Case 31

MANILA LODGE NO. 761 BENEVELONT

PROTECTIVE ORDER OF THE ELKS V CA

&

CASTRO; September 30, 1976

NATURE Petitions for review on certiorari of the
decision of the Court of Appeals
FACTS
- On June 26, 1905 the Philippine Commission
enacted Act No. 1360 which authorized the City of
Manila to reclaim a portion of Manila Bay. The
reclaimed area was to form part of the Luneta
extension. The Act provided that the reclaimed area
"shall be the property of the City of Manila" and that
the City of Manila is authorized to set aside a tract of
the reclaimed land formed by the Luneta extension
at the north end for a hotel site, and to lease the
same, with the approval of the Governor General, to
a responsible person or corporation for a term not to
exceed 99 years.
Subsequently, the Philippine Commission passed on
May 18, 1907 Act No. 1657, amending Act No. 1360,
so as to authorize the City of Manila either to lease or
to sell the portion set aside as a hotel site.
- The total area reclaimed was a little over 25
hectares. The City of Manila applied for the
registration of the reclaimed area, and on January 20,
1911, original certificate of title was issued in the
name of the City of Manila. The title described the
registered land as "un terreno conocido con el
nombre de Luneta Extension, situado en el distrito de
la Ermita." [Translation: A land known under the
name of Luneta Extension, situated in the district of
Ermita.]
- The registration was subject, however, to the
encumbrances mentioned in Article 39 of the Land
Registration Act as may be subsisting and "sujeto a
las disposiciones y condiciones inipuestas en la Ley
No. 1360; y sujeto tambien a los contratos de venta,
celebratlos y oborgados por ta Ciudad de Manila a
favor del Army and Navy Club y la Manila Lodge No.
761. Benevolent and Protective Order of Elks,
fechadosen 29 de Diciembre de 1908 y 16 de Enero
de 1909."
[Translation: Subject to the dispositions and
conditions provided by Act No. 1360; and subject also
to contracts of sale celebrated and entered into by
the City of Manila in favor of the Army and Navy Club
and Manila Lodge No. 761 Benevolent and Protective
Order of Elks (BPOE for short), dated 29th of
December 1908 and
16th of January 1909.]
- On July 13, 1911, the City of Manila conveyed
5,543.07 square meters of the
reclaimed area to the Manila Lodge No. 761, BPOE on
the basis of which a transfer
certificate of title was issued to the latter over the
"parcela de terreno que es parte
de la Luneta Extension, Situada en el Distrito de la
Ermita."

[Translation: Parcel of land which is part of the Luneta

Extension, situated in the
District of Ermita]
- At the back of this title was an annotated document
which in part reads as follows:
"que la citada ciudad de Manila tendra derecho a su
opcion de recompray la expresada propiedad para
fines puldicos solamente, en cualquier tiempo
despues de cincuenta anos desde el 13 de Julio de
1911, previo pago a la entidad compradora, o a sus
sucesores del precio de la venta de la misma
propiedad, mas el valor que entoces tengan las
mejores."
[Attempted Translation: That the said city of Manila
has the legal option to repurchase the said property
solely for public purposes, at any time after fifty
years from the 13th of July 1911, at the price
previously paid to the buying entity or the future
market price of the property, whichever value is
higher.]
- In January 1963 the BPOE petitioned the CFI of
Manila, Branch IV, for the cancellation of the right of
the City Manila to repurchase the property. This
petition was granted on February 15, 1963.
- On November 19, 1963 the BPOE sold for the sum
of P4,700,000 the land together with all the
improvements thereon to the Tarlac Development
Corporation (TDC, for short) which paid P1,700,000
as down payment and mortgaged to the vendor the
same realty to secure the payment of the balance to
be paid in quarterly installments. At the time of the
sale, there was no annotation of any subsisting lien
on the title to the property. On December 12, 1963
TCT No. 73444 was issued to TDC over the subject
land still described as "Una parcela de terreno, que
es parte de la Luneta Extension, situada en el Distrito
de Ermita."
- In June 1964 the City of Manila filed with the CFI of
Manila a petition for the reannotation of its right to
repurchase. The court, after hearing, issued an order,
dated November 19, 1964, directing the Regrister of
Deeds of the City of Manila to reannotate in toto the
entry regarding the right of the City of Manila to
repurchase the property after fifty years. From this
order TDC and BPOE appealed to this Court which on
July 31, 1968 affirmed the trial court's order of
reannotation, but reserved to TDC the right to bring
another action for the clarification of its rights.
- After trial the court a quo rendered on July 14, 1972
its decision finding the subject land to be part of the
"public park or plaza" and, therefore, part of the
public domain. The court consequently declared that
the sale of the subject land by the City of Manila to
Manila Lodge No. 761, BPOE, was null and void; that
plaintiff TDC was a purchaser thereof in good faith
and for value from BPOE and can enforce its rights
against the latter; and that BPOE is entitled to
recover from the City of Manila whatever
consideration it had paid the latter.
- In its decision promulgated on June 30, 1975, the
CA concurred in the findings and conclusions of the
lower court.

ISSUES
1. WON the property subject of the action was
patrimonial property of the City of Manila and not a
park or plaza
2. WON the City of Manila is estopped from
questioning the validity of the sale it executed on July
13, 1911 conveying the subject property to the
Manila Lodge No. 761, BPOE
3. WON the CA has departed from the accepted and
usual course of judicial proceedings in that it did not
make its own findings but simply recited those of the
lower court\
HELD
1. NO
We hold that it is of public dominion, intended for
public use. Reasoning Firstly, if the reclaimed area
was granted to the City of Manila as its patrimonial
property, the City could, by virtue of its ownership,
dispose of the whole reclaimed area without need of
authorization to do so from the lawmaking body. Thus
Article 348 of the Civil Code of Spain provides that
"ownership is the right to enjoy and dispose of a
thing without further limitations than those
established by law." The right to dispose (jus
disponendi) of one's property is an attribute of
ownership. Act No. 1360, as amended, however,
provides by necessary implication, that the City of
Manila could not dispose of the reclaimed area
without being authorized by the lawmaking, body.
Thus the statute provides that "the City of Manila is
hereby authorized to set aside a tract at the north
end, for a hotel site, and to lease the same x x x
should the municipal board x x x deem it advisable, it
is hereby authorized x x x to sell said tract of land x x
x." If the reclaimed area were patrimonial property of
the City, the latter could dispose of it without need of
the authorization provided by the statute, and the
authorization to set aside, lease, or sell given by the
statute would indeed be superfluous. To so construe
the statute as to render the term "authorize," which
is repeatedly used by the statute, superfluous would
violate the elementary rule of legal hermeneutics
that effect must be given to every word, clause, and
sentence of the statute and that a statute should be
so interpreted that no part thereof becomes
inoperative or superflous. To authorizemeans to
empower, to give a right to act. Act No. 1360
furthermore qualifies the verb "authorize" with the
adverb "hereby," which means "by means of this
statue or section." Hence without the authorization
expressly given by Act No. 1360, the City of Manila
could not lease or sell even the northern portion;
much less could it dispose of the whole reclaimed
area. Consequently, the reclaimed area was granted
to the City of Manila, not as its patrimonial property.
At most, only the northern portion reserved as a
hotel site could be said to be patrimonial property,
for, by express statutory provision it could be
disposed of, and the title thereto would revert to the
City should the grantee fail to comply with the terms
provided by the statute.
- Secondly. the reclaimed area is an "extension to the
Luneta in the City of Manila." If the reclaimed area is
an extension of the Luneta, then it is of the same
nature or character as the old Luneta. Anent this

matter, it has been said that a power to extend or

continue an act or business cannot authorize a
transaction that is totally distinct. It is not disputed
that the old Luneta is a public park or plaza and it is
so considered by Section 859 of the Revised
Ordinances of the City of Manila.
Hence the "extension to the Luneta" must be also a
public park or plaza and for public use. TDC,
however, contends that the subject property cannot
be considered an extension of the old Luneta
because it is outside of the limits of the old Luneta
when extended to the sea. This is a strained
interpretation of the term "extension," for an
"extension" it has been held, "signifies enlargement
in any direction-in length, breadth, or circumstances.
- Thirdly, the reclaimed area was formerly a part of
the Manila Bay. A bay is nothing more than an inlet of
the sea. Pursuant to Article 1 of the Law of Waters of
1866, bays, roadsteads, coast sea, inlets and shores
are parts of the national domain open to public use.
These are also property of public ownership devoted
to public use, according to Article 339 of the Civil
Code of Spain. When the shore or part of the bay is
reclaimed, it does not lose its character of being
property for public use.
- Fourthly, Act 1360, as amended, authorized the
lease or sale of the northern portion of the reclaimed
area as a hotel site. The subject property is not that
northern portion authorized to be leased or sold; the
subject property is the southern portion. Hence,
applying the rule of expresio unius est exlusio
alterius, the City of Manila was not authorized to sell
the subject property. The application of this principle
of statutory construction becomes the more
imperative in the case at bar inasmuch as not only
must the public grant of the reclaimed area to the
City of Manila be, as above stated, strictly construed
against the City of Manila, but also because a grant
of power to a municipal corporation, as happens in
this case where the city is authorized to lease or sell
the northern portion of the Luneta extension, is
strictly limited to such as are expressly or impliedly
authorized or necessarily incidental to the objectives
of the corporation.
- Fifthly, Article 344 of the Civil Code of Spain
provides that property of public use, in provinces and
in towns, comprises the provincial and town roads,
the squares, streets, fountains, and public waters,
the promenades, and public works of general service
paid for by such towns or provinces." A park or plaza,
such as the extension to the Luneta, is undoubtedly
comprised in said article.
- We have demonstrated that the Luneta extension
was intended to be property of the City of Manila for
public use. But, could not said property later on be
converted, as the petitioners contend, to patrimonial
property? It could be. But this Court has already said,
in Ignacio v. The Director of Lands that it is only the
executive and possibly the legislative department
that has the authority and the power to make the
declaration that said Property is no longer required
for public use, and until such declaration is made the
property must continue to form part of the public
domain. In the case at bar, there has been no such

explicit or unequivocal declaration. It should be noted

that courts are undoubtedly not primarily called
upon, and are not in a position, to determine whether
any public land is still needed for the purposes
specified in Article 4 of the Law of Waters.

corresponding deed of absolute sale was executed

2. NO

consent. As a result of these sales, TCTs were issued

Ratio The Government is never estopped by

mistakes or errors on the part of its agents and
estoppel does not apply to a municipal corporation to
validate a contract that is prohibited by law or its
against public policy.

REYES."

Reasoning The sale of July 13, 1911 executed by the

City of Manila to ManilaLodge was certainly a
contract prohibited by law. Estoppel cannot be urged
even if the City of Manila accepted the benefits of
such contract of sale and the Manila
Lodge No. 761 had performed its part of the
agreement, for to apply the doctrine of estoppel
against the City of Manila in this case would be
tantamount to enabling it to do indirectly what it
could not do directly. The sale of the subject property
executed by the City of Manila to the Manila Lodge
No. 761, BPOE, was void and inexistent for lack of
subject matter. [a park is outside the commerce of
man] It suffered from an incurable defect that could
not be ratified either by lapse of time or by express
ratification. The Manila Lodge No. 761 therefore
acquired no right by virtue of the said sale. Hence to
consider now the contract inexistent as it always has
been, cannot be an impairment of the obligations of
contracts, for there was in contemplation of law, no
contract at all. The inexistence of said sale can be set
up against anyone who asserts a right arising from it,
not only against the first vendee, the Manila Lodge
No. 761, BPOE, but also against all its Successors,
including the TDC, which are not protected by law.
The doctrine of bone fide purchaser without notice,
being claimed by the TDC, does not apply where
there is a total absence of title in the vendor, and the
good faith of the purchaser TDC cannot create title
where none exists. The restoration or restitution of
what has been given is in order.
3. NO. We have shown in our discussion of the first
issue that the decision of the trial court is fully in
accordance with law. It follows that when such
decision was affirmed by the CA, the affirmance was
likewise in accordance with law. Hence, no useful
purpose will be served in further discussing this
issue.
Disposition The petitions are denied for lack of
merit and the decision of the CA is affirmed, at
petitioners' cost.

where the vendee named is 'Julia de Reyes'. Her

signatures appear over the caption vendee and those
of Ponciano under the phrase: 'with my marital
in the name of "JULIA REYES married to PONCIANO

While Ponciano was absent attending his farm in

Pampanga, Julia sold absolutely the lots in question
Efren V. Mendoza and Inocencia R. De Mendoza, as
vendees, without the knowledge and consent of
Ponciano. At the same time the spouses were living
separately and were not in speaking terms.
Ponciano filed a complaint for the annulment of a
deed of sale of two parcels of land contending that
said properties were conjugal properties of himself
and his wife and that she had sold them to
petitioners "all by herself" and without his knowledge
or consent.
Petitioner Mendozas alleged that the properties were
paraphernal properties of Julia and that they had
purchased the same in good faith and for adequate
consideration. Julia testified that she bought the two
parcels of land on installment basis and that the first
payment came from her personal funds.

The CFI

declared the properties exclusive and paraphernal

properties of Julia and ruled that she could validly
dispose of the same without the consent of her
husband.
ISSUE: WON the disputed properties are conjugal
properties.
HELD: Yes. The deed of sale is declared null and void
with respect to one- half share of Ponciano.
Article 153 of the Civil Code provides:
ART.

153.

The

following

are

conjugal

partnership property:
That which is acquired by onerous title during the
marriage at the expense of the common fund,
whether the acquisition be for the partnership, or for
only one of the spouses;

Case 32
Mendoza v. Reyes, 124 SCRA 154
FACTS: Ponciano and Julia were married in 1915. The
properties in question consisting of Lots 5 and 6,
were bought on installment basis. Thus, the spouses
jointly obtained a loan to pay their balance. The

It is sufficient to prove that the property was

acquired during the marriage in order that the same
may be deemed conjugal property. There is no
question that the disputed property was acquired by
onerous title during the marriage.

Records show that the funds came from loans

Valentin Salao claimed 1/3 interest on the said

obtained by the spouses. Under Article 161 of the

fishpond.

Civil Code, all debts and obligations contracted by

the husband and the wife for the benefit of the
conjugal partnership are liabilities of the partnership.

The defendant Juan Y. Salao Jr. inherited from his

father Juan Y. Salao, Sr. of the fishpond and the

Julias claim of exclusive ownership is belied by the

other half from the donation of his auntie Ambrosia

Income Tax Returns which she herself prepared and

Salao.

filed in behalf of the conjugal partnership wherein

she made the statement that the rentals paid to her
were income of the conjugal partnership, and she
made to appear the properties in question as capital
assets of the conjugal partnership.

It was alleged in the said case that Juan Y. Salao, Sr

and Ambrosia Salao had engaged in the fishpond
business. Where they obtained the capital and that
Valentin Salao and Alejandra Salao were included in
that joint venture, that the funds used were the

Property acquired during a marriage is presumed to

be conjugal and the fact that the land is later
registered in the name of only one of the spouses
does not destroy its conjugal nature. If the fact that
property acquired during marriage was registered in

earnings of the properties supposedly inherited from

Manuel Salao, and that those earnings were used in
the acquisition of the Calunuran fishpond. There is no
documentary evidence to support that theory.

the name of the husband alone does not affect its

conjugal nature, neither does registration in the

The lawyer of Benita Salao and the Children of

name of the wife.

Victorina Salao in a letter dated January 26, 1951

informed Juan S. Salao, Jr. that his clients had a one-

Case 33
Salao vs Salao L-26699, March 16, 1976

third share in the two fishponds and that when Juani

took possession thereof in 1945, in which he refused
to give Benita and Victorinas children their one-third

Facts:

share of the net fruits which allegedly amounted to

The spouses Manuel Salao and Valentina Ignacio of

Barrio Dampalit, Malabon, Rizal begot four children
named Patricio, Alejandra, Juan (Banli) and Ambrosia.
Manuel Salao died in 1885. His eldest son, Patricio,
died in 1886 survived by his only child. Valentin
Salao.

deeds as to the share of Valentin and Alejandra.

Juan S. Salao, Jr. in his answer dated February 6,
1951 categorically stated that Valentin Salao did not
have any interest in the two fishponds and that the
sole owners thereof his father Banli and his aunt

After Valentinas death, her estate was administered

by her daughter Ambrosia.

prior to the death of Valentina Ignacio her two

children, Juan Y. Salao, Sr. and Ambrosia Salao,
secured a Torrens title, OCT No. 185 of the Registry of
Deeds of Pampanga, in their names

at

Sitio

1911 and 1917, and that he Juani was the donee of

Calunuran,

Benita Salao and her nephews and niece asked for

the annulment of the donation to Juan S. Salao, Jr.
and for the reconveyance to them of the Calunuran
fishpond as Valentin Salaos supposed one-third
share in the 145 hectares of fishpond registered in

The property in question is the forty-seven-hectare

located

Ambrosia, as shown in the Torrens titles issued in

Ambrosias one-half share.

The documentary evidence proves that in 1911 or

fishpond

P200,000. However, there was no mention on the

Lubao,

Pampanga, wherein Benita Salao-Marcelo daughter of

the names of Juan Y. Salao, Sr. and Ambrosia Salao.

Issue :

1.

Whether or not the Calunuran fishpond was

Trusts; evidence needed to establish trust on parol

held in trust for Valentin Salao by Juan Y. Salao,

testimony. In order to establish a trust in real

Sr. and Ambrosia Salao.

property by parol evidence, the proof should be as

2.

Whether

or

not

plaintiffs

action

for

reconveyance had already prescribed.

fully convincing as if the act giving rise to the trust

obligation were proven by an authentic document.
Such a trust cannot be established upon testimony

Held:

consisting in large part of insecure surmises based

on ancient hearsay. (Syllabus, Santa Juana vs. Del

1.

There was no resulting trust in this case

Rosario 50 Phil. 110).

because there never was any intention on the

part of Juan Y. Salao, Sr., Ambrosia Salao and

The foregoing rulings are good under article 1457 of

Valentin Salao to create any trust. There was

the Civil Code which, as already noted, allows an

no constructive trust because the registration

implied

of the two fishponds in the names of Juan and

Trustworthy oral evidence is required to prove an

Ambrosia was not vitiated by fraud or mistake.

implied trust because, oral evidence can be easily

This is not a case where to satisfy the demands

fabricated.

trust

to

be

proven

by

oral

evidence.

of justice it is necessary to consider the

Calunuran fishpond being held in trust by the

On the other hand, a Torrens title is generally a

heirs of Juan Y. Salao, Sr. for the heirs of

conclusive of the ownership of the land referred to

Valentin Salao.

therein (Sec. 47, Act 496). A strong presumption

exists. that Torrens titles were regularly issued and

Ratio:

that they are valid. In order to maintain an action for

reconveyance, proof as to the fiduciary relation of the

A Torrens Title is generally a conclusive evidence of

parties must be clear and convincing.

the ownership of the land referred to therein. (Sec.

47, Act 496). A strong presumption exists that

The real purpose of the Torrens system is, to quiet

Torrens titles were regularly issued and that they are

title to land. Once a title is registered, the owner

valid.

for

may rest secure, without the necessity of waiting in

reconveyance, proof as to the fiduciary relation of the

the portals of the court, or sitting in the mirador de

parties must be clear and convincing.

su casa, to avoid the possibility of losing his land.

The plaintiffs utterly failed to prove by clear,

2.

satisfactory and convincing evidence. It cannot rest

Plaintiffs

on vague and uncertain evidence or on loose,

prescription or laches.

In

order

to

maintain

an

action

Reconveyance
action

had
is

already
clearly

prescribed.
barred

by

equivocal or indefinite declarations.

Ratio:
Trust and trustee; establishment of trust by parol
evidence; certainty of proof. Where a trust is to be

Under Act No. 190, whose statute of limitation would

established by oral proof, the testimony supporting it

apply if there were an implied trust in this case, the

must be sufficiently strong to prove the right of the

longest period of extinctive prescription was only ten

alleged beneficiary with as much certainty as if a

year.

document proving the trust were shown. A trust

cannot be established, contrary to the recitals of a

The Calunuran fishpond was registered in 1911. The

Torrens title, upon vague and inconclusive proof.

written extrajudicial demand for its reconveyance

was made by the plaintiffs in 1951. Their action was

filed in 1952 or after the lapse of more than forty

years from the date of registration. The plaintiffs and
their predecessor-in-interest, Valentin Salao, slept on
their rights if they had any rights at all. Vigilanti
prospiciunt jura or the law protects him who is
watchful of his rights (92 C.J.S. 1011, citing Esguerra
vs. Tecson, 21 Phil. 518, 521).
Undue delay in the enforcement of a right is
strongly persuasive of a lack of merit in the claim,
since it is human nature for a person to assert his
rights most strongly when they are threatened or
invaded. Laches or unreasonable delay on the part
of a plaintiff in seeking to enforce a right is not only
persuasive of a want of merit but may, according to
the circumstances, be destructive of the right itself.
Having reached the conclusion that the plaintiffs are
not entitled to the reconveyance of the Calunuran
fishpond, it is no longer to Pass upon the validity of
the donation made by Ambrosia Salao to Juan S.
Salao, Jr. of her one-half share in the two fishponds
The plaintiffs have no right and personality to assil
that donation.
Even if the donation were declared void, the plaintiffs
would not have any successional rights to Ambrosias
share. The sole legal heir of Ambrosia was her
nephew, Juan, Jr., her nearest relative within the third
degree. Valentin Salao, if living in 1945 when
Ambrosia died, would have been also her legal heir,
together with his first cousin, Juan, Jr. (Juani). Benita
Salao, the daughter of Valentin, could not represent
him in the succession to the estate of Ambrosia since
in the collateral line, representation takes place only
in favor of the children of brothers or sisters whether
they be of the full or half blood is (Art 972, Civil
Code). The nephew excludes a grandniece like Benita
Salao

or

great-gandnephews

like

the

Alcuriza (Pavia vs. Iturralde 5 Phil. 176).

Case 36
BUCE V CA
DAVIDE; May 12, 2000

plaintiffs

NATURE
Petition to review the decision of the CA.
FACTS
- Petitioner leased a 56-square meter parcel of land.
The lease contract was for a period of fifteen years to
commence on 1 June 1979 and to end on 1 June 1994
"subject to renewal for another ten (10) years, under
the same terms and conditions."
-Petitioner then constructed a building and paid the
required monthly rental of P200. Private respondents,
later demanded a gradual increase in the rental until
it reached P400 in 1985. For July and August 1991,
petitioner paid private respondents P1,000 as
monthly rental.
- On 6 December 1991, private respondents' counsel
wrote petitioner informing her of the increase in the
rent to P1,576.58 effective January 1992 pursuant to
the provisions of the Rent Control Law. Petitioner,
however, tendered checks dated 5 October 1991, 5
November 1991, 5 December 1991, 5 January 1992,
31 May 1992, and 2 January 1993 for only P400 each.
Private respondents refused to accept the same.
- Petitioner filed with the RTC of Manila a complaint
for specific performance with prayer for consignation,
that private respondents be ordered to accept the
rentals in accordance with the lease contract and to
respect the lease of fifteen years, which was
renewable for another ten years, at the rate of P200
a month.
- In their Answer, private respondents countered that
petitioner had already paid the monthly rent of
P1,000 for July and August 1991. Under Republic Act
No. 877, as amended, rental payments should
already be P1,576.5810 per month; hence, they were
justified in refusing the checks for P400 that
petitioner tendered. Moreover, the phrase in the
lease contract authorizing renewal for another ten
years does not mean automatic renewal; rather, it
contemplates a mutual agreement between the
parties.
- During the pendency of the controversy, counsel for
private respondents wrote petitioner reminding her
that the contract expired on 1 June 1994 and
demanding that she pay the rentals in arrears, which
then amounted to P33,000.
- RTC declared the lease contract automatically
renewed for ten years and considered as evidence
thereof (a) the stipulations in the contract giving the
lessee the right to construct buildings and
improvements and (b) the filing by petitioner of the
complaint almost one year before the expiration of
the initial term of fifteen years. It then fixed the
monthly rent at P400 from 1 June 1990 to 1 June
1994; P1,000 from 1 June 1994 until 1 June 1999;
and P1,500 for the rest of the period or from 1 June
2000 to 1 June 2004, reasoning that the continuous
increase of rent from P200 to P250 then P300, P400
and finally P1,000 caused "an inevitable novation of
their contract."
- Court of Appeals reversed the decision of the RTC,
and ordered petitioner to immediately vacate the
leased premises on the ground that the contract
expired on 1 June 1994 without being renewed and to
pay the rental arrearages at the rate of P1,000
monthly.
- The Court of Appeals denied petitioner's motion for
reconsideration. Hence this petition.

ISSUES
1. WON the parties intended an automatic renewal of
the lease contract when they agreed that the lease
shall be for a period of fifteen years "subject to
renewal for another ten (10) years."
2. WON CA erred in ordering the petitioner to vacate
the land upon expiration of the lease contract.
HELD
1. NO.
- Rules of interpretation: the literal meaning of the
stipulations shall control if the terms of the contract
are clear and leave no doubt upon the intention of
the contracting parties. However, if the terms of the
agreement are ambiguous resort is made to contract
interpretation which is the determination of the
meaning attached to written or spoken words that
make the contract. Also, to ascertain the true
intention of the parties, their actions, subsequent or
contemporaneous, must be principally considered.
- *The phrase "subject to renewal for another ten
(10) years" is unclear on whether the parties
contemplated an automatic renewal or extension of
the term, or just an option to renew the contract; and
if what exists is the latter, who may exercise the
same or for whose benefit it was stipulated.
-There is nothing in the stipulations in the contract
and the parties' actuation that shows that the parties
intended an automatic renewal or extension of the
term of the contract. The fact that the lessee was
allowed to introduce improvements on the property
is not indicative of the intention of the lessors to
automatically extend the contract. Neither the filing
of the complaint a year before the expiration of the
15-year term nor private respondents' acceptance of
the increased rentals has any bearing on the
intention of the parties regarding renewal. It must be
recalled that the filing of the complaint was even
spawned by private respondents' refusal to accept
the payment of monthly rental in the amount of only
P400.
- Fernandez v. CA is applicable to the case at bar,
thus: In a reciprocal contract like a lease, the period
must be deemed to have been agreed upon for the
benefit of both parties, absent language showing
that the term was deliberately set for the benefit of
the lessee or lessor alone. It was not specifically
indicated who may exercise the option to renew,
neither was it stated that the option was given for
the benefit of herein petitioner. Thus, pursuant to the
Fernandez ruling and Article 1196 of the Civil Code,
the period of the lease contract is deemed to have
been set for the benefit of both parties. Renewal of
the contract may be had only upon their mutual
agreement or at the will of both of them. Since the
private respondents were not amenable to a renewal,
they cannot be compelled to execute a new contract
when the old contract terminated on 1 June 1994. It
is the owner-lessor's prerogative to terminate the
lease at its expiration.
2. YES
- After the lease terminated on 1 June 1994 without
any agreement for renewal being reached, petitioner
became subject to ejectment from the premises. It
must be noted, however, that private respondents
did not include in their Answer with Counterclaim a
prayer for the restoration of possession of the leased
premises. Neither did they file with the proper

Metropolitan Trial Court an unlawful detainer suit

against petitioner after the expiration of the lease
contact. Moreover, the issues agreed upon by the
parties to be resolved during the pre-trial were the
correct interpretation of the contract and the validity
of private respondents' refusal to accept petitioner's
payment of P400 as monthly rental. The issue of
possession of the leased premises was not among
the issues agreed upon by the parties or threshed
out before the court a quo. Neither was it raised by
private respondents on appeal. T he Court of Appeals
went beyond the bounds of its authority when after
interpreting the questioned provision of the lease
contract in favor of the private respondents it
proceeded to order petitioner to vacate the subject
premises.
Disposition
Petition is partly GRANTED. The
decision of the CA is REVERSED insofar as it ordered
the petitioner to immediately vacate the leased
premises, without prejudice, however, to the filing by
the private respondents of an action for the recovery
of possession of the subject property
Case 37
ARANETA V PHILIPPINE SUGAR ESTATES DEVT.
CO.
REYES; May 31, 1967
NATURE
Review by certiorari
FACTS
- On July 28, 1950, J. M. Tuason & Co. sold a portion
of its land in Sta. Mesa Heights Subdivision, Q.C. to
Philippine Sugar Estates Development (PSED) Co.,
Ltd., through Gregorio Araneta Inc. (GAI) for P 430,
514. In their contract of purchase and sale, the
parties stipulated that the buyer will build the Sto.
Domingo Church and the seller will construct streets
on the NE and NW and SW sides of the land.
- The buyer PSED finished the construction of the
church but the seller, GAI, was unable to finish the
construction of the street in the NE side because a
certain third party, Manuel Abundo, who has been
physically occupying a middle part thereof, refused
to vacate the same.
- On May 7, 1958, PSED filed a complaint against J.
M. Tuason & Co, Inc., and GAI in CFI Manila, seeking
to compel the latter to comply with their obligation
and/or to pay damages in the event they failed or
refused to perform the obligation.
- Both defendants answered the complaint with GAI
setting up the principal defense that the action was
premature since its obligation to construct the
streets in question was without a definite period
which needs to be fixed first by the court in a proper
suit for that purpose before a complaint for specific
performance will prosper.
- After the lower court dismissed the complaint, PSED
moved for a reconsideration praying that the court
fix a period within which defendants will comply with
their obligation to construct the streets in question.
Defendant GAI opposed said motion, maintaining
that plaintiff's complaint did not expressly or

impliedly allege and pray for the fixing of a period to

comply with its obligation and that the evidence
presented at the trial was insufficient to warrant the
fixing of such a period.
- On July 16, 1960, the lower court amended its
previous decision and, after finding that the proven
facts warrant the fixing of such a period, rendered
judgment giving defendant GAI, a period of Two (2)
Years from notice within which to comply with its
obligation under the contract: to construct streets on
the NE, NW and SW sides of the land sold to plaintiff
so that the same would be a block surrounded by
streets on all four sides.
- The case was brought to the CA by GAI and the
same rendered a decision affirming that of the lower
courts, setting a period of 2 years from finality of
judgment to comply with the obligation. GAI now
resorted to the SC, hence this petition for certiorari
ISSUE
WON the trial court and the CA erred in setting the
date for the performance of the contract
HELD
The decision of the CA, affirming that of the CFI is
legally untenable. It does not lie within them to fix
the period of the performance of the obligation.
Ratio Article 1197 is predicated on the absence of
any period fixed by the parties and it involves a twostep process. The court must first determine that
the obligation does not fix a period (or that the
period is made to depend upon the will of the
debtor), but from the nature and the circumstances
it can be inferred that a period was intended. The
court must then proceed to the second step, and
decide what period was probably contemplated by
the parties.
Reasoning
- In no case can it be logically held that the
intervention of the court to fix the period for
performance was warranted, for even on the
assumption that the court should have found that no
reasonable time or no period at all had been fixed
(the trial court's amended decision nowhere declared
any such fact) still, the complaint not having sought
that the court should set a period, the court could not
proceed to do so unless the complaint was first
amended; for the original decision is clear that the
complaint proceeded on the theory that the period
for performance had elapsed already, that the
contract had been breached and defendant was
already answerable in damages.
- Granting, however, that it lay within the Court's
power to fix the period of performance, still the
amended decision is defective in that no basis is
stated to support the conclusion that the period
should be set at two years after finality of the
judgment. The last paragraph of Article 1197 is clear
that the period can not be set arbitrarily. The law
expressly prescribes that the courts shall determine
such period as may under the circumstance have
been probably contemplated by the parties.
All that the trial court's amended decision says is
that the proven facts precisely warrant the fixing of
such a period, which is insufficient to explain how
the two-year period given to petitioner herein was
arrived at. The trial court appears to have pulled the
two-year period set in its decision out of thin air, no
circumstances are mentioned to support it.

- The contract shows that the parties were fully

aware that the land described was occupied by
squatters. As the parties must have known that they
could not take the law into their own hands and must
resort to legal processes in evicting the squatters,
they must have realized that the duration of the suits
to be brought would not be under their control nor
could the same be determined in advance. The
conclusion is thus forced that the parties must have
intended to defer the performance of the obligations
under the contract until the squatters were duly
evicted, as contended by the petitioner GAI.
- CA objected to this conclusion that it would render
the date of performance indefinite. However, this
very indefiniteness is what explains why the
agreement did not specify any exact periods or dates
of performance. It follows that there is no justification
in law, for the setting of the date of performance at
any other time than that of the eviction of the
squatters occupying the land in question; and in not
so holding, both the trial court and the CA committed
reversible error. In addition, the case against one of
the squatters, Abundo, was still pending in the CA
when its decision in this case was rendered.
Disposition decision appealed from is reversed. The
time for the performance of the obligations of
petitioner Gregorio Araneta, Inc. fixed at the date
that all the squatters on affected areas are finally
evicted.

Case 38
LAFARGE
CEMENT
PHLIPPINES,
INC.
CONTINENTAL CEMENT CORPORATION
PANGANIBAN; November 23, 2004

FACTS
- 8/11/98: in a Letter of Intent (LOI), petitioner
Lafargeon behalf of its affiliates including Petitioner
Luzon Continental Land Corp. (LCLC) agreed to
purchase
respondent
Continental
Cement
Corporation (CCC). At the time, CCC were
respondents in a pending case against Asset
Privatization Trust (APT) [GR No. 119712]
- 10/21/98: both parties entered into a Sale and
Purchase Agreement (SPA)
- under clause 2 of the SPA the parties allegedly
agreed to retain P117,020,846.84 from the purchase
price to be deposited in an interest-bearing account
in Citibank NY for payment to APT
- petitioners allegedly refused to pay APT; fearing
foreclosure, CCC filed w/ the RTC of QC a Complaint
w/ Application for Preliminary Attachment against
petitioners [CC No. Q-00-41103]
- petitioners moved to dismiss the complaint on the
grounds of forum-shopping
- to avoid being in default, petitioners filed their
Answer and Compulsory Counterclaims ad Cautelam
against Respondent CCC, its majority stockholder
Gregory Lim, and its corporate secretary Anthony
Mariano, praying for the sums of P2.7M as actual
damages, P100M as exemplary damages, P100M as
moral damages and P5M as attys fees and costs
each
- petitioners allege that the Writ of Attachment was
procured in bad faith

- the RTC dismissed petitioners counterclaims since

the counterclaims against Lim and Mariano were not
compulsory, the Sapugay ruling wasnt applicable,
and the Counterclaims violated procedural rules on
the proper joinder of causes of action
- acting for MFR, the TC admitted an error in
pronouncing the counterclaim was against Lim and
Mariano only; the RTC clarified that it impleaded the
two, even if CCC was included then
ISSUES
1. WON the RTC gravely erred in ruling that (a)
petitioners counterclaims against Respondents Lim
and Mariano are not compulsory; (b) Sapugay v.
Court of Appeals is inapplicable here; and (c)
petitioners violated the rule on joinder of causes of
action.
2. WON the RTC gravely erred in refusing to rule that
Respondent CCC has no personality to move to
dismiss petitioners compulsory counterclaims on
Respondents Lim and Marianos behalf.
HELD
1.
1(a) Sec 6 Rule 6 of the Rules of Civil Procedure
states: (A counterclaim is) any claim which a
defending party may have against an opposing
party
- they are generally allowed to facilitate the
disposition of the whole controversy in a single action
- a counterclaim is permissive if it is not necessarily
connected w/ the subject matter of the opposing
partys claim and may be filed in a separate case
- a counterclaim is compulsory if it arises out of the
transaction or occurrence of the subject matter
- compulsory counterclaims must be set up in the
same action or be barred forever
NAMARCO v. Fed of United Namarco Dist. lays down
the criteria to determine counterclaim type:
1. are issues of fact and law raised by the
claim and by the counterclaim largely the
same?
2. Would res judicata bar a subsequent suit on
defendants claim, absent the compulsory
counterclaim rule?
3. Will substantially the same evidence
support
or
refute
plaintiffs
claim/counterclaim?
4. Is there any logical relation b/w the claim
and counterclaim?
- a positive answer to all four would indicate it is
compulsory
- The court then examined petitioners basis for their
allegations using these criteria:
1. Lim and Mariano were responsible for
making the bad faith decisions and causing
the plaintiff to file this baseless suit and
procure an unwarranted Writ of Attachment
2. They are also the plaintiffs co-joint
tortfeasors in the commission of complained
acts and as such are jointly and solidarily
liable
3. Lim and Mariano should pay P5M each for
counsel fees and litigation costs. For
damage to the reputations of defendants, a
sum of P100M each for moral damages is
prayed for
- since the alleged damages suffered by the
defendants were a consequence of petiitioners

actions, the requisites for compulsory counterclaim

are met.
1(b) In the Sugapay case, Respondent Mobil Phils.
filed an action for replevin against the sps Sugapay.
The sps failed to keep their end of a Dealership
Agreement; they answered with a counterclaim
alleging the plaintiff refused to give them gas. They
still had a post surety bond w/c they couldnt claim
w/o the Agreement, later discovering Mobil and its
manager, Cardenas, intended all along to award the
agreement to Island Air Product Corp.
- an issue raised was whether Cardenas, who wasnt
a party to the original action, could be impleaded in
the counterclaim
- the Court held that new parties may be brought to
the action to accord complete relief to all in a single
action and to avert a multiplicity of suits
- respondent CCC contends that as a corporation with
a separate legal personality, it has the juridical
capacity to indemnify petitioners even w/o Lim and
Mariano; the Court however points out that the
inclusion of the co-defendants is not premised on the
assumption of CCCs financial ability but on the
allegations of fraud and bad faith against them,
making them indispensable parties
- in Sagupay, Cardenas was furnished w/ a copy of
the Answer w/ Counterclaim but he did not respond.
Hence
the
Court
considered
his
apparent
acquiescence, despite his active participation in the
trial, and adopted as his answer the allegations in the
complaint, and is deemed to have submitted to the
TCs jurisdiction. Sec 12 Rule 6 of the Rules of Court
state that only upon service of summons can the TC
obtain jurisdiction over them.
- in the instant case, no records show that Lim and
Mariano are aware of the counterclaims or that they
actively participated in the proceeding. So unlike in
Sagupay, the court cannot be said to have treated
CCCs motion to dismiss as having been filed on their
behalf
1(c) CCC claims that while the original complaint was
a suit for specific performance based on a contract,
the counterclaim was based on tortuous acts of the
respondents, violating the rule on joinder of causes
of action as stated in S5 Rule 2 and S6 Rule 3 of the
Rules of Civil Procedure
-these rules are founded on practicalitydismissing
the counterclaim for damages would likely only lead
to a separate case re-filing it. Nevertheless, the two
are indispensable parties
2. Art 1207 of the Civil Code provides that obligations
are generally considered joint unless expressly stated
or when the nature of the obligation requires
solidarity. Obligations arising from tort, however, are
always solidary.
-the fact that liability sought against CCC is for
specific performance and tort, while those against
Lim and Mariano are based solely on tort does not
negate the solidary nature of their liablility
-petitioners assertion that CCC cannot move to
dismiss the counterclaims on the grounds that
pertain solely to its individual co-debtors cannot be
given credence. A1222 of the CC provides:
With respect to (defenses) w/c personally belong to
the others, (a solidary debtor) may avail himself

thereof as regards that part of the debt for w/c the

latter are responsible.
-the filing of CCC of a motion to dismiss on grounds
pertaining to its individual debtors is allowed
-however, it lacks the requisite authority to file this
motion on the behalf of Lim and Marianothus,
unless expressly adopted by Lim and Mariano, the
motion has no force and effect as to them
Disposition Wherefore, the petition is granted and
the assailed orders reversed. The court of origin is
ordered to take cognizance of the counterclaims and
to cause the service of summons on Lim and Mariano

Case 39
INCIONG V COURT OF APPEALS
ROMERO; June 26, 1996
NATURE
A petition for review on certiorari of the decision of
the Court of Appeals affirming that of the Regional
Trial Court of Misamis Oriental, which disposed of
Civil Case No. 10507 for collection of a sum of money
and damages
FACTS
- RTC ordered Inciong to pay Phil. Bank of
Communications (PBC) P50,000 w/ interest.
His
liability resulted from the promissory note (P50,000)
w/c he signed w/ Rene Naybe and Gregorio
Pantanosas on Feb. 3, 1983 holding themselves
jointly and severally liable to private respondent PBC.
The promissory note was due on May 5, 1983
- The due date expired w/o the promissors having
paid their obligation
- PBC sent telegrams demanding payment and a final
letter demand through registered mail
- Since both obligors did not respond, PBC filed a
complaint for collection of the money against the 3
obligors.
- Only the summon addressed to Inciong was served
bec. Naybe was already in Saudi Arabia
Petitioners' Claim
- In his answer, petitioner Inciong alleged that he was
persuaded by Campos to act as a co-maker in the
said loan in order to go into the falcate log operations
business
- Petitioner alleged further that five (5) copies of a
blank promissory note were brought to him by
Campos at his office. He affixed his signature thereto
but in one copy, he indicated that he bound himself
only for the amount of P5,000.00. Thus, it was by
trickery, fraud and misrepresentation that he was
made liable for the amount of P50,000.00.
- Annexed to the present petition is a copy of an
affidavit executed by Gregorio Pantanosas, who is a
co-maker in the promissory note. In the affidavit, he
supports the allegation that they were induced to
sign the promissory note on the belief that it was
only for P5,000.
- He also said that the promissory note should be
declared bull and void also on the grounds that:
o
The promissory note was signed outside the
premises of the bank

o
o

The loan was incurred only for the purpose

of buying a chainsaw worth 5thousand;
even a new chain saw would cost only P27k
Petitioner and Pantanosas were not present
during the time the loan was released

ISSUE
WON the promissory note should be declared null
and void
HELD
No
- The stated points are factual, which should be
determined in the lower court not in this court
- By alleging fraud in his answer, petitioner was in
the right direction towards proving that he agreed to
a loan of P5k only.
However, fraud must be
established by clear and convincing evidence. Mere
preponderance of evidence is not adequate
- On his argument that since the complaint against
Naybe was dismissed, his should be dismissed as
well: It is to be noted, however, that petitioner
signed the promissory note as a solidary co-maker
and not as a guarantor. While a guarantor may bind
himself solidarily with the principal debtor, the
liability of a guarantor is different from that of a
solidary debtor
- A solidary or joint and several obligation is one in
which each debtor is liable for the entire obligation,
and each creditor is entitled to demand the whole
obligation.
- Because the promissory note involved in this case
expressly states that the three signatories therein
are jointly and severally liable, any one, some or all
of them may be proceeded against for the entire
obligation
- The choice is left to the solidary creditor to
determine against whom he will enforce collection.
Ratio
- as a general rule, bills, notes and other instruments
of a similar nature are not subject to be varied or
contradicted by parol or extrinsic evidence
- (Tolentino) explains:
"A guarantor who binds
himself in solidum with the principal debtor under the
provisions of the second paragraph does not become
a solidary co-debtor to all intents and purposes.
There is a difference between a solidary co-debtor,
and a fiador in solidum (surely). The later, outside of
the liability he assumes to pay the debt before the
property of the principal debtor has been exhausted,
retains all the other rights, actions and benefits
which pertain to him by reason of the fiansa; while a
solidary co-debtor has no other rights than those
bestowed upon him in Section 4, Chapter 3, title 1,
Book IV of the Civil Code.
- when there are two or more debtors in one and the
same obligation, the presumption is that the
obligation is joint so that each of the debtors is liable
only for a proportionate part of the debt. There is a
solidarily liability only when the obligation expressly
so states, when the law so provides or when the
nature of the obligation so requires.
Case 40
ALIPIO V COURT OF APPEALS
MENDOZA; September 29, 2000

FACTS
- Respondent Romeo Jaring[1] was the lessee of a
14.5 hectare fishpond in Barito, Mabuco, Hermosa,
Bataan. The lease was for a period of five years
ending on September 12, 1990. On June 19, 1987,
he subleased the fishpond, for the remaining period
of his lease, to the spouses Placido and Purita Alipio
and the spouses Bienvenido and Remedios Manuel.
The stipulated amount of rent was P485,600.00,
payable in two installments of P300,000.00 and
P185,600.00, with the second installment falling due
on June 30, 1989. Each of the four sublessees signed
the contract.
- The first installment was duly paid but only a
portion of the second was paid leaving a balance of
P50,600. despite demand, the balance remained
unpaid thus Jaring sued for the collection of such
amount. In the alternative, he prayed for the
recission of the sublease contract should the
defendants fail to pay the balance.
Purita Alipio on the other hand moved to dismiss the
case on the ground that her husband, Placido Alipio,
had passed away on December 1, 1988.[2] She
based her action on Rule 3, 21 of the 1964 Rules of
Court which is now amended and reads:
- When the action is for the recovery of money
arising from contract, express or implied, and the
defendant dies before entry of final judgment in the
court in which the action was pending at the time of
such death, it shall not be dismissed but shall instead
be allowed to continue until entry of final judgment.
A favorable judgment obtained by the plaintiff
therein shall be enforced in the manner especially
provided in these Rules for prosecuting claims
against the estate of a deceased person.
- Trial court denied motion on the ground that since
petitioner was herself a party to the sublease
contract, she could be independently impleaded in
the suit together with the Manuel spouses and that
the death of her husband merely resulted in his
exclusion from the case. CA also denied appeal
stating:
- The rule that an action for recovery of money, debt
or interest thereon must be dismissed when the
defendant dies before final judgment in the regional
trial court, does not apply where there are other
defendants against
whom the action should be
maintained as mentioned in Climaco v. Siy Uy
wherein the court stated that the deceased Siy Uy
was not the only defendant, Manuel Co was also
named defendant in the complaint the remaining
defendants cannot avoid the action by claiming that
the death of one of the parties to the contract has
totally extinguished their obligation. This was also
the case in Imperial Insurance, Inc. v. David. In the
said case, the court stated that . Under the law and
well settled jurisprudence, when the obligation is a
solidary one, the creditor may bring his action in toto
against any of the debtors obligated in solidum.
Thus, if husband and wife bound themselves jointly
and severally, in case of his death, her liability is
independent of and separate from her husband's; she
may be sued for the whole debt and it would be error
to hold that the claim against her as well as the claim
against her husband should be made in the
decedent's estate.
- Petitioner filed a motion for reconsideration but it
was also denied, hence this appeal.

ISSUE
WON a creditor can sue the surviving spouse for the
collection of a debt which is owed by the conjugal
partnership of gains, or whether such claim must be
filed in proceedings for the settlement of the estate
of the decedent
HELD
NO.
Ratio
We hold that a creditor cannot sue the
surviving spouse of a decedent in an ordinary
proceeding for the collection of a sum of money
chargeable against the conjugal partnership and that
the proper remedy is for him to file a claim in the
settlement of estate of the decedent.
- Petitioner's husband died on December 1, 1988,
more than ten months before private respondent
filed the collection suit in the trial court on October
13, 1989. This case thus falls outside of the ambit of
Rule 3, 21 which deals with dismissals of collection
suits because of the death of the defendant during
the pendency of the case and the subsequent
procedure to be undertaken by the plaintiff. The issue
to be resolved is whether private respondent can, in
the first place, file this case against petitioner.
Under the law, the Alipios' obligation (and also that
of the Manuels) is one which is chargeable against
their conjugal partnership. When petitioner's
husband died, their conjugal partnership was
automatically dissolved[9] and debts chargeable
against it are to be paid in the settlement of estate
proceedings in accordance with Rule 73, 2 which
states: When the marriage is dissolved by the
death of the husband or wife, the community
property shall be inventoried, administered, and
liquidated, and the debts thereof paid, in the testate
or intestate proceedings of the deceased spouse.
- As held in Calma v. Taedo, after the death of either
of the spouses, no complaint for the collection of
indebtedness chargeable against the conjugal
partnership can be brought against the surviving
spouse. Instead, the claim must be made in the
proceedings for the liquidation and settlement of the
conjugal property. The reason for this is that upon
the death of one spouse, the powers of
administration of the surviving spouse ceases and is
passed to the administrator appointed by the court
having jurisdiction over the settlement of estate
proceedings. Indeed, the surviving spouse is not
even a de facto administrator such that conveyances
made by him of any property belonging to the
partnership prior to the liquidation of the mass of
conjugal partnership property is void
- This ruling was reaffirmed in the recent case of
Ventura v. Militante wherein it was stated that the
conjugal partnership terminates upon the death of
either spouse. . . . Where a complaint is brought
against the surviving spouse for the recovery of an
indebtedness chargeable against said conjugal
[partnership], any judgment obtained thereby is void.
The proper action should be in the form of a claim to
be filed in the testate or intestate proceedings of the
deceased spouse. Furthermore, the Court said that
the cases cited by the CA were based on facts
different from the case at hand.
- It must be noted that for marriages governed by the
rules of conjugal partnership of gains, an obligation
entered into by the husband and wife is chargeable

against their conjugal partnership and it is the

partnership which is primarily bound for its
repayment. Thus, when the spouses are sued for the
enforcement of an obligation entered into by them,
they are being impleaded in their capacity as
representatives of the conjugal partnership and not
as independent debtors such that the concept of joint
or solidary liability, as between them, does not apply

Disposition
complaint against petitioner is
dismissed without prejudice to the filing of a claim by
private respondent in the proceedings for the
settlement of estate of Placido Alipio for the
collection of the share of the Alipio spouses in the
unpaid balance of the rent in the amount of
P25,300.00.