obedencio the respective owners the unirrigated riceland and residential lot
mentioned in the "Barter Agreement" of February 2, 1964; 2) ordering Avelino Baluran to vacate the
residential lot and removed improvements built by thereon, provided, however that he shall not be
compelled to do so unless the unirrigated riceland shall five been restored to his possession either
on volition of the party concerned or through judicial proceedings which he may institute for the
purpose.
Without pronouncement as to costs. So Ordered.
Teehankee (Chairman), Makasiar, Martin, Fernandez and Guerrero, JJ., concur.

CASE #88
[G.R. No. 124290. January 16, 1998]
ALLIED BANKING CORPORATION, petitioner, vs. COURT OF
APPEALS, HON. JOSE C. DE GUZMAN, OSCAR D.
TANQUECO, LUCIA D. TANQUECO-MATIAS, RUBEN D.
TANQUECO and NESTOR D. TANQUECO, respondents
D E C I S I O N
BELLOSILLO, J .:
There are two (2) main issues in this petition for review: namely, (a) whether a
stipulation in a contract of lease to the effect that the contract "may be renewed for a
like term at the option of the lessee" is void for being potestative or violative of the
principle of mutuality of contracts under Art. 1308 of the Civil Code and, corollarily, what
is the meaning of the clause "may be renewed for a like term at the option of the
lessee;" and, (b) whether a lessee has the legal personality to assail the validity of a
deed of donation executed by the lessor over the leased premises.
Spouses Filemon Tanqueco and Lucia Domingo-Tanqueco owned a 512-square
meter lot located at No. 2 Sarmiento Street corner Quirino Highway, Novaliches,
Quezon City, covered by TCT No. 136779 in their name. On 30 June 1978 they leased
the property to petitioner Allied Banking Corporation (ALLIED) for a monthly rental
of P1,000.00 for the first three (3) years, adjustable by 25% every three (3) years
thereafter.
[1]
The lease contract specifically states in its Provision No. 1 that "the term of
this lease shall be fourteen (14) years commencing from April 1, 1978 and may be
renewed for a like term at the option of the lessee."
Pursuant to their lease agreement, ALLIED introduced an improvement on the
property consisting of a concrete building with a floor area of 340-square meters which it
used as a branch office. As stipulated, the ownership of the building would be
transferred to the lessors upon the expiration of the original term of the lease.
Sometime in February 1988 the Tanqueco spouses executed a deed of donation
over the subject property in favor of their four (4) children, namely, private respondents
herein Oscar D. Tanqueco, Lucia Tanqueco-Matias, Ruben D. Tanqueco and Nestor D.
Tanqueco, who accepted the donation in the same public instrument.
On 13 February 1991, a year before the expiration of the contract of lease, the
Tanquecos notified petitioner ALLIED that they were no longer interested in renewing
the lease.
[2]
ALLIED replied that it was exercising its option to renew their lease under
the same terms with additional proposals.
[3]
Respondent Ruben D. Tanqueco, acting in
behalf of all the donee-lessors, made a counter-proposal.
[4]
ALLIED however rejected
the counter-proposal and insisted on Provision No. 1 of their lease contract.
When the lease contract expired in 1992 private respondents demanded that
ALLIED vacate the premises. But the latter asserted its sole option to renew the lease
and enclosed in its reply letter a cashiers check in the amount of P68,400.00
representing the advance rental payments for six (6) months taking into account the
escalation clause. Private respondents however returned the check to ALLIED,
prompting the latter to consign the amount in court.
An action for ejectment was commenced before the Metropolitan Trial Court of
Quezon City. After trial, the MeTC-Br. 33 declared Provision No. 1 of the lease
contract void for being violative of Art. 1308 of the Civil Code thus -
x x x but such provision [in the lease contract], to the mind of the Court, does
not add luster to defendants cause nor constitutes as an unbridled or
unlimited license or sanctuary of the defendant to perpetuate its occupancy on
the subject property. The basic intention of the law in any contract is mutuality
and equality. In other words, the validity of a contract cannot be left at (sic)
the will of one of the contracting parties. Otherwise, it infringes (upon) Article
1308 of the New Civil Code, which provides: The contract must bind both
contracting parties; its validity or compliance cannot be left to the will of one
of them x x x x Using the principle laid down in the case of Garcia v.
Legarda as cornerstone, it is evident that the renewal of the lease in this case
cannot be left at the sole option or will of the defendant notwithstanding
provision no. 1 of their expired contract. For that would amount to a situation
where the continuance and effectivity of a
contract will depend only upon the sole will or power of the lessee, whi
ch is repugnant to the very spirit envisioned under Article 1308 of the New
Civil Code x x x x the theory adopted by this Court in the case at bar finds
ample affirmation from the principle echoed by the Supreme Court in the case
of Lao Lim v. CA, 191 SCRA 150, 154, 155.
On appeal to the Regional Trial Court, and later to the Court of Appeals, the
assailed decision was affirmed.
[5]

On 20 February 1993, while the case was pending in the Court of Appeals, ALLIED
vacated the leased premises by reason of the controversy.
[6]

ALLIED insists before us that Provision No. 1 of the lease contract was mutually
agreed upon hence valid and binding on both parties, and the exercise by petitioner of
its option to renew the contract was part of their agreement and in pursuance thereof.
We agree with petitioner. Article 1308 of the Civil Code expresses what is known in
law as the principle of mutuality of contracts. It provides that "the contract must bind
both the contracting parties; its validity or compliance cannot be left to the will of one of
them." This binding effect of a contract on both parties is based on
the principle that the obligations arising from contracts have the force of law between
the contracting parties, and there must be mutuality between them based essentially on
their equality under which it is repugnant to have one party bound
by the contract while leaving the other free therefrom. The ultimate purpose is to
render void a contract containing a condition which makes its fulfillment dependent
solely upon the uncontrolled will of one of the contracting parties.
An express agreement which gives the lessee the sole option to renew the lease is
frequent and subject to statutory restrictions, valid and binding on the parties. This
option, which is provided in the same lease agreement, is fundamentally part of the
consideration in the contract and is no different from any other provision of the lease
carrying an undertaking on the part of the lessor to act conditioned on the performance
by the lessee. It is a purely executory contract and at most confers a right to obtain a
renewal if there is compliance with the conditions on which the right is made to
depend. The right of renewal constitutes a part of the lessees interest in the land and
forms a substantial and integral part of the agreement.
The fact that such option is binding only on the lessor and can be exercised only by
the lessee does not render it void for lack of mutuality. After all, the lessor is free to
give or not to give the option to the lessee. And while the lessee has a right to elect
whether to continue with the lease or not, once he exercises his option to continue and
the lessor accepts, both parties are thereafter bound by the new lease
agreement. Their rights and obligations become mutually fixed, and the lessee is
entitled to retain possession of the property for the duration of the new lease, and the
lessor may hold him liable for the rent therefor. The lessee cannot thereafter escape
liability even if he should subsequently decide to abandon the premises. Mutuality
obtains in such a contract and equality exists between the lessor and the lessee since
they remain with the same faculties in respect to fulfillment.
[7]

The case of Lao Lim v. Court of Appeals
[8]
relied upon by the trial court is not
applicable here. In that case, the stipulation in the disputed compromise agreement
was to the effect that the lessee would be allowed to stay in the premises "as long as
he needs it and can pay the rents." In the present case, the questioned provision
states that the lease "may be renewed for a like term at the option of the lessee." The
lessor is bound by the option he has conceded to the lessee. The lessee likewise
becomes bound only when he exercises his option and the lessor cannot thereafter be
excused from performing his part of the agreement.
Likewise, reliance by the trial court on the 1967 case of Garcia v. Rita Legarda,
Inc.,
[9]
is misplaced. In that case, what was involved was a contract to sell involving
residential lots, which gave the vendor the right to declare the contract cancelled and
of no effect upon the failure of the vendee to fulfill any of the conditions therein set
forth. In the instant case, we are dealing with a contract of lease which gives
the lessee the right to renew the same.
With respect to the meaning of the clause "may be renewed for a like term at the
option of the lessee," we sustain petitioner's contention that its exercise of the option
resulted in the automatic extension of the contract of lease under the same terms and
conditions. The subject contract simply provides that "the term of this lease shall be
fourteen (14) years and may be renewed for a like term at the option of the
lessee." As we see it, the only term on which there has been a clear agreement is the
period of the new contract, i.e., fourteen (14) years, which is evident from the clause
"may be renewed for a like term at the option of the lessee," the phrase "for a like
term" referring to the period. It is silent as to what the specific terms and conditions of
the renewed lease shall be. Shall it be the same terms and conditions as in the original
contract, or shall it be under the terms and conditions as may be mutually agreed upon
by the parties after the expiration of the existing lease?
In Ledesma v. Javellana
[10]
this Court was confronted with a similar problem. In that
case the lessee was given the sole option to renew the lease, but the contract failed to
specify the terms and conditions that would govern the new contract. When the lease
expired, the lessee demanded an extension under the same terms and conditions. The
lessor expressed conformity to the renewal of the contract but refused to accede to the
claim of the lessee that the renewal should be under the same terms and conditions as
the original contract. In sustaining the lessee, this Court made the following
pronouncement:
x x x in the case of Hicks v. Manila Hotel Company, a similar issue
was resolved by this Court. It was held that 'such a clause relates to the
very contract in which it is placed, and does not permit the defendant upon
the renewal of the contract in which the clause is found, to insist upon different
terms than those embraced in the contract to be renewed;' and that 'a
stipulation to renew always relates to the contract in which it is found and the
rights granted thereunder, unless it expressly provides for variations in the
terms of the contract to be renewed.'
The same principle is upheld in American Law regarding the renewal of lease
contracts. In 50 Am. Jur. 2d, Sec. 1159, at p. 45, we find the following
citations: 'The rule is well-established that a general covenant to renew or
extend a lease which makes no provision as to the terms of a
renewal or extension implies a renewal or extension upon the same terms
as provided in the original lease.'
In the lease contract under consideration, there is no provision to indicate
that the renewal will be subject to new terms and conditions that the parties
may yet agree upon. It is to renewal provisions of lease contracts of the kind
presently considered that the principles stated above squarely apply. We do
not agree with the contention of the appellants that if it was intended by the
parties to renew the contract under the same terms and conditions stipulated
in the contract of lease, such should have expressly so
stated in the contract itself. The same argument could easily be
interposed by the appellee who could likewise contend that if the intention
was to renew the contract of lease under such new terms and conditions that
the parties may agree upon, the contract should have so specified. Between
the two assertions, there is more logic in the latter.
The settled rule is that in case of uncertainty as to the meaning of a provision
granting extension to a contract of lease, the tenant is the one favored
and not the landlord. 'As a general rule, in construing provisions relating to
renewals or extensions, where there is any uncertainty, the tenant is favored,
and not the landlord, because the latter, having the power of stipulating in
his own favor, has neglected to do so; and also upon the
principle that every man's grant is to be taken most strongly against
himself (50 Am Jur. 2d, Sec. 1162, p. 48; see also 51 C.J.S. 599).'
Besides, if we were to adopt the contrary theory that the terms and conditions to
be embodied in the renewed contract were still subject to mutual agreement by and
between the parties, then the option - which is an integral part of the consideration for
the contract - would be rendered worthless. For then, the lessor could easily defeat the
lessee's right of renewal by simply imposing unreasonable and onerous conditions to
prevent the parties from reaching an agreement, as in the case at bar. As in a statute
no word, clause, sentence, provision or part of a contract shall be considered
surplusage or superfluous, meaningless, void, insignificant or nugatory, if that can be
reasonably avoided. To this end, a construction which will render every word operative
is to be preferred over that which would make some words idle and nugatory.
[11]

Fortunately for respondent lessors, ALLIED vacated the premises on 20 February
1993 indicating its abandonment of whatever rights it had under the renewal
clause. Consequently, what remains to be done is for ALLIED to pay rentals for the
continued use of the premises until it vacated the same, computed from the expiration
of the original term of the contract on 31 March 1992 to the time it actually left the
premises on 20 February 1993, deducting therefrom the amount
of P68,400.00 consigned in court by ALLIED and any other amount which it may have
deposited or advanced in conection with the lease. Since the old lease contract was
deemed renewed under the same terms and conditions upon the exercise by ALLIED of
its option, the basis of the computation of rentals should be the rental rate provided for
in the existing contract.
Finally, ALLIED cannot assail the validity of the deed of donation, not being a party
thereto. A person who is not principally or subsidiarily bound has no legal capacity to
challenge the validity of the contract.
[12]
He must first have an interest in it. "Interest"
within the meaning of the term means material interest, an interest to be affected by the
deed, as distinguished from a mere incidental interest. Hence, a person who is not a
party to a contract and for whose benefit it was not expressly made cannot maintain an
action on it, even if the contract, if performed by the parties thereto would incidentally
affect him,
[13]
except when he is prejudiced in his rights with respect to one of the
contracting parties and can show the detriment which could positively result to him from
the contract in which he had no intervention.
[14]
We find none in the instant case.
WHEREFORE, the Decision of the Court of Appeals is REVERSED and SET
ASIDE. Considering that petitioner ALLIED BANKING CORPORATION already vacated
the leased premises as of 20 February 1993, the renewed lease contract is deemed
terminated as of that date. However, petitioner is required to pay rentals to respondent
lessors at the rate provided in their existing contract, subject to computation in view of
the consignment in court of P68,400.00 by petitioner, and of such other amounts it may
have deposited or advanced in connection with the lease.
SO ORDERED.


CASE #89
[G.R. No. 113626. September 27, 2002]
JESPAJO REALTY CORPORATION, petitioner, vs. HON. COURT OF
APPEALS, TAN TE GUTIERREZ and CO TONG, respondents.
D E C I S I O N
AUSTRIA-MARTINEZ, J .:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking to review and set aside the decision of the Court of Appeals promulgated on
January 26, 1994 in CA-G.R. SP No. 27312
[1]
which reversed the decision of the
Regional Trial Court in Civil Case No. 91-57757
[2]
and reinstated the Metropolitan Trial
Court rulings in Civil Case No. 134022-CV, entitled, Jespajo Realty Corp., Plaintiff, vs.
Tan Te Gutierrez and Co Tong, Defendants.
[3]

The uncontroverted facts of the case as found by the Court of Appeals are as
follows:
The subject of this controversy is an apartment building located at 619 Asuncion
Street, Binondo, Manila and owned by Jespajo Realty Corporation. On February 1,
1985, said corporation, represented by its President, Jesus L. Uy, entered into separate
contracts of lease with Tan Te Gutierrez and Co Tong.xxx Pursuant to the contract,
Tan Te occupied room No. 217 of the subject building at a monthly rent of P847.00
while Co Teng occupied the Penthouse at a monthly rent of P910.00xxx The terms of
the contract among others are the following:
PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985 and
shall continue for an indefinite period provided the lessee is up-to-date in the payment
of his monthly rentals. The LESSEE may, at his option, terminate this contract any
time by giving sixty (60) days prior written notice of termination to the LESSOR.
However, violation of any of the terms and conditions of this contract shall be a
sufficient ground for termination thereof by the LESSOR.
xxx xxx xxx
RENT INCREASE - For the duration of this contract, the LESSEE agrees to an
automatic 20% yearly increase in the monthly rentals.
Since the effectivity of the lease agreement on February 1985, the lessees religiously
paid their respective monthly rentals together with the 20% yearly increased (sic) in
the monthly rentals as stipulated in the contract. On January 2, 1990, the lessor
corporation sent a written notice to the lessees informing them of the formers
intention to increase the monthly rentals on the occupied premises to P3,500.00
monthly effective February 1, 1990. The lessees through its counsel in a letter dated
March 10, 1990 xxx manifested their opposition alleging that the same is in
contravention of the terms of the contract of lease as agreed upon. Due to the
opposition and the failure of the lessees to pay the increased monthly rentals in the
amount of P3,500.00, the lessor through its counsel in a letter dated April 10,1990 xxx
demanded that the lessees vacate the premises and pay the amount of P7,000.00
corresponding to the months of February and March, 1990.
The lessees exerted effort to pay the rentals due for the months of February and
March 1990 at the monthly rate stipulated in the contract but was refused by the lessor
so that on May 2, 1990, they instituted before the Metropolitan Trial Court of Manila,
Branch 16 a case for consignation xxx
In the said complaint, plaintiffs alleged that the amount of P2,107.60 and P2,264.40
are the monthly rental obligations of Tan Te and Co Tong respectively. They sought
to consign with the court their monthly rental obligations at the rate above mentioned
for the months of February up to April 1990. Additionally, they prayed that the court
issue an order directing the defendant to honor the terms and conditions of the lease.
It is to be noted that on February 6, 1991, the trial judge in the consignation case
issued an order allowing the plaintiffs therein to deposit with the City Treasurer of
Manila the amount of P33,480.28 for Co Tong and the amount of P32,710.32 for Tan
Te Gutierrez representing their respective rentals for thirteen (13) months from
February, 1990 to January, 1991. This order however is without prejudice to the final
outcome of the case. Plaintiffs duly complied with the order as evidenced by an
official receipts (sic) xxx in the name of Tan Te Gutierrez and Co Tong, respectively,
issued by the City Treasurer on February 11, 1991.
On November 15, 1990, or more than six (6) months from the filing of the case for
consignation, the lessor instituted an ejectment suit against the lessees before the
Metropolitan Trial Court of Manila Branch 20 xxx. The court in its decision dated
May 10, 1991 rendered a decision dismissing the ejectment suit for lack of merit.
xxx
[4]

Portions of the MTC decision read:
Furthermore, it appears that the plaintiff realizing that it had virtually surrendered
certain aspects of its rights of ownership over the subject premises in stipulating that
the lease shall continue for an indefinite period provided the LESSEE is up-to-date in
the payment of his monthly rentals, has raised the monthly rental to P3,500.00 which
is much higher than the correct rental in accordance with their stipulated 20%
automatic increase annually. This was done by the plaintiff apparently in order to
create an artificial cause of action, as when the LESSEES would refuse, as in fact they
refused, to pay the monthly rentals at the increase rate. This pretext of the plaintiff
cannot be countenanced by law.
Anent the final issue as to whether or not the defendants are already in arrears in the
payment of rentals on the premises, it is noteworthy that the instant case for Unlawful
Detainer was filed by the plaintiff-LESSOR herein only on November 15, 1990, while
the LESSEES consignation case against the LESSOR-plaintiff herein based on the
latters refusal to accept the rentals have been pending with Branch XVI of this Court
since May 2, 1990. And, in accordance with the consignation case, the LESSEES,
upon proper motion approved by the Court, deposited the amounts of P33,480.28
covered by O.R. No. B-578503 (for CO TONG) and P32,710.32 covered by O.R. B-
578502 (for TAN TE GUTIERREZ) both receipts dated February 11, 1991.
IN VIEW OF THE FOREGOING, and after careful scrutiny of the entire record
including all documentary evidence adduced by both parties, this Court is of the
opinion and so holds that the plaintiff (Jespajo Realty Corporation) has failed to
establish its claims by preponderance of evidence.
WHEREFORE, this case is hereby dismissed for utter lack of merit. The
counterclaim is likewise dismissed for lack of evidence to support the same. No
pronouncement as to costs.
SO ORDERED.
[5]

Jespajo Realty Corporation then appealed to the Regional Trial Court which ruled in
its favor, thus:
The Court is fully convinced that the sum demanded by appellant as increase in
appellees monthly rentals to the premises which they are renting from appellant is
very reasonable considering that the leased premises are located in the commercial
and business section of Manila in Binondo. It is also undisputed that appellant has a
24-hour security unit over the property as well as parking spaces and provisions for
electricity, water and telephone services.
In the light of the foregoing, the Court is constrained to reverse the appealed decision
and hereby orders another judgment to be entered in favor of appellant.
WHEREFORE, PREMISES CONSIDERED, judgment is rendered as follows:
1. Reversing the decision of the court a quo insofar as it dismissed appellants
complaint;
2. Declaring the termination or revocation [of the] lease contracts Annexes A
and A-1, Complaint executed between appellant and appellees;
3. Ordering appellees, their heirs and all other persons acting for and in their
behalf to vacate and surrender immediately the lease premises to appellant;
4. Adjudging appellees to pay unto appellant their rental arrearages of P57,426.45
for appellee (Tan Te Gutierrez) and P56,153.75 for appellee (Co Tong) as of April 30,
1991 and thereafter each appellee is ordered to pay also appellant the sum of
P3,500.00 every month starting May 1, 1991 until they shall have fully vacated and
surrendered the leased premises;
5. Appellees are likewise adjudged to pay the sum of P10,000.00 as and for
attorneys fees, and
6. The costs of suit.
SO ORDERED.
[6]

However, said RTC decision was reversed by the Court of Appeals in the herein
assailed decision, portions of which read:
Be that as it may, We find that it was the private respondent who, in fact, violated the
lease agreement by charging petitioners a monthly rental of P3,500.00, well in excess
of the rental stipulated in the lease contract. We see in the refusal of private
respondent to accept the rental being offered by petitioners, a scheme to place
petitioners in default of their rental payments. However, said scheme was waylaid by
petitioners consignation of the rentals due from them.
In view of the foregoing discussion, We find no more necessity in discussing the last
two (2) errors raised in the petition. We likewise find that the respondent court
committed an error of fact and law in reversing the decision of the Metropolitan Trial
Court of Manila and in arriving at the decision under review.
WHEREFORE, the decision under review is hereby REVERSED and SET
ASIDE. The decision dated May 10, 1991 of the Metropolitan Trial Court of Manila,
Branch XX which dismissed Civil Case No. 134022 CV for lack of merit is hereby
REINSTATED. No pronouncement as to costs.
SO ORDERED.
[7]

Petitioner comes before this Court with the following questions:
I
WHEN THE PARTIES TO A CONTRACT OF LEASE STIPULATED FOR
AN INDEFINITE PERIOD AND SHALL CONTINUE FOR AS LONG AS THE
LESSEE IS PAYING THE RENT, IS THE SAID CONTRACT INTERMINABLE
EVEN BY THE LESSOR?
II
WHEN THERE IS A DISAGREEMENT ON THE RENTALS TO BE PAID,
SHOULD IT BE RESOLVED IN A CONSIGNATION CASE OR IN AN
EJECTMENT CASE?
[8]

Petitioner claims that the contracts of lease entered into between the petitioner and
private respondents did not provide for a definite period, hence, Art. 1687 of the New
Civil Code applies. Said Article reads:
Art. 1687. If the period for the lease has not been fixed, it is understood to be from
year to year, if the rent agreed upon is annual; from month to month, if it is monthly;
from week to week, if the rent is weekly; and from day to day, if the rent is to be paid
daily. However, even though a monthly rent is paid, and no period for the lease has
been set, the courts may fix a longer term for the lease after the lessee has occupied
the premises for over one year. If the rent is weekly, the courts may likewise
determine a longer period after the lessee has been in possession for over six
months. In case of daily rent, the courts may also fix a longer period after the lessee
has stayed in the place for over one month.
Petitioner cited Yek Seng Co. vs. Court of Appeals,
[9]
where this Court held that:
[c]onformably, we hold that as the rental in the case at bar was paid monthly and the
term was not expressly agreed upon, the lease was understood under Article 1687 of
the Civil Code to be terminable from month to month.
[10]

On the premise that the lease contract was effective on a monthly basis, petitioner
claims that the contract of lease with respondent has been terminated, without being
renewed, after respondents refused to comply with the increased monthly rate of
P3,500.00 and that this refusal even after receiving a notice of termination and a final
demand letter is a valid cause of action for unlawful detainer.
[11]

As to the second issue, petitioner argues that the Court of Appeals erred in ruling
that their allegation of respondents non-payment of rentals in the complaint for
ejectment was false. Petitioner insists that when it filed the case of ejectment, private
respondents had failed and refused to pay the demanded P3,500.00 monthly
rentals. Thus, petitioner correctly alleged non-payment of this rental as another ground
for ejectment aside from the basic allegation of termination of the lease contract.
Petitioner also contends that the issue of whether or not the P3,500.00 monthly rental
should be the correct rental to be paid by the private respondents cannot properly be
determined in the consignation case earlier filed by private respondents since the issue
can be resolved only in the ejectment case.
[12]

Crucial in the resolution of this case is the construction of the lease agreement,
particularly the portion on the period of lease, which reads:
PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985 and
shall continue for an indefinite period provided the lessee is up-to-date in the payment
of his monthly rentals. xxx
Petitioner insists that the subject contract of lease did not provide for a definite period
hence it falls under the ambit of Art. 1687 of the NCC, making the agreement effective
on a month-to-month basis since rental payments are made monthly.
The Court of Appeals opined otherwise. It reasoned that the application of Art.
1687 in this case is misplaced because when there is a fixed period for the lease,
whether the period be definite or indefinite or when the period of the lease is expressly
left to the will of the lessee, Art. 1687 will not apply
[13]
, citing Eleizagui vs. Manila Lawn
Tennis Club, 2 Phil 309.
We agree with the ruling of the Court of Appeals. Art. 1687 finds no application in
the case at bar.
The lease contract between petitioner and respondents is with a period subject to a
resolutory condition. The wording of the agreement is unequivocal: The lease period
xxx shall continue for an indefinite period provided the lessee is up-to-date in the
payment of his monthly rentals. The condition imposed in order that the contract shall
remain effective is that the lessee is up-to-date in his monthly payments. It is
undisputed that the lessees Gutierrez and Co Tong religiously paid their rent at the
increasing rate of 20% annually. The agreement between the lessor and the lessees
are therefore still subsisting, with the original terms and conditions agreed upon, when
the petitioner unilaterally increased the rental payment to more than 20% or P3,500.00
a month.
Petitioner cites Puahay Lao vs. Suarez
[14]
where it said that the Court in the earlier
case of Singson v. Baldomar,
[15]
rejected the theory that a lease could continue for an
indefinite term so long as the lessee paid the rent, because then its continuance and
fulfillment would depend solely on the free and uncontrolled choice of the tenant
between continuing to pay rentals or not, thereby depriving the lessors of all say in the
matter as it would be contrary to the spirit of Article 1256 of the Old Civil Code, now
Article 1308 of the New Civil Code of the Philippines which provides that validity or
compliance of contracts can not be left to the will of one of the parties.
[16]

A review of the Puahay and Singson cases shows that the factual backgrounds
therein are not the same as in the case at bar. In those cases, the lessees were
actually in arrears with their rental payments. The Court, in the Puahay case, ruled that
the lessor had the right to terminate the lease under par. 3, Art. 1673 of the Civil Code,
declaring that the lessor may judicially eject the lessee for violation of any of the
conditions agreed upon in the contract.
[17]
In the case of Singson, the lease contract was
expressly on a month-to-month basis.
The contention of the petitioner that a provision in a contract that the lease period
shall subsist for an indefinite period provided the lessee is up-to-date in the payment of
his monthly rentals is contrary to Art. 1308 of the Civil Code is not plausible. As
expounded by the Court in the case of Philippine Banking Corporation vs. Lui She:
[18]

We have had occasion to delineate the scope and application of article 1308 in the
early case of Taylor v. Uy Tieng Piao.
[19]
We said in that case:
Article 1256 [now art. 1308] of the Civil Code in our opinion creates no impediment
to the insertion in a contract for personal service of a resolutory condition permitting
the cancellation of the contract by one of the parties. Such a stipulation, as can be
readily seen, does not make either the validity or the fulfillment of the contract
dependent upon the will of the party to whom is conceded the privilege of
cancellation; for where the contracting parties have agreed that such option shall exist,
the exercise of the option is as much in the fulfillment of the contract as any other act
which may have been the subject of agreement. xxx.
[20]

Also held in the recent case of Allied Banking Corp. vs. CA
[21]
where this Court
upheld the validity of a contract provision in favor of the lessee:
xxx Article 1308 of the Civil Code expresses what is known in law as the principle
of mutuality of contracts. xxx This binding effect of a contract on both parties is based
on the principle that the obligations arising from contracts have the force of law
between the contracting parties, and there must be mutuality between them based
essentially on their equality under which it is repugnant to have one party bound by
the contract while leaving the other free therefrom. The ultimate purpose is to render
void a contract containing a condition which makes its fulfillment dependent solely
upon the uncontrolled will of one of the contracting parties.
An express agreement which gives the lessee the sole option to renew the lease is
frequent and subject to statutory restrictions, valid and binding on the parties. This
option, which is provided in the same lease agreement, is fundamentally part of the
consideration in the contract and is no different from any other provision of the lease
carrying an undertaking on the part of the lessor to act conditioned on the performance
by the lessee. xxx
The fact that such option is binding only on the lessor and can be exercised only
by the lessee does not render it void for lack of mutuality. After all, the lessor is
free to give or not to give the option to the lessee. And while the lessee has a right
to elect whether to continue with the lease or not, once he exercises his option to
continue and the lessor accepts, both parties are thereafter bound by the new
lease agreement. Their rights and obligations become mutually fixed, and the
lessee is entitled to retain possession of the property for the duration of the new
lease, and the lessor may hold him liable for the rent therefor. The lessee cannot
thereafter escape liability even if he should subsequently decide to abandon the
premises. Mutuality obtains in such a contract and equality exists between the
lessor and the lessee since they remain with the same faculties in respect to
fulfillment.
[22]
(Emphasis supplied)
As correctly ruled by the MTC in its decision, the grant of benefit of the period in
favor of the lessee was given in exchange for no less than an automatic 20% yearly
increase in monthly rentals. This additional condition was not present in the Puahay
and Singson cases.
Moreover, the express provision in the lease agreement of the parties that violation
of any of the terms and conditions of the contract shall be sufficient ground for
termination thereof by the lessor, removes the contract from the application of Article
1308.
Lastly, after having the lessees believe that their lease contract is one with an
indefinite period subject only to prompt payment of the monthly rentals by the lessees,
we agree with private respondents that the lessor is estopped from claiming otherwise.
[23]

In the case of Opulencia vs. Court of Appeals,
[24]
this Court held that petitioner is
estopped from backing out of her representations in the contract with respondent, that
is, she may not renege on her own acts and representations, to the prejudice of the
respondents who relied on them. We have held in a long line of cases that neither the
law nor the courts will extricate a party from an unwise or undesirable contract he or she
entered into with all the required formalities and will full awareness of its
consequences.
[25]

Anent the second issue, we likewise hold that the contention of petitioner is without
merit. The Court of Appeals found that the petitioners allegation of respondents non-
payment is false. This is a finding of fact which we respect and uphold, absent any
showing of arbitrariness or grave abuse on the part of the court. Furthermore, the
statement of petitioner that the correct amount of rents cannot be considered in a
consignation case but only in the ejectment case is misleading because nowhere in the
decision of the appellate court did it state otherwise. This second issue is clearly just a
futile attempt to overthrow the appellate courts ruling.
Nevertheless, suffice it to be stated that under Article 1258 of the Civil Code which
provides:
Art. 1258. Consignation shall be made by depositing the things due at the disposal of
judicial authority, before whom to tender of payment shall be proved, in a proper case,
and the announcement of the consignation in other cases.
The consignation having been made, the interested parties shall also be notified
thereof.
the rationale for consignation is to avoid the performance of an obligation becoming
more onerous to the debtor by reason of causes not imputable to him.
[26]
Whether or not
petitioner has a cause of action to eject private respondents from the leased premises
due to refusal of the lessees to pay the increased monthly rentals had been duly
determined in the ejectment case by the Municipal Trial Court which was correctly
upheld by the Court of Appeals.
WHEREFORE, finding no error in the assailed decision, we DENY the petition for
lack of merit and AFFIRM the decision of the Court of Appeals.
Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, and Callejo, Sr., JJ., concur.
Mendoza, J., on official leave.



CASE #90
G.R. No. L-21601 December 17, 1966
NIELSON & COMPANY, INC., plaintiff-appellant,
vs.
LEPANTO CONSOLIDATED MINING COMPANY, defendant-appellee.
W. H. Quasha and Associates for plaintiff-appellant.
Ponce Enrile, Siguion-Reyna, Montecillo and Belo for defendant-appellee.
ZALDIVAR, J .:
On February 6, 1958, plaintiff brought this action against defendant before the Court of First Instance
of Manila to recover certain sums of money representing damages allegedly suffered by the former
in view of the refusal of the latter to comply with the terms of a management contract entered into
between them on January 30, 1937, including attorney's fees and costs.
Defendant in its answer denied the material allegations of the complaint and set up certain special
defenses, among them, prescription and laches, as bars against the institution of the present action.
After trial, during which the parties presented testimonial and numerous documentary evidence, the
court a quorendered a decision dismissing the complaint with costs. The court stated that it did not
find sufficient evidence to establish defendant's counterclaim and so it likewise dismissed the same.
The present appeal was taken to this Court directly by the plaintiff in view of the amount involved in
the case.
The facts of this case, as stated in the decision appealed from, are hereunder quoted for purposes of
this decision:
It appears that the suit involves an operating agreement executed before World War II
between the plaintiff and the defendant whereby the former operated and managed the
mining properties owned by the latter for a management fee of P2,500.00 a month and a
10% participation in the net profits resulting from the operation of the mining properties. For
brevity and convenience, hereafter the plaintiff shall be referred to as NIELSON and the
defendant, LEPANTO.
The antecedents of the case are: The contract in question (Exhibit `C') was made by the
parties on January 30, 1937 for a period of five (5) years. In the latter part of 1941, the
parties agreed to renew the contract for another period of five (5) years, but in the meantime,
the Pacific War broke out in December, 1941.
In January, 1942 operation of the mining properties was disrupted on account of the war. In
February of 1942, the mill, power plant, supplies on hand, equipment, concentrates on hand
and mines, were destroyed upon orders of the United States Army, to prevent their utilization
by the invading Japanese Army. The Japanese forces thereafter occupied the mining
properties, operated the mines during the continuance of the war, and who were ousted from
the mining properties only in August of 1945.
After the mining properties were liberated from the Japanese forces, LEPANTO took
possession thereof and embarked in rebuilding and reconstructing the mines and mill; setting
up new organization; clearing the mill site; repairing the mines; erecting staff quarters and
bodegas and repairing existing structures; installing new machinery and equipment; repairing
roads and maintaining the same; salvaging equipment and storing the same within the
bodegas; doing police work necessary to take care of the materials and equipment
recovered; repairing and renewing the water system; and remembering (Exhibits "D" and
"E"). The rehabilitation and reconstruction of the mine and mill was not completed until 1948
(Exhibit "F"). On June 26, 1948 the mines resumed operation under the exclusive
management of LEPANTO (Exhibit "F-l").
Shortly after the mines were liberated from the Japanese invaders in 1945, a disagreement
arose between NIELSON and LEPANTO over the status of the operating contract in question
which as renewed expired in 1947. Under the terms thereof, the management contract shall
remain in suspense in case fortuitous event or force majeure, such as war or civil
commotion, adversely affects the work of mining and milling.
"In the event of inundations, floodings of mine, typhoon, earthquake or any other
force majeure, war, insurrection, civil commotion, organized strike, riot, injury to the
machinery or other event or cause reasonably beyond the control of NIELSON and
which adversely affects the work of mining and milling; NIELSON shall report such
fact to LEPANTO and without liability or breach of the terms of this Agreement, the
same shall remain in suspense, wholly or partially during the terms of such inability."
(Clause II of Exhibit "C").
NIELSON held the view that, on account of the war, the contract was suspended during the
war; hence the life of the contract should be considered extended for such time of the period
of suspension. On the other hand, LEPANTO contended that the contract should expire in
1947 as originally agreed upon because the period of suspension accorded by virtue of the
war did not operate to extend further the life of the contract.
No understanding appeared from the record to have been bad by the parties to resolve the
disagreement. In the meantime, LEPANTO rebuilt and reconstructed the mines and was able
to bring the property into operation only in June of 1948, . . . .
Appellant in its brief makes an alternative assignment of errors depending on whether or not the
management contract basis of the action has been extended for a period equivalent to the period of
suspension. If the agreement is suspended our attention should be focused on the first set of errors
claimed to have been committed by the court a quo; but if the contrary is true, the discussion will
then be switched to the alternative set that is claimed to have been committed. We will first take up
the question whether the management agreement has been extended as a result of the supervening
war, and after this question shall have been determined in the sense sustained by appellant, then
the discussion of the defense of laches and prescription will follow as a consequence.
The pertinent portion of the management contract (Exh. C) which refers to suspension should any
event constituting force majeure happen appears in Clause II thereof which we quote hereunder:
In the event of inundations, floodings of the mine, typhoon, earthquake or any other force
majeure, war, insurrection, civil commotion, organized strike, riot, injury to the machinery or
other event or cause reasonably beyond the control of NIELSON and which adversely affects
the work of mining and milling; NIELSON shall report such fact to LEPANTO and without
liability or breach of the terms of this Agreement, the same shall remain in suspense, wholly
or partially during the terms of such inability.
A careful scrutiny of the clause above-quoted will at once reveal that in order that the management
contract may be deemed suspended two events must take place which must be brought in a
satisfactory manner to the attention of defendant within a reasonable time, to wit: (1) the event
constituting the force majeure must be reasonably beyond the control of Nielson, and (2) it must
adversely affect the work of mining and milling the company is called upon to undertake. As long as
these two condition exist the agreement is deem suspended.
Does the evidence on record show that these two conditions had existed which may justify the
conclusion that the management agreement had been suspended in the sense entertained by
appellant? Let us go to the evidence.
It is a matter that this Court can take judicial notice of that war supervened in our country and that
the mines in the Philippines were either destroyed or taken over by the occupation forces with a view
to their operation. The Lepanto mines were no exception for not was the mine itself destroyed but
the mill, power plant, supplies on hand, equipment and the like that were being used there were
destroyed as well. Thus, the following is what appears in the Lepanto Company Mining Report dated
March 13, 1946 submitted by its President C. A. DeWitt to the defendant:
1
"In February of 1942, our
mill, power plant, supplies on hand, equipment, concentrates on hand, and mine, were destroyed
upon orders of the U.S. Army to prevent their utilization by the enemy." The report also mentions the
report submitted by Mr. Blessing, an official of Nielson, that "the original mill was destroyed in 1942"
and "the original power plant and all the installed equipment were destroyed in 1942." It is then
undeniable that beginning February, 1942 the operation of the Lepanto mines stopped or became
suspended as a result of the destruction of the mill, power plant and other important equipment
necessary for such operation in view of a cause which was clearly beyond the control of Nielson and
that as a consequence such destruction adversely affected the work of mining and milling which the
latter was called upon to undertake under the management contract. Consequently, by virtue of the
very terms of said contract the same may be deemed suspended from February, 1942 and as of that
month the contract still had 60 months to go.
On the other hand, the record shows that the defendant admitted that the occupation forces
operated its mining properties subject of the management contract,
2
and from the very report
submitted by President DeWitt it appears that the date of the liberation of the mine was August 1,
1945 although at the time there were still many booby traps.
3
Similarly, in a report submitted by the
defendant to its stockholders dated August 25, 1948, the following appears: "Your Directors take
pleasure in reporting that June 26, 1948 marked the official return to operations of this Company of
its properties in Mankayan, Mountain Province, Philippines."
4

It is, therefore, clear from the foregoing that the Lepanto mines were liberated on August 1, 1945,
but because of the period of rehabilitation and reconstruction that had to be made as a result of the
destruction of the mill, power plant and other necessary equipment for its operation it cannot be said
that the suspension of the contract ended on that date. Hence, the contract must still be deemed
suspended during the succeeding years of reconstruction and rehabilitation, and this period can only
be said to have ended on June 26, 1948 when, as reported by the defendant, the company officially
resumed the mining operations of the Lepanto. It should here be stated that this period of
suspension from February, 1942 to June 26, 1948 is the one urged by plaintiff.
5

It having been shown that the operation of the Lepanto mines on the part of Nielson had been
suspended during the period set out above within the purview of the management contract, the next
question that needs to be determined is the effect of such suspension. Stated in another way, the
question now to be determined is whether such suspension had the effect of extending the period of
the management contract for the period of said suspension. To elucidate this matter, we again need
to resort to the evidence.
For appellant Nielson two witnesses testified, declaring that the suspension had the effect of
extending the period of the contract, namely, George T. Scholey and Mark Nestle. Scholey was a
mining engineer since 1929, an incorporator, general manager and director of Nielson and
Company; and for some time he was also the vice-president and director of the Lepanto Company
during the pre-war days and, as such, he was an officer of both appellant and appellee companies.
As vice-president of Lepanto and general manager of Nielson, Scholey participated in the
negotiation of the management contract to the extent that he initialed the same both as witness and
as an officer of both corporations. This witness testified in this case to the effect that the
standard force majeure clause embodied in the management contract was taken from similar mining
contracts regarding mining operations and the understanding regarding the nature and effect of said
clause was that when there is suspension of the operation that suspension meant the extension of
the contract. Thus, to the question, "Before the war, what was the understanding of the people in the
particular trend of business with respect to the force majeure clause?", Scholey answered: "That was
our understanding that the suspension meant the extension of time lost."
6

Mark Nestle, the other witness, testified along similar line. He had been connected with Nielson
since 1937 until the time he took the witness stand and had been a director, manager, and president
of the same company. When he was propounded the question: "Do you know what was the custom
or usage at that time in connection with force majeure clause?", Nestle answered, "In the mining
world the force majeure clause is generally considered. When a calamity comes up and stops the
work like in war, flood, inundation or fire, etc., the work is suspended for the duration of the calamity,
and the period of the contract is extended after the calamity is over to enable the person to do the
big work or recover his money which he has invested, or accomplish what his obligation is to a third
person ."
7

And the above testimonial evidence finds support in the very minutes of the special meeting of the
Board of Directors of the Lepanto Company issued on March 10, 1945 which was then chairmaned
by Atty. C. A. DeWitt. We read the following from said report:
The Chairman also stated that the contract with Nielson and Company would soon expire if
the obligations were not suspended, in which case we should have to pay them the retaining
fee of P2,500.00 a month. He believes however, that there is a provision in the contract
suspending the effects thereof in cases like the present, and that even if it were not there,
the law itself would suspend the operations of the contract on account of the war. Anyhow,
he stated, we shall have no difficulty in solving satisfactorily any problem we may have with
Nielson and Company.
8

Thus, we can see from the above that even in the opinion of Mr. DeWitt himself, who at the time was
the chairman of the Board of Directors of the Lepanto Company, the management contract would
then expire unless the period therein rated is suspended but that, however, he expressed the belief
that the period was extended because of the provision contained therein suspending the effects
thereof should any of the case of force majeure happen like in the present case, and that even if
such provision did not exist the law would have the effect of suspending it on account of the war. In
substance, Atty. DeWitt expressed the opinion that as a result of the suspension of the mining
operation because of the effects of the war the period of the contract had been extended.
Contrary to what appellant's evidence reflects insofar as the interpretation of the force
majeure clause is concerned, however, appellee gives Us an opposite interpretation invoking in
support thereof not only a letter Atty. DeWitt sent to Nielson on October 20, 1945,
9
wherein he
expressed for the first time an opinion contrary to what he reported to the Board of Directors of
Lepanto Company as stated in the portion of the minutes of its Board of Directors as quoted above,
but also the ruling laid down by our Supreme Court in some cases decided sometime ago, to the
effect that the war does not have the effect of extending the term of a contract that the parties may
enter into regarding a particular transaction, citing in this connection the cases of Victorias Planters
Association v. Victorias Milling Company, 51 O.G. 4010; Rosario S. Vda. de Lacson, et al. v.
Abelardo G. Diaz, 87 Phil. 150; andLo Ching y So Young Chong Co. v. Court of Appeals, et al., 81
Phil. 601.
To bolster up its theory, appellee also contends that the evidence regarding the alleged custom or
usage in mining contract that appellant's witnesses tried to introduce was incompetent because (a)
said custom was not specifically pleaded; (b) Lepanto made timely and repeated objections to the
introduction of said evidence; (c) Nielson failed to show the essential elements of usage which must
be shown to exist before any proof thereof can be given to affect the contract; and (d) the testimony
of its witnesses cannot prevail over the very terms of the management contract which, as a rule, is
supposed to contain all the terms and conditions by which the parties intended to be bound.
It is here necessary to analyze the contradictory evidence which the parties have presented
regarding the interpretation of the force majeure clause in the management contract.
At the outset, it should be stated that, as a rule, in the construction and interpretation of a document
the intention of the parties must be sought (Rule 130, Section 10, Rules of Court). This is the basic
rule in the interpretation of contracts because all other rules are but ancilliary to the ascertainment of
the meaning intended by the parties. And once this intention has been ascertained it becomes an
integral part of the contract as though it had been originally expressed therein in unequivocal terms
(Shoreline Oil Corp. v. Guy, App. 189, So., 348, cited in 17A C.J.S., p. 47). How is this intention
determined?
One pattern is to ascertain the contemporaneous and subsequent acts of the contracting parties in
relation to the transaction under consideration (Article 1371, Civil Code). In this particular case, it is
worthy of note what Atty. C. A. DeWitt has stated in the special meeting of the Board of Directors of
Lepanto in the portion of the minutes already quoted above wherein, as already stated, he
expressed the opinion that the life of the contract, if not extended, would last only until January, 1947
and yet he said that there is a provision in the contract that the war had the effect of suspending the
agreement and that the effect of that suspension was that the agreement would have to continue
with the result that Lepanto would have to pay the monthly retaining fee of P2,500.00. And this belief
that the war suspended the agreement and that the suspension meant its extension was so firm that
he went to the extent that even if there was no provision for suspension in the agreement the law
itself would suspend it.
It is true that Mr. DeWitt later sent a letter to Nielson dated October 20, 1945 wherein apparently he
changed his mind because there he stated that the contract was merely suspended, but not
extended, by reason of the war, contrary to the opinion he expressed in the meeting of the Board of
Directors already adverted to, but between the two opinions of Atty. DeWitt We are inclined to give
more weight and validity to the former not only because such was given by him against his own
interest but also because it was given before the Board of Directors of Lepanto and in the presence,
of some Nielson officials
10
who, on that occasion were naturally led to believe that that was the true
meaning of the suspension clause, while the second opinion was merely self-serving and was given
as a mere afterthought.
Appellee also claims that the issue of true intent of the parties was not brought out in the complaint,
but anent this matter suffice it to state that in paragraph No. 19 of the complaint appellant pleaded
that the contract was extended.
11
This is a sufficient allegation considering that the rules on
pleadings must as a rule be liberally construed.
It is likewise noteworthy that in this issue of the intention of the parties regarding the meaning and
usage concerning the force majeure clause, the testimony adduced by appellant is uncontradicted. If
such were not true, appellee should have at least attempted to offer contradictory evidence. This it
did not do. Not even Lepanto's President, Mr. V. E. Lednicky who took the witness stand,
contradicted said evidence.
In holding that the suspension of the agreement meant the extension of the same for a period
equivalent to the suspension, We do not have the least intention of overruling the cases cited by
appellee. We simply want to say that the ruling laid down in said cases does not apply here because
the material facts involved therein are not the same as those obtaining in the present. The rule
of stare decisis cannot be invoked where there is no analogy between the material facts of the
decision relied upon and those of the instant case.
Thus, in Victorias Planters Association vs. Victorias Milling Company, 51 O.G. 4010, there was no
evidence at all regarding the intention of the parties to extend the contract equivalent to the period of
suspension caused by the war. Neither was there evidence that the parties understood the
suspension to mean extension; nor was there evidence of usage and custom in the industry that the
suspension meant the extension of the agreement. All these matters, however, obtain in the instant
case.
Again, in the case of Rosario S. Vda. de Lacson vs. Abelardo G. Diaz, 87 Phil. 150, the issue
referred to the interpretation of a pre-war contract of lease of sugar cane lands and the liability of the
lessee to pay rent during and immediately following the Japanese occupation and where the
defendant claimed the right of an extension of the lease to make up for the time when no cane was
planted. This Court, in holding that the years which the lessee could not use the land because of the
war could not be discounted from the period agreed upon, held that "Nowhere is there any
insinuation that the defendant-lessee was to have possession of lands for seven years excluding
years on which he could not harvest sugar." Clearly, this ratio decidendi is not applicable to the case
at bar wherein there is evidence that the parties understood the "suspension clause by force
majeure" to mean the extension of the period of agreement.
Lastly, in the case of Lo Ching y So Young Chong Co. vs. Court of Appeals, et al., 81 Phil. 601,
appellant leased a building from appellee beginning September 13, 1940 for three years, renewable
for two years. The lessee's possession was interrupted in February, 1942 when he was ousted by
the Japanese who turned the same over to German Otto Schulze, the latter occupying the same
until January, 1945 upon the arrival of the liberation forces. Appellant contended that the period
during which he did not enjoy the leased premises because of his dispossession by the Japanese
had to be deducted from the period of the lease, but this was overruled by this Court, reasoning that
such dispossession was merely a simple "perturbacion de merohecho y de la cual no responde el
arrendador" under Article 1560 of the old Civil Code Art. 1664). This ruling is also not applicable in
the instant case because in that case there was no evidence of the intention of the parties that any
suspension of the lease by force majeure would be understood to extend the period of the
agreement.
In resume, there is sufficient justification for Us to conclude that the cases cited by appellee are
inapplicable because the facts therein involved do not run parallel to those obtaining in the present
case.
We shall now consider appellee's defense of laches. Appellee is correct in its contention that the
defense of laches applies independently of prescription. Laches is different from the statute of
limitations. Prescription is concerned with the fact of delay, whereas laches is concerned with the
effect of delay. Prescription is a matter of time; laches is principally a question of inequity of
permitting a claim to be enforced, this inequity being founded on some change in the condition of the
property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in
equity, whereas prescription applies at law. Prescription is based on fixed time, laches is not. (30
C.J.S., p. 522; See also Pomeroy's Equity Jurisprudence, Vol. 2, 5th ed., p. 177).
The question to determine is whether appellant Nielson is guilty of laches within the meaning
contemplated by the authorities on the matter. In the leading case of Go Chi Gun, et al. vs. Go Cho,
et al., 96 Phil. 622, this Court enumerated the essential elements of laches as follows:
(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which complaint is made and for which the complaint seeks a remedy; (2) delay
in asserting the complainant's rights, the complainant having had knowledge or notice of the
defendant's conduct and having been afforded an opportunity to institute a suit; (3) lack of
knowledge or notice on the part of the defendant that the complainant would assert the right
on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held barred.
Are these requisites present in the case at bar?
The first element is conceded by appellant Nielson when it claimed that defendant refused to pay its
management fees, its percentage of profits and refused to allow it to resume the management
operation.
Anent the second element, while it is true that appellant Nielson knew since 1945 that appellee
Lepanto has refused to permit it to resume management and that since 1948 appellee has resumed
operation of the mines and it filed its complaint only on February 6, 1958, there being apparent delay
in filing the present action, We find the delay justified and as such cannot constitute laches. It
appears that appellant had not abandoned its right to operate the mines for even before the
termination of the suspension of the agreement as early as January 20, 1946
12
and even before
March 10, 1945, it already claimed its right to the extension of the contract,
13
and it pressed its claim
for the balance of its share in the profits from the 1941 operation
14
by reason of which negotiations
had taken place for the settlement of the claim
15
and it was only on June 25, 1957 that appellee
finally denied the claim. There is, therefore, only a period of less than one year that had elapsed
from the date of the final denial of the claim to the date of the filing of the complaint, which certainly
cannot be considered as unreasonable delay.
The third element of laches is absent in this case. It cannot be said that appellee Lepanto did not
know that appellant would assert its rights on which it based suit. The evidence shows that Nielson
had been claiming for some time its rights under the contract, as already shown above.
Neither is the fourth element present, for if there has been some delay in bringing the case to court it
was mainly due to the attempts at arbitration and negotiation made by both parties. If Lepanto's
documents were lost, it was not caused by the delay of the filing of the suit but because of the war.
Another reason why appellant Nielson cannot be held guilty of laches is that the delay in the filing of
the complaint in the present case was the inevitable of the protracted negotiations between the
parties concerning the settlement of their differences. It appears that Nielson asked for
arbitration
16
which was granted. A committee consisting of Messrs. DeWitt, Farnell and Blessing was
appointed to act on said differences but Mr. DeWitt always tried to evade the issue
17
until he was
taken ill and died. Mr. Farnell offered to Nielson the sum of P13,000.58 by way of compromise of all
its claim arising from the management contract
18
but apparently the offer was refused. Negotiations
continued with the exchange of letters between the parties but with no satisfactory result.
19
It can be
said that the delay due to protracted negotiations was caused by both parties. Lepanto, therefore,
cannot be permitted to take advantage of such delay or to question the propriety of the action taken
by Nielson. The defense of laches is an equitable one and equity should be applied with an even
hand. A person will not be permitted to take advantage of, or to question the validity, or propriety of,
any act or omission of another which was committed or omitted upon his own request or was caused
by his conduct (R. H. Stearns Co. vs. United States, 291 U.S. 54, 78 L. Ed. 647, 54 S. Ct., 325;
United States vs. Henry Prentiss & Co., 288 U.S. 73, 77 L. Ed., 626, 53 S. Ct., 283).
Had the action of Nielson prescribed? The court a quo held that the action of Nielson is already
barred by the statute of limitations, and that ruling is now assailed by the appellant in this appeal. In
urging that the court a quoerred in reaching that conclusion the appellant has discussed the issue
with reference to particular claims.
The first claim is with regard to the 10% share in profits of 1941 operations. Inasmuch as appellee
Lepanto alleges that the correct basis of the computation of the sharing in the net profits shall be as
provided for in Clause V of the Management Contract, while appellant Nielson maintains that the
basis should be what is contained in the minutes of the special meeting of the Board of Directors of
Lepanto on August 21, 1940, this question must first be elucidated before the main issue is
discussed.
The facts relative to the matter of profit sharing follow: In the management contract entered into
between the parties on January 30, 1937, which was renewed for another five years, it was
stipulated that Nielson would receive a compensation of P2,500.00 a month plus 10% of the net
profits from the operation of the properties for the preceding month. In 1940, a dispute arose
regarding the computation of the 10% share of Nielson in the profits. The Board of Directors of
Lepanto, realizing that the mechanics of the contract was unfair to Nielson, authorized its President
to enter into an agreement with Nielson modifying the pertinent provision of the contract effective
January 1, 1940 in such a way that Nielson shall receive (1) 10% of the dividends declared and paid,
when and as paid, during the period of the contract and at the end of each year, (2) 10% of any
depletion reserve that may be set up, and (3) 10% of any amount expended during the year out of
surplus earnings for capital account.
20
Counsel for the appellee admitted during the trial that the
extract of the minutes as found in Exhibit B is a faithful copy from the original.
21
Mr. George Scholey
testified that the foregoing modification was agreed upon.
22

Lepanto claims that this new basis of computation should be rejected (1) because the contract was
clear on the point of the 10% share and it was so alleged by Nielson in its complaint, and (2) the
minutes of the special meeting held on August 21, 1940 was not signed.
It appearing that the issue concerning the sharing of the profits had been raised in appellant's
complaint and evidence on the matter was introduced
23
the same can be taken into account even if
no amendment of the pleading to make it conform to the evidence has been made, for the same is
authorized by Section 4, Rule 17, of the old Rules of Court (now Section 5, Rule 10, of the new
Rules of Court).
Coming now to the question of prescription raised by defendant Lepanto, it is contended by the latter
that the period to be considered for the prescription of the claim regarding participation in the profits
is only four years, because the modification of the sharing embodied in the management contract is
merely verbal, no written document to that effect having been presented. This contention is
untenable. The modification appears in the minutes of the special meeting of the Board of Directors
of Lepanto held on August 21, 1940, it having been made upon the authority of its President, and in
said minutes the terms of the modification had been specified. This is sufficient to have the
agreement considered, for the purpose of applying the statute of limitations, as a written contract
even if the minutes were not signed by the parties (3 A.L.R., 2d, p. 831). It has been held that a
writing containing the terms of a contract if adopted by two persons may constitute a contract in
writing even if the same is not signed by either of the parties (3 A.L.R., 2d, pp. 812-813). Another
authority says that an unsigned agreement the terms of which are embodied in a document
unconditionally accepted by both parties is a written contract (Corbin on Contracts, Vol. 1, p. 85)
The modification, therefore, made in the management contract relative to the participation in the
profits by appellant, as contained in the minutes of the special meeting of the Board of Directors of
Lepanto held on August 21, 1940, should be considered as a written contract insofar as the
application of the statutes of limitations is concerned. Hence, the action thereon prescribes within ten
(10) years pursuant to Section 43 of Act 190.
Coming now to the facts, We find that the right of Nielson to its 10% participation in the 1941
operations accrued on December 21, 1941 and the right to commence an action thereon began on
January 1, 1942 so that the action must be brought within ten (10) years from the latter date. It is
true that the complaint was filed only on February 6, 1958, that is sixteen (16) years, one (1) month
and five (5) days after the right of action accrued, but the action has not yet prescribed for various
reasons which We will hereafter discuss.
The first reason is the operation of the Moratorium Law, for appellant's claim is undeniably a claim
for money. Said claim accrued on December 31, 1941, and Lepanto is a war sufferer. Hence the
claim was covered by Executive Order No. 32 of March 10, 1945. It is well settled that the operation
of the Moratorium Law suspends the running of the statue of limitations (Pacific Commercial Co. vs.
Aquino, G.R. No. L-10274, February 27, 1957).
This Court has held that the Moratorium Law had been enforced for eight (8) years, two (2) months
and eight (8) days (Tioseco vs. Day, et al., L-9944, April 30, 1957; Levy Hermanos, Inc. vs. Perez, L-
14487, April 29, 1960), and deducting this period from the time that had elapsed since the accrual of
the right of action to the date of the filing of the complaint, the extent of which is sixteen (16) years,
one (1) month and five (5) days, we would have less than eight (8) years to be counted for purposes
of prescription. Hence appellant's action on its claim of 10% on the 1941 profits had not yet
prescribed.
Another reason that may be taken into account in support of the no-bar theory of appellant is the
arbitration clause embodied in the management contract which requires that any disagreement as to
any amount of profits before an action may be taken to court shall be subject to arbitration.
24
This
agreement to arbitrate is valid and binding.
25
It cannot be ignored by Lepanto. Hence Nielson could
not bring an action on its participation in the 1941 operations-profits until the condition relative to
arbitration had been first complied with.
26
The evidence shows that an arbitration committee was
constituted but it failed to accomplish its purpose on June 25, 1957.
27
From this date to the filing of
the complaint the required period for prescription has not yet elapsed.
Nielson claims the following: (1) 10% share in the dividends declared in 1941, exclusive of interest,
amounting to P17,500.00; (2) 10% in the depletion reserves for 1941; and (3) 10% in the profits for
years prior to 1948 amounting to P19,764.70.
With regard to the first claim, the Lepanto's report for the calendar year of 1954
28
shows that it
declared a 10% cash dividend in December, 1941, the amount of which is P175,000.00. The
evidence in this connection (Exhibits L and O) was admitted without objection by counsel for
Lepanto.
29
Nielson claims 10% share in said amount with interest thereon at 6% per annum. The
document (Exhibit L) was even recognized by Lepanto's President V. L. Lednicky,
30
and this claim is
predicated on the provision of paragraph V of the management contract as modified pursuant to the
proposal of Lepanto at the special meeting of the Board of Directors on August 21, 1940 (Exh. B),
whereby it was provided that Nielson would be entitled to 10% of any dividends to be declared and
paid during the period of the contract.
With regard to the second claim, Nielson admits that there is no evidence regarding the amount set
aside by Lepanto for depletion reserve for 1941
31
and so the 10% participation claimed thereon
cannot be assessed.
Anent the third claim relative to the 10% participation of Nielson on the sum of P197,647.08, which
appears in Lepanto's annual report for 1948
32
and entered as profit for prior years in the statement
of income and surplus, which amount consisted "almost in its entirety of proceeds of copper
concentrates shipped to the United States during 1947," this claim should to denied because the
amount is not "dividend declared and paid" within the purview of the management contract.
The fifth assignment of error of appellant refers to the failure of the lower court to order Lepanto to
pay its management fees for January, 1942, and for the full period of extension amounting to
P150,000.00, or P2,500.00 a month for sixty (60) months, a total of P152,500.00 with interest
thereon from the date of judicial demand.
It is true that the claim of management fee for January, 1942 was not among the causes of action in
the complaint, but inasmuch as the contract was suspended in February, 1942 and the management
fees asked for included that of January, 1942, the fact that such claim was not included in a specific
manner in the complaint is of no moment because an appellate court may treat the pleading as
amended to conform to the evidence where the facts show that the plaintiff is entitled to relief other
than what is asked for in the complaint (Alonzo vs. Villamor, 16 Phil. 315). The evidence shows that
the last payment made by Lepanto for management fee was for November and December,
1941.
33
If, as We have declared, the management contract was suspended beginning February
1942, it follows that Nielson is entitled to the management fee for January, 1942.
Let us now come to the management fees claimed by Nielson for the period of extension. In this
respect, it has been shown that the management contract was extended from June 27, 1948 to June
26, 1953, or for a period of sixty (60) months. During this period Nielson had a right to continue in
the management of the mining properties of Lepanto and Lepanto was under obligation to let
Nielson do it and to pay the corresponding management fees. Appellant Nielson insisted in
performing its part of the contract but Lepanto prevented it from doing so. Hence, by virtue of Article
1186 of the Civil Code, there was a constructive fulfillment an the part of Nielson of its obligation to
manage said mining properties in accordance with the contract and Lepanto had the reciprocal
obligation to pay the corresponding management fees and other benefits that would have accrued to
Nielson if Lepanto allowed it (Nielson) to continue in the management of the mines during the
extended period of five (5) years.
We find that the preponderance of evidence is to the effect that Nielson had insisted in managing the
mining properties soon after liberation. In the report
34
of Lepanto, submitted to its stockholders for
the period from 1941 to March 13, 1946, are stated the activities of Nielson's officials in relation to
Nielson's insistence in continuing the management. This report was admitted in evidence without
objection. We find the following in the report:
Mr. Blessing, in May, 1945, accompanied Clark and Stanford to San Fernando (La Union) to await
the liberation of the mines. (Mr. Blessing was the Treasurer and Metallurgist of Nielson). Blessing
with Clark and Stanford went to the property on July 16 and found that while the mill site had been
cleared of the enemy the latter was still holding the area around the staff houses and putting up a
strong defense. As a result, they returned to San Fernando and later went back to the mines on July
26. Mr. Blessing made the report, dated August 6, recommending a program of operation. Mr.
Nielson himself spent a day in the mine early in December, 1945 and reiterated the program which
Mr. Blessing had outlined. Two or three weeks before the date of the report, Mr. Coldren of the
Nielson organization also visited the mine and told President C. A. DeWitt of Lepanto that he thought
that the mine could be put in condition for the delivery of the ore within ten (10) days. And according
to Mark Nestle, a witness of appellant, Nielson had several men including engineers to do the job in
the mines and to resume the work. These engineers were in fact sent to the mine site and submitted
reports of what they had done.
35

On the other hand, appellee claims that Nielson was not ready and able to resume the work in the
mines, relying mainly on the testimony of Dr. Juan Nabong, former secretary of both Nielson and
Lepanto, given in the separate case of Nancy Irving Romero vs. Lepanto Consolidated Mining
Company (Civil Case No. 652, CFI, Baguio), to the effect that as far as he knew "Nielson and
Company had not attempted to operate the Lepanto Consolidated Mining Company because Mr.
Nielson was not here in the Philippines after the last war. He came back later," and that Nielson and
Company had no money nor stocks with which to start the operation. He was asked by counsel for
the appellee if he had testified that way in Civil Case No. 652 of the Court of First Instance of
Baguio, and he answered that he did not confirm it fully. When this witness was asked by the same
counsel whether he confirmed that testimony, he said that when he testified in that case he was not
fully aware of what happened and that after he learned more about the officials of the corporation it
was only then that he became aware that Nielson had really sent his men to the mines along with
Mr. Blessing and that he was aware of this fact personally. He further said that Mr. Nielson was here
in 1945 and "he was going out and contacting his people."
36

Lepanto admits, in its own brief, that Nielson had really insisted in taking over the management and
operation of the mines but that it (Lepanto) unequivocally refuse to allow it. The following is what
appears in the brief of the appellee:
It was while defendant was in the midst of the rehabilitation work which was fully described
earlier, still reeling under the terrible devastation and destruction wrought by war on its mine
that Nielson insisted in taking over the management and operation of the mine. Nielson thus
put Lepanto in a position where defendant, under the circumstances, had to refuse, as in fact
it did, Nielson's insistence in taking over the management and operation because, as was
obvious, it was impossible, as a result of the destruction of the mine, for the plaintiff to
manage and operate the same and because, as provided in the agreement, the contract was
suspended by reason of the war. The stand of Lepanto in disallowing Nielson to assume
again the management of the mine in 1945 was unequivocal and cannot be
misinterpreted, infra.
37

Based on the foregoing facts and circumstances, and Our conclusion that the management contract
was extended, We believe that Nielson is entitled to the management fees for the period of
extension. Nielson should be awarded on this claim sixty times its monthly pay of P2,500.00, or a
total of P150,000.00.
In its sixth assignment of error Nielson contends that the lower court erred in not ordering Lepanto to
pay it (Nielson) the 10% share in the profits of operation realized during the period of five (5) years
from the resumption of its post-war operations of the Mankayan mines, in the total sum of
P2,403,053.20 with interest thereon at the rate of 6% per annum from February 6, 1958 until full
payment.
38

The above claim of Nielson refers to four categories, namely: (1) cash dividends; (2) stock dividends;
(3) depletion reserves; and (4) amount expended on capital investment.
Anent the first category, Lepanto's report for the calendar year 1954
39
contains a record of the cash
dividends it paid up to the date of said report, and the post-war dividends paid by it corresponding to
the years included in the period of extension of the management contract are as follows:
POST-WAR
8 10% November 1949 P 200,000.00
9 10% July 1950 300,000.00
10 10% October 1950 500,000.00
11 20% December 1950 1,000,000.00
12 20% March 1951 1,000,000.00
13 20% June 1951 1,000,000.00
14 20% September 1951 1,000,000.00
15 40% December 1951 2,000,000.00
16 20% March 1952 1,000,000.00
17 20% May 1952 1,000,000.00
18 20% July 1952 1,000,000.00
19 20% September 1952 1,000,000.00
20 20% December 1952 1,000,000.00
21 20% March 1953 1,000,000.00
22 20% June 1953 1,000,000.00

TOTAL

P14,000,000.00
According to the terms of the management contract as modified, appellant is entitled to 10% of the
P14,000,000.00 cash dividends that had been distributed, as stated in the above-mentioned report,
or the sum of P1,400,000.00.
With regard to the second category, the stock dividends declared by Lepanto during the period of
extension of the contract are: On November 28, 1949, the stock dividend declared was 50% of the
outstanding authorized capital of P2,000,000.00 of the company, or stock dividends worth
P1,000,000.00; and on August 22, 1950, the stock dividends declared was 66-2/3% of the standing
authorized capital of P3,000,000.00 of the company, or stock dividends worth P2,000,000.00.
40

Appellant's claim that it should be given 10% of the cash value of said stock dividends with interest
thereon at 6% from February 6, 1958 cannot be granted for that would not be in accordance with the
management contract which entitles Nielson to 10% of any dividends declared paid, when and as
paid. Nielson, therefore, is entitled to 10% of the stock dividends and to the fruits that may have
accrued to said stock dividends pursuant to Article 1164 of the Civil Code. Hence to Nielson is due
shares of stock worth P100,000.00, as per stock dividends declared on November 28, 1949 and all
the fruits accruing to said shares after said date; and also shares of stock worth P200,000.00 as per
stock dividends declared on August 20, 1950 and all fruits accruing thereto after said date.
Anent the third category, the depletion reserve appearing in the statement of income and surplus
submitted by Lepanto corresponding to the years covered by the period of extension of the contract,
may be itemized as follows:
In 1948, as per Exh. F, p. 36 and Exh. Q, p. 5, the depletion reserve set up was P11,602.80.
In 1949, as per Exh. G, p. 49 and Exh. Q, p. 5, the depletion reserve set up was P33,556.07.
In 1950, as per Exh. H, p. 37, Exh. Q, p. 6 and Exh. I, p. 37, the depletion reserve set up was
P84,963.30.
In 1951, as per Exh. I, p. 45, Exh. Q, p. 6, and Exh. J, p. 45, the depletion reserve set up was
P129,089.88.
In 1952, as per Exh. J, p. 45, Exh. Q, p. 6 and Exh. K p. 41, the depletion reserve was
P147,141.54.
In 1953, as per Exh. K, p. 41, and Exh. Q, p. 6, the depletion reserve set up as P277,493.25.
Regarding the depletion reserve set up in 1948 it should be noted that the amount given was for the
whole year. Inasmuch as the contract was extended only for the last half of the year 1948, said
amount of P11,602.80 should be divided by two, and so Nielson is only entitled to 10% of the half
amounting to P5,801.40.
Likewise, the amount of depletion reserve for the year 1953 was for the whole year and since the
contract was extended only until the first half of the year, said amount of P277,493.25 should be
divided by two, and so Nielson is only entitled to 10% of the half amounting to P138,746.62.
Summing up the entire depletion reserves, from the middle of 1948 to the middle of 1953, we would
have a total of P539,298.81, of which Nielson is entitled to 10%, or to the sum of P53,928.88.
Finally, with regard to the fourth category, there is no figure in the record representing the value of
the fixed assets as of the beginning of the period of extension on June 27, 1948. It is possible,
however, to arrive at the amount needed by adding to the value of the fixed assets as of December
31, 1947 one-half of the amount spent for capital account in the year 1948. As of December 31,
1947, the value of the fixed assets was P1,061,878.88
41
and as of December 31, 1948, the value of
the fixed assets was P3,270,408.07.
42
Hence, the increase in the value of the fixed assets for the
year 1948 was P2,208,529.19, one-half of which is P1,104,264.59, which amount represents the
expenses for capital account for the first half of the year 1948. If to this amount we add the fixed
assets as of December 31, 1947 amounting to P1,061,878.88, we would have a total of
P2,166,143.47 which represents the fixed assets at the beginning of the second half of the year
1948.
There is also no figure representing the value of the fixed assets when the contract, as extended,
ended on June 26, 1953; but this may be computed by getting one-half of the expenses for capital
account made in 1953 and adding the same to the value of the fixed assets as of December 31,
1953 is P9,755,840.41
43
which the value of the fixed assets as of December 31, 1952 is
P8,463,741.82, the difference being P1,292,098.69. One-half of this amount is P646,049.34 which
would represent the expenses for capital account up to June, 1953. This amount added to the value
of the fixed assets as of December 31, 1952 would give a total of P9,109,791.16 which would be the
value of fixed assets at the end of June, 1953.
The increase, therefore, of the value of the fixed assets of Lepanto from June, 1948 to June, 1953 is
P6,943,647.69, which amount represents the difference between the value of the fixed assets of
Lepanto in the year 1948 and in the year 1953, as stated above. On this amount Nielson is entitled
to a share of 10% or to the amount of P694,364.76.
Considering that most of the claims of appellant have been entertained, as pointed out in this
decision, We believe that appellant is entitled to be awarded attorney's fees, especially when,
according to the undisputed testimony of Mr. Mark Nestle, Nielson obliged himself to pay attorney's
fees in connection with the institution of the present case. In this respect, We believe, considering
the intricate nature of the case, an award of fifty thousand (P50,000.00) pesos for attorney's fees
would be reasonable.
IN VIEW OF THE FOREGOING CONSIDERATIONS, We hereby reverse the decision of the court a
quo and enter in lieu thereof another, ordering the appellee Lepanto to pay appellant Nielson the
different amounts as specified hereinbelow:
(1) 10% share of cash dividends of December, 1941 in the amount of P17,500.00, with legal interest
thereon from the date of the filing of the complaint;
(2) management fee for January, 1942 in the amount of P2,500.00, with legal interest thereon from
the date of the filing of the complaint;
(3) management fees for the sixty-month period of extension of the management contract,
amounting to P150,000.00, with legal interest from the date of the filing of the complaint;
(4) 10% share in the cash dividends during the period of extension of the management contract,
amounting to P1,400,000.00, with legal interest thereon from the date of the filing of the complaint;
(5) 10% of the depletion reserve set up during the period of extension, amounting to P53,928.88,
with legal interest thereon from the date of the filing of the complaint;
(6) 10% of the expenses for capital account during the period of extension, amounting to
P694,364.76, with legal interest thereon from the date of the filing of the complaint;
(7) to issue and deliver to Nielson and Co., Inc. shares of stock of Lepanto Consolidated Mining Co.
at par value equivalent to the total of Nielson's l0% share in the stock dividends declared on
November 28, 1949 and August 22, 1950, together with all cash and stock dividends, if any, as may
have been declared and issued subsequent to November 28, 1949 and August 22, 1950, as fruits
that accrued to said shares;
If sufficient shares of stock of Lepanto's are not available to satisfy this judgment, defendant-
appellee shall pay plaintiff-appellant an amount in cash equivalent to the market value of said shares
at the time of default (12 C.J.S., p. 130), that is, all shares of the stock that should have been
delivered to Nielson before the filing of the complaint must be paid at their market value as of the
date of the filing of the complaint; and all shares, if any, that should have been delivered after the
filing of the complaint at the market value of the shares at the time Lepanto disposed of all its
available shares, for it is only then that Lepanto placed itself in condition of not being able to perform
its obligation (Article 1160, Civil Code);
(8) the sum of P50,000.00 as attorney's fees; and
(9) the costs. It is so ordered.