OBLICON2
FLORENCIO DEUDOR, ET AL vs. J.M. TUASON &CO., INC.
ET AL
PONENTE: JUSTICE FERNANDEZ
FACTS:
Plaintiff claimed a parcel of land of about 50 "quiones",
or 225 hectares, located in Tatalon, Quezon City, over
which J. M. Tuason& Co., Inc., asserted ownership under
the Land Registration Act, by virtue of an original
certificate of title. The Deudors acknowledged therein the
title of J. M. Tuason& Co., Inc. and in consideration
thereof, J. M. Tuason& Co., Inc. undertook to pay them, to
be paid in the manner and under the conditions set forth
in the Compromise Agreement (April 10, 1953). Under the
Compromise Agreement, and subject to its other terms
and conditions, the Deudors are obligated to deliver the
clear and peaceful possession of the entire 50 quiones to
the owners. The first payment shall be P100,000.00 and
shall be made within sixty (60) days from the date the
decision rendered approving the Compromise Agreement
becomes final; Provided, that within said period the
Deudors shall have effected the delivery to the OWNERS of
at least 20 quiones. The portion of 20 "quiones" was not
delivered by the Deudors until January 14, 1956, and this
was made possible only because the appellees had agreed
to and did advance certain in sums to defray the expenses
necessary therefor. On April 27, 1956, the appellees filed
supplemental motion and "manifestation" praying that
payment of balance of P79,800.00 to the Deudors "be
withheld until after the additional 129 illegal constructions
the 30 'quiones' area shall have been removed". On
February 28, 1957, the Court, therefore, hereby sets a
period of 4 months within which the 'Deudors' shall deliver
possession of the entire 30 quiones to the owners.
Failure of the Deudors to do so will have the effect of
freeing the J.M. Tuason& Co., Inc. and the Gregorio
Araneta, Inc. from all its obligations under the
Compromise Agreement and judgment. The Deudors had
not delivered the aforementioned portion of 30
"Quiones", despite the expiration of the period of 4
months and that, owing to the failure of the Deudors to
make said delivery, the construction of houses by
squatters within said area had continued so unabated
that, as of August 12, 1957, there were 341 constructions
therein. Appellants maintain that the orders are
erroneous.
ISSUE:
Whether or not the orders issued by the Court to the
appellants are erroneous.
HELD:
With respect to the period fixed by the lower court for the
delivery of said 30 "quiones" and the effect of the failure
to deliver the same within said period, it is urged that the
order of February 28, 1957, amounted to an amendment
of the Compromise Agreement, without the consent of the
parties therein, and of the decision of April 10, 1953, long
after the same had become final and executory. There is
no merit in this pretense. Indeed, considering that the
appellees had a Torrens title, they had no reason to agree
on paying the Deudors, except upon the expectation of
delivery of said area without unreasonable delay.
Accordingly, said agreement is subject to the principle set
forth in Article 1197 of the Civil Code of the Philippines
that If the obligation does not fix a period, but from its
nature and the circumstances it can be inferred that a
period was intended the courts may fix the duration
thereof. Hence, whenever a period is fixed pursuant to
said Article, the court merely enforces or carries out an
implied stipulation in the contract. It will be noted that
under the agreement, the Deudors are supposed to make
delivery of the areas unconditionally. In fact, the
registered owners of the and made it clear that they were
agreeing to the settlement only because they wanted to
obtain early possession of the whole property. There is no
excuse, therefore, for the failure of the Deudors to deliver
the remaining 30 quiones 4 years and 8 months after the
execution and approval of the compromise agreement.
The failure to deliver and the continued mushrooming of
houses in the area, despite the compromise, justify the
release of J.M. Tuason& Co., Inc. and Gregorio Araneta,
Inc. from further obligation under the agreement of March
16, 1953. Lastly, appellants say that they have as much
right as appellees herein to the execution of the decision
herein, and yet the lower court granted the letter's motion
for a writ of execution thereof and denied a motion of the
former to the same effect. It is not true, however, that the
two (2) motions were identical. It was proper for the lower
court to grant appellees' motion. It would have been
improper for the lower court to grant appellants'
squatters, who are neither parties in this proceeding nor
bound by the aforementioned decision, and, hence, are
beyond the jurisdiction of the court in this case. Therefore,
the orders appealed from are affirmed by the Court, with
costs against the appellants.
Inchausti& Co. vs. Yulo 34 Phil. 978
PONENTE: CHIEF JUSTICE ARELLANO
Facts: TeodoroYulo, property owner of Iloilo, has been
borrowing money from the firm of Inchausti& Company
under specific conditions. This money has been used to
cultivate his haciendas in Negros Occidental. TeodoroYulo
died testate and left his wife whom have died later and
other legitimate children including the defendant as
administrators of his estates. There remaining of the
marriage the following legitimate children: Pedro,
Francisco, Teodoro, Manuel, Gregorio, Mariano, Carmen,
Concepcion, and Jose Yulo y Regalado. Of these children
Concepcion and Jose were minors, while Teodoro was
mentally incompetent. They held the property in common
and have continued their current account with the plaintiff
under the name Hijos de T. Yulo. On August 12, 1909, the
defendant in representation of his brothers including his
brother Manuel, and their own behalf Pedro, Francisco,
Carmen and Concepcion, the latter being of age, ratified
an instrument on their indebtedness towards plaintiff all
the documents executed by them before. In this
document, they have severally and jointly acknowledged
and admitted their indebtedness to the plaintiff at the
amount of P253,445.42 with an interest of ten percent per
annum and payable within five installments. Payment
begins on June 30, 19 and ends on June 30, 1914. Also part
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of the stipulation that the abovementioned instrument
shall be ratified by their brother Mariano Yuko Regalado
but failed to do so. Moreover, the brothers and sisters did
not pay the first installment of the obligation. Hence,
plaintiff instituted an action at CFI Iloilo against defendant
for the payment of P253,445.42 plus interest. On May 12,
1911, Francisco, Manuel, and Carmen Yulo y Regalado
executed in favor of plaintiff another instrument of
indebtedness whereby the debt is reduce to P225,000 with
an interest of 6 per centum per annum payable by eight
installments starting on June 30, 1911 and ends at June 30,
1919. The trial court ruled in favor of defendant without
prejudice to the plaintiff's bringing within the proper time
another suit for his proportional part of the joint debt.
Hence plaintiff appealed decision; one of the averments is
that the court erred in considering the contract of May 12,
1911, as constituting a novation of that of August 12,
1909.
Issue: a) Whether or not plaintiff can sue defendant alone
and by doing that it lost its right by the second agreement
executed; and, b) Whether or not the contract with the
three aforesaid obligors constitutes novation of the first
notarial instrument executed by 6 debtors being the
subject matter of litigation.
Held: As to the first issue, the law provides that obligations
in solidum or in conjoint or solidary obligations, the
creditor can bring an action against any solidary debtors to
fulfill the obligation. And even so the plaintiff stipulated
various installments and conditions as it did with the
second instrument of May 12, 1911, the solidarity
stipulated in the instrument of August 12, 1909 is not
broken. Solidarity may exist even though the debtors are
not bound in the same manner and for the same periods
and under the same conditions (Art. 1140).
With respect to the third issue, the contract of May 12,
1911, does not constitute a novation of the former one. In
order that an obligation may be extinguished by another
which substitutes it, it is necessary that it should be so
expressly declared or that the old and the new be
incompatible in all points (Civil Code, article 1204). The
contract of May 12, 1911 does not expressly provide for
the substitution of the first. There also exist no
incompatibility between the old and the new obligation.
As provided for in the previous cases, the legal doctrine
that an obligation to pay a sum of money is not novated in
a new instrument wherein the old is ratified, by changing
only the term of payment and adding other obligations not
incompatible with the old one.
Although, the contract of May 12, 1911 did not novate
that of August 12, 1909, it has affected the case filed by
plaintiff with respect to the payment for the sum of
P253,445.42. Hence by virtue of remission, plaintiff can
only recover the amount stated in the second contract
granted to the granted to the three of the solidary
debtors. As regards to the payment, he can pay only
P112,500 of which is due or already matured. Hence,
defendant cannot allege the prematurity of debt since
when the lawsuit is instituted, the obligation for the first
installment of the contract if August 12, 1909 has already
matured and due to the solidarity of the obligation he is
liable to pay the whole obligation. An exception would be
the shares of Francisco, Manuel, and Carmen Yulo, none of
the installments payable under their obligation, contracted
later had yet matured. The personal defense of Francisco,
Manuel, and Carmen Yulo "as to the part of the debt for
which they were responsible" can be used by Gregorio
Yulo as a defense for paying the whole obligation. The part
of the debt for which these three are responsible is three-
sixths of P225,000 or P112,500, which is not yet
demandable due to the execution of the second contract.
Hence, defendant can only pay the half portion of the
obligation that is demandable at that time. This is in
consonance with Art. 1448 which states that, The solidary
debtor may utilize against the claims of the creditor of the
defenses arising from the nature of the obligation and
those which are personal to him. Those personally
pertaining to the others may be employed by him only
with regard to the share of the debt for which the latter
may be liable.
Therefore, defendant cannot be made to pay the whole
obligation because he has been benefited by remission
made by the plaintiff to three of his co debtors. The
judgment appealed has been reversed.
INCIONG V CA
257 SCRA 578
Romero J; June 26, 1996
FACTS:
-Petitioner's liability resulted from the promissory note in
the amount of P50,000.00 which he signed with Rene C.
Naybe and Gregorio D. Pantanosas on February 3, 1983,
holding themselves jointly and severally liable to private
respondent Philippine Bank of Communications (PBC),
Cagayan de Oro City branch. The promissory note was due
on May 5, 1983
-Due date came and obligation was left unfulfilled. PBC
sent telegrams to Inciong demanding payment. It also sent
a letter to Nayde. Both obligors did not respond. Thus PBC
filed a suit for the collection of 50,000.
- Case was initially dismissed for failure of plaintiff to
prosecute the case. However, the lower court
reconsidered the dismissal order and required the sheriff
to serve the summonses. Lower court also dismissed the
case against defendant Pantanosas as prayed for by the
private respondent herein. Meanwhile, only the summons
addressed to petitioner was served as the sheriff learned
that defendant Naybe had gone to Saudi Arabia.
-Inciong on his part stated that: he was approached by his
friend Campos who claimed that he was a partner of the
branch manager of PBC, in the falcata logs operation.
Campos also told him that Rene C. Naybe was interested in
the business and would contribute a chainsaw to the
venture. Campos then persuaded petitioner to act as a
"co-maker" in the said loan.
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Petitioner allegedly acceded but with the understanding
that he would only be a co-maker for the loan of
P5,000.00.
-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.
-TC and CA ordered Inciong to pay amount. Inciong
appealed.
ISSUE: WON Inciong is liable for the payment of
promissory note
HELD: Yes
*RULING ON PAROL EVIDENCE
-Inciong claimed that since the promissory note "is not a
public deed with the formalities prescribed by law but a
mere commercial paper which does not bear the signature
of attesting witnesses," parol evidence may "overcome"
the contents of the promissory note.
The first paragraph of the parol evidence rule states:
"When the terms of an agreement have been reduced to
writing, it is considered as containing all the terms agreed
upon and there can be, between the parties and their
successors-in-interest, no evidence of such terms other
than the contents of the written agreement."
- The rule does not specify that the written agreement be
a public document. What is required is that agreement be
in writing as the rule is in fact founded on "long experience
that written evidence is so much more certain and
accurate than that which rests in fleeting memory only,
that it would be unsafe, when parties have expressed the
terms of their contract in writing, to admit weaker
evidence to control and vary the stronger and to show that
the parties intended a different contract from that
expressed in the writing signed by them. Thus, for the
parol evidence rule to apply, a written contract need not
be in any particular form, or be signed by both parties. 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.
-By alleging fraud in his answer, petitioner was actually in
the right direction towards proving that he and his co-
makers agreed to a loan of P5,000.00 only, considering
that, where aparol contemporaneous agreement was the
inducing and moving cause of the written contract, it may
be shown by parol evidence. However, fraud must be
established by clear and convincing evidence, mere
preponderance of evidence, not even being adequate.
Petitioner's attempt to prove fraud must, therefore, fail as
it was evidenced only by his own uncorroborated and,
expectedly, self-serving testimony.
*other contentions
-Inciong claimed that since the complaint was dropped
against Naybe, his co-debtor and Pantonasa the guarantor,
he should also be released from liability citing Art 2080 of
CC. however contention is invalid.
-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. Consequently, the dismissal of the case
against Judge Pontanosas may not be deemed as having
discharged petitioner from liability as well. As regards
Naybe, suffice it to say that the court never acquired
jurisdiction over him.
Petitioner, therefore, may only have recourse against his
co-makers, as provided by law.
RCBC VS CA
PONENTE: JUSTICE MELENCIO- HERRERA
FACTS: ASOn 4 May 1979, Alfredo Ching signed a
'Comprehensive Surety Agreement' with Rizal Commercial
Banking Corporation (RCBC), binding himself to jointly and
severally guarantee the prompt payment of all PBM
obligations owing RCBC in the aggregate sum of Forty
Million (P40,000,000.00) Pesos.
Between 8 September to 30 October 1980, PBM filed
several applications for letters of credit with RCBC.
Through said applications, PBM obligated itself, among
other things, to pay on demand for all draft(s) drawn
under or purporting to be drawn under the credits.
Everything being in order, RCBC opened the corresponding
letters of credit and imported various goods for PBM's
account. In due time the imported goods arrived and were
released, in trust, to PBM who acknowledged receipt
thereof through various trust receipts. All in all, PBM's
obligations stood at P7,982,649.08.
Less than a year later, or on 7 August 1981, RCBC filed a
Complaint for collection of said sum against respondents
PBM and Alfredo Ching with the then Court of First
Instance of Pasig, docketed as CV-42333. Upon filing of a
bond satisfactory to the Court, a Writ of Preliminary
Attachment was issued against the assets and properties
of respondents PBM and Ching on the same day. By way of
special and affirmative defenses they alleged that
"although the trust receipts stipulate due dates, the true
intent and agreement of the parties was that the maturity
dates of the trust receipts were to be extended at the end
of the stipulated dates, as had been the customary
practice of RCBC with PBM."
On 23 September 1981, PBM and Ching moved to
discharge the attachment, which RCBC opposed. On 4
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December 1981 the Court issued an Order lifting the
attachment upon their filing of a satisfactory counter-
bond.
Meanwhile, on 1 April 1982, PBM filed a Petition for
Suspension of Payments with the Securities and Exchange
Commission, docketed as SEC Case No. 2250, seeking at
the same time its rehabilitation.
In an injunctive Order, dated 6 July 1982, all actions for
claims against PBM pending before any Court or tribunal,
in whatever stage the same may have been, were ordered
suspended by the SEC in order to give the Commission the
opportunity to pass upon the feasibility of any
rehabilitation plans. And on 26 April 1988, SEC approved
the revised rehabilitation plan and ordered its
implementation.
On 14 October 1982, RCBC pursued its claims with the Trial
Court and filed, unopposed, a Motion for Summary
Judgment in CV-42333, a motion for extension to file said
opposition having been earlier withdrawn. RCBC
contended that respondents PBM and Ching had not
denied their indebtedness to RCBC and, therefore, no
genuine issue was raised in the pleadings.
On 25 November 1982, the CFI rendered such summary
judgment** in RCBC's favor.
On appeal, respondent Court of Appeals,*** ruling that it
was precipitate and improper for the lower Court to have
continued with the proceedings despite the SEC Order of
suspension, set aside the lower Court Decision and
ordered it to hold in abeyance the determination of the
merits invoked in CV-42333 pending the outcome of SEC
Case No. 2250. On 6 October 1988, the Appellate Court
denied RCBC's Motion for Reconsideration.
ISSUE: Will a Securities and Exchange Commission (SEC)
Order suspending, during the pendency of a
rehabilitation proceeding, payment of all claims against
the principal debtor bar or preclude the creditor from
recovering from the surety?
RULING: ASHence, this Petition for Review, to which we
gave due course on 31 May 1989, and required the filing of
Memoranda by the parties, the last of which was
submitted on 27 July 1989.
RCBC takes the position that the SEC injunctive Order
pertains and affects only PBM, the corporation under
rehabilitation, and that its right, as creditor, to proceed
against respondent Ching, as Surety, is not affected by said
Order. In fine, RCBC avers that to hold the injunctive Order
applicable to both respondents PBM and Ching is to
deprive RCBC of its right to proceed against the Surety
based on the latter's separate and independent
undertaking.
PBM and Ching counter that the liabilities incurred by PBM
were corporate in character and, hence, as a corporate
officer, Alfredo Ching cannot be held liable therefor; that
the pendency of SEC Case No. 2250 and the rendition of an
Order therein on 26 April 1988 implementing respondent
PBM's rehabilitation plan must necessarily benefit the
Surety, inasmuch as payment of PBM obligations must be
made pursuant to that plan; and that the liability of the
Surety can not be more than what would remain after
payment of all the obligations of the principal. Moreover,
they continue, it is usual for majority stockholders to act as
co-signors with their respective corporations where
promissory notes, collaterals or guaranty or security
agreements are involved. Respondent Ching's action may,
it is claimed, be classified as a corporate act.
Under the attendant facts and circumstances, we answer
the question earlier posed in the negative.
Where an obligation expressly states a solidary liability,
the concurrence of two or more creditors or two or more
debtors in one and the same obligation implies that each
one of the former has a right to demand, or that each one
of the latter is bound to render, entire compliance with
the prestation (Article 1207, Civil Code). The creditor may
proceed against any one of the solidary debtors or some
or all of them simultaneously (Article 1216, Civil Code).
That there exists a Comprehensive Surety Agreement
between RCBC and respondent Ching is admitted. There is
no escaping the attendant liability that binds respondent
Ching, as Surety. He is charged as an original promissor by
virtue of his primary obligation under the Suretyship
Agreement. That Agreement is bare of words imputing to
respondent Ching any liability other than that of a Surety
who binds himself to insure a debt in his personal capacity,
lacking consideration therefor notwithstanding (p. 94,
Original Record). That respondent Ching acted for and on
behalf of respondent PBM as part of its usual corporate
procedure is not supported by the evidence nor the
pleadings on record, nor the Agreement itself .We can not
give any additional meaning to the plain language of the
subject agreement. It is basic that the parties are bound by
the terms of their contract, which is the law between
them. As held in Zenith Insurance Corporation vs. Court of
Appeals (No. L-57957, 29 December 1982,119 SCRA 485),
the extent of a surety's liability is determined only by the
clause of the contract of suretyship. It cannot be extended
by implication, beyond the terms of the contract.
Conversely, liability therefor may not be restricted unless
expressly so stated.
Neither can respondent Ching seek refuge behind the SEC
injunctive Order. Under Section 3 of P.D. 902-A, as
amended by P.D. 1758, the Commission is given absolute
jurisdiction, supervision and control only over corporations
or associations, which are grantees of a primary franchise
and/or a license or permit issued by the government to
operate in the Philippines. The SEC injunctive Order can
not effect a suspension of payment of respondent Surety's
due and demandable obligation, it being clear therefrom
that the rehabilitation receivers were limited "to tak(ing)
custody and control over all the existing assets and
property of PBM." Nothing in said Order puts respondent
Ching within its scope.
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To further avoid payment of their obligation, PBM and
Ching allege a customary extension given by petitioner in
PBM's favor, which, it is averred, must necessarily benefit
the Surety. Suffice it to say that the summary judgment
made by the lower Court offers an acceptable explanation
finding respondents' obligation as matured and
demandable. Thus:
The trust receipts from No. 2042 to 2100 in the schedule
(pages 2 and 3, complaint) shows that the maturity dates
thereof vary from May 12, 1981 at the latest and February
19, 1981 at the earliest. The alleged agreement to extend,
granting its existence, obviously would have had a much
earlier date than the maturity dates of the trust receipts
and considering that the instant case was brought on
August 7, 1981, there should have been, to say the least,
representation made prior to the maturity dates or at least
on the dates of maturity thereof. But it has not even been
alleged by defendants that such representations were
made by defendants. It is too far fetched to rule that the
Court will grant an extension of time to pay, when no such
extension has ever been requested by defendants. The
obligation, therefore, is covered by Article 1193 of the Civil
Code and hence, demandable when the day comes (pp.
199-200, Original Record).
The lower Court correctly found the case to be without
any genuine issue of fact and ripe for summary judgment.
Respondents' bare allegation of customary extensions is
not corroborated by any documentary evidence but
remains plain self-serving assertions.
In fine, the SEC injunctive Order is of no effect as far as the
respondent Surety, Alfredo Ching, is concerned. He can be
sued separately to enforce his liability as Surety for PBM
(Traders Royal Bank vs. Court of Appeals, et al. G.R. No.
78412, September 26, 1989).
WHEREFORE, the Decision of the Court of Appeals, dated
30 June 1988, and its Resolution denying reconsideration
thereof, dated 6 October 1988, are SET ASIDE. The
judgment of the lower Court is hereby REINSTATED and
made executory as far as respondent, Alfredo Ching, is
concerned.
Costs against private respondents, Philippine Blooming
Mills and Alfredo Ching.
Lafarge Cement Philippines, Inc. v. Continental Cement
Corporation
443 SCRA 522 (November 23, 2004)
PONENTE: JUSTICE PANGANIBAN
Facts:
Lafarge agreed to purchase Continental. On October 21,
1998, both parties entered into a sale of Purchase and
Agreement (SPA) and were well aware that Continental
had a case pending with the Supreme Court.The parties,
under Clause 2 (c) of the SPA, allegedly agreed to retain
from the purchase price a portion of the contract price to
be deposited for payment to APT.
However, petitioners allegedly refused to apply the sum to
the payment to APT, despite the subsequent finality of the
Decision in GR No. 119712 in favor of the latter and the
repeated instructions of Respondent Continental.
Continental filed a case against Lafarge stating that
petitioners be directed to pay the APT Retained Amount
referred in Clause 2 (c) of the SPA. Petitioners moved to
dismiss the complaint on the ground of forum shopping.
RTC denied the Motion to Dismiss, Lafarge elevated the
matter to CA. Lafarge filed their Answer and Compulsory
Counterclaims and prayed by way of compulsory
counterclaims against Respondent Continental, its
majority stockholder and president Lim, and corporate
secretary Mariano -- for the sums of (a) P2,700,000 each
as actual damages, (b) P100,000,000 each as exemplary
damages, (c) P100,000,000 each as moral damages, and
(d) P5,000,000 each as attorneys fees plus costs of suit.
On May 22, 2002, the Regional Trial Court of Quezon City
(Branch 80) dismissed petitioners counterclaims for
several reasons, among which were the following: a) the
counterclaims against Respondents Lim and Mariano were
not compulsory; b) the ruling in Sapugay was not
applicable; and c) petitioners Answer with Counterclaims
violated procedural rules on the proper joinder of causes
of action. In an amended order dated September 3, 2002.
Issue: Whether Continental has no personality to move to
dismiss petitioners compulsory counterclaims on
Respondents Lim and Marianos behalf.
Held/Ruling: YES
Obligations may be classified as either joint or
solidary. Joint or jointly or conjoint means
mancumor mancomunadaor pro rata obligation; on the
other hand, solidary obligations may be used
interchangeably with joint and several. Thus, petitioners
use of the term joint and solidary is confusing and
ambiguous.
The ambiguity in petitioners counterclaims
notwithstanding, respondents liability, if proven, is
solidary. This characterization finds basis in Article 1207 of
the Civil Code, which provides that obligations are
generally considered joint, except when otherwise
expressly stated or when the law or the nature of the
obligation requires solidarity. However, obligations arising
from tort are, by their nature, always solidary. We have
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assiduously maintained this legal principle as early as 1912
in Worcester v. Ocampo, in which we held:
General Rule: joint tort feasors are all the persons who
command, instigate, promote, encourage, advise,
countenance, cooperate in, aid or abet the commission of
a tort, or who approve of it after it is done, if done for
their benefit. They are each liable as principals, to the
same extent and in the same manner as if they had
performed the wrongful act themselves. x xx
Joint tort feasors are jointly and severally liable for the tort
which they commit. The persons injured may sue all of
them or any number less than all. Each is liable for the
whole damages caused by all, and all together are jointly
liable for the whole damage. It is no defense for one sued
alone, that the others who participated in the wrongful act
are not joined with him as defendants; nor is it any excuse
for him that his participation in the tort was insignificant
as compared to that of the others. x xx
Joint tort feasors are not liable pro rata. The damages can
not be apportioned among them, except among
themselves. They cannot insist upon an apportionment,
for the purpose of each paying an aliquot part. They are
jointly and severally liable for the whole amount. x xx
In a joint obligation, each obligor answers only for a part
of the whole liability; in a solidary or joint and several
obligation, the relationship between the active and the
passive subjects is so close that each of them must comply
with or demand the fulfillment of the whole obligation.
The fact that the liability sought against the Continental is
for specific performance and tort, while that sought
against the individual respondents is based solely on tort
does not negate the solidary nature of their liability of
tortuous acts alleged in the counterclaims. Article 1211 of
the Civil Code is explicit to this point: Solidarity may exist
although the creditors and the debtors may not be bound
in the same manner and by the same periods and
conditions.
*Petition is GRANTED and the assailed Orders REVERSED.
The court of origin is hereby ORDERED to take cognizance
of the counterclaims pleaded in petitioners Answer with
Compulsory Counterclaims and to cause the service of
summons on Respondents Lim and Mariano. No costs.
G.R. No. L-11307 October 5, 1918
ROMAN JAUCIAN v. FRANCISCO QUEROL, administrator
of the intestate estate of the deceased Hermenegildo
Rogero,
STREET, J. :
Facts: Surety Rogero is solidarily liable with principal
Dayadante because she bound herself as jointly and
severally liable for his debt.
October 1908: Private Writing by Lino Dayadante and
Hermenegilda Rogero (supposedly as surety)
acknowledging their indebtedness, jointly and severally, to
Roman Jaucian worth P13,332.3
November 1909: Action for cancellation of document by
Rogero, alleging fraud because she was made to sign
believing that she was only a surety > Counterclaim for
payment of the sum which had become demandable > debtor
Granted Rogero that the claim against her was invalid >
Appeal by Jaucian > Rogero died > SC Granted validity of
claim
September 3, 1912: committee on the estate proceedings
of Rogero made its report to pass upon claims against the
estate > March 24, 1914: Jaucian filed a claim against the
estate of Rogero for payment due to insolvency of
Dayadante
ISSUE: WON Rogeros liability is absolute
HELD: YES. As surety, Rogeros liability is absolute > NOT
SUBSIDIARY where Jaucian should first exhaust the remedy
against principal Dayadante before impugning Rogero for
Dayadantes deficiency > SHE BOUND HERSELF JOINTLY
WITH principal
*Art. 1822: By security a person binds himself to pay or
perform for a third person in case the latter should fail to
do so.
If the surety binds himself jointly with the principal debtor,
the provisions of section fourth, chapter third, title first, of
this book shall be observed.
Art. 1144: A creditor may sue any of the joint and several
(solidarios) debtors or all of them simultaneously. The
claims instituted against one shall not be an obstacle for
those that may be later presented against the others, as
long as it does not appear that the debt has been collected
in full.
*Art. 1830: The surety can not be compelled to pay a
creditor until application has been previously made of all
the property of the debtor.
*Art. 1831: This application can not take place
(1) . . . (2) If he has jointly bound himself with the
OBLIGATION ABSOLUTE WHERE SURETY BOUND JOINTLY
AND SEVERALLY WITH PRINCIPAL. Where a guarantor or
surety is jointly and severally bound with the principal
debtor, the obligation of the guarantor or surety, equally
with that of the principal debtor, is absolute and not
contingent within the meaning of section 746 of the Code
of Civil Procedure.
CONTRACTS; APPORTIONABLE JOINT OBLIGATIONS AND
SOLIDARY JOINT OBLIGATIONS. The opinion contains an
exposition of the difference between the juridical
conceptions of liability incident to multiple obligations, as
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OBLICON2
embodied in the civil law and common law respectively;
and the civil law distinction is noted between the
apportionable joint obligation and the solidary joint
obligation. At common law each of the debtors in a
multiple obligation is liable in solidum for the whole, the
obligation not being apportionable among the debtors.
G.R. No. L-7185 August 31, 1955
REHABILITATION FINANCE CORPORATION v. COURT OF
APPEALS and REALTY INVESTMENTS, INC.
REYES, A., J.:
Facts: RFC solely liable for the purchase price due to seller
even if it is not the principal debtor because it had
assumed the obligation upon fulfilment of the condition
that the title be made in favour of principal free of liens
and encumbrances and mortgage registered thereon.
June 17, 1948: Contract of Sale > Delfin Dominguez and
Realty Investments, Inc. where former would purchase
property of the latter for dp of P39.98 and balance in 119
monthly instalments > Loan from Rehabilitation Finance
Corporation worth P10k to shoulder house expenses IN
EXCHANGE FOR mortgage of the house and lot >
Payment/assumption by RFC of the purchase price to RII
upon TCT in favour of Dominguez and registration of
mortgage (title to the lot be first conveyed to Dominguez
and RFC's mortgage lien thereon registered)
> September 20, 1948: TCT to Dominguez and registration
of mortgage in registry of deeds > Relase of P6,500 from
loan but remainder not released ~ due to default of
Dominguez for payment of what he had already received >
Foreclosure of the mortgage by RFC > Suit for payment of
the purchase price by RII against RFC when latter refused
ISSUE: WON the liability of RFC is absolute> YES
HELD: Liability of RFC > Absolute and Exclusive > Why
exclude Dominguez: obligation was assumed by RFC upon
the condition that the title to the lot be first conveyed to
Dominguez and RFC's mortgage lien thereon registered >
already fulfilled > Dominguez was induced to part with his
title to a piece of real property upon RFC's assurance that
it would itself pay the balance of the purchase price due
from the purchaser after its mortgage lien thereon had
been registered
G.R. No. 93010 August 30, 1990
NICENCIO TAN QUIOMBING v. COURT OF APPEALS, and
Sps. FRANCISCO and MANUELITA A. SALIGO
CRUZ, J.:
Facts: Solidary creditor Quiombing can exercise action for
payment against debtor even without the other solidary
creditor because either one can mutually represent the
other to whom the debtor are both liable
> August 30, 1983: Construction and Service Agreement
where Nicencio Tan Quiombing and Dante Biscocho jointly
and severally bound themselves to construct a house of
Sps. Francisco and Manuelita Saligo for P137,940.00,
> October 10, 1984: Agreement where sps. acknowledged
house completion and undertook to pay the balance
> November 19, 1984: Promissory note by Saligo for
P125,363.50
> October 9, 1986: Action for recovery of amount by
Quiombing due to failure of sps. to pay the balance
> Contention of Sps: that Biscocho was an indispensable
party and should have been included as co-plaintiff
> Appeal by Quiombing that as a solidary creditor he could
act by himself alone in the enforcement of his claim
against the private respondents
ISSUE: WON Quiombing that as a solidary creditor he could
act by himself alone
HELD: Yes.
> SOLIDARITY BETWEEN Quiombing and Biscocho >
authority of each creditor to claim and enforce the rights
of all, with the resulting obligation of paying every one
what belongs to him > no merger, much less a
renunciation of rights, but only mutual representation >
Immaterial who sued the sps. who were liable to either of
the 2 creditors > full satisfaction of a judgment obtained
against them by Quiombing would discharge their
obligation to Biscocho, and vice versa > not necessary for
both Quiombing and Biscocho to file the complaint >
either one is indispensable
> Sps. to pay and be concerned only with Quiombing > Art.
1214 that "the debtor may pay any of the solidary
creditors; but if any demand, judicial or extrajudicial, has
been made by any one of them, payment should be made
to him" > Biscocho may later claim his share from
Quiombing but that decision is for him alone to make > as
far as the debtors are concerned, payment of the
judgment debt to the complainant will be considered
payment to the other solidary creditor even if the latter
was not a party to the suit
*A joint obligation is one in which each of the debtors is
liable only for a proportionate part of the debt, and each
creditor is entitled only to a proportionate part of the
credit. A solidary obligation is one in which each debtor is
liable for the entire obligation, and each creditor is
entitled to demand the whole obligation. Hence, in the
former, each creditor can recover only his share of the
obligation, and each debtor can be made to pay only his
part; whereas, in the latter, each creditor may enforce the
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OBLICON2
entire obligation, and each debtor may be obliged to pay it
in full.
*Art. 1212: Each one of the solidary creditors may do
whatever may be useful to the others, but not anything
which may be prejudice to the latter.
*Indispensable parties are those with such an interest in
the controversy that a final decree would necessarily
affect their rights, so that the court cannot proceed
without their presence. Necessary parties are those whose
presence is necessary to adjudicate the whole controversy,
but whose interests are so far separable that a final decree
can be made in their absence without affecting them.
G.R. No. 134100 September 29, 2000
PURITA ALIPIO v. COURT OF APPEALS and ROMEO G.
JARING
MENDOZA, J.:
Facts: Death of a sublessor spouse
> June 19, 1987Contract of Sublease over a Fishpond
among Romeo Jaring and Sps. Placido and Purita Alipio
and Bienvenido and Remedios Manuel ~ bound
themselves as spouses > Over a 5-year-leased fishpond of
Jaring > Valid until September 12, 1990 or the remaining
period of his lease > Rent: P485,600.00 (P300k upon
signing PAID; P185,600 on June 30, 1989 PARTIALLY
PAID WITH BALANCE OF P50,600 > Demand but Failure to
Pay
> October 13, 1989: Suit by Jaring against Sps. for
collection or rescission
> RTC (February 26, 1991) and CA favoured Jaring and
ordered Sps. Manuel and Mrs. Alipio to pay the balance, at
the exclusion of Mr. Alipio who had died
ISSUE: WON the sps. Alipio Should be solidary liable
HELD: No
SC UPHELD: Dismissal due to death of her Husband on
December 1, 1988 > that the obligation is chargeable
against the Sps. and not the individual (NCC 161(1)) > must
be held against the conjugal partnership which is primarily
bound for its repayment through an action for settlement
of estate ~ conjugal partnership was automatically
dissolved and debts chargeable against it are to be paid in
the settlement of estate proceedings > hence, she cannot
be sued as an independent party in an action for collection
> 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 > powers of
administration of the surviving spouse ceases and is
passed to the administrator > surviving spouse is not even
a de facto administrator > Sps. are being impleaded in
their capacity as representatives of the conjugal
partnership and not as independent debtors
> REMEDY OF JARING AGAINST ALIPIO SPOUSES:
> Sec. 6, Rule 78 of the Revised Rules of Court: Creditor
may (1) file a claim against the Alipios in the proceeding
for the settlement of the estate of petitioner's husband;
(2) apply in court for letters of administration in his
capacity as a principal creditor; (3) the allowance of will,
depending on whether petitioner's husband died intestate
or testate.
> LIABILITY OF SPOUSES AND WIDOW > JOINT not solidary
> RTC ordered payment of the P50,600 balance without
specifying whether it is joint or solidarity (NCC 1207) >
P50,600 divided between spouses ~ P25,300 each couple >
Solidary only if sublessees refuse to vacate the leased
property after the expiration of the lease period and
despite due demands by the lessor ~ not from contract but
as tortfeasors
> ONLY APPLIES TO dismissals of collection suits because
of the death of the defendant during the pendency of the
case and the subsequent procedure to be undertaken
> Rule 3, 21 of the 1964 Rules of Court which then
provided that "when the action is for recovery of money,
debt or interest thereon, and the defendant dies before
final judgment in the Court of First Instance, it shall be
dismissed to be prosecuted in the manner especially
provided in these rules."
> Rule 3, 20 of the 1997 Rules of Civil Procedure: 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.
G.R. No. L-21780 June 30, 1967
MAKATI DEVELOPMENT CORPORATION v. EMPIRE
INSURANCE CO. and RODOLFO P. ANDAL
CASTRO, J.:
Facts: Forfeiture of the P12k surety bond in favour of MDC
(vendor) upon failure of vendee to construct 50% of the
house on the purchased lot, as a special condition to sale
of lot, is a PENAL CLAUSE that is meant to compel the
conditions performance. Failure of the vendee to comply
grants vendor the operation of such penalty as a substitute
for damages and interest. But the Court can mitigate the
liability and because second vendee has constructed 50%
of the house just a month after the expiration, the bond
was validly reduced.
8|P a g e
OBLICON2
> Deed of Sale (March 31, 1959) > by Makati Development
Corporation to Rodolfo P. Andal over a lot in Urdaneta
Village, Makati > SPECIAL CONDITION: VENDEE/S shall
commence the construction and complete at least 50% of
his/her/their/its residence on the property within 2y from
March 31, 1959 to the satisfaction of the VENDOR and, in
the event of his/her/their/its failure to do so, the bond
which the VENDEE/S has delivered to the VENDOR in the
sum of P11,123.00 and evidenced by a cash bond receipt
dated April 10, 1959 will be forfeited in favor of the
VENDOR by the mere fact of failure of the VENDEE/S to
comply with this special condition > Surety bond worth
P12k (April 10, 1959) by Andal as principal with Empire
Insurance Company as surety, jointly or severally > Andal
did not build house and sold lot to Juan Carlos (January 18,
1960) > Notice of Claim (April 3, 1961) by MDC to Empire
re: Andals failure > Refusal of Empire to pay > Suit for
Collection against Empire (May 22, 1961) > Third party
complaint against Andal > RTC Held Empire liable (March
28, 1963) to pay MDC P1,500, with interest at the rate of
12% from the time of the filing of the complaint until the
amount was fully paid > Once paid by Empire, Andal
should in turn pay [Empire] the sum of P1,500 with
interest at 12% from the time of the filing of the complaint
to the time of payment > Appeal by MDC > Reduction of
Andals liability from P12k to P1,500
HELD: Special Condition is a PENAL CLAUSE but not for
indemnity for damages that might result from a breach of
contract but for COMPULSION OF PERFORMANCE
(Resolutory Obligation)
> GENERAL RULE FOR OBLIGATIONS WITH PENAL CLAUSES
> penalty takes the place of damages and the payment of
interest in case of non-compliance > obligee is entitled to
recover upon the breach of the obligation without the
need of proving damages BUT Court can mitigate liability
(NCC 1229 ~ The judge shall equitably reduce the penalty
when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the
courts if it is iniquitous or unconscionable) > Partial
Performance by Carlos > that where there has been partial
or irregular compliance with the provisions in a contract
for special indemnification in the event of failure to
comply with its terms, courts will rigidly apply the doctrine
of strict construction against the enforcement in its
entirety of the indemnification, where it is clear from the
contract that the amount or character of the indemnity is
fixed without regard to the probable damages which might
be anticipated as a result of a breach of the terms of the
contract, or, in other words, where the indemnity
provided for is essentially a mere penalty having for its
object the enforcement of compliance with the contract
> Reduction of Andals liability from P12k to P1,500 due to
little delay in fulfilment of obligations ~ that area has been
fenced, building materials has been stocked in the
premises > Juan Carlos was able to construct 50% of the
house by the end of April 1961 ~ just a month after
expiration
> LIABILITY of Andal cannot be construed as a personal
obligation > not to limit Andal's right to dispose of the lot
where there is nothing in the deed of sale restricting
Andal's right to sell > Carloss construction as Andals
construction
Option of penalty in lieu of performance is with creditor
If it is indemnity for damages ~ tied to losses suffered by
creditor, penalty cannot be reduced > but if intended to
insure performance of obligation ~ court can reduce >
Antonio Tan vs. Court of Appeals & CCP
GR No. 116285 October 19, 2001
Facts:
On May 14, 1978 and July 6, 1978, petitioner Antonio Tan
obtained 2 loans, P2,000,000.00 in each loans, or a total of
P4,000,000.00 from respondent Cultural Center of the
Philippines with promissory notes and maturity dates after
a year. Petitioner defaulted but after a few partial
payments he had the loans restructured by respondent
CCP, and petitioner accordingly executed a promissory
note that P3,411,421.32 is payable in five (5) installments.
Petitioner Tan failed to pay any installment on the said
restructured loan.
In a letter, TAN requested and proposed to respondent
CCP a mode of paying the restructured loan (a) 20% of the
principal amount of the loan upon the respondent giving
its conformity to his proposal (b)Balance on the principal
obligation payable 36 monthly installments until fully
paid. TAN also requested for a moratorium on his loan
obligation until the following year allegedly due to a
substantial deduction in the volume of his business and on
account of the peso devaluation. However, theres no
favorable response to the said letters. CCP demanded full
payment, within ten (10) days from receipt of said letter
P6,088,735.03.
CCP then filed a COMPLAINT to collect the money. TAN
interposed the defense that he accommodated a friend
who asked for help to obtain a loan from CCP but he
claimed that the friend cannot find. TAN filed a
Manifestation wherein he proposed to settle his
indebtedness to CCP but they didnt reach an amicable
settlement.
TRIAL COURT ORDERED TAN TO PAY CCP P7,996,314.67,
representing defendants outstanding account as of
August 28, 1986, with the corresponding stipulated
interest and charges thereof, until fully paid, plus
attorneys fees in an amount equivalent to 25% of said
outstanding account, plus P50,000.00, as exemplary
damages, plus costs. This is because the reason of loan for
accommodation of friend was not credible. Assuming,
9|P a g e
OBLICON2
arguendo, that TAN did not personally benefit from loan,
he should have filed a 3rd-party complaint against Wilson
Lucmen. Also, petitioner offered to settle his loan
obligation with CCP thrice and yet failed to do so. TAN may
not avoid his liability to pay his obligation under the
promissory note which he must comply with in good faith.
He is also estopped from denying his liability or loan
obligation to the private respondent.
Hence, this appeal for reduction of penalties and charges
on his loan obligation.
Issue:
Whether or not there are contractual and legal bases for
the imposition of the penalty, interest on the penalty and
attorneys fees.
Held:
Article 1226 of the New Civil Code provides that:
In obligations with a penal clause, the penalty shall
substitute the indemnity for damages and the payment of
interests in case of non-compliance, if there is no
stipulation to the contrary. Nevertheless, damages shall
be paid if the obligor refuses to pay the penalty or is guilty
of fraud in the fulfillment of the obligation.
The penalty may be enforced only when it is demandable
in accordance with the provisions of this Code.
In the case at bar, the promissory note expressly provides
for the imposition of both interest and penalties in case of
default on the part of the petitioner in the payment of
the subject restructured loan. Promissory note imposing
interest and penalties provides that:
For value received, I/We jointly and severally promise to
pay to the CULTURAL CENTER OF THE PHILIPPINES at its
office in Manila, the sum of THREE MILLION FOUR
HUNDRED ELEVEN THOUSAND FOUR HUNDRED + PESOS
(P3,411,421.32) Philippine Currency,
xxx.
With interest at the rate of FOURTEEN per cent (14%) per
annum from the date hereof until paid. PLUS THREE
PERCENT (3%) SERVICE CHARGE.
In case of non-payment of this note at maturity/on
demand or upon default of payment of any portion of it
when due, I/We jointly and severally agree to pay
additional penalty charges at the rate of TWO per cent
(2%) per month on the total amount due until paid,
payable and computed monthly. Default of payment of
this note or any portion thereof when due shall render all
other installments and all existing promissory notes made
by us in favor of the CULTURAL CENTER OF THE
PHILIPPINES immediately due and demandable.
(Underscoring supplied)
xxx xxx xxx
The stipulated fourteen percent (14%) per annum interest
charge until full payment of the loan constitutes the
monetary interest on the note and is allowed under Article
1956 of the New Civil Code. On the other hand, the
stipulated two percent (2%) per month penalty is in the
form of penalty charge which is separate and distinct from
the monetary interest on the principal of the loan.
Penalty on delinquent loans may take different forms. In
Government Service Insurance System v. Court of Appeals,
this Court has ruled that the New Civil Code permits an
agreement upon a penalty apart from the monetary
interest. If the parties stipulate this kind of agreement,
the penalty does not include the monetary interest, and as
such the two are different and distinct from each other
and may be demanded separately. Quoting Equitable
Banking Corp. v. Liwanag, the GSIS case went on to state
that such a stipulation about payment of an additional
interest rate partakes of the nature of a penalty clause
which is sanctioned by law, more particularly under Article
2209 of the New Civil Code which provides that:
If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall
be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest, which is six per
cent per annum.
The penalty charge of two percent (2%) per month in the
case at bar began to accrue from the time of default by the
petitioner. There is no doubt that the petitioner is liable
for both the stipulated monetary interest and the
stipulated penalty charge. The penalty charge is also
called penalty or compensatory interest. Having clarified
the same, the next issue to be resolved is whether interest
may accrue on the penalty or compensatory interest
without violating the provisions of Article 1959 of the New
Civil Code, which provides that:
Without prejudice to the provisions of Article 2212,
interest due and unpaid shall not earn interest. However,
the contracting parties may by stipulation capitalize the
interest due and unpaid, which as added principal, shall
earn new interest.
According to the petitioner, there is no legal basis for the
imposition of interest on the penalty charge for the reason
that the law only allows imposition of interest on
monetary interest but not the charging of interest on
penalty. He claims that since there is no law that allows
imposition of interest on penalties, the penalties should
not earn interest. But as we have already explained,
penalty clauses can be in the form of penalty or
compensatory interest. Thus, the compounding of the
penalty or compensatory interest is sanctioned by and
allowed pursuant to the above-quoted provision of Article
1959 of the New Civil Code considering that:
First, there is an express stipulation in the promissory note
(Exhibit A) permitting the compounding of interest. The
fifth paragraph of the said promissory note provides that:
Any interest which may be due if not paid shall be added
to the total amount when due and shall become part
thereof, the whole amount to bear interest at the
maximum rate allowed by law. Therefore, any penalty
interest not paid, when due, shall earn the legal interest of
twelve percent (12%) per annum, in the absence of
express stipulation on the specific rate of interest, as in the
case at bar.
Second, Article 2212 of the New Civil Code provides that
Interest due shall earn legal interest from the time it is
judicially demanded, although the obligation may be silent
upon this point. In the instant case, interest likewise
began to run on the penalty interest upon the filing of the
10 | P a g e
OBLICON2
complaint in court by respondent CCP on August 29, 1984.
Hence, the courts a quo did not err in ruling that the
petitioner is bound to pay the interest on the total amount
of the principal, the monetary interest and the penalty
interest.
Country Bankers Insurance Corporation & Enrique Sy, vs.
CA & Oscar Ventanilla Enterprises Corporation
G.R. No. 85161 September 9, 1991
Facts:
Respondent Oscar Ventanilla Enterprises Corporation
(OVEC), as lessor, and the petitioner Enrique F. Sy, as
lessee, entered into a lease agreement over the Avenue,
Broadway and Capitol Theaters and the land on which they
are situated in Cabanatuan City, including their air-
conditioning systems, projectors and accessories needed
for showing the films. The term of the lease was for six (6)
years commencing from June 13, 1977 and ending June
12,1983. After more than two (2) years of operation of the
Theater, respondent made demands for the repossession
of the leased properties in view of the Sy's arrears in
monthly rentals and non-payment of amusement taxes.
On August 8,1979, OVEC and Sy had a conference and by
reason of Sy's request for reconsideration of OVECs
demand for repossession of the three (3) theaters, the
former was allowed to continue operating the leased
premises upon his conformity to certain conditions
imposed by the latter in a supplemental agreement dated
August 13, 1979.
In pursuance of their latter agreement, Sy's arrears in
rental in the amount of P125,455.76 (as of July 31, 1979)
was reduced to P71,028.91 as of December 31, 1979.
However, the accrued amusement tax liability of the three
(3) theaters to the City Government of Cabanatuan City
had accumulated to P84,000.00 despite the fact that Sy
had been deducting the amount of P4,000.00 from his
monthly rental with the obligation to remit the said
deductions to the city government. Hence, letters of
demand dated January 7, 1980 and February 3, 1980 were
sent to Sy demanding payment of the arrears in rentals
and amusement tax delinquency. The latter demand was
with warning that OVEC will re-enter and repossess the
Avenue, Broadway and Capital Theaters on February 11,
1980 in pursuance of the pertinent provisions of their
lease contract of June 11, 1977 and their supplemental
letter-agreement of August 13, 1979. But notwithstanding
the said demands and warnings SY failed to pay the above-
mentioned amounts in full Consequently, OVEC padlocked
the gates of the three theaters under lease and took
possession thereof in the morning of February 11, 1980 by
posting its men around the premises of the Id movie
houses and preventing the lessee's employees from
entering the same.
Sy, through his counsel, filed the present action for
reformation of the lease agreement, damages and
injunction late in the afternoon of the same day.
The trial court held that Sy is not entitled to the
reformation of the lease agreement; that the repossession
of the leased premises by OVEC after the cancellation and
termination of the lease was in accordance with the
stipulation of the parties in the said agreement and the
law applicable thereto and that the consequent forfeiture
of Sy's cash deposit in favor of OVEC was clearly agreed
upon by them in the lease agreement. The trial court
further concluded that Sy was not entitled to the writ of
preliminary injunction issued in his favor after the
commencement of the action and that the injunction bond
filed by Sy is liable for whatever damages OVEC may have
suffered by reason of the injunction.
Hence this appeal.
Issue:
Whether or not private respondent will be unjustly
enriched
Held:
We find no merit in petitioners' argument that the
forfeiture clause stipulated in the lease agreement would
unjustly enrich the respondent OVEC at the expense of Sy
and CBISCO contrary to law, morals, good customs,
public order or public policy. A provision which calls for the
forfeiture of the remaining deposit still in the possession
of the lessor, without prejudice to any other obligation still
owing, in the event of the termination or cancellation of
the agreement by reason of the lessee's violation of any of
the terms and conditions of the agreement is a penal
clause that may be validly entered into. A penal clause is
an accessory obligation which the parties attach to a
principal obligation for the purpose of insuring the
performance thereof by imposing on the debtor a special
presentation (generally consisting in the payment of a sum
of money) in case the obligation is not fulfilled or is
irregularly or inadequately fulfilled. As a general rule, in
obligations with a penal clause, the penalty shall substitute
the indemnity for damages and the payment of interests in
case of non-compliance. This is specifically provided for in
Article 1226, par. 1, New Civil Code. In such case, proof of
actual damages suffered by the creditor is not necessary in
order that the penalty may be demanded (Article 1228,
New Civil Code). However, there are exceptions to the rule
that the penalty shall substitute the indemnity for
damages and the payment of interests in case of non-
compliance with the principal obligation. They are first,
when there is a stipulation to the contrary; second, when
the obligor is sued for refusal to pay the agreed penalty;
and third, when the obligor is guilty of fraud (Article 1226,
par. 1, New Civil Code). It is evident that in all said cases,
the purpose of the penalty is to punish the obligor.
Therefore, the obligee can recover from the obligor not
only the penalty but also the damages resulting from the
non-fulfillment or defective performance of the principal
obligation.
In the case at bar, inasmuch as the forfeiture clause
provides that the deposit shall be deemed forfeited,
without prejudice to any other obligation still owing by the
lessee to the lessor, the penalty cannot substitute for the
P100,000.00 supposed damage resulting from the issuance
of the injunction against the P290,000.00 remaining cash
deposit. This supposed damage suffered by OVEC was the
alleged P10,000.00 a month increase in rental from
P50,000.00 to P60,000,00), which OVEC failed to realize
for ten months from February to November, 1980 in the
total sum of P100,000.00. This opportunity cost which was
duly proven before the trial court, was correctly made
11 | P a g e
OBLICON2
chargeable by the said court against the injunction bond
posted by CBISCO. The undertaking assumed by CBISCO
under subject injunction refers to "all such damages as
such party may sustain by reason of the injunction if the
Court should finally decide that the Plaintiff was/were not
entitled thereto." (Rollo, p. 101) Thus, the respondent
Court correctly sustained the trial court in holding that the
bond shall and may answer only for damages which OVEC
may suffer as a result of the injunction. The arrears in
rental, the unmeritted amounts of the amusement tax
delinquency, the amount of P100,000.00 (P10,000.00
portions of each monthly rental which were not deducted
from plaintiffs cash deposit from February to November,
1980 after the forfeiture of said cash deposit on February
11, 1980) and attorney's fees which were all charged
against Sy were correctly considered by the respondent
Court as damages which OVEC sustained not as a result of
the injunction.
OCTAVIO A. KALALO vs. ALFREDO J. LUZ
G.R. No. L-27782 July 31, 1970
Facts:
On November 17, 1959, plaintiff-appellee Octavio A. Kalalo
hereinafter referred to as appellee), a licensed civil
engineer doing business under the firm name of O. A.
Kalalo and Associates, entered into an agreement with
defendant-appellant Alfredo J . Luz (hereinafter referred to
as appellant), a licensed architect, doing business under
firm name of A. J. Luz and Associates, whereby the former
was to render engineering design services to the latter for
fees, as stipulated in the agreement. The services included
design computation and sketches, contract drawing and
technical specifications of all engineering phases of the
project designed by O. A. Kalalo and Associates bill of
quantities and cost estimate, and consultation and advice
during construction relative to the work. The fees agreed
upon were percentages of the architect's fee, structural
engineering, 12-%; electrical engineering, 2-%. The
agreement was subsequently supplemented by a
"clarification to letter-proposal" which provided , that "the
schedule of engineering fees in this agreement does not
cover the following: ... D. Foundation soil exploration,
testing and evaluation; E. Projects that are principally
engineering works such as industrial plants, ..." and "O. A.
Kalalo and Associates reserve the right to increase fees on
projects ,which cost less than P100,000 ...." 2 Pursuant to
said agreement, appellee rendered engineering services to
appellant in the following projects:
(a) Fil-American Life Insurance
Building at Legaspi City;
(b) Fil-American Life Insurance
Building at Iloilo City;
(c) General Milling Corporation Flour
Mill at Opon Cebu;
(d) Menzi Building at Ayala Blvd.,
Makati, Rizal;
(e) International Rice Research
Institute, Research center Los Baos,
Laguna;
(f) Aurelia's Building at Mabini,
Ermita, Manila;
(g) Far East Bank's Office at Fil-
American Life Insurance Building at
Isaac Peral Ermita, Manila;
(h) Arthur Young's residence at
Forbes Park, Makati, Rizal;
(i) L & S Building at Dewey Blvd.,
Manila; and
(j) Stanvac Refinery Service Building
at Limay, Bataan.
the only question being the assessment of the proper fees
Appellee sent to appellant a statement of account to
which was attached an itemized statement of defendant-
appellant's account, according to which the total
engineering fee asked by appellee for services rendered
amounted to P116,565.00 from which sum was to be
deducted the previous payments made in the amount of
P57,000.00, thus leaving a balance due in the amount of
P59,565.00.
On May 18, 1962 appellant sent appellee a resume of fees
due to the latter. Said fees, according to appellant.
amounted to P10,861.08 instead of the amount claimed by
the appellee. On June 14, 1962 appellant sent appellee a
check for said amount, which appellee refused to accept
as full payment of the balance of the fees due him.
On August 10, 1962, appellee filed a complaint against
appellant.
In his answer, appellant admitted that appellee rendered
engineering services, as alleged in the first cause of action,
but averred that some of appellee's services were not in
accordance with the agreement and appellee's claims
were not justified by the services actually rendered, and
that the aggregate amount actually due to appellee was
only P80,336.29, of which P69,475.21 had already been
paid, thus leaving a balance of only P10,861.08. Appellant
denied liability for any damage claimed by appellee to
have suffered, as alleged in the second, third and fourth
causes of action. Appellant also set up affirmative and
special defenses, alleging that appellee had no cause of
action, that appellee was in estoppel because of certain
acts, representations, admissions and/or silence, which led
appellant to believe certain facts to exist and to act upon
said facts, that appellee's claim regarding the Menzi
project was premature because appellant had not yet
been paid for said project, and that appellee's services
were not complete or were performed in violation of the
agreement and/or otherwise unsatisfactory. Appellant also
set up a counterclaim for actual and moral damages for
such amount as the court may deem fair to assess, and for
attorney's fees of P10,000.00.
Inasmuch as the pleadings showed that the appellee's
right to certain fees for services rendered was not denied,
and the balance due to appellee after deducting the
admitted payments made by appellant, the trial court,
12 | P a g e
OBLICON2
upon agreement of the parties, authorized the case to be
heard before a Commissioner. The Commissioner
rendered a report which, in resume, states that the
amount due to appellee was $28,000.00 (U.S.) as his fee in
the International Research Institute Project which was
twenty percent (20%) of the $140,000.00 that was paid to
appellant, and P51,539.91 for the other projects, less the
sum of P69,475.46 which was already paid by the
appellant. The Commissioner also recommended the
payment to appellee of the sum of P5,000.00 as attorney's
fees.
At the hearing on the Report of the Commissioner,
judgment is rendered in favor of plaintiff. Hence, this
appeal.
Issue:
Whether or not the lower court erred in awarding
attorney's fees in the sum of P8,000.00, despite the
commissioner's finding, which plaintiff-appellee has
accepted and has not questioned, that said fee be only
P5,000.00
Held:
In his fourth assignment of error, appellant questions the
award by the lower court of P8,000.00 for attorney's fees.
Appellant argues that the Commissioner, in his report,
fixed the sum of P5,000.00 as "just and reasonable"
attorney's fees, to which amount appellee did not
interpose any objection, and by not so objecting he is
bound by said finding; and that, moreover, the lower court
gave no reason in its decision for increasing the amount to
P8,000.00.
Appellee contends that while the parties had not objected
to the findings of the Commissioner, the assessment of
attorney's fees is always subject to the court's appraisal,
and in increasing the recommended fees from P5,000.00
to P8,000.00 the trial court must have taken into
consideration certain circumstances which warrant the
award of P8,000.00 for attorney's fees.
We believe that the trial court committed no error in this Section 11 of Rule 33 of the Rules of Court, the court may
connection. Section 12 of Rule 33 of the Rules of Court, on adopt, modify, or reject the report of the commissioner, in
which the fourth assignment of error is presumably based, whole or in part, and hence, it was within the trial court's
provides that when the parties stipulate that a authority to increase the recommended attorney's fees of
commissioner's findings of fact shall be final, only P5,000.00 to P8,000.00. It is a settled rule that the amount
questions of law arising from the facts mentioned in the of attorney's fees is addressed to the sound discretion of
report shall thereafter be considered. Consequently, an the court. 3 1
agreement by the parties to abide by the findings of fact of
the commissioner is equivalent to an agreement of facts
It is true, as appellant contends, that the trial court did not
binding upon them which the court cannot disregard. The
state in the decision the reasons for increasing the
question, therefore, is whether or not the estimate of the
attorney's fees. The trial court, however, had adopted the
reasonable fees stated in the report of the Commissioner
report of the Commissioner, and in adopting the report
is a finding of fact.
the trial court is deemed to have adopted the reasons
given by the Commissioner in awarding attorney's fees, as
The report of the Commissioner on this matter reads as stated in the above-quoted portion of the report. Based on
follows: the reasons stated in the report, the trial court must have
considered that the reasonable attorney's fees should be
P8,000.00. Considering that the judgment against the
As regards attorney's fees, under the provisions of Art
appellant would amount to more than P100,000.00, We
2208, par (11), the same may be awarded, and considering
believe that the award of P8,000.00 for attorney's fees is
the number of hearings held in this case, the nature of the
reasonable.
case (taking into account the technical nature of the case
and the voluminous exhibits offered in evidence), as well
as the way the case was handled by counsel, it is believed,
subject to the Court's appraisal of the matter, that the sum
of P5,000.00 is just and reasonable as attorney's fees." 2 8
It is thus seen that the estimate made by the
Commissioner was an expression of belief, or an opinion.
St. Paul Fire & Marine Insurance Co. vs. Macondray& Co.,
An opinion is different from a fact. The generally
IncG.R. No. L 27796March 25, 1976
recognized distinction between a statement of "fact" and
an expression of "opinion" is that whatever is susceptible
Winthrop Products, Inc. of New York ShipperSS Tai Ping
of exact knowledge is a matter of fact, while that not
owned and operated by Wilhelm WilhemsenWinthrop
susceptible of exact knowledge is generally regarded as an
Stearns, Inc. Manila ConsigneeBarber Steamship Lines,
expression of opinion. 2 9 It has also been said that the
Inc. agent of Wilhelm WilhelmsenSt. Paul Fire & Marine
word "fact," as employed in the legal sense includes
Insurance Company InsurerManila Port Service arrastre
"those conclusions reached by the trior from shifting
contractorMacondray& Co., Inc. carrier
testimony, weighing evidence, and passing on the credit of
the witnesses, and it does not denote those inferences
FACTS:
drawn by the trial court from the facts ascertained and
settled by it. 3 0 In the case at bar, the estimate made by
Winthrop Products, Inc. of New York shipped aboard the
the Commissioner of the attorney's fees was an inference
SS TaiPing, 218 cartons and drums of drugs and medicine
from the facts ascertained by him, and is, therefore, not a
which wereconsigned to Winthrop Stearns, Inc. Manila
finding of facts. The trial court was, consequently, not
Philippines
bound by that estimate, in spite of the manifestation of
the parties that they had no objection to the findings of
Barber Steamship Lines, Inc. issued a Bill of Lading in the
facts of the Commissioner in his report. Moreover, under
name of Winthrop Products, Inc. as shipper, with arrival
13 | P a g e
OBLICON2
notice in Manila toconsignee Wintrhop Stearns, Inc.
Manila
The shipment was insured by the shipper against loos
and/ordamage with St. Paul Fire and Marine Insurance
Company
SS Tai Ping arrived at the Port of Manila and discharged
theshipment into the custody of Manila Port Service
The shipment was discharged complete and in good
order with the exception of 1 drum and several cartons
which were in bad ordercondition
The consignee filed a claim in the amount of
P1,109.47representing the C.I.F value of the damaged
drum andcartons of medine with the carrier and Manila
Port Service
Both the carrier and Manila Port Service refused to pay
such claim
The consignee then filed its claim with the insurer. On
the basis of such claim,
the insurance company paid to the consignee theinsured
value of the lost and damaged goods, includingother
expenses in connection therewith in the total amountof
$1,134.46
As subrogee of the rights of the shipper and/or cosignee,
theinsurer instituted with the CFI an action against the
defendants forthe recovery of the amount of $1,134.46
Contention of defendant Manila Port Service:
The whole cargo was delivered to the
consignee in thesame condition in which it was received
from the carryingvessel
Their liability is limited to the invoice value of
the goods,but in no case more than P500 per
package pursuant totheir Management
Contract
Contention of defendants Macondray& Co., Inc, Barber
SteamshipLines, Inc. and Wilhelm Wilhelmsen:
The carriers liability for the shipment ceased
upondischarge thereof from the ships tackle
If any damage was sustained by the shipment
while it wasunder the control of the vessel,
such damage was causedby insufficinecy of
packaging, force majeure and/or perilsof the
sea
Lower Court Ruling:
Defendants Macondray& Co, Barber Steamship Lines
IncandWilhelWilhelmsen to pay plaintiff, jointly and
severally P300 Defendant Manila Port Service to pay
plaintiff P809.67 (Total P1109.67)
Contention of St. Paul Fire & Marine Insurance Co.:
As subrogee of the consignee, it should be entitled
torecover from defendants the amount
of$1,134.46whichit actually paid to theconsignee and
which represents thevalue of the lost and damaged
shipment as well as other legitimate expenses
Contention of Defendants:
Their liability is limited to the C.I.F. value of the
goods,pursuant to contract of sea carriage embodied in
the bill of lading that the consignees claim against the
carrier and arrastreoperators was only for the sum of
P1,109.67
ISSUES:
1.Whether or not, in case of loss or damage, the liability of
thecarrier to the consignee is limited to the C.I.F value of
the goodswhich were lost or damaged
HELD:
1.Yes. The liabilities of the defendants with respect to
thelost or damaged shipments are expressly limited tothe
C.I.F. value of the goodsas per contract of sea carriage
embodied in the bill of lading It reads:
The limitation of liability xxx shall inure not only tothe
benefit of the carrier xxx but also to the benefitof any
independent contractor performing servicesxxx
The shipper and consignee are, therefore, bound by
suchstipulations
It is for this reason that the consignee filed its claimagainst
the defendant on the basis of the C.I.F. value of the lost or
damaged goods in the aggregate amount of P1,109.67
PAPA VS AU VALENCIA
Facts: Myron Papa, acting as attorney-in-fact of Angela
Butte, allegedly sold a parcel of land in La Loma, Quezon
City to Felix Penarroyo. However, prior to the alleged sale,
the land was mortgaged by Butte to Associated Banking
Corporation along with other properties and after the
alleged sale but prior to the propertys release by delivery,
Butte died. The Bank refused to release the property
despite Penarroyos unless and until the other mortgaged
properties by Butte have been redeemed and because of
this Penarroyo settled to having the title of the property
annotated.
It was later discovered that the mortgage rights of the
Bank were transferred to one Tomas Parpana,
administrator of the estate of Ramon Papa Jr. and his since
then been collecting rents. Despite repeated demands of
Penarroyo and Valencia, Papa refused to deliver the
property which led to a suit for specific performance. The
trial court ruled in favor of Penarroyo and Valencia.
On appeal to the CA, and ultimately in relation to
negotiable instruments, Papa averred that the sale of the
property was not consummated since the PCIB check
issued by Penarroyo for payment worth 40000 pesos was
not encashed by him. However, the CA saw the contrary
and that Papa in fact encashed the check by means of a
receipt.
Finally on appeal to the SC, Papa cited that according to
Art 1249 of the Civil Code, payment of checks only
produce effect once they have been encashed and he
insists that he never encashed the check. He further
alleged that if check was encashed, it should have been
stamped as such or at least a microfilm copy. It must be
noted that the check was in possession of Papa for ten (10)
years from the time payment was made to him.
Issue: Whether or not the check was encashed and can be
considered effective as payment
Held: YES. The Court held that acceptance of a check
implies an undertaking of due diligence in presenting it for
payment, and if he from whom it is received sustains loss
by want of such diligence, it will be held to operate as
actual payment of the debt or obligation for which it is
given. In this case, granting that check was never
encashed, Papas failure to do so for more than ten (10)
years undoubtedly resulted in the impairment of the check
through his unreasonable and unexplained delay.
14 | P a g e
OBLICON2
After more than ten (10) years from the payment in part
by cash and in part by check, the presumption is that the
check had been encashed.
PHILIPPINES AIRLINES VS CA
THE FACTS:
Amelia Tan commenced a complaint for damages before
the Court of First Instance against Philippine Airlines, Inc.
(PAL). The Court rendered a judgment in favor of the
former and against the latter.
PAL filed its appeal with the Court of Appeals (CA), and the
appellate court affirmed the judgment of the lower court
with the modification that PAL is condemned to pay the
latter the sum of P25, 000.00 as damages and P5, 000.00
as attorneys fee.
Judgment became final and executory and was
correspondingly entered in the case, which was remanded
to the trial court for execution. The trial court upon the
motion of Amelia Tan issued an order of execution with
the corresponding writ in favor of the respondent. Said
writ was duly referred to Deputy Sheriff Reyes for
enforcement.
Four months later, Amelia Tan moved for the issuance of
an alias writ of execution, stating that the judgment
rendered by the lower court, and affirmed with
modification by the CA, remained unsatisfied. PAL
opposed the motion, stating that it had already fully paid
its obligation to plaintiff through the issuance of checks
payable to the deputy sheriff who later did not appear
with his return and instead absconded.
The CA denied the issuance of the alias writ for being
premature. After two months the CA granted her an alias
writ of execution for the full satisfaction of the judgment
rendered, when she filed another motion. Deputy Sheriff
del Rosario is appointed special sheriff for enforcement
thereof.
PAL filed an urgent motion to quash the alias writ of
execution stating that no return of the writ had as yet
been made by Deputy Sheriff Reyes and that judgment
debt had already been fully satisfied by the former as
evidenced by the cash vouchers signed and received by
the executing sheriff.
Deputy Sheriff del Rosario served a notice of garnishment
on the depository bank of PAL, through its manager and
garnished the latters deposit. Hence, PAL brought the
case to the Supreme Court and filed a petition for
certiorari.
THE ISSUES:
WON an alias writ of execution can be issued without prior
return of the original writ by the implementing officer.
WON payment of judgment to the implementing officer as
directed in the writ of execution constitutes satisfaction of
judgment.
WON payment made in checks to the sheriff and under his
name is a valid payment to extinguish judgment of debt.
THE RULING:
1. Affirmative. Technicality cannot be countenanced to
defeat the execution of a judgment for execution is the
fruit and end of the suit and is very aptly called the life of
the law. A judgment cannot be rendered nugatory by
unreasonable application of a strict rule of procedure.
Vested right were never intended to rest on the
requirement of a return. So long as judgment is not
satisfied, a plaintiff is entitled to other writs of execution.
2. Negative. In general, a payment, in order to be effective
to discharge an obligation, must be made to the proper
person. Article 1240 of the Civil Code provides:
Payment made to the person in whose favor the
obligation has been constituted, or his successor in
interest, or any person authorized to receive it.
Under ordinary circumstances, payment by the judgment
debtor in the case at bar, to the sheriff should be valid
payment to extinguish judgment of debt.
However, under the peculiar circumstances of this case,
the payment to the absconding sheriff by check in his
name did not operate as a satisfaction of the judgment
debt.
3. Negative. Article 1249 of the Civil Code provides:
The payment of debts in money shall be made in the
currency stipulated, and if it is not possible to deliver such
currency, then in the currency which is legal tender in the
Philippines.
Unless authorized to do so by law or by consent of the
obligee, a public officer has no authority to accept
anything other than money in payment of an obligation
under a judgment being executed. Strictly speaking, the
acceptance by the sheriff of the petitioners checks does
not, per se, operate as a discharge of the judgment of
debt.
A check, whether managers check or ordinary check, is
not legal tender, and an offer of a check in payment of a
debt is not a valid tender or payment and may be refused
receipt by the oblige or creditor. Hence, the obligation is
not extinguished.
THE TWIST: Payment in cash is logical, but it was not
proper.
Payment in cash to the implementing officer may be
deemed absolute payment of judgment debt but the Court
has never, in the least bit, suggested that judgment
debtors should settle their obligations by turning over
huge amounts of cash or legal tender to the executing
officers. Payment in cash would result in damage or
endless litigations each time a sheriff with huge amounts
of cash in his hands decides to abscond.
As a protective measure, the courts encourage the
practice of payment of check provided adequate controls
are instituted to prevent wrongful payment and illegal
withdrawal or disbursement of funds.
However, in the case at bar, it is out of the ordinary that
checks intended for a particular payee are made out in the
name of another. The issuance of the checks in the name
of the sheriff clearly made possible the misappropriation
of the funds that were withdrawn.
The Court of Appeals explained:
Knowing as it does that the intended payment was for the
respondent Amelia Tan, the petitioner corporation,
15 | P a g e
OBLICON2
utilizing the services of its personnel who are or should be
knowledgeable about the accepted procedure and
resulting consequences of the checks drawn, nevertheless,
in this instance, without prudence, departed from what is
generally observed and done, and placed as payee in the
checks the name of the errant Sheriff and not the name of
the rightful payee. Petitioner thereby created a situation
which permitted the said Sheriff to personally encash said
checks and misappropriate the proceeds thereof to his
exclusive benefit. For the prejudice that resulted, the
petitioner himself must bear the fault
Having failed to employ the proper safeguards to protect
itself, the judgment debtor whose act made possible the
loss had but itself to blame.
PACULDO VS. REGALADO
345 SCRA 134
FACTS:
On December 27, 1990, petitioner Paculdo and
respondent Regalado entered into a contract oflease over
a parcel of land with a wet market building. The contract
was for twenty five (25) years,beginning on January 1,
1991 and ending on December 27, 2015. For the first five
(5) years of thecontract beginning December 27,
1990, Paculdo would pay a monthly rental of P450,000,
payablewithin the first five (5) days of each month with a
2% penalty for every month of late payment.
Aside from the above lease, petitioner leased eleven (11)
other property from the respondent,ten (10) of which
were located within the Fairview compound, while the
eleventh was locatedalong Quirino Highway Quezon City.
Petitioner also purchased from respondent eight (8) units
ofheavy equipment and vehicles in the cumulative amount
of Php 1, 020,000. The respondent sent two demand
letters to petitioner demanding payment of the back
rentals,on account of petitioners failure to pay P361,
895.55 in rental for the month of May, 1992, and
the monthly rental of P450, 000.00 for the months of June
and July 1992, and if no payment wasmade within fifteen
(15) days from the receipt of the letter, it would cause
the cancellation of thelease contract.
Without the knowledge of petitioner, on August 3, 1992,
respondent mortgaged the land subjectof the lease
contract, including the improvements which petitioner
introduced into the landamounting to P35, 000,000.00, to
Monte de Piedad Savings Bank, as a security for a loan. On
August 12, 1992, and the subsequent dates thereafter,
respondent refused to acceptpetitioners daily rental
payments.
Subsequently, petitioner filed an action for injunction
and damages seeking to enjoin respondentsfrom
disturbing his possession of the property subject of the
lease contract. On the same day,respondent also filed a
complaint for ejectment against petitioner.
ISSUE:
Was the petitioner truly in arrears in the payment of
rentals on the subject property at the time of thefiling of
the complaint for ejectment?
RULING:
NO, the petitioner was not in arrears in the payment of
rentals on the subject property at the time of thefiling of
the complaint for ejectment.As found by the lower court
there was a letter sent by respondent to herein petitioner,
dated November19, 1991, which states that petitioners
security deposit for the Quirino lot, be applied as partial
paymentfor his account under the subject lot as well as to
the real estate taxes on the Quirino lot.
Petitionerinterposed no objection, as evidenced by his
signature signifying his conformity thereto.Meanwhile, in
an earlier letter, dated July 15, 1991, respondent informed
petitioner that the paymentwas to be applied not only to
petitioners accounts under the subject land and the
Quirino lot but also toheavy equipment bought by the
latter from respondent. Unlike in the November letter, the
July letter didnot contain the signature
petitioner.Petitioner submits that his silence is not consent
but is in fact a rejection.Rationale:As provided in Article
1252 of the Civil Code, the right to specify which among
his various obligations tothe same creditor is to be
satisfied first rest with the debtor.In the case at bar, at the
time petitioner made the payment, he made it clear to
respondent that theywere to be applied to his rental
obligations on the Fairview wet market property . Though
he entered intovarious contracts and obligations with
respondent, all the payments made, about P11,000,000.00
wereto be applied to rental and security deposit on the
Fairview wet market property. However,
respondentapplied a big portion of the amount paid by
petitioner to the satisfaction of an obligation which was
notyet due and demandable- the payment of the eight
heavy equipment.Under the law, if the debtor did not
declare at the time he made the payment to which of his
debts withthe creditor the payment is to be applied, the
law provided the guideline; i.e. no payment is to
be appliedto a debt which is not yet due and the payment
has to be applied first to the debt which is most onerousto
the debtor.The lease over the Fairview wet market is the
most onerous to the petitioner in the case at bar.
DBP vs CA Gr No. 118342 1.5.98 Davide, JR., J,:
Lydia P. Cuba is a grantee of a Fishpond Lease Agreement
No. 2083 dated May 13, 1974 from the Government;
Subject is a 44 hectare fishpond located in Bolinao
Pangasinan. She obtained several loans of P109,000.00;
P109,000.00; and P98,700.00 from the Development Bank
of the under the terms stated in the Promissory Notes; As
security for said loans, Cuba executed two Deeds of
Assignment of her Leasehold Rights;
Cuba failed to pay her loan on the scheduled dates thereof
in accordance with the terms of the Promissory Notes;
without foreclosure proceedings, whether judicial or extra-
judicial, DBP appropriated the Leasehold Rights of Cuba
over the fishpond in question;
of
After DBP has appropriated the Leasehold Rights of Cuba
over the fishpond in question, DBP, in turn, executed a
Deed of Conditional Sale of the Leasehold Rights in favor
of Cuba over the same fishpond in question;
In the negotiation for repurchase, Cuba addressed two
letters to the Manager DBP, Dagupan City. DBP thereafter
16 | P a g e
OBLICON2
accepted the offer to repurchase in a letter addressed to
Cuba;
After the Deed of Conditional Sale was executed in favor
of Cuba , a new Fishpond Lease Agreement was issued by
the Ministry of Agriculture and Food in favor of Cuba only,
excluding her husband;
Cuba failed to pay the amortizations stipulated in the
Deed of Conditional Sale; After Cuba failed to pay the
amortization as stated in Deed of Conditional Sale, she
entered with the DBP a temporary arrangement whereby
in consideration for the deferment of the Notarial
Rescission of Deed of Conditional Sale, Cuba promised to
make certain payments;
DBP thereafter sent a Notice of Rescission thru Notarial
Act, and which was received by Cuba; After the Notice of
Rescission, DBP took possession of the Leasehold Rights of
the fishpond in question;
That after DBP took possession of the Leasehold Rights
over the fishpond in question, through the SUNDAY
PUNCH advertised public bidding DBP thereafter executed
a Deed of Conditional Sale in favor of defendant Agripina
Caperal through a public sale; Thereafter, Caperal was
awarded Fishpond Lease Agreement.
The principal issue presented was whether the act of DBP
in appropriating to itself CUBA's leasehold rights over the
fishpond in question without foreclosure proceedings was
contrary to Article 2088 of the Civil Code and, therefore,
invalid. CUBA insisted on an affirmative resolution. DBP
stressed that it merely exercised its contractual right
under the Assignments of Leasehold Rights, which was not
a contract of mortgage. Defendant Caperal sided with DBP.
ISSUE: WON the assignment constitute dation in payment
under article 1245 of the civil code.
HELD: No. The assignment did not constitute dation in
payment under Article 1245 of the civil Code, which reads:
"Dation in payment, whereby property is alienated to the
creditor in satisfaction of a debt in money, shall be
governed by the law on sales." It bears stressing that the
assignment, being in its essence a mortgage, was but a
security and not a satisfaction of indebtedness.
In view, however, of DBP's act of appropriating CUBA's
leasehold rights which was contrary to law and public
policy, as well as its false representation to the then
Ministry of Agriculture and Natural Resources that it had
"foreclosed the mortgage," an award of moral damages in
the amount of P50,000 is in order conformably with Article
2219(10), in relation to Article 21, of the Civil Code.
Exemplary or corrective damages in the amount of
P25,000 should likewise be awarded by way of example or
correction for the public good. 20 There being an award of
exemplary damages, attorney's fees are also recoverable.
Filinvest vs Philippine Acetylene Co. Gr L-50449; De
Castro J
Facts: On October 30, 1971, the Philippine Acetylene Co.,
Inc., purchased from one Alexander Lim, as evidenced by a
Deed of Sale, a motor vehicle described as Chevorlet, 1969
model with Serial No. 136699Z303652 for P55,247.80 with
a down payment of P20,000.00 and the balance of
P35,247.80 payable, under the terms and conditions of the
promissory note, at a monthly installment of P1,036.70 for
thirty-four (34) months, due and payable on the first day
of each month starting December 1971 through and
inclusive September 1, 1974 with 12 % interest per annum
on each unpaid installment, and attorney's fees in the
amount equivalent to 25% of the total of the outstanding
unpaid amount. As security for the payment of said
promissory note, PAC executed a chattel mortgage over
the same motor vehicle in favor of said Alexander Lim. Lim
assigned to Filinvest Finance Corp his interests in the PN
and Chattel Mortgage. After defauling in 9 installments,
Filinvest sent a demand letter to PAC, to pay and return
the vehicle. PAC returned the car but Filinvest cannot sell
the car due to unpaid taxes theron incurred by PAC.
Filinvest offered to deliver back the car to PAC, the latter
refused. Filinvest thus filed a complaint for collection of
money with damages in CFI Manila. PAC Averred that
Filinvest has no cause of action vs "PAC becuase the car
was returned after the demand letter, the obligation was
thus extinguished.
Issue: WON when appellant opted to return, as in fact it
did return, the mortgaged motor vehicle to the appellee,
said return necessarily had the effect of extinguishing
appellant's obligation for the unpaid price to the appellee,
construing the return to and acceptance by the appellee of
the mortgaged motor vehicle as a mode of payment,
specifically, dation in payment or dacion en pago which
according to appellant, virtually made appellee the owner
of the mortgaged motor vehicle by the mere delivery
thereof?
Held: No. We find appellant's contention devoid of
persuasive force. The mere return of the mortgaged motor
vehicle by the mortgagor, the herein appellant, to the
mortgagee, the herein appellee, does not constitute
dation in payment or dacion en pago in the absence,
express or implied of the true intention of the parties.
Dacion en pago, according to Manresa, is the transmission
of the ownership of a thing by the debtor to the creditor
as an accepted equivalent of the performance of
obligation. In dacion en pago, as a special mode of
payment, the debtor offers another thing to the creditor
who accepts it as equivalent of payment of an outstanding
debt. The undertaking really partakes in one sense of the
nature of sale, that is, the creditor is really buying the
thing or property of the debtor, payment for which is to be
charged against the debtor's debt. As such, the essential
elements of a contract of sale, namely, consent, object
certain, and cause or consideration must be present. In its
modern concept, what actually takes place in dacion en
pago is an objective novation of the obligation where the
17 | P a g e
OBLICON2
thing offered as an accepted equivalent of the
performance of an obligation is considered as the object of
the contract of sale, while the debt is considered as the
purchase price. 5 In any case, common consent is an
essential prerequisite, be it sale or innovation to have the
effect of totally extinguishing the debt or obligation.
The evidence on the record fails to show that the
mortgagee, the herein appellee, consented, or at least
intended, that the mere delivery to, and acceptance by
him, of the mortgaged motor vehicle be construed as
actual payment, more specifically dation in payment or
dacion en pago. The fact that the mortgaged motor vehicle
was delivered to him does not necessarily mean that
ownership thereof, as juridically contemplated by dacion
en pago, was transferred from appellant to appellee. In
the absence of clear consent of appellee to the proferred
special mode of payment, there can be no transfer of
ownership of the mortgaged motor vehicle from appellant
to appellee. If at all, only transfer of possession of the
mortgaged motor vehicle took place, for it is quite possible
that appellee, as mortgagee, merely wanted to secure
possession to forestall the loss, destruction, fraudulent
transfer of the vehicle to third persons, or its being
rendered valueless if left in the hands of the appellant.
A more solid basis of the true intention of the parties is
furnished by the document executed by appellant
captioned "Voluntary Surrender with Special Power of
Attorney To Sell" dated March 12, 1973, attached as
Annex "C" of the appellant's answer to the complaint.
Had appellee intended to completely release appellant of
its mortgage obligation, there would be no necessity of
executing the document captioned "Voluntary Surrender
with Special Power of Attorney To Sell." Nowhere in the
said document can We find that the mere surrender of the
mortgaged motor vehicle to the appellee extinguished
appellant's obligation for the unpaid price.
PILAR DE GUZMAN, ROLANDO GESTUVO, and MINERVA
GESTUVO, petitioners,
vs.
CA, THE HON. JUDGE PEDRO JL. BAUTISTA, Presiding
Judge of the Court of First Instance of Rizal, Branch III,
Pasay City, and LEONIDA P. SINGH, respondents. GR L-
52733 July 23, 1985
FACTS: On February 17, 1971, the De Guzman, as SELLER,
and the private respondent, as BUYER, executed a
Contract to Sell covering 2 parcels of land owned by the
petitioners located at Cementina Street, Pasay City. It was
stipulated therein that the private respondent should pay
the balance of the purchase price of P133,640.00 on or
before February 17, 1975. Two days before the said date,
or on February 15, 1975, the petitioners denied the
request of the respondent to furnish her with a statement
of account of the balance due; copies of the certificates of
title covering the two parcels of land subject of the sale;
and a copy of the power of attorney executed by Rolando
Gestuvo in favor of Pilar de Guzman.
As a result, the private respondent filed a complaint for
specific performance with damages against the petitioners
before the CFI of Rizal. The case was dismissed for failure
to prosecute. The private respondent subsequently refiled
the case. In her complaint, the private respondent charged
that the petitioners, by refusing to furnish her with copies
of the documents requested, deliberately intended not to
comply with their obligations under the contract to sell, as
a result of which the said petitioners committed a breach
of contract, and had also acted unfairly and in manifest
bad faith for which they should be held liable for damages.
Petitioners claimed that the complaint failed to state a
cause of action; that the balance due was already pre-
determined in the contract; that the petitioners have no
obligation to furnish the private respondent with copies of
the documents requested; and that the private
respondent's failure to pay the balance of the purchase
price on the date specified had caused the contract to
expire and become ineffective without necessity of notice
or of any judicial declaration to that effect.
Trial court rendered a decision approving compromise
agreement between the parties.
Private respondent went to the sala of Judge Bautista on
the appointed day to make payment, as agreed upon in
their compromise agreement. But, the petitioners were
not there to receive it. Only the petitioners' counsel
appeared later, but, he informed the private respondent
that he had no authority to receive and accept payment.
Instead, he invited the private respondent and her
companions to the house of the petitioners to effect
payment. But, the petitioners were not there either. They
were informed that the petitioner Pilar de Guzman would
arrive late in the afternoon, possibly at around 4:00
o'clock. The private respondent was assured, however,
that she would be informed as soon as the petitioners
arrived. The private respondent, in her eagerness to settle
her obligation, consented and waited for the call which did
not come and unwittingly let the period lapse. The next
day, January 28, 1978, the private respondent went to the
office of the Clerk of the Court of First Instance of Rizal,
Pasay City Branch, to deposit the balance of the purchase
price. But, it being a Saturday, the cashier was not there to
receive it. So, on the next working day, Monday, January
30, 1978, the private respondent deposited the amount of
P30,000.00 with the cashier of the Office of the Clerk of
the Court of First Instance of Rizal, Pasay City Branch, to
complete the payment of the purchase price of
P250,000.00.
On January 28, 1978, the petitioners filed a motion for the
issuance of a writ of execution, claiming that the private
respondent had failed to abide by the terms of the
compromise agreement. The private respondent opposed
saying that she had complied with the terms and
conditions of the compromise agreement and asked the
court to direct the petitioners to comply with the court's
decision and execute the necessary documents to effect
the transfer of ownership of the two parcels of land in
question to her.
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OBLICON2
Acting upon the motions, the respondent judge issued an
order on March 27, 1978, denying the petitioners' motion
for execution, and instead, directed the petitioners to
immediately execute the necessary documents,
transferring to private respondent the title to the
properties. He also ordered the Clerk of Court to release to
the petitioners the amount of P250,000.00, which had
been deposited by the private respondent, upon proper
receipt therefor.
ISSUE: WON Respondent breached the compromise
agreement when she failed to deliver the full payment to
De Guzman.
HELD: SC agreed with the findings of the trial court that
the private respondent had substantially complied with
the terms and conditions of the compromise agreement.
Her failure to deliver to the petitioners the full amount on
January 27, 1978 was not her fault. The blame lies with the
petitioners.
Since the deposit of the balance of the purchase price was
made in good faith and that the failure of the private
respondent to deposit the purchase price on the date
specified was due to the petitioners who also make no
claim that they had sustained damages because of the two
days delay, there was substantial compliance with the
terms and conditions of the compromise agreement.
TLG INTERNATIONAL CONTINENTAL ENTERPRISING, INC.,
petitioner,
vs.
HON. DELFIN B. FLORES, Presiding Judge, Court of First
Instance of Rizal, Branch XI, respondent.
October 5, 1971 The case was an action for declaratory
relief involving the rights of Bearcon Trading Co., Inc. as
lessee of the premises of the aforesaid defendants. TLG
intervened as sub-lessee of Bearcon over the property,
and the purpose of its intervention was to protect its rights
as such sub-lessee and to enable it, during pendency of the
case, to make a consignation of the monthly rentals as it
was "at a loss as to who is lawfully and rightfully entitled
to receive payments of the monthly" rentals.
As a consequence of the admission of the "Complaint In
Intervention", petitioner deposited with the Clerk of Court
of the Court of First Instance of Rizal, the following sums
by way of rentals: .
October 27, 1971 P900.00
November 29, 1971 600.00
January 19, 1972 750.00
March 8, 1972 1,500.00
or a total of P3,750.00, which deposits are properly
covered by official receipts.
On October 20, 1971, defendants in Civil Case No. 14880,
filed with said Court, an "Omnibus Motion" in which they
prayed that the complaint, as well as the Complaint In
Intervention, be dismissed on the ground that the subject
matter thereof could be better ventilated in the ejectment
case filed by Juan Fabella against Bearcon Trading Co., Inc.
(Civil Case No. 3979) then pending before the municipal
court of Mandaluyong Rizal.
The court issued an "Omnibus Order", dismissing both the
complaint and the complaint in intervention.
On May 27, 1972, petitioner filed its Motion to withdraw
the sums it deposited, as "the order dismissing the case as
well as the complaint in intervention without a resolution
having been made as to the right of the plaintiff or the
defendants to the rentals deposited by the intervenor, left
the intervenor without any recourse but to apply for
authority to withdraw the amount and turn over the same
to the defendants in accordance with the understanding
arrived at between the parties hereto". This was denied by
Respondent in its order of June 23, 1972. The motion for
reconsideration of petitioner was likewise denied by
Respondent on July 15, 1972.
Hence this petition for certiorari.
ISSUE: Whether or not Respondent could authorize the
withdrawal of the deposits considering that according to
Respondent, the Court "has not ordered the intervenor to
make any deposit in connection" with the case.
HELD: There is no question that in cases of consignation,
the debtor is entitled as a matter of right to withdraw the
deposit made with the court, before the consignation is
accepted by the creditor or prior to the judicial approval of
such consignation. This is explicit from the second
paragraph of Article 1260 of the new Civil Code which
states that: "Before the creditor has accepted the
consignation, or before a judicial declaration that the
consignation has been properly made, the debtor may
withdraw the thing or the sum deposited, allowing the
obligation to remain in force".
In the case at bar, the case was dismissed before the
amount deposited was either accepted by the creditor or a
declaration made by the Court approving such
consignation. Such dismissal rendered the consignation
ineffectual. Under such circumstances it was incumbent
upon Respondent to have allowed the withdrawal by
petitioner of the sums of money deposited by it with the
Court.
Respondent nevertheless insists that the Court had no
authority to authorize its withdrawal since it "has not
ordered intervenor to make" the deposit. This contention
ignores the fact that the deposit was made by petitioner as
a consequence of the admission by the Court of its
"Complaint In Intervention". It must be noted that the
aforesaid deposit was made with and officially receipted
by the Clerk of Court. The deposit was made pursuant to
Article 1258 of the new Civil Code which states that:
"Consignation shall be made by depositing the things due
at the disposal of judicial authority, before whom the
tender of payment shall be proved, in a proper case, ...". It
was therefore money received by the Clerk of Court
pursuant to Section 6 of the Judiciary Act. (Rep. Act 296 as
19 | P a g e
OBLICON2
Amended). From the moment the deposit was made by
petitioner, "the money remained under the control and
jurisdiction of the court and the former could not recover
it without an express order of restitution. In the light of
the aforecited statutory provisions and jurisprudence the
SC finds no justification for Respondent's intransigent
posture.
LUISA F. MCLAUGHLIN V. C.A. & RAMON FLORES G.R. No.
L-57552 October 10, 1986 FERIA, Actg. C.J.
FACTS: Petitioner Luisa F. McLaughlin and private
respondent Ramon Flores entered into a contract of
conditional sale of real property. The deed of conditional
sale fixed the total purchase price of P140k payable as
follows: a) P26k upon the execution of the deed; and b)
the balance of P113k to be paid not later than May 1977.
The parties also agreed that the balance shall bear interest
at the rate of 1% per month to commence from December
1976, until the full purchase price was paid.
In 1979, petitioner filed a complaint for the rescission of
the deed of conditional sale due to the failure of private
respondent to pay the balance due on May 31, 1977.
Later, the parties submitted a Compromise Agreement on
the basis of which the court rendered a decision. In said
compromise agreement, private respondent
acknowledged his indebtedness to petitioner under the
deed of conditional sale in the amount of P119k, and the
parties agreed that said amount would be payable as
follows: a) P50k upon signing of the agreement; and b) the
balance of P69k in two equal installments on June 1980
and December 1980. As agreed upon, private respondent
paid P50k upon the signing of the agreement and in
addition he also paid an "escalation cost" of P25k.
In October 1980, petitioner wrote to private respondent
demanding that the latter pay the balance of P69k.
Private respondent then sent a letter to petitioner
signifying his willingness and intention to pay the full
balance of P69k, and at the same time demanding to see
the certificate of title of the property and the tax payment
receipts.
Private respondent holds that on the first working day
of said month, he tendered payment to petitioner but this
was refused acceptance by petitioner. Petitioner filed a
Motion for Writ of Execution alleging that private
respondent failed to pay the installment due on June 1980
and that since June 1980 he had failed to pay the monthly
rental of P1k.
RTC granted the motion for writ of execution. It denied the
motion for reconsideration in an order dated November
21, 1980and issued the writ of execution on November 25,
1980. In an order dated November 27, 1980, the trial court
granted petitioner's ex-parte motion for clarification of the
order of execution rescinding the deed of conditional sale
of real property.
ISSUE: WON the tender made by Flores was valid
HELD: YES. It is significant to note that on November 17,
1980, or just 17 days after October 31,1980, the deadline
set by McLaughlin, Flores tendered the certified manager's
check. Considering that Flores had already paid
P101,550.00 under the contract to sell, excluding the
monthly rentals paid, certainly it would be the height of
inequity to have this amount forfeited in favor McLaughlin.
Under the questioned orders, McLaughlin would get back
the property and still keep P101,550.00. Moreover, section
4 of Republic Act No. 6552 (Maceda Law) provides as
follows: In case where less than two years of installments
were paid, the seller shall give the buyer a grace period of
not less than sixty days from the date the installment
became due. If the buyer fails to pay the installments due
at the expiration of the grace period, the seller may
cancel the contract after thirty days from receipt by the
buyer of the notice of the cancellation or the demand for
rescission of the contract by a notarial act.
Section 7 of said law provides as follows: Any stipulation
in any contract hereafter entered into contrary to the
provisions of Sections 3, 4, 5 and 6, shall be null and void.
Considering petitioner's motion for execution filed on
November 7, 1980 as a notice of cancellation, petitioner
could cancel the contract of conditional sale after thirty
days from receipt by private respondent of said motion.
The tender made by private respondent of a certified
bank manager's check payable to petitioner was a valid
tender of payment.
Moreover, Section 49, Rule 130 of the Revised Rules of
Court provides that: An offer in writing to pay a
particular sum of money or to deliver a written
instrument or specific property is, if rejected, equivalent
to the actual production and tender of the money,
instrument, or property.
However, although private respondent had made a valid
tender of payment which preserved his rights as avendee
in the contract of conditional sale of real property, he did
not follow it with a consignation or deposit of the sum
due with the court. In one case, it was held: True that
consignation of the redemption price is not necessary in
order that the vendor may compel the vendee to allow the
repurchase within the time provided by law or by contract.
We have held that in such cases a mere tender of payment
is enough, if made on time, as a basis for action against the
vendee to compel him to resell. But that tender does not
in itself relieve the vendor from his obligation to pay the
price when redemption is allowed by the court. In other
words, tender of payment is sufficient to compel
redemption but is not in itself a payment that relieves the
vendor from his liability to pay the redemption price."In
compliance with a resolution issued by the lower court,
both parties submitted their respective manifestations
which confirm that the Manager's Check in question was
subsequently withdrawn and replaced by cash, but the
cash was not deposited with the court.
20 | P a g e
OBLICON2
SOLEDAD SOCO vs. HON. FRANCIS MILITANTE, Incumbent
Presiding Judge of the CFI of Cebu, Branch XII, Cebu City
and REGINO FRANCISCO, JR.
Ponente: GUERRERO, J.:
Place: Cebu City
FACTS: Soco and Francisco entered into a contract of lease
on January 17, 1973, whereby Soco leased her commercial
building and lot situated at Manalili Street, Cebu City, to
Francisco for a monthly rental of P 800.00 for a period of
10 years renewable for another 10 years at the option of
the lessee. It can readily be discerned from Exhibit A
(from SOCO) that paragraphs 10 and 11 appear to have
been cancelled while in Exhibit 2 (from FRANCISCO) only
paragraph 10 has been cancelled. Claiming that paragraph
11 of the Contract of Lease was in fact not part of the
contract because it was cancelled, Soco filed Civil Case No.
R-16261 in the Court of First Instance of Cebu seeking the
annulment and/or reformation of the Contract of Lease.
Sometime before the filing of Civil Case No. R-16261
Francisco noticed that Soco did not anymore send her
collector for the payment of rentals and at times there
were payments made but no receipts were issued. This
situation prompted Francisco to write Soco the letter
dated February 7, 1975 which the latter received. After
writing this letter, Francisco sent his payment for rentals
by checks issued by the Commercial Bank and Trust
Company.
The factual background setting of this case clearly
indicates that soon after Soco learned that Francisco sub-
leased a portion of the building to NACIDA, at a monthly
rental of more than P3,000.00 which is definitely very
much higher than what Francisco was paying to Soco
under the Contract of Lease, the latter felt that she was on
the losing end of the lease agreement so she tried to look
for ways and means to terminate the contract.
In view of this alleged non-payment of rental of the leased
premises beginning May, 1977, Soco through her lawyer
sent a letter dated November 23, 1978 to Francisco
serving notice to the latter to vacate the premises leased.
In answer to this letter, Francisco through his lawyer
informed Soco and her lawyer that all payments of rental
due her were in fact paid by Commercial Bank and Trust
Company through the Clerk of Court of the City Court of
Cebu. Despite this explanation, Soco filed this instant case
of Illegal Detainer.
MTC and RTC have conflicting findings. The former found
that the consignation was valid. RTC reversed and ordered
the eviction of the Francisco.
ISSUE: WON there was a valid consignation of payment of
the rentals.
HELD: In order that consignation may be effective, the
debtor must first comply with certain requirements
prescribed by law. The debtor must show (1) that there
was a debt due; (2) that the consignation of the obligation
had been made because the creditor to whom tender of
payment was made refused to accept it, or because he
was absent or incapacitated, or because several persons
claimed to be entitled to receive the amount due (Art.
1176, Civil Code); (3) that previous notice of the
consignation had been given to the person interested in
the performance of the obligation (Art. 1177, Civil Code);
(4) that the amount due was placed at the disposal of the
court (Art. 1178, Civil Code); and (5) that after the
consignation had been made the person interested was
notified thereof (Art. 1178, Civil Code). Failure in any of
these requirements is enough ground to render a
consignation ineffective. (parangwalanaman tong mga to
sa 1176, 1177 and 1178?)
We hold that the respondent lessee has utterly failed to
prove the following requisites of a valid consignation: First,
tender of payment of the monthly rentals to the lessor.
Second, respondent lessee also failed to prove the first
notice to the lessor prior to consignation,
Evidently, from this arrangement, it was the lessees duty
to send someone to get the cashiers check from the bank
and logically, the lessee has the obligation to make and
tender the check to the lessor. This the lessee failed to do,
which is fatal to his defense.
Third, respondent lessee likewise failed to prove the
second notice, that is after consignation has been made,
to the lessor. And the fourth requisite that respondent
lessee failed to prove is the actual deposit or consignation
of the monthly rentals except the two cashiers checks
referred to in Exhibit 12. As indicated earlier, not a single
copy of the official receipts issued by the Clerk of Court
was presented at the trial of the case to prove the actual
deposit or consignation.
We, therefore, find and rule that the lessee has failed to
prove tender of payment except that in Exh. 10; he has
failed to prove the first notice to the lessor prior to
consignation except that given in Exh. 10; he has failed to
prove the second notice after consignation except the two
made in Exh. 12; and he has failed to pay the rentals for
the months of July and August, 1977 as of the time the
complaint was filed for the eviction of the lessee. We hold
that the evidence is clear, competent and convincing
showing that the lessee has violated the terms of the lease
contract and he may, therefore, be judicially ejected.
CRISTINA SOTTO, plaintiff-appellee,
vs.
HERNANI MIJARES, ET AL., defendants-appellants.
MAKALINTAL, J.:
FACTS:
This is an appeal taken by herein defendants from that
portion of the order of the Court of First Instance of
Negros Occidental dated March 20, 1963 in its Civil Case
21 | P a g e
OBLICON2
No. 6796 which requires them to deposit with the Clerk of
Court the amount of P5,106.00 within ten (10) days from
receipt of said order. Originally appealed to the Court of
Appeals, this case was subsequently certified to this Court,
the only issue being one of law.
In the aforesaid Civil case[[1]] plaintiff filed a "Motion for
Deposit" on November 13, 1962, the pertinent portions of
which read:
2. That in accordance with the contract including the allied
transactions as evidenced by other documents, the
balance indebtedness of the defendants in favor of the
plaintiff is the amount of P5,106.00 only, Philippine
Currency ...;
3. That according to the answer of the defendants, the
said claim of P5,106.00 is admitted ..., with the defendants
further alleging that they have offered the said amount to
the plaintiff who refused to receive the said amount;
4. That in view of the admission of the defendants of the
same and in order to limit the other controversial issue ...
it is fitting and proper that the said amount of P5,106.00
be deposited in the Office of the Clerk of Court of this
province or to deliver the same to the plaintiff and/or her
counsel.
Defendants, in their "Opposition" dated November 23,
1962, signified their willingness to deposit the requested
amount provided that the complaint be dismissed and that
they be absolved of all other liabilities, expenses and costs.
On November 26, 1962 the lower court issued the
following order:
It appearing that the defendants have admitted the claim
of the plaintiff in the sum of P5,106.00, as prayed for by
the counsel for the plaintiff the said defendants are hereby
ordered to deposit said amount to the Clerk of Court
pending the final termination of this case.
On November 28, 1962 plaintiff this time represented
by new counsel filed a motion for partial judgment on
the pleadings with respect to the amount of P5,106.00,
modifying their previous request for judicial deposit, which
had already been granted. On the other hand, defendants
moved to reconsider the order of November 26, explaining
that through oversight they failed to allege in their
"Opposition" that the sum of P5,106.00 was actually
secured by a real estate mortgage. They would thus
premise their willingness to deposit said amount upon the
condition "... that the plaintiff will cancel the mortgage
abovementioned and that the plaintiff be ordered to
return to the defendants Transfer Certificate of Title No.
29326 covering Lot No. 327 of Pontevedra and Transfer
Certificate of Title No. 29327 covering Lot No. 882 of
HinigaranCadastre, Negros Occidental."
On March 20, 1963 the lower court resolved both motions,
in effect denying them and reiterating its previous order,
as follows:
WHEREFORE, the motion for partial judgment on the
pleadings dated November 28, 1962 is hereby denied but
in its stead the defendants are hereby ordered to deposit
with the Clerk of Court the amount of P5,106.00 within ten
(10) days from receipt of this order subject to further
disposition thereof in accordance with the decision to be
rendered after trial.
HELD:
It is the foregoing order from which the present appeal has
been taken. Since this case was submitted upon the filing
of the briefs, there has been no showing as to the
outcome of the main case below for foreclosure of
mortgage. The decision therein, if one has been rendered,
since no injunction was sought in or granted by this Court,
must have rendered this appeal moot and academic,
considering that the defendants admit their indebtedness
to the plaintiff but object merely to their being compelled
to deposit the amount thereof in court during the
pendency of the foreclosure case. However, no
manifestation having been received on the matter, we
shall proceed to the issues raised by the parties.
The first of said issue is procedural, and has been set up by
the appellee as a roadblock to this appeal. She maintains
that the controverted order is interlocutory, since it does
not dispose of the case with finality but leaves something
still to be done, and hence is unappealable. The remedy, it
is pointed out, should have been by petition for certiorari.
The point, strictly speaking, is well taken; but this Court
sees fit to disregard technicalities and treat this appeal as
such a petition and consider it on the merits, limiting the
issue, necessarily, to whether or not the court below
exceeded its jurisdiction or committed a grave abuse of
discretion in issuing the order complained of.
The defendants admit their indebtedness to the plaintiff,
but only in the sum of P5,106.00. It seems that the
controversy refers to the plaintiff's additional claim for
interest, attorney's fees and costs.
The defendants expressed their willingness to deposit the
said amount in court, subject to the condition that the
mortgage they had executed as security be cancelled. The
question, then, is: Did the court act with authority and in
the judicious exercise of its discretion in ordering the
defendants to make the deposit but without the condition
they had stated? Whether or not to deposit at all the
amount of an admitted indebtedness, or to do so under
certain conditions, is a right which belongs to the debtor
exclusively. If he refuses he may not be compelled to do
so, and the creditor must fall back on the proper coercive
processes provided by law to secure or satisfy his credit, as
by attachment, judgment and execution. From the
viewpoint of the debtor a deposit such as the one involved
here is in the nature of consignation, and consignation is a
facultative remedy which he may or may not avail himself
of. If made by the debtor, the creditor merely accepts it, if
he wishes; or the court declares that it has been properly
made, in either of which events the obligation is ordered
cancelled. Indeed, the law says that "before the creditor
has accepted the consignation or before a judicial
22 | P a g e
OBLICON2
declaration that the consignation has been properly made,
the debtor may withdraw the thing or the sum deposited,
allowing the obligation to remain in force."[[2]] If the
debtor has such right of withdrawal, he surely has the right
to refuse to make the deposit in the first place. For the
court to compel him to do so was a grave abuse of
discretion amounting to excess of jurisdiction.
The order appealed from is set aside, without
pronouncement as to costs.
G.R. No. 90359 June 9, 1992
JOHANNES RIESENBECK, petitioner, vs. THE HON. COURT
OF APPEALS, and JUERGEN MAILE, respondents.
GRIO-AQUINO, J.:
FACTS:
This is a petition for review on certiorari to annul the
decision dated April 21, 1989 of the Court of Appeals
which dismissed for lack of merit the petition
for certiorari against two (2) orders of Regional Trial Court
Judge Teodoro K. Risos.
On July 25, 1988, petitioner Riesenbeck filed in the
Regional Trial Court of Cebu, Branch 27, a complaint for
consignation and damages against respondent
JuergenMaile. On July 27, 1988, petitioner consigned and
deposited with the Clerk of Court of the Regional Trial
Court of Cebu the sum of P113,750. The private
respondent subsequently filed a Manifestation Accepting
Consignation and Motion to Dismiss dated August 1, 1988,
wherein he stated, inter alia, that "without necessarily
admitting the correctness of obligation of plaintiff to
defendant, the latter hereby manifests to accept the said
amount of P113,750 which is consigned by plaintiff,
provided that the present complaint be dismissed outright
with cost against plaintiff." (p. 14, CA Rollo.) The petitioner
opposed the manifestation, respondent Maile filed an
Answer with Special Defenses and Counterclaim. On
August 23, 1988, petitioner filed his Answer to
Counterclaim. Private respondent filed a rejoinder/reply to
the petitioner's opposition.
Thereafter, on September 28, 1988, respondent Judge
issued the first questioned order reading in part as follows:
After a thorough evaluation of the issues involved in the
manifestation and the opposition thereto, the Court is of
the opinion that there was a valid consignation, and
defendant could legally accept the payment by
consignation with reservation to prove damages and other
claims as held by the Supreme Court in the case of Sing
Juco vs. Cuaycong, 46 Phil. 81.
WHEREFORE the Clerk of Court of this Court is hereby
ordered to deliver to defendant JuergenMaile the sum of
P113,750.00 immediately, but the motion to dismiss is
hereby in the meantime DENIED. (p.31, CA, Rollo.)
On November 11. 1988, Judge Risos denied petitioner's
motion for reconsideration.
On November 18, 1988, petitioner filed a petition
for certiorari in the Court of Appeals to annul and set aside
the two orders of Judge Risos.
In a decision dated April 21, 1989, the Court of Appeals
dismissed the petition for certiorari.
Petitioner's motion for reconsideration was denied by the
Court of Appeals in a Resolution dated August 29, 1989.
In this petition for review, the petitioner raises the
following issue: What is the effect on the petitioner's
obligation to the private respondent of the
latter's acceptance with reservation of the amount
consigned by the petitioner?
HELD:
Private respondent's acceptance of the amount consigned
by the petitioner-debtor with a reservation or qualification
as to the correctness of the petitioner's obligation, is
legally permissible. There is authority for the view that
before a consignation can be judicially declared proper,
the creditor may prevent the withdrawal of the amount
consigned by the debtor, by accepting the consignation,
even with reservations (Tolentino, Civil Code of the Phil.,
Vol. IV, 1973 Ed., p. 317, citing 3 Llerena 263).
In ruling that there was a valid consignation and that the
respondent creditor could accept the same with a
reservation of his damages and other claims, the Court of
Appeals relied on the 1924 case of Sing Juco vs. Cuaycong,
46 Phil. 81. In that case, the defendants consigned in court
the amount which they had received from the plaintiff as
the price of sugar, the sale of which did not materialize.
The defendants were given the alternative of delivering
the sugar or returning the price per stipulation in the
contract. We ruled that plaintiff's acceptance of the
money consigned, unconditionally and without
reservation, was a waiver of his other claims under the
contract.
A sensucontrario, when the creditor's acceptance of the
money consigned is conditional and with reservations, he
is not deemed to have waived the claims he reserved
against his debtor. Thus, when the amount consigned does
not cover the entire obligation, the creditor may accept it,
reserving his right to the balance (Tolentino, Civil Code of
the Phil., Vol. IV, 1973 Ed., p. 317, citing 3 Llerena 263).
The same factual milieu obtains here because the
respondent creditor accepted with reservation the amount
consigned in court by the petitioner-debtor. Therefore, the
creditor is not barred from raising his other claims, as he
did in his answer with special defenses and counterclaim
against the petitioner-debtor.
As respondent-creditor's acceptance of the amount
consigned was with reservations, it did not completely
extinguish the entire indebtedness of the petitioner-
debtor. It is apposite to note here that consignation is
23 | P a g e
OBLICON2
completed at the time the creditor accepts the
same without objections, or, if he objects, at the time the
court declares that it has been validly made in accordance
with law. (Tolentino, Civil Code of the Phil., Vol. IV, 1973
Ed., p. 315.)
Since the lower court in this case declared on September
28, 1988 that there was a valid consignation by the
petitioner, the latter cannot tenably argue that he is still
the owner of the amount consigned and that he can still
withdraw it.
The consignation has retroactive effect. The payment is
deemed to have been made at the time of the deposit of
the money in court, or when it was placed at the disposal
of the judicial authority, supra. In this case, payment is
considered made on July 27, 1988 when petitioner
consigned and deposited with the respondent court the
sum of P113,750. instant petition is hereby DISMISSED for
lack of merit.
G.R. No. L-32116 April 2l, 1981
RURAL BANK OF CALOOCAN, INC. and JOSE O. DESIDERIO,
JR., petitioners,
vs.
THE COURT OF APPEALS and MAXIMA CASTRO,
respondents.
FACTS:
Maxima Castro, accompanied by Severino Valencia, went
to the Rural Bank of Caloocan to apply for a loan. Valencia
arranged everything about the loan with the bank. He
supplied to the latter the personal data required for
Castro's loan application. After the bank approved the loan
for the amount of P3,000.00, Castro, accompanied by the
Valencia spouses, signed a promissory note corresponding
to her loan in favor of the bank. On the same day, the
Valencia spouses obtained from the bank an equal amount
of loan for P3,000.00. They signed another promissory the annulment as far as she is concerned of the promissory
note (Exhibit "2") corresponding to their loan in favor of note (Exhibit "2") and mortgage (Exhibit "6") insofar as it
the bank and had Castro affixed thereon her signature as exceeds P3,000.00; and
co-maker.
for the discharge of her personal obligation with the bank
Both loans were secured by a real-estate mortgage on by reason of a deposit of P3,383.00 with the court a quo
Castro's house and lot. Later, the sheriff of Manila sent a upon the filing of her complaint.
notice to Castro, saying that her property would be sold at
public auction to satisfy the obligation covering the two ISSUE:
promissory notes plus interest and attorney's fees. Upon
request by Castro and the Valencias and with conformity Whether or not respondent court correctly affirmed the
of the bank, the auction sale was postponed, but was lower court in declaring the promissory note (Exhibit 2)
nevertheless auctioned at a later date. invalid insofar as they affect respondent Castro vis-a-vis
petitioner bank, and the mortgage contract (Exhibit 6)
Castro claimed that she is a 70-year old widow who cannot valid up to the amount of P3,000.00 only.
read and write in English. According to her, she has only
finished second grade. She needed money in the amount HELD:
of P3,000.00 to invest in the business of the defendant
spouses Valencia, who accompanied her to the bank to Yes.
secure a loan of P3,000.00. While at the bank, an
RATIO:
employee handed to her several forms already prepared
which she was asked to sign, with no one explaining to her
While the Valencias defrauded Castro by making her sign
the nature and contents of the documents. She also
the promissory note and the mortgage contract, they also
alleged that it was only when she received the letter from
misrepresented to the bank Castro's personal
the sheriff that she learned that the mortgage contract
qualifications in order to secure its consent to the loan.
which was an encumbrance on her property was for
Thus, as a result of the fraud upon Castro and the
P6.000.00 and not for P3,000.00 and that she was made to
misrepresentation to the bank inflicted by the Valencias
sign as co-maker of the promissory note without her being
both Castro and the bank committed mistake in giving
informed.
their consents to the contracts. In other words, substantial
mistake vitiated their consents given. For if Castro had
Castro filed a suit against petitioners contending that thru
been aware of what she signed and the bank of the true
mistake on her part or fraud on the part of Valencias she
qualifications of the loan applicants, it is evident that they
was induced to sign as co-maker of a promissory note and
would not have given their consents to the contracts.
to constitute a mortgage on her house and lot to secure
the questioned note. At the time of filing her complaint,
Article 1342 of the Civil Code which provides:
respondent Castro deposited the amount of P3,383.00
with the court a quo in full payment of her personal loan Art. 1342. Misrepresentation by a third person does not
plus interest. vitiate consent, unless such misrepresentation has created
substantial mistake and the same is mutual.
Castro prayed for:
24 | P a g e
OBLICON2
We cannot declare the promissory note valid between the
bank and Castro and the mortgage contract binding on
Castro beyond the amount of P3,000.00, for while the
contracts may not be invalidated insofar as they affect the
bank and Castro on the ground of fraud because the bank
was not a participant thereto, such may however be
invalidated on the ground of substantial mistake mutually
committed by them as a consequence of the fraud and
misrepresentation inflicted by the Valencias.
Thus, in the case of Hill vs. Veloso, this Court declared that
a contract may be annulled on the ground of vitiated
consent if deceit by a third person, even without
connivance or complicity with one of the contracting
parties, resulted in mutual error on the part of the parties
to the contract.
The fraud particularly averred in the complaint, having
been proven, is deemed sufficient basis for the declaration
of the promissory note invalid insofar as it affects Castro
vis-a-vis the bank, and the mortgage contract valid only up
to the amount of P3,000.00.
G.R. No. L-59805 July 21, 1989
LEONILA J. LICUANAN, petitioner, vs. HON. RICARDO D.
DIAZ, Judge, Branch XXVII Court of First Instance of Manila,
and AIDA PINEDA,respondents.
PARAS, J.:
FACTS:
This is a petition for review on certiorari of the October 15,
1981 Decision of the then Court of First Instance of Manila
affirming the August 8, 1979 Decision of the City Court of
Manila.
Herein petitioner is the owner of an apartment situated at
3415 F. Aguilar St., Bo. Obrero, Tondo, Manila, being
rented by herein private respondent since March, 1973.
On January 22, 1974, they executed a lease contract, and
stipulated therein, among others, that the monthly rental
is One Hundred Eighty Pesos (Pl80.00) to be paid within
the first five (5) days of every month.
On April 4, 1978, the law office of Amado E. Salalongos
and Associates sent private respondent a letter, the body
of which, reads:
Upon arrival of your lessor, Mrs. LeonilaLicuanan from the
United States, she found out that you have occupied her
garage situated at 3415 F. Aguilar, Bo. Obrero, Tondo,
Manila, which portion is not included in your lease
contract, and that despite her request that you remove
the aparador and other things which you have placed
there as your stockpile, you have failed and refused to do
so, and instead showed arrogance by telling her that it will
need a court order before she removes the same and
restores possession to you, in violation of the terms of
your contract.
In view thereof, we are giving you five (5) days from
receipt hereof within which to vacate the premises at 3415
F. Aguilar, otherwise, we shall be constrained to file an
ejectment suit against you.
Private respondent, reacting to the said letter, on April 12,
1979, wrote the Civil Relations Service, AFP, Camp
Aguinaldo, Quezon City, for help. A portion of her letter,
reads:
May I have the honor to solicit the help of your good office
with regard to the letter I received from the law office of
Amado C. Sagalongos& Associates attached herein.
The accusations implied therein are not true and for your
information, Sir, I have faithfully paid my monthly rentals
from the time we occupied our apartment on March, 1973
up to March, 1978.
On April 24, 1978, both petitioner and private respondent
appeared before Lt. Col. Antonio Penala, Hearing Officer of
the Civil Relations Service, but since the parties failed to
reach any agreement, Lt. Col. Penala placed the notation
"HOLD" on the pertinent document; and as precautionary
measure, instructed private respondent to deposit the
amount of rental due for that month so that she could not
be charged with non-payment, which directive private
respondent readily complied with and she was issued the
corresponding receipt.
On August 30,1978, private respondent received a letter
from Atty. Manuel Melo, counsel for petitioner,
demanding payment of the April to August, 1978 rentals
amounting to P900.00.
On September 13, 1978, petitioner filed Civil Case No.
037226-V with the City Court of Manila, Branch VII,
presided over by Hon. Priscilla C. Mijares against private
respondent for unlawful detainer with damages (Rollo, pp.
11-13). In the same, petitioner alleged, among others, that
private respondent had failed to pay her monthly rentals
from April to September, 1978, amounting to Pl,080.00;
that a demand letter dated August 23, 1978, was sent and
received by private respondent on August 30, 1978,
wherein it is demanded that she pay her rentals in arrears
and to vacate the premises; and that despite repeated
demands, written and verbal, she refuses to pay her
rentals in arrears and to vacate the premises.
On September 27,1978, private respondent filed her
answer (Ibid., pp. 14-17). In the same, private respondent,
among others, denies that she failed in paying her monthly
rentals, claiming that petitioner has refused the rental
being tendered and that upon advice of the Office of the
Civil Relations, AFP, she deposited her monthly rentals
with that office for the months of April to September,
1978, inclusive at P80.00 a month; and that she admits
having received the letter of demand dated August 23,
1978, and claims that upon receipt of the said letter, she
called up by telephone petitioner's counsel, Atty. Manuel
Melo, informing him that the rentals due for the months of
April to August, 1978 have been deposited with the Office
of Civil Relations, AFP, and that petitioner can withdraw
the said amount due from the said office.
25 | P a g e
OBLICON2

The trial court, in a Decision dated August 8, 1979, ruled in
favor of private respondent (Ibid., pp. 37-42). The
dispositive portion of the said decision reads:
In view thereof, the complaint for unlawful detainer with
damages is hereby dismissed for lack of merit. The petition
for consignation having been rendered moot and
academic, said petition is also hereby dismissed.
Petitioner appealed the decision, but the then Court of
First Instance of Manila, presided over by herein
respondent judge, in a Decision dated October 15, 1981,
affirmed the appealed judgment
A Motion for Reconsideration was filed (Ibid., pp. 75-77),
but the same was denied in an Order dated February 18,
1982 (Ibid., pp. 92-93). Hence, the instant petition.
We do not agree with the questioned decision. We hold
that the essential requisites of a valid consignation must
be complied with fully and strictly in accordance with the
law. Articles 1256 to 1261, New Civil Code. That these
Articles must be accorded a mandatory construction is
clearly evident and plain from the very language of the
codal provisions themselves which require absolute
compliance with the essential requisites therein provided.
Substantial compliance is not enough for that would
render only directory construction to the law. The use of
the words 'shall' and 'must' which are imperative,
operating to impose a duty which may be enforced,
positively indicated that all the essential requisites of a
valid consignation must be complied with. The Civil Code
Articles expressly and explicitly direct what must be
essentially done in order that consignation shall be valid
and effectual ...
when the hearing officer of the Office for Civil Relations,
AFP, instructed private respondent to deposit the April
rental, it will be noted that petitioner thereafter was never
notified that a deposit was made in the said office; and in
the succeeding monthly rentals, no tender of payment was
made to petitioner, nor was she given any notice that
consignation will be made or that consignation had been
made.
PREMISES CONSIDERED, the October 15,1981, Decision of
the then Court of First Instance of Manila is REVERSED and
SET ASIDE, and the respondent is ordered to vacate the
premises and to pay all accrued rentals.
CHAN VS CA (1994)
PONENTE: JUSTICE DAVIDE JR.

ISSUE: whether or not private respondent's deposit of the
rentals due to petitioner with Civil Relations Service, now
Office for Civil Relations, AFP, is a valid consignation.
HELD:
The instant petition is impressed with merit.
This issue was already answered in the negative by this
Court in the case of Landicho v. Tensuan (150 SCRA 410,
415 [1987]) wherein it stated-
Their protestation that they deposited the rentals due
though belatedly in the Office of then Presidential
Assistant Ronaldo Zamora does not help their cause at all.
The law prescribes that such consignation or deposit of
rentals should be made with the Court and/or under Batas
PambansaBlg. 25 in the bank and not elsewhere.
In addition, it must be stated that in the case of Soco v.
Militante (123 SCRA 160, 166-167 [1983]), this Court ruled
that the codal provision of the Civil Code dealing with
consignation (Articles 1252-1261) should be accorded a
mandatory construction-
Likewise, in the said Soco case, this Court enumerated the SETTING: URBISTONDO MANILA
requirements prescribed by law for a valid consignation (p.
FACTS:
173). One of the given requirements is that after
consignation had been made, the person interested was
SIt appears from the records that on February 1, 1983,
notified thereof (Art. 1178, Civil Code). The reason for such
Felisa Chan and Grace Cu entered into a contract of lease
a requirement was given by this Court. lt stated-
whereby the latter will occupy for residential purposes
Room 401 and the roof top of Room 442 of a building
The reason for the notification to the persons interested in
owned by the former located at Elcano corner Urbistondo,
the fulfillment of the obligation after consignation had
Manila. The term of the lease is one year or up to February
been made, which is separate and distinct from the
1, 1984 at a monthly rental of P2,400.00. Said contract of
notification which is made prior to the consignation, is
lease was renewed every year for two successive years or
stated in Cabanas v. Calo, G.R. No. L-10927, October 30,
up to February 1, 1986. In the contracts, it was agreed that
1958, 104 Phil. 1058, thus: 'There should be notice to the
the premises shall be used as a learning center. After
creditor prior and after consignation as required by the
February 1, 1986, there was no written contract of lease
Civil Code. The reason for this is obvious, namely, to
executed by the parties, but Grace has continuously
enable the creditor to withdraw the goods or money
occupied the premises as a learning center.
deposited. Indeed, it would be unjust to make him suffer
the risk for any deterioration, depreciation or loss of such
The monthly rental was raised every year. In January,
goods or money by reason of lack of knowledge of the
1989, it was increased to P3,484.80.
consignation. (P. 181)
Sometime in November, 1989, Felisa padlock the way to
In the instant case, perusal of the records will readily show
the roof top. Thereafter, there was an exchange of
that private respondent failed to comply with this
communications between the parties. Grace insisted that
requirement. Even granting that petitioner was present

26 | P a g e
OBLICON2
she should be allowed to use the roof top of Room 442,
while Felisa maintained that only Room 401 was leased
and that the use of the roof top which, according to her
poses danger to the students, was merely tolerated.
Eventually, Felisa terminated the lease, giving Grace until
January 1, 1990 to vacate the premises.
Because of the dispute between the parties, Felisa did not
collect the rental for December, 1989. Whereupon, Grace
tendered to Felisa a check amounting to P3,310.56. The
latter refused to accept the check. So Grace's lawyer
tendered the payment in cash in the same amount of
P3,310.56, with notice to Felisa that if she will not accept
the payment, the same will be deposited in court by way
of consignation. At this juncture, Felisa allowed Grace to
hold classes only up the March, 1990.
On January 15, 1990, Grace filed Civil Case No. 131203 for
consignation with the Metropolitan Trial Court of Manila,
Branch 15, alleging in her complaint that Felisa refused to
accept, without justifiable cause, the rentals for the
premises in question. Felisa interposed in her answer a
counterclaim for ejectment, contending that the lease,
being month to month, had expired but that despite
demand, Grace refused to vacate the premises. 4
On 18 December 1990, the MTC rendered its decision, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
1. The court declares that the roof top of the building at
442 Elcano corner Urbistondo Street, Manila is included in
the lease;
2. The court fixes the term of the lease over the subject
premises until June 30, 1992 upon the expiration of which,
petitioner [Grace Cu] is ordered to vacate the said
premises;
3. The court declares the consignation of rentals made by
the petitioner to be valid and legal and hereby release[s]
the petitioner from the obligation of paying the said
rentals;
4. All the respective claims of the parties against each
other for damages and attorney's fees are hereby
dismissed.
SO ORDERED. 5
Both parties appealed to the RTC of Manila. Grace Cu
maintained that the MTC should have fixed a longer
period, while Felisa Chan contended that the MTC erred in
extending the term of the lease and in upholding the
validity of the consignation. In its Decision of 27 March
1992, the RTC affirmed the decision of the MTC.
Cu then went to the Court of Appeals on a petition for
review 6 alleging therein that the RTC erred "in not fixing a
longer period of extension of the lease" and "in extending
the duration of the lease to 30 June 1992 but subverting
its factual findings in justification of the extension as it
concluded that the period was intended by the parties for
a longer duration." In its challenged Decision of 20 January
1993, the Court of Appeals reversed and set aside the
decisions of the MTC and the RTC and dismissed the
complaint for consignation for lack of merit. It likewise said
that the MTC and the RTC erred in passing upon the issue
of ejectment raised in Chan's counterclaim since an action
for ejectment can only be initiated through a verified
complaint, not a counterclaim.
In dismissing the complaint for consignation, the Court of
Appeals ruled that under Article 1256 of the Civil Code,
consignation may only be resorted to by a debtor if the
creditor to whom tender of payment has been made
refuses without just cause to accept it. The court of
Appeals held that Chan's refusal to accept the rental was
justified. It said:
Thus, the respondent [Chan] allowed the petitioner [Cu] to
hold classes in the premises only until March,
1981. 7 Obviously, from respondent landlord's point of
view, beyond March, 1989, 8 (1) the petitioner may no
longer be considered as lessee or debtor who may relieve
herself of liability by tendering payment of the rentals and
if refused, by consigning them in court; and that (2) the
petitioner is a squatter or trespasser who has occupied the
premises not only without any agreement with the
respondent but against her will. So, as far as the
respondent is concerned, this consignation may not come
under the provisions of Article 1256 of the Civil Code cited
above. Simply put, respondent's refusal to accept
petitioner['s] rental payments was with just cause and
that, therefore, the respondent may not be compelled to
accept such rental payments. 9
On the issue of ejectment, the Court of Appeals made the
following observations:
Now, for a digression, We cannot see our way clear why
the MTC and the RTC passed upon the issue of ejectment
raised in respondent's counterclaim and fixed the term of
the lease up to June 10, 1992. Under Section 1, Rule 70 of
the Revised Rules of Court, an action for ejectment can
only be initiated through a verified complaint, not
counterclaim. This is basic. Thus, the said courts should
not have fixed the terms of the lease. This issue can only
be decided in a case of ejectment filed pursuant to the
said rule. The supreme Court, in ChingPue vs. Gonzales [87
Phil. 81] held:
Consignation in court under article 1176 of the Civil Code,
is not the proper proceedings to determine the relation
between landlord and tenant, the period or life of the lease
or tenancy, the reasonableness of the rental, the right of
the tenant to keep the premises against the will of
landlord, etc. These questions should be decided in a case
of ejectment or detainer like those two cases brought by
Gonzales against two of the petitioners under the
provisions of Rule 72 of the Rules of Court. In a case of
ejectment, the landlord claims either that the lease has
ended or been terminated or that the lessee has forfeited
his right as such because of his failure to pay the rents as
agreed upon or because he failed or refused to pay the
27 | P a g e
OBLICON2
new rentals fixed and demanded by the lessor. The lessee
in his turn may put up the defense that according to law,
the rental demanded of him is unreasonable, exorbitant
and illegal, or that the period of the lease has not yet
expired, or that if the rental law is applicable, and that the
premises are destined solely for dwelling, he may not be
ousted therefrom because the owner does not need them
for his own use, etc. We repeat that all these questions
should be submitted and decided in a case of ejectment
and cannot be decided in a case of consignation. 10
ISSUE: Whether or not an action for ejectment may be
raised in a counter
claim in a consignation case.
RULING:
Yes. Section 8 Rule 6 of RC provides that the answer
may contain any counter claim which a party may have
against opposing party provided the court has
jurisdiction to entertain the claim and can if the presence
of third parties is essential for its adjudication
acquire jurisdiction of such parties. Under Section 4 Rule
9, a counterclaim not set up shall be barred if it arises out
of or is necessarily connected with the transaction
occurrence that is the subject matter of the opposing
party's claim and does not require for its adjudication the
presence of third parties of whom the court
cannot acquire jurisdiction as counterclaim may be
compulsory or permissive.
Chan's counterclaim is a compulsory counterclaim
because it is necessarily connected with the transaction
or occurrence which is the subject matter of Cu's
complaint the lease of contract between
them. Consequently, the CA erred when it held that
Chan's cause of action in ejectment could not be set
up in a counter claim.
FROM WHOLE CASE
SA counterclaim is any claim for money or other relief
which a defending party may have against an opposing
party. It need not diminish or defeat the recovery sought
by the opposing party, but may claim relief exceeding in
amount or different in kind from that sought by the
opposing party's claim. 24 Counterclaims are designed to
enable the disposition of a whole controversy of
interested parties' conflicting claims, at one time and in
one action, provided all the parties can be brought before
the court and the matter decided without prejudicing the
rights of any party. 25 A counterclaim "is in itself a distinct
and independent cause of action, so that when properly
stated as such, the defendant becomes, in respect to the
matter stated by him, an actor, and there are two
simultaneous actions pending between the same parties,
wherein each is at the same time both a plaintiff and a
defendant . . . A counterclaim stands on the same footing
and is to be tested by the same rules, as if it were an
independent action." 26 In short, the defendant is a
plaintiff with respect to his counterclaim.
Section 8, Rule 6 of the Rules of Court provides that the
answer may contain any counterclaim which a party may
have against the opposing party provided that the court
has jurisdiction to entertain the claim and can, if the
presence of third parties is essential for its adjudication,
acquire jurisdiction of such parties. Under Section 4 of
Rule 9, a counterclaim not set up shall be barred if it arises
out of or is necessarily connected with the transaction or
occurrence that is the subject matter of the opposing
party's claim and does not require for its adjudication the
presence of third parties of whom the court cannot
acquire jurisdiction. A counterclaim may be compulsary or
permissive. The former is that covered by Section 4 of Rule
9.
Chan's counterclaim for ejectment is a compulsary
counterclaim because it is necessarily connected with the
transaction or occurrence which is the subject matter of
Cu's complaint, viz., the lease contract between them.
Consequently, the Court of Appeals erred when it held
that Chan's cause of action for ejectment should not be set
up in a counterclaim.
We agreed with Chan that ChingPue vs. Gonzales is
inapplicable because in ChingPue the consignation cases
were filed with the Court of First Instance which did not
have jurisdiction over ejectment cases; necessarily, no
counterclaim for ejectment could have been interposed
therein. The ratio decidendi of the said case is that
consignation is not proper where the refusal of the
creditor to accept tender of payment is with just cause.
One will search therein in vain even for an obiter
dictum which suggests that an action for ejection cannot
be set up in a counterclaim. In the instant case, the
ejectment was set up as a counterclaim in the MTC which
has jurisdiction over it and Cu joined that issue and the
incidents thereto by her answer to the counterclaim and
the counterclaim to the counterclaim.
The Court of Appeals therefore should have confined itself
to the principal error raised in Cu's petition in CA-G.R. SP
No. 28870, viz., the duration of the extended term of the
lease fixed in the decision of the MTC and affirmed by the
RTC. As fixed, the term of the lease was extended to 30
June 1992. That period had expired six months before the
Court of Appeals promulgated its challenged decision.
Considering that Chan did not file any petition for the
review of the RTC decision and was, therefore, deemed to
have agreed to the extension; and considering further that
Cu, as petitioner in CA-G.R. SP No. 28870 , did not come to
us on a petition for review to seek reversal of the decision
therein and should thus be considered to have agreed to
the dismissal of her consignation case, the parties must be
deemed bound by the extended term, which has,
nevertheless, already lapsed.
MEAT PACKING CORP VS CA (2001)
PONENTE: JUSTICE YNARES SANTIAGO
FACTS:
28 | P a g e
OBLICON2
aPetitioner Meat Packing Corporation of the Philippines
(hereinafter, MPCP), is a corporation wholly owned by the
Government Service Insurance System (GSIS). It is the
owner of three (3) parcels of land situated in Barrio Ugong,
Pasig City, as well as the meat processing and packing
plant thereon. On November 3, 1975, MPCP and the
Philippine Integrated Meat Corporation (hereinafter,
PIMECO) entered into an Agreement[1] whereby MPCP
leased to PIMECO, under a lease-purchase arrangement,
its aforesaid property at an annual rental rate of
P1,375,563.92, payable over a period of twenty-eight
years commencing on the date of execution of the
Agreement, or for a total consideration of
P38,515,789.87. The Agreement contained rescission
clauses, to wit:
5. If for any reason whatsoever the LESSEE-VENDEE
should fail or default in the payment of rentals equivalent
to the cumulative sum total of three (3) annual
installments, this Agreement shall be deemed
automatically cancelled and forfeited without need of
judicial intervention, and LESSOR-VENDOR shall have the
complete and absolute power, authority, and discretion,
and without reservation by the LESSEE-VENDEE, to dispose
of, sell, transfer, convey, lease, assign, or encumber the
project to any person or persons, natural or juridical, in
the same manner as if this lease-purchase arrangement
was never entered into. In the event of such cancellation
or forfeiture, the LESSEE-VENDEE unconditionally agrees
that all forms of money paid or due from the LESSEE-
VENDEE shall be considered as rentals for the use and
occupancy of the project, and the LESSEE-VENDEE hereby
waives and forfeits all rights to ask for and demand the
return or reimbursement thereof.[2]
16. Violation of any of the terms and conditions of this
Agreement shall be sufficient ground for the LESSOR-
VENDOR to rescind and/or consider null and void this
Agreement without need of judicial intervention by giving
the LESSEE-VENDEE one hundred eighty (180) days written
notice to that effect, which shall be final and binding on
the LESSEE-VENDEE, and the LESSEE-VENDEE shall
thereupon leave and vacate the project, provided that if
LESSEE-VENDEE has subleased portions of the project,
LESSEE-VENDEE shall relinquish all its rights and/or
interests over the sublease contracts in favor of the
LESSOR-VENDOR. LESSEE-VENDEE shall leave all
improvements, whether finished or unfinished, in good
and serviceable condition immediately after the
corresponding notice in writing has been received by the
LESSEE-VENDEE, and all said improvements shall
automatically belong to and become the property of the
LESSOR-VENDOR without liability or obligation on the part
of the LESSOR-VENDOR to pay for the value
thereof. LESSEE-VENDEE further holds the LESSOR-
VENDOR free and harmless from any and all liabilities
arising from and/or connected with such sublease
contracts.[3]
Subsequently, on November 3, 1975, MPCP and PIMECO
entered into a Supplementary and Loan
Agreement,[4] whereby, in consideration of the additional
expenditures incurred by MPCP for rehabilitating and
refurbishing the meat processing and packing plant, the
total contract price of the lease-purchase agreement was
increased to P93,695,552.59, payable over a period of
twenty-eight years commencing on January 1, 1981, at the
annual rental rate of P3,346,269.70.
On March 17, 1986, the PCGG, in a letter signed by then
Commissioner Ramon A. Diaz, sequestered all the assets,
properties and records of PIMECO.[5] The sequestration
included the meat packing plant and the lease-purchase
agreement.
MPCP wrote a letter on November 17, 1986 to
PIMECO,[6] giving notice of the rescission of the lease-
purchase agreement on the ground, among others, of non-
payment of rentals of more than P2,000,000.00 for the
year 1986.
GSIS asked the PCGG to exclude the meat packing plant
from the sequestered assets of PIMECO, inasmuch as the
same is owned by MPCP. However, PCGG denied the
request. Likewise, MPCP sought the turnover to it of the
meat packing plant on the ground that the lease-purchase
agreement had already been rescinded. Acceding to this,
PCGG passed on January 24, 1989 a resolution stating
thus:
WHEREAS, the Presidential Commission on Good
Government at its session en banc on September 20, 1988
ordered the transfer of subject property, consisting of a
meat packing complex including the land located at Barrio
Ugong, Pasig, Metro Manila, to the GSIS under the
condition then that the PCGG management team might
continue its operations for the purpose of completing the
outstanding orders up to December 1988;
WHEREAS, the Government Service Insurance System has
shown, to the satisfaction of the Commission, that it owns
the said plant complex; that it has the legal and equitable
right to regain possession and control thereof; that
whatever claim PIMECO had to the complex under its so-
called agreement to lease/purchase with GSIS/MPCP has
been validly rescinded by the GSIS; and that the projected
turn-over to the GSIS will not adversely affect the ill-gotten
wealth case pending against crony Peter Sabido before
the Sandiganbayan;
WHEREFORE, the turn-over to the GSIS of the said
property should be done forthwith upon compliance with
these conditions, to be implemented by the Operations
and Legal Departments: (a) joint PCGG-COA audit; (b)
approval by the Sandiganbayan; and (c) execution of a
Memorandum of Agreement to contain these stipulations,
among others: (a) that the shares of Peter Sabido in
PIMECO are subject to the Sandiganbayan case; (b) that
any disposition or transfer by the GSIS of said property or
any part thereof shall be with the conformity of the PCGG;
and (c) that this Memorandum be annotated on the title of
the property.[7]
Meanwhile, PCGG instituted with the Sandiganbayan on
July 29, 1987 a complaint for reconveyance, reversion,
accounting, restitution and damages, docketed as Civil
29 | P a g e
OBLICON2
Case No. 0024, entitled, Republic of the Philippines,
Plaintiff versus Peter Sabido, et al., Defendants.[8] The
complaint alleged, in pertinent part, that Peter Sabido
obtained, under favored and very liberal terms, huge loans
from the GSIS in favor of PIMECO, among other
corporations, which was beneficially held and controlled
by defendants Peter Sabido, Roberto S. Benedicto and Luis
D. Yulo; and that PIMECO was granted the monopoly to
supply meat products in the Greater Manila Area.
The Sandiganbayan, in a Resolution dated May 4,
1989,[11] ordered the PCGG to submit its comment as to
the veracity of the alleged turnover of the management,
control and possession of PIMECO to the GSIS or MPCP,
and if true, to furnish movant Sabido a copy of the PCGG
resolution approving the same.
Meanwhile, on May 20, 1989, Sabido filed an Urgent
Manifestation and Motion,[12] alleging that, according to
newspaper accounts, PCGG had in fact already turned over
the management and operation of PIMECO to the
GSIS/MPCP. Thus, he prayed that the transfer of the
management, control and possession of PIMECO to GSIS
be declared null and void ab initio for having been done
without the approval of the Sandiganbayan.
Sometime thereafter, the Sandiganbayan received a
letter[13] from members of the PIMECO Labor Union,
praying for the maintenance of the status quo to enable
PIMECO to continue its business operations and to ensure
their continuity of work and security of tenure. Thus, on
June 2, 1989, the Sandiganbayan issued a Resolution, the
dispositive portion of which reads:
On June 22, 1989, Sabido filed with the Sandiganbayan a
Motion for the Issuance of a Writ of Preliminary
Injunction, alleging that the PCGG, in an Order dated May
11, 1989, had ordered that the status quo as regards the
management and operations of PIMECO be maintained
pending submission of inventory and financial
audit. However, at the hearings of this incident, it was
sufficiently shown that the transfer of PIMECO to MPCP
will result in the dissipation of assets which will cause
irreparable injury to Sabidos rights and interests in the
company in the event that the Sandiganbayan shall
ultimately rule that the same was not ill-gotten.
PCGG filed a Motion for Reconsideration of the Resolution
of June 22, 1989. On August 3, 1989, the Sandiganbayan
issued its Resolution, viz:
WHEREFORE, finding the verified application for issuance
of a writ of preliminary injunction to be sufficient in form
and substance and that after due hearing, it appears that
great and irreparable injury will be caused not only to
defendant-applicant but also to PIMECO should the acts
sought to be enjoined be allowed to be done or
performed, accordingly, upon defendant-applicants
posting of a bond of P50,000.00, let the corresponding
writ of preliminary injunction issue commanding the
Presidential Commission on Good Government, its officers,
representatives, nominees or agents from proceeding or
consummating the projected turnover of PIMECO to the
GSIS-MPCP until further orders of this Court and from
replacing, dismissing, demoting, reassigning, grounding, or
otherwise prejudicing the present members of the PCGG
management team in PIMECO, except for valid and serious
reasons not attributable to or arising from their objection
or opposition to or activities of statements against the said
turnover.
ISSUES:
A(1) That the PCGG gravely abused its discretion when it
passed the resolutions dated September 20, 1988, and
January 24, 1989, turning over the meat packing complex
including the land located at Barrio Ugong, Pasig, Metro
Manila, to the GSIS/MPCP (Exh. E).
(2) That the PCGG commissioner concerned exceeded his
authority when he executed the Memorandum of
Agreement with MPCP on April 28, 1989, transferring the
management and operation of PIMECO to the GSIS/MPCP
(Record, pp. 1828-1832).
(3) That, accordingly, the said turnovers or transfers are
declared null and void ab initio, and
(4) That the PCGG, its commissioners, officers,
representatives, and agents are permanently enjoined
from implementing the same turnovers or transfers.
RULING:
AOn August 30, 1990, PIMECO filed with the
Sandiganbayan a petition, docketed as Civil Case No. 0108,
entitled, Philippine Integrated Meat Corporation
(PIMECO), Petitioner versus Meat Packing Corporation of
the Philippines (MPCP) and Presidential Commission on
Good Government (PCGG), Respondents, captioned as for
Declaratory Relief and Other Similar Remedies (Related to
PCGG Case No. 25 and Civil Case No. 0024).[19]
In its petition, PIMECO alleged that from 1981 to 1985,
PIMECO has been regularly paying the annual rentals in
the amount of P3,346,269.70; and that prior to its
sequestration in January 1986, PIMECO was able to pay
MPCP the amount of P846,269.70. However, after its
sequestration, the PCGG Management Team that took
over the plant became erratic and irregular in its payments
of the annual rentals to MPCP, thus presenting the danger
that PIMECO may be declared in default in the payment of
rentals equivalent to three (3) annual installments and
causing the cancellation of the lease-purchase
agreement. Hence, PIMECO prayed for a declaration that
it is no longer bound by the provisions of the above-
quoted paragraph 5 of the lease-purchase agreement.
In the meantime, PCGG tendered to MPCP two checks in
the amounts of P3,000,000.00 and P2,000,000.00, or a
total of P5,000,000.00, representing partial payment of
accrued rentals on the meat packing plant, which MPCP
refused to accept on the theory that the lease-purchase
agreement had been rescinded. Thus, the PCGG filed an
Urgent Motion[20] praying that the Sandiganbayan order
MPCP to accept the tendered amount of P5,000,000.00.
30 | P a g e
OBLICON2
The Sandiganbayan set the aforesaid Urgent Motion for
hearing. On April 3, 1991, MPCP, by special appearance,
filed its Comment,[21] alleging that the Sandiganbayan had
no jurisdiction over MPCP since it was not a party in Civil
Case No. 0024; that its lease-purchase agreement with
PIMECO has been rescinded as early as November 19,
1986; and that PIMECO was in arrears in the payment of
rentals in the amount of P12,378,171.06, which is more
than the equivalent of three cumulative rentals at the
annual rate of P3,346,269.70.
On July 2, 1991, the Sandiganbayan issued the first
assailed Resolution, as follows:
WHEREFORE, the Court declares that the tender of
payment and consignation of P5,000,000.00 in the form of
two checks, namely: China Banking Corporation Check No.
LIB M 003697 for P3,000,000.00 and Far East Bank and
Trust Company Check No. 29A A 021341 for
P2,000,000.00, both dated January 30, 1991, and payable
to GSIS-MPCP, have been validly made in accordance with
law and, accordingly, orders Meat Packing Corporation of
the Philippines to accept the payment and issue the
corresponding receipt.
SO ORDERED.[22]
MPCP, still under a special appearance, filed a Motion for
Reconsideration of the above Resolution.[23] On November
29, 1991, the Sandiganbayan issued the second assailed
Resolution,[24] denying MPCPs Motion for
Reconsideration. Said the Sandiganbayan:
When the PCGG sequestered the assets and records of
PIMECO, including the lease-purchase agreement over
MPCPs meat packing plant, it assumed the duty to
preserve and conserve those assets and documents while
they remained in its possession and control. That duty did
not disappear when the writ was deemed ipso
facto lifted. On the contrary, it continued until the
sequestered assets and records where returned to
PIMECO. And in the performance of that duty in order to
prevent the cancellation of the lease-purchase agreement
by reason of the failure to pay three accumulated yearly
rentals-installments, the PCGG made the timely tender of
payment and consignation which the Resolution sought to
be reconsidered sustained. To rule otherwise would be
unfair and unjust to PIMECO considering that during the
time the PCGG had possession and control of the
sequestered assets and records, PIMECO was not in the
position to take steps necessary for the preservation and
conservation of those assets and records.[25]
Meanwhile, on December 2, 1991, the Sandiganbayan
dismissed Civil Case No. 0108, i.e., the petition for
declaratory relief, it appearing that while the unpaid
rentals as of January 27, 1991 have reached
P7,530,036.21, PCGGs tender of payment and
consignation of the amount of P5,000,000.00, which was
upheld by the Sandiganbayan in Civil Case No. 0024,
averted the accumulation of the unpaid rentals to three
yearly rentals-installments. Consequently, the petition for
declaratory relief has become moot and academic.[26]
Hence, MPCP brought this petition for certiorari,
mandamus and prohibition, arguing in fine that the
Sandiganbayan did not have jurisdiction over its person
since it was not a party to Civil Case No. 0024; that the
Sandiganbayan likewise did not acquire jurisdiction over
the person of PIMECO since it has not been served
summons; and that the PCGG is in estoppel because it has
already admitted in its en banc resolutions that the lease-
purchase agreement between MPCP and PIMECO has
been rescinded. MPCP prays for injunctive relief and for
judgment setting aside the assailed Resolutions of the
Sandiganbayan; ordering the Sandiganbayan to deny the
PCGGs motion for consignation and to compel MPCP to
accept the tendered amount of P5,000,000.00; and
prohibiting the Sandiganbayan from accepting any papers
or pleadings from PCGG or PIMECO against MPCP in Civil
Case No. 0024.
Counsel for Peter Sabido filed his Comment,[27] with the
qualification that the same was being filed only on behalf
of Sabido, a stockholder of PIMECO, and not on behalf of
the corporation. He argued that the Sandiganbayan
correctly held that the MPCP voluntarily submitted itself to
the courts jurisdiction; that there was a valid consignation
made by PCGG; and that the Sandiganbayan did not
commit grave abuse of discretion in issuing the assailed
resolutions.
PCGG filed its Comment,[28] also contending that MPCP
voluntarily submitted itself to the jurisdiction of the
Sandiganbayan; and that the consignation was validly
made.
Copies of this Courts resolutions were furnished PIMECO
at its principal office at 117 E. Rodriguez, Sr. Ave., Barrio
Ugong, Pasig City. However, all of these were returned
unserved with the notation, RTS Closed.[29]Thus, on June
19, 1995, this Court resolved to dispense with the
comment of PIMECO.[30]
The petition, being one for certiorari, mandamus and
prohibition, is mainly anchored on the alleged grave abuse
of discretion amounting to want of jurisdiction on the part
of the Sandiganbayan.
Grave abuse of discretion implies a capricious and
whimsical exercise of judgment as is equivalent to lack of
jurisdiction, or, when the power is exercised in an arbitrary
or despotic manner by reason of passion or personal
hostility, and it must be so patent and gross as to amount
to an evasion of positive duty enjoined or to act at all in
contemplation of law.[31] It is not sufficient that a tribunal,
in the exercise of its power, abused its discretion; such
abuse must be grave.[32]
In the assailed resolutions, the Sandiganbayan approved
the consignation by PCGG of the amount of P5,000,000.00
as payment for back rentals or accrued amortizations on
the meat packing plant, after the MPCP refused the tender
of payment of the same.
31 | P a g e
OBLICON2
Consignation is the act of depositing the thing due with
the court or judicial authorities whenever the creditor
cannot accept or refuses to accept payment, and it
generally requires a prior tender of payment.[33] It should
be distinguished from tender of payment. Tender is the
antecedent of consignation, that is, an act preparatory to
the consignation, which is the principal, and from which
are derived the immediate consequences which the
debtor desires or seeks to obtain. Tender of payment may
be extrajudicial, while consignation is necessarily judicial,
and the priority of the first is the attempt to make a
private settlement before proceeding to the solemnities of
consignation.[34]Tender and consignation, where validly
made, produces the effect of payment and extinguishes
the obligation.
If the creditor to whom tender of payment has been made
refuses without just cause to accept it, the debtor shall be
released from responsibility by the consignation of the
thing or sum due.
Consignation alone shall produce the same effect in the
following cases:
(1) When the creditor is absent or unknown, or does not
appear at the place of payment;
(2) When he is incapacitated to receive the payment at the
time it is due;
(3) When, without just cause, he refuses to give a receipt;
(4) When two or more persons claim the same right to
collect;
(5) When the title of the obligation has been lost.[35]
In the case at bar, there was prior tender by PCGG of the
amount of P5,000,000.00 for payment of the rentals in
arrears. MPCPs refusal to accept the same, on the ground
merely that its lease-purchase agreement with PIMECO
had been rescinded, was unjustified. As found by the
Sandiganbayan, from January 29, 1986 to January 30,
1990, PIMECO paid, and GSIS/MPCP received, several
amounts due under the lease-purchase agreement, such
as annual amortizations or rentals, advances, insurance,
and taxes, in total sum of P15,921,205.83.[36] Surely, the
acceptance by MPCP and GSIS of such payments for
rentals and amortizations negates any rescission of the
lease-purchase agreement. Parenthetically, the factual
findings of the Sandiganbayan are conclusive upon this
Court, subject to certain exceptions.[37] The aforesaid
factual findings, moreover, have not been disputed by
petitioner.
In support of its contention that the lease-purchase
agreement has been rescinded, MPCP makes reference to
the resolutions of the PCGG turning over to the GSIS the
meat packing complex and the land on which it is
situated. MPCP argues that PCGG was estopped from
taking a contrary position. A closer perusal of the
resolutions, however, readily shows that the turn-over was
explicitly made dependent on certain conditions
precedent, among which was the approval by the
Sandiganbayan and the execution of a Memorandum of
Agreement between PCGG and MPCP.[38] A Memorandum
of Agreement was in fact executed on April 28, 1989,
although the same suffers from formal and substantial
infirmities. However, no approval was sought from the
Sandiganbayan. On the contrary, the Sandiganbayan, in its
Resolution declaring the turn-over null and void, refused
to honor the PCGG resolutions, reasoning thus:
First, what was approved by the PCGG in its resolutions of
September 20, 1988, and January 24, 1989, is the transfer
of the meat packing complex including the land located at
Barrio Ugong, Pasig, Metro Manila, and not the
management and operation of PIMECO. It is, however,
the latter that the Memorandum of Agreement, executed
on April 28, 1989, pursuant to the said resolutions,
transferred to the GSIS.
Second, the second resolution made the turnover of the
meat packing complex including the land located at Barrio
Ugong, Pasig Metro Manila, upon compliance with these
conditions, to be implemented by the [PCGG] Operations
and Legal Departments: . . . (b) approval by the
Sandiganbayan . . . Until now, however, no motion has
been presented to secure that approval, and none can be
expected because the same Memorandum of Agreement
changed the requirement of approval to (t)he
Sandiganbayanshall be advised of this Agreement. Even
the advice stipulated has never been given by the PCGG.
Since the Memorandum of Agreement was executed by
one PCGG commissioner only, the same cannot validly
amend the resolutions passed by the PCGG
itself. Consequently, the turnover of the management and
operation of PIMECO, which, of course, include the meat
packing complex and the land of which it stands,
stipulated in the Memorandum of Agreement, cannot be
legally enforced. Needless to say, the commissioners
should be the first to abide by the PCGGs resolutions.[39]
Under the terms of the lease-purchase agreement, the
amount of arrears in rentals or amortizations must be
equivalent to the cumulative sum of three annual
installments, in order to warrant the rescission of the
contract. Therefore, it must be shown that PIMECO failed
to pay the aggregate amount of at least P10,038,809.10
before the lease-purchase agreement can be deemed
automatically cancelled. Assuming in the extreme that, as
alleged by MPCP, the arrears at the time of tender on
January 30, 1991 amounted to P12,578,171.00,[40] the
tender and consignation of the sum of P5,000,000.00,
which had the effect of payment, reduced the back rentals
to only P7,578,171.00, an amount less than the equivalent
of three annual installments. Thus, with the
Sandiganbayans approval of the consignation and
directive for MPCP to accept the tendered payment, the
lease-purchase agreement could not be said to have been
rescinded.
MPCPs chief complaint in its present petition is that it was
not a party in Civil Case No. 0024. As such, it alleges that
the Sandiganbayan had no jurisdiction over its person and
32 | P a g e
OBLICON2
may not direct it to accept the consigned amount of
P5,000,000.00. In rejecting this argument, the
Sandiganbayan held that Civil Case No. 0024, i.e., the
sequestration case, on the one hand, and Civil Case No.
0108, i.e., the petition for declaratory relief in which it was
the named respondent, on the other hand, were
interrelated since they both involved the sequestered
assets of PIMECO. Thus, the titles of both cases appear on
the caption of the assailed Resolutions dated July 2,
1991. On this point, the Sandiganbayan further ruled:
While MPCP is not a named party in Civil Case No. 0024, it
is in Civil Case No. 0108. These two civil actions are
interrelated in the sense that they both involve the
sequestered and taken-over assets of PIMECO, principal of
which are the lease-purchase agreement, the rights
thereunder of PIMECO, and, since these rights can not be
exercised without possession of the meat processing plant,
the plant itself. It is for this reason that the caption of the
present Urgent Motion expressly indicates that Civil Case
No. 0024 is Related to Civil Case No. 0108. In view of
these circumstances, the Court considers the Urgent
Motion as also filed in Case No. 0108.
Moreover, when the propriety of the turn-over of the
management and control of PIMECO, including the meat
packing plant, to MPCP was in issue in Civil Case No. 0024,
MPCP, through its officers, appeared in all the proceedings
and actively coordinated with PCGG. To justify the turn-
over, the Office of the Solicitor General echoed the stand
of MPCP that the lease-purchase agreement had already
been rescinded. And in the present Urgent Motion, MPCP
again appeared. In fact, it appeared in Case No. 0024 even
if the matter at hand was not the said motion. Although
MPCPs lawyer entered a special appearance in the
present incident, he did not confine himself to assailing
the jurisdiction of this Court over MPCP, but went to the
extent of participating in the oral argument on the merits
of the motion,. Indeed, his Comment devoted only one
page on the issue of jurisdiction and seven pages to the
alleged untenability of the motion. Although MPCP did
not expressly pray for the denial of the urgent motion, not
even for lack of jurisdiction over it, by setting forth therein
arguments not only on the jurisdictional issue, but more
extensively on the alleged lack of merit of the motion, it
thereby impliedly prayed for affirmative relief in its
favor. Under these circumstances, MPCP voluntarily
submitted itself to the jurisdiction of the Court.[41]
Jurisdiction over the person of the defendant in civil cases
is acquired either by his voluntary appearance in court and
his submission to its authority or by service of
summons.[42] Furthermore, the active participation of a
party in the proceedings is tantamount to an invocation of
the courts jurisdiction and a willingness to abide by the
resolution of the case, and will bar said party from later on
impugning the court or bodys jurisdiction.[43] In this case,
petitioner MPCP is precluded from questioning the
jurisdiction of the Sandiganbayan over its person in Civil
Case No. 0024, considering that, as shown by the records,
it actively participated in the discussion of the merits of
the said case, even going to the extent of seeking
affirmative relief. The Sandiganbayan did not commit
grave abuse of discretion in saying so.
OCCENA VS JABSON (1976)
PONENTE: JUSTICE TEEHANKEE
SETTING: DAVAO CITY
FACTS:AThe Court reverses the Court of Appeals appealed
resolution. The Civil Code authorizes the release of an
obligor when the service has become so difficult as to be
manifestly beyond the contemplation of the parties but
does not authorize the courts to modify or revise the
subdivision contract between the parties or fix a different
sharing ratio from that contractually stipulated with the
force of law between the parties. Private respondent's
complaint for modification of the contract manifestly has
no basis in law and must therefore be dismissed for failure
to state a cause of action. On February 25, 1975 private
respondent Tropical Homes, Inc. filed a complaint for
modification of the terms and conditions of its subdivision
contract with petitioners (landowners of a 55,330 square
meter parcel of land in Davao City), making the following
allegations:
"That due to the increase in price of oil and its derivatives
and the concomitant worldwide spiralling of prices, which
are not within the control of plaintiff, of all commodities
including basis raw materials required for such
development work, the cost of development has risen to
levels which are unanticipated, unimagined and not within
the remotest contemplation of the parties at the time said
agreement was entered into and to such a degree that the
conditions and factors which formed the original basis of
said contract, Annex 'A', have been totally changed;
'That further performance by the plaintiff under the
contract.
That further performance by the plaintiff under the
contract,Annex 'S', will result in situation where
defendants would be unustly enriched at the expense of
the plaintiff; will cause an inequitous distribution of
proceeds from the sales of subdivided lots in manifest
actually result in the unjust and intolerable exposure of
plaintiff to implacable losses, all such situations resulting
in an unconscionable, unjust and immoral situation
contrary to and in violation of the primordial concepts of
good faith, fairness and equity which should pervade all
human relations.
Under the subdivision contract, respondent "guaranteed
(petitioners as landowners) as the latter's fixed and sole
share and participation an amount equivalent to forty
(40%) percent of all cash receifptsfromthe sale of the
subdivision lots"
Respondent pray of the Rizal court of first instance that
"after due trial, this Honorable Court render judgment
modifying the terms and conditions of the contract ... by
fixing the proer shares that shouls pertain to the herein
parties out of the gross proceeds from the sales of
subdivided lots of subjects subdivision".
33 | P a g e
OBLICON2
Petitioners moved to dismiss the complaint principally for
lack of cause of action, and upon denial thereof and of
reconsideration by the lower court elevated the matter on
certiorari to respondent Court of Appeals.
Respondent court in its questioned resolution of June 28,
1976 set aside the preliminary injunction previously issued
by it and dimissed petition on the ground that under
Article 1267 of the Civil Code which provides that
ART. 1267. When the service has become so difficult as to
be manifestly beyond the contemplation of the parties,
the obligor may also be released therefrom, in whole or in
part. 1
... a positive right is created in favor of the obligor to be
released from the performance of an obligation in full or in
part when its performance 'has become so difficult as to
be manifestly beyond the contemplation of the parties.
ISSUE: the petition at abar wherein petitioners insist that
the worldwide increase inprices cited by respondent does
not constitute a sufficient casue of action for modification
of the subdivision contrct. After receipt of respondent's
comment, the Court in its Resolution of September 13,
1976 resolved to treat the petition as special civil
actionand declared the case submitted for decision.
RULING:A he petition must be granted.
While respondent court correctly cited in its decision the
Code Commission's report giving the rationale for Article
1267 of the Civil Code, to wit;
The general rule is that impossibility of performance
releases the obligor. However, it is submitted that when
the service has become so difficult as to be manifestly
beyond the contemplation of the parties, the court should
be authorized to release the obligor in whole or in part.
The intention of the parties should govern and if it appears
that the service turns out to be so difficult as have been
beyond their contemplation, it would be doing violence to
that intention to hold the obligor still responsible. ... 2
It misapplied the same to respondent's complaint.
If respondent's complaint were to be released from having
to comply with the subdivision contract, assuming it could
show at the trial that the service undertaken contractually
by it had "become so difficult as to be manifestly beyond
the contemplation of the parties", then respondent court's
upholding of respondet's complaint and dismissal of the
petition would be justifiable under the cited codal article.
Without said article, respondent would remain bound by
its contract under the theretofore prevailing doctrine that
performance therewith is ot excused "by the fact that the
contract turns out to be hard and improvident,
unprofitable, or unespectedly burdensome", 3 since in
case a party desires to be excuse from performance in the
event of such contingencies arising, it is his duty to provide
threfor in the contract.
But respondent's complaint seeks not release from the
subdivision contract but that the court "render judgment I
modifying the terms and Conditions of the Contract by
fixing the proper shares that should pertain to the herein
parties out of the gross proceed., from the sales of
subdivided lots of subject subdivision". The cited article
does not grant the courts this authority to remake, modify
or revise the contract or to fix the division of shares
between the parties as contractually stipulated with the
force of law between the parties, so as to substitute its
own terms for those covenanted by the partiesthemselves.
Respondent's complaint for modification of contract
manifestly has no basis in law and therefore states no
cause of action. Under the particular allegations of
respondent's complaint and the circumstances therein
averred, the courts cannot even in equity grant the relief
sought.
A final procedural note. Respondent cites the general rule
that an erroneous order denying a motion to dismiss is
interlocutory and should not be corrected by certiorari but
by appeal in due course. This case however manifestly falls
within the recognized exception that certiorari will lie
when appeal would not prove to be a speedy and
adequate remedy.' Where the remedy of appeal would
not, as in this case, promptly relieve petitioners from the
injurious effects of the patently erroneous order
maintaining respondent's baseless action and compelling
petitioners needlessly to go through a protracted trial and
clogging the court dockets by one more futile case,
certiorari will issue as the plain, speedy and adequate
remedy of an aggrieved party.
NAGA TELEPHONE VS CA(1994)
PONENTE: JUSTICE NOCON
SETTING: CAMARINES SUR
1. ANATELCO: telephone company rendering local
and long distance services in Naga.
1. Entered into contract with
Camarines Sur II Electric Cooperative
(electrice power service):
i. For the use in operation of its telephone service,
electric light posts of CASURECO II.
ii. In return, free use of 10 telephone connections.
iii. Period: as long as NATELCO needs electric light
posts, CASURECO understands that contract will terminate
when they are forced to stop, abandon operation and
remove lightposts.
2. CASURECO after 10 years: filed for reformation
of contract with damages, not conforming to
guidelines of National Electrification
Administration (NEA)- reasonable
compensation for use of posts.
34 | P a g e
OBLICON2

i. Compensation is P10/posts but consumption of 5. CA: agreed to TRIAL COURT but for different therefore, cannot be an element in
telephone cables costs P2630. reasons: the determination of the period for
prescription of the action to reform.
ii. NATELCO used 319 posts without any contract at 1. Article 1267 applicable
P10.00; refused to pay. 2. Article 1144: Action upon a written
2. Contract POTESTATIVE CONDITION, contract must be brought within 10
iii. Poor servicing- damage not less than P100,000. THUS VOID years from the time the right of
action accrues.
3. NATELCO ISSUE:
i. From the time the right of action accrues not
1. Compensation: Is Article 1267 applicable? YES necessarily the date of execution of the contract.

i. No cause of action for reformation of contract.
ii. Barred by prescription (10 years execution of
contract)
iii. Barred by estoppel.
iv. Utilization could not have cause deterioration
because already used for 11 years. v. Value of expenses
been equal to use of telephone lines.
4. TRIAL COURT
1. ORDERED REFORMATION OF
AGREEMENT:
i. NATELCO to pay for electric
polls sum of P10/pole from January 1989.
1. Contract eventually became unfair due to increase in
volume of subscribers without increase of telephone
connections which are free of charge to CASURECO.
2. REFORMATION OF CONTACT: cannot make another
contract but abolish inequities.
3. Contract does not mention use of posts outside Naga
City. Contract should be reformed including provision that
for the use posts outside Naga.
Has the filing of reformation of contract prescribed? NO.
Is the period of contract, as long as the party of the first
part has need for electrive light posts potestative? YES.
HELD:
1. ARTICLE 1267, EVEN THOUGH NEVER RAISED
BEFORE, IS APPLICABLE.
1. ARTICLE 1267: Art. 1267. When the
service has become so difficult as to
be manifestly beyond the
contemplation of the parties, the
obligor may also be released
therefrom, in whole or in part.
2. PRESTATION: payment of money; a
toll or duty; also, the rendering of a
service.
3. Contract was one-sided unfair, and
disadvantageous to plaintiff.
2. PRESCRIPTION HAS NOT YET LAPSED.
1. What is reformed is not the contract
itself, but the instrument embodying
the contract. It follows that whether
the contract is disadvantageous or
not is irrelevant to reformation and
ii. As correctly ruled by respondent court, private
respondent's right of action arose "sometime during the
latter part of 1982 or in 1983 when according to Atty. Luis
General, Jr. . . ., he was asked by (private respondent's)
Board of Directors to study said contract as it already
appeared disadvantageous to (private respondent) in
1989.
iii. 10 years had not yet elapsed.
3. PERIOD OF CONTRACT IS POTESTATIVE, THUS INVALID.
a. Leaves the continued effectivity of the aforesaid
agreement to the latter's sole and exclusive will as long as
plaintiff is in operation
b. Leaves leaves the effectivity and enjoyment of
leasehold rights to the sole and exclusive will of the lessee.
PNCC VS CA (1997)
PONENTE: JUSTICE DAVIDE JR.
FACTS: On 18 November 1985, private respondents and
petitioner entered into a contract of lease of a parcel of
land owned by the former. The terms and conditions of
said contract of lease are as follows: a) the lease shall be
for a period of five (5) years which begins upon the
issuance of permit by the Ministry of Human Settlement
and renewable at the option of the lessee under the terms

35 | P a g e
OBLICON2
and conditions, b) the monthly rent is P20, 000.00 which
shall be increased yearly by 5% based on the monthly rate,
c) the rent shall be paid yearly in advance, and d) the
property shall be used as premises of a rock crushing plan.
On January 7, 1986, petitioner obtained permit from the
Ministry which was to be valid for two (2) years unless
revoked by the Ministry. Later, respondent requested the
payment of the first annual rental. But petitioner alleged
that the payment of rental should commence on the date
of the issuance of the industrial clearance not on the date
of signing of the contract. It then expressed its intention to
terminate the contract and decided to cancel the project
due to financial and technical difficulties. However,
petitioner refused to accede to respondents request and
reiterated their demand for the payment of the first
annual rental. But the petitioner argued that it was only
obligated to pay P20, 000.00 as rental for one month
prompting private respondent to file an action against the
petitioner for specific performance with damages before
the RTC of Pasig. The trial court rendered decision in favor
of private respondent. Petitioner then appealed the
decision of the trial court to the Court of Appeals but the
later affirmed the decision of the trial court and denied
the motion for reconsideration.
ISSUE: Whether or not petitioner can avail of the benefit
of Article 1267 of the New Civil Code.
RULING: NO. The petitioner cannot take refuge of the said
article. Article 1267 of the New Civil Code provides that
when the service has become so difficult as to manifestly
beyond the contemplation of the parties, the obligor may
also be released therefrom, in whole or in part. This
article, which enunciates the doctrine of unforeseen
events, is not, however an absolute application of the
principle of rebus sic stantibus, which would endanger the
security of contractual relations. The parties to the
contract must be presumed to have assumed the risks of
unfavorable developments. It is therefore only in
absolutely exceptional chances of circumstances that
equity demands assistance for the debtor. The principle of
rebus sic stantibus neither fits in with the facts of the case.
Under this theory, the parties stipulate in the light of
certain prevailing conditions, and once these conditions
cease to exist, the contract also ceases to exist.
In this case, petitioner averred that three (3) abrupt
change in the political climate of the country after the
EDSA Revolution and its poor financial condition rendered
the performance of the lease contract impractical and
inimical to the corporate survival of the petitioner.
However, as held in Central Bank v. CA, mere pecuniary
inability to fulfill an engagement does not discharge a
contractual obligation, nor does it constitute a defense of
an action for specific performance.
judgment for attorney's fees in his favor. Gan Tion went on
Gan Tion vs. Court of Appeals, 28 SCRA 235 No. L-22490,
May 21, 1969
Gan Tion vs. CA, 28 SCRA 235, G.R. No. L-22490 May 21,
1969
GAN TION, petitioner,
vs.
HON. COURT OF APPEALS, HON. JUDGE AGUSTIN P.
MONTESA, as Judge of the Court of First Instance of
Manila, ONG WAN SIENG and THE SHERIFF OF MANILA,
respondents.
Burgos and Sarte for petitioner.
Roxas, Roxas, Roxas and Associates for respondents.
MAKALINTAL, J.:
The sole issue here is whether or not there has been
legal compensation between petitioner Gan Tion and
respondent Ong Wan Sieng.
Ong Wan Sieng was a tenant in certain premises
owned by Gan Tion. In 1961 the latter filed an ejectment
case against the former, alleging non-payment of rents for
August and September of that year, at P180 a month, or in
the municipal court (of Manila), but upon appeal the Court
of First Instance, on July 2, 1962, reversed the judgment
and dismissed the complaint, and ordered the plaintiff to
pay the defendant the sum P360 altogether. The
defendant denied the allegation and said that the agreed
monthly rental was only P160, which he had offered to but
was refused by the plaintiff. The plaintiff obtained a
favorable judgment of P500 as attorney's fees. That
judgment became final.
On October 10, 1963 Gan Tion served notice on Ong
Wan Sieng that he was increasing the rent to P180 a
month, effective November 1st, and at the same time
demanded the rents in arrears at the old rate in the
aggregate amount of P4,320.00, corresponding to a period
from August 1961 to October 1963.lwphi1.et
In the meantime, over Gan Tion's opposition, Ong
Wan Sieng was able to obtain a writ of execution of the
certiorari to the Court of Appeals, where he pleaded legal
compensation, claiming that Ong Wan Sieng was indebted
to him in the sum of P4,320 for unpaid rents. The
appellate court accepted the petition but eventually
decided for the respondent, holding that although
"respondent Ong is indebted to the petitioner for unpaid
rentals in an amount of more than P4,000.00," the sum of
P500 could not be the subject of legal compensation, it
being a "trust fund for the benefit of the lawyer, which
would have to be turned over by the client to his counsel."
In the opinion of said court, the requisites of legal
compensation, namely, that the parties must be creditors
and debtors of each other in their own right (Art. 1278,
Civil Code) and that each one of them must be bound
principally and at the same time be a principal creditor of
the other (Art. 1279), are not present in the instant case,
since the real creditor with respect to the sum of P500 was
the defendant's counsel.
This is not an accurate statement of the nature of an
award for attorney's fee's. The award is made in favor of
the litigant, not of his counsel, and is justified by way of
indemnity for damages recoverable by the former in the
cases enumerated in Article 2208 of the Civil Code.1 It is
the litigant, not his counsel, who is the judgment creditor
and who may enforce the judgment by execution. Such
credit, therefore, may properly be the subject of legal
compensation. Quite obviously it would be unjust to
compel petitioner to pay his debt for P500 when
36 | P a g e
OBLICON2
admittedly his creditor is indebted to him for more than
P4,000.
WHEREFORE, the judgment of the Court of Appeals is
reversed, and the writ of execution issued by the Court of
First Instance of Manila in its Civil Case No. 49535 is set
aside. Costs against respondent.
BPI VS. CA 255 SCRA 571
DECISION
PUNO, J.:
Petitioners seek a review of the Decision1 of respondent
Court of Appeals in CA-G.R. CV No. 41543 reversing the
Decision2 of the Regional Trial Court of Quezon City,
Branch 79, and ordering petitioners to credit private
respondents Savings
Account No. 3185-0172-56 with P10,556.00 plus interest.
The facts reveal that on September 25, 1985, private
respondent Edvin F. Reyes opened Savings Account No. 3
185-0172-56 at petitioner Bank of the Philippine Islands
(BPI) Cubao, Shopping Center Branch. It is a joint
AND/OR account with his wife, Sonia S. Reyes.
Private respondent also held a joint AND/OR Savings
Account No. 3185-0128-82 with his grandmother,
Emeteria M. Fernandez, opened3 on February 11, 1986 at
the same BPI branch. He regularly deposited in this
account the U.S. Treasury Warrants payable to the order
of Emeteria M. Fernandez as her monthly pension.
Emeteria M. Fernandez died on December 28, 1989
without the knowledge of the U.S. Treasury Department.
She was still sent U.S. Treasury Warrant No. 21667302
dated January 1, 1990 in the amount of U.S. $377.003 or
P10,556.00. On January 4, 1990, private respondent
deposited the said U.S. treasury check of Fernandez in
Savings Account No. 3 185-0128-82. The U.S. Veterans
Administration Office in Manila conditionally cleared the
check.4 The check was then sent to the United States for
further clearing.5
Two months after or on March 8, 1990, private
respondent closed Savings Account No. 3 185-0128-82
and transferred its funds amounting to P13,112.91 to
Savings Account No. 3 185-0172-56, the joint account
with his wife.
On January 16, 1991, U.S. Treasury Warrant No.
21667302 was dishonored as it was discovered that
Fernandez died three (3) days prior to its issuance. The
U.S. Department of Treasury requested petitioner bank
for a refund.6 For the first time petitioner bank came to
know of the death of Fernandez.
On February 19, 1991, private respondent received a PT
& T urgent telegram from petitioner bank requesting him
to contact Manager Grace S. Romero or Assistant
Manager Carmen Bernardo. When he called up the bank,
he was informed that the treasury check was the subject
of a claim by Citibank NA, correspondent of petitioner
bank. He assured petitioners that he would drop by the
bank to look into the matter. He also verbally authorized
them to debit from his other joint account the amount
stated in the dishonored U.S. Treasury Warrant.7 On the
same day, petitioner bank debited the amount of
P10,556.00 from private respondents Savings Account
No. 3185-0172-56.
On February 21, 1991, private respondent with his lawyer
Humphrey Tumaneng visited the petitioner bank and the
refund documents were shown to them. Surprisingly,
private respondent demanded from petitioner bank
restitution of the debited amount. He claimed that
because of the debit, he failed to withdraw his money
when he needed them. He then filed a suit for Damages8
against petitioners before the Regional Trial Court of
Quezon City, Branch 79.
Petitioners contested the complaint and counter-claimed
for moral and exemplary damages. By way of Special and
Affirmative Defense, they averred that private
respondent gave them his express verbal authorization to
debit the questioned amount. They claimed that private
respondent later refused to execute a written authority.9
In a Decision dated January 20, 1993, the trial court
dismissed the complaint of private respondent for lack of
cause of action.10
Private respondent appealed to the respondent Court of
Appeals. On August 16, 1994, the Sixteenth Division of
respondent court in AC-G.R. CV No. 41543 reversed the
impugned decision, viz:
WHEREFORE, the judgment appealed from is set aside,
and another one entered ordering defendant (petitioner)
to credit plaintiffs (private respondents) S.A. No. 3 185-
0172-56 with P10,556.00 plus interest at the applicable
rates for express teller savings accounts from February
19,1991, until compliance herewith. The claim and
counterclaim for damages are dismissed for lack of merit.
ISSUE:
Whether or not, private respondent
verbally authorized petitioner bank to debit his joint
account with his wife for the amount of the returned U.S.
37 | P a g e
OBLICON2
Treasury Warrant. We find that petitioners were able to
prove this verbal authority by preponderance of
evidence.
HELD:
We are not disposed to believe private respondents
allegation that he did not give any verbal authorization. His
testimony is uncorroborated. Nor does he inspire
credence. His past and fraudulent conduct is an evidence
against him.15 He concealed from petitioner bank the
death of Fernandez on December 28, 1989.16 As of that
date, he knew that Fernandez was no longer entitled to
receive any pension. Nonetheless, he still received the
U.S. Treasury Warrant of Fernandez, and on January 4,
1990 deposited the same in Savings Account No. 3185-
0128-82. To pre-empt a refund, private respondent closed
his joint account with Fernandez (Savings Account No. 31-
85- 0128-82) on March 8, 1990 and transferred its balance
to his joint account with his wife (Savings Account No. 3
185-0172-56). Worse, private respondent declared under
the penalties of perjury in the withdrawal
slip17 dated March 8, 1990 that his co-depositor,
Fernandez, is still living. By his acts, private respondent
has stripped himself of credibility.
More importantly, the respondent court erred
when it failed to rule that legal compensation is
proper. Compensation shall take place when two persons,
in their own right, are creditors and debtors of each
other.18 Article 1290 of the Civil Code provides that when
all the requisites mentioned in Article 1279 are present,
compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even
though the creditors and debtors are not aware of the
compensation. Legal compensation operates even
against the will of the interested parties and even without
the consent of them.19 Since this compensation takes
place ipso jure, its effects arise on the very day on which
all its requisites concur.20When used as a defense, it
retroacts to the date when its requisites are fulfilled.21
Article 1279 states that in order that compensation
may be proper, it is necessary:
(1) That each one of the obligors be bound principally,
and that he be at the same time a principal creditor of the
other;
(2) That both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind, and
also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor.
The elements of legal compensation are all present
in the case at bar. The obligors bound principally are at the
same time creditors of each other. Petitioner bank stands
as a debtor of the private respondent, a depositor. At the
same time, said bank is the creditor of the private
respondent with respect to the dishonored U.S. Treasury
Warrant which the latter illegally transferred to his joint
account. The debts involved consist of a sum of
money. They are due, liquidated, and demandable. They
are not claimed by a third person.
It is true that the joint account of private
respondent and his wife was debited in the case at
bar. We hold that the presence of private respondents
wife does not negate the element of mutuality of parties,
i.e., that they must be creditors and debtors of each other
in their own right. The wife of private respondent is not a
party in the case at bar. She never asserted any right to
petitioner PNB) to pay the plaintiff (private respondent
the debited U.S. Treasury Warrant. Indeed, the right of
the petitioner bank to make the debit is clear and cannot
be doubted. To frustrate the application of legal
compensation on the ground that the parties are
not all mutually obligated would result in unjust
enrichment on the part of the private respondent and his
wife who herself out of honesty has not objected to the
debit.
The rule as to mutuality is strictly applied at
law. But not in equity, where to allow the same would
defeat a clear right or permit irremediable injustice.22
IN VIEW HEREOF, the Decision of respondent Court
of Appeals in CA-G.R. CV No. 41543 dated August
16,1994 is ANNULLED and SET ASIDE and the Decision of
the trial court in Civil Case No. Q-91-8451 dated January
20, 1993 is REINSTATED. Costs against private respondent.
SO ORDERED.
259 SCRA 174 PNB
PHILIPPINE NATIONAL BANK, petitioner, vs. THE COURT
OF APPEALS and RAMON LAPEZ,[1] doing
business under the name and style SAPPHIRE
SHIPPING, respondents.
DECISION
PANGANIBAN, J.:
Does a local bank, while acting as local
correspondent bank, have the right to intercept funds
being coursed through it by its foreign counterpart for
transmittal and deposit to the account of an individual
with another local bank, and apply the said funds to
certain obligations owed to it by the said individual?
Assailed in this petition is the Decision of
respondent Court of Appeals[2] in CA-G.R. CV No. 27926
rendered on June 16, 1992 affirming the decision of the
Regional Trial Court, Branch 107 of Quezon City, the
dispositive portion of which read:[3]
"WHEREFORE, judgment is hereby rendered:
1) In the main complaint, ordering the defendant (herein
herein) the sum of US$2,627.11 or its equivalent in
Philippine currency with interest at the legal rate from
January 13, 1987, the date of judicial demand;
2) The plaintiff's supplemental complaint is hereby
dfismissed (sic);
3) The defendant's counterclaims are likewise
dismissed.
38 | P a g e
OBLICON2
The Facts
The factual antecedents as quoted by the
respondent Court are reproduced hereinbelow, the same
being undisputed by the parties:[4]
"The body of the decision reads:
"'After a close scrutiny and analysis of the pleadings as
well as the evidence of both parties, the Court makes the
following conclusions:
"'(a) The defendant applied/appropriated the amounts of
$2,627.11 and P34,340.38 from remittances of the
plaintiff's principals (sic) abroad. These were admitted by
the defendant, subject to the affirmative defenses of
compensation for what is owing to it on the principle of
solution (sic) indebiti;
"'(b) The first remittance was made by the NCB of Jeddah
for the benefit of the plaintiff, to be credited to his
account at Citibank, Greenhills Branch; the second was
from Libya, and was intended to be deposited at the
plaintiff's account with the defendant, No. 830-2410;
(c) The plaintiff made a written demand upon the
defendant for remittance of the equivalent of P2,627.11
by means of a letter dated December 4, 1986 (Exh.
D). This was answered by the defendant on December 22,
1986 (Exh. 13), inviting the plaintiff to come for a
conference;
"'(d) There were indeed two instances in the past, one in
November 1980 and the other in January 1981 when the
plaintiff's account No. 830-2410 was doubly credited with
the equivalents of $5,679.23 and $5,885.38, respectively,
which amounted to an aggregate amount of
P87,380.44. The defendant's evidence on this point (Exhs.
1 thru 11, 14 and 15; see also Annexes C and E to
defendant's Answer), were never refuted nor impugned by
the plaintiff. He claims, however, that plaintiffs claim has
prescribed.
"'(e) Defendant PNB made a demand upon the plaintiff for
refund of the double or duplicated credits erroneously
made on plaintiff's account, by means of a letter (Exh. 12)
dated October 23, 1986 or 5 years and 11 months from
November 1980, and 5 years and 9 months from January
1981. Such letter was answered by the plaintiff on
December 2, 1986 (Annex C, Complaint). This plaintiff's
letter was likewise replied to by the defendant through
Exh. 13;
"'(f) The deduction of P34,340.38 was made by the
defendant not without the knowledge and consent of the
plaintiff, who was issued a receipt No. 857576 dated
February 18, 1987 (Exh. E) by the defendant.
"'There is no question that the two erroneous double
payments made to plaintiff's accounts in 1980 and 1981
created an extra-contractual obligation on the part of the
plaintiff in favor of the defendant, under the principle
of solutio indebiti, as follows:
"'If something is received when there is no right to
demand it, and it was unduly delivered throughg (sic)
mistake, the obligation to return it arises."' (Article 2154,
Civil Code of the Phil.)
Two issues were raised before the trial court,
namely, first, whether the herein petitioner was legally
justified in making the compensation or set-off against the
two remittances coursed through it in favor of private
respondent to recover on the double credits it erroneously
made in 1980 and 1981, based on the principle of solutio
indebiti, and second, whether or not petitioner's claim is
barred by the statute of limitations. The trial court's
ratiocination, as quoted by the appellate Court, follows:[5]
"'Article 1279 of the Civil Code provides:
"'In order that compensation may prosper, it is necessary:
(1) That each one of the obligors be bound
principally, and that he be at the same
time a principal creditor of the other;
(2) That both debts consists in a sum of
money, or if the things due are
consumable, they be of the same kind,
and also of the same quality if the latter
has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there by any
retention or controversy, commenced by
third persons and communicated in due
time to the debtor."'
"'In the case of the $2,627.11, requisites Nos. 2 through 5
are apparently present, for both debts consist in a sum of
money, are both due, liquidated and demandable, and
over neither of them is there a retention or controversy
commenced by third persons and communicated in due
time to the debtor. The question, however, is, where both
of the obligors bound principally, and was each one of
them a debtor and creditor of the other at the same time?
"'Analyzing now the relationship between the parties, it
appears that:
"'(a) With respect to the plaintiff's being a depositor of the
defendant bank, they are creditor and debtor respectively
(Guingona, et al. vs. City Fiscal, et al., 128 SCRA 577);
"'(b) As to the relationship created by the telexed fund
transfers from abroad: A contract between a foreign bank
and local bank asking the latter to pay an amount to a
beneficiary is a stipulation pour autrui. (Bank of America
NT & SA vs. IAC, 145 SCRA 419).
"'A stipulation pour autrui is a stipulation in favor of a third
person (Florentino vs. Encarnacion, 79 SCRA 193; Bonifacio
Brothers vs. Mora, 20 SCRA 261; Uy Tam vs. Leonard, 30
Phils. 475).
"'Thus between the defendant bank (as the local
correspondent of the National Commercial Bank of
Jeddah) and the plaintiff as beneficiary, there is created an
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implied trust pursuant to Art. 1453 of the Civil Code,
quoted as follows:
"'When the property is conveyed to a person in reliance
upon his declared intention to hold it for, or transfer it to
another or the grantor, there is an implied trust in favor of
the person whose benefit is contemplated (sic).
"'c) By the principle of solutio indebiti (Art. 2154, Civil
Code), the plaintiff who unduly received something (sic) by
mistake (i.e., the 2 double credits, although he had no
right to demand it), became obligated to the defendant to
return what he unduly received. Thus, there was created
between them a relationship of obligor and obligee, or of
debtor and creditor under a quasi-contract.
"In view of the foregoing, the Court is of the opinion that
the parties are not both principally bound with respect to
the $2,627.11 from Jeddah neither are they at the same
time principal creditor of the other. Therefore, as matters
stand, the parties' obligations are not subject to
compensation or set off under Art. 1279 of the Civil Code,
for the reason that the defendant is not a principal debtor
nor is the plaintiff a principal creditor insofar as the
amount of $2,627.11 is concerned. They are debtor and
creditor only with respect to the double payments; but are
trustee-beneficiary as to the fund transfer of $2,627.11.
"'Only the plaintiff is principally bound as a debtor of the
defendant to the extent of the double credits. On the
other hand, the defendant was an implied trustee, who
was obliged to deliver to the Citibank for the benefit of the
plaintiff the sum of $2,627.11.
"'Thus while it may be concluded that the plaintiff owes
the defendant the equivalent of the sums of $5,179.23 and
$5,885.38 erroneously doubly credited to his account, the
defendant's actuation in intercepting the amount of
$2,627.11 supposed to be remitted to another bank is not
only improper; it will also erode the trust and confidence
of the international banking community in the banking
system of the country, something we can ill afford at this
time when we need to attract and invite deposits of
foreign currencies."'
"It would have been different has the telex advice from
NCB of Jeddah been for deposit of $2,627.11 to plaintiffs
account No. 830-2410 with the defendant bank. However,
the defendant alleged this for the first time in its
Memorandum (Pls. see par. 16, p. 6 of defendant's
Memorandum). There was neither any allegation thereof
in its pleadings, nor was there any evidence to prove such
fact. On the contrary, the defendant admitted that the
telex advice was for credit of the amount of $2,627.11 to
plaintiffs account with Citibank, Greenhills, San Juan,
MetroManila (Pls. see par. of defendant's Answer with
Compulsory Counterclaim, in relation to plaintiff's
Complaint). Hence, it is submitted that the set-off or
compensation of $2,627.11 against the double payments
to plaintiff's account is not in accordance with law.
"'On this point, the Court finds the plaintiff's theory of
agency to be untenable. For one thing, there was no
express contract of agency. On the other hand, were we
to infer that there was an implied agency, the same would
not be between the plaintiff and defendant, but rather,
between the National Commercial Bank of Jeddah as
principal on the one hand, and the defendant as agent on
the other. Thus, in case of violation of the agency, the
cause of action would accrue to the NCB and not to the
plaintiff.
"'The P34,340.38 subject of the supplemental complaint is
quite another thing. The plaintiff's Exh. "E", which is a
receipt issued to the plaintiff by the defendant for the
amount of P34,340.00 in "full settlement of accounts
receivables with RICB Fund Transfer Department, PNB-
Escolta base on Legal Department Memo dated February
28, 1987" seems to uphold the defendant's theory that the
said amount was voluntarily delivered by the plaintiff to
the defendant as alleged in the last paragraph of
defendant's memorandum. The same is in accordance
with the defendant's answer, as follows:
"The retention and application of the amount of
P34,340.38 was done in a manner consonant with basic
due process considering that
plaintiff was not only furnished documented proof of the c
ause but wasalso given the opportunity to con(tro)vert suc
h Proof.
"Moreover, plaintiff, through counsel, communicated his u
nequivocal and unconditional consent to the retention and
application of the amount in question." (Pls. see
paragraphs 8-9, defendant's Answer with Compulsory
Counterclaim to Plaintiff's Supplemental Complaint)."
This conclusion is borne by the fact that the receipt is in
the hands of the plaintiff, indicating that such receipt was
handed over to the plaintiff when he "paid" or allowed the
deduction from the amount of $28,392.38 from Libya.
"'At any rate, the plaintiff in his Memorandum, stated that
the subsequent fund transfer from Brega Petroleum
Marketing Company of Libya (from where the P34,340.38
was deducted) was intended for credit and deposit in
plaintiff's account at the defendant's Bank CA No. 830-
2410 (per par. 1, page 2, Memorandum for the
plaintiff). Such being the case, the Court believes that
insofar as the amount of P34,340.38 is concerned, all the
requirements of Art. 1279 of the Civil Code are present,
and the said amount may properly be the subject of
compensation or set-off. And since all the requisites of
Art. 1279 of the Civil Code are present (insofar as the
amount of P34,392.38 is concerned), compensation takes
place by operation of law (Art. 1286, Ibid.), albeit only
partial with respect to plaintiff's indebtedness of
P7,380.44.
"Now, on the question of prescription, the Court believes
that Art. 1149 as cited by the plaintiff is not applicable in
this case. Rather, the applicable law is Art. 1145, which
fixes the prescriptive period for actions upon a quasi-
contract (such as solutio indebiti) at six years.
In the dispositive portion of its decision, the trial
court ruled that the herein petitioner was obligated to pay
private respondent the amount of US$2,627.11 or its peso
equivalent, with interest at the legal rate. The court
dismissed all other claims and counterclaims.
On appeal to the respondent Court, petitioner bank
continued to insist that it validly retained the US$2,627.11
in payment of the private respondent's indebtedness by
way of compensation or set-off, as provided under Art.
1279 of the Civil Code.
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The respondent Court of Appeals rejected such
argument, saying:
"The telegraphic money transfer was sent by the IBN,
plaintiff's principal in Jeddah, Saudi Arabia, thru the
National Commercial Bank of Jeddah, Saudi Arabia (NCB,
for short), for the credit/account of Plaintiff with the
Citibank, Greenhills Branch, San Juan, Metro Manila,
coursed thru the PNB's head office, the NCB's
corresponden(t) bank in the Philippines.
"The credit account, or simply account means
that the amount stated in the telegraphic money transfer i
s to be credited in the account of plaintiff with the Citibank
, and, in that sense, presupposes a creditor-
debtor relationship between the plaintiff, as creditor and t
he Citibank, as debtor. Withal the telegraphic money trans
fer, no such creditor-
debtor relationship could have been created between the
plaintiff anddefendant.
"The telegraphic money transfer, or simply telegraphic
transfer(,) was purchased by the IBN from the NCB in Saudi
Arabia, and since the PNB is the NCB's corresponden(t)
bank in the Philippines, there is created between the two
banks a sort of communication exchange for the
corresponden(t) bank to transmit and/or remit and/or pay
the value of the telegraphic transfer in accordance with
the dictate of the correspondence exchange. Some such
responsibility of the corresponden(t) bank is akin to
Section 7 of the Rules and Regulations Implementing E.O.
857, as amended by E.O. 925, "x x x to take charge of the
prompt payment" of the telegraphic transfer, that is,
by transmitting the telegraphic money transfer to the Citib
ank so that the amount can be promptly credited to the ac
count of the plaintiff with the saidbank. That is all that the
PNB can do under the remittance arrangement that it has
with the NCB. With its responsibility as defined as well as
by the nature of its banking business and the responsibility
attached to it, and through which the industry, trade and
commerce of all countries and communities are carried on,
the PNB's liability as corresponden(t) bank continues until
it has completgely (sic) performed and discharged it(s)
obligation thereunder." (underscoring ours)
Hence, the respondent Court affirmed the trial
court's holding in toto.
Dissatisfied, petitioner bank comes before this
Court seeking a review of the assailed Decision.
The Issue : Petitioner's arguments revolve around one
single issue:[6]
"WHILE THE RESPONDENT COURT CORRECTLY FOUND
PRIVATE RESPONDENT LEGALLY BOUND (UNDER THE
PRINCIPLE OF SOLUTIO INDEBITI) TO RETURN TO PNB THE
SUM OF US$2,627.11, IT ERRED IN NOT RULING THAT
LEGAL COMPENSATION HAS TAKEN PLACE WHEN PNB
WAS ORDERED BY THE TRIAL COURT TO RETURN TO
PRIVATE RESPONDENT THE SAME AMOUNT. SUCH
COURSE OF ACTION IS IN CONSONANCE WITH SPEEDY
AND SUBSTANTIAL JUSTICE, AND WOULD PREVENT THE
UNNECESSARY FILING OF A SUBSEQUENT SUIT BY PNB FOR
THE COLLECTION OF THE SAME AMOUNT FROM PRIVATE
RESPONDENT."
The Court's Ruling
We note that in framing the issue in the manner
aforecited, the petitioner implicitly admits the correctness
of the respondent Court's affirmance of the trial court's
ruling finding herein petitioner liable to private
respondent for the sum of US$2,627.11 or its peso
equivalent. And it could not have done otherwise. After a
careful scrutiny of both the decision of the trial court and
that of the appellate court, we find no reversible error
whatsoever in either ruling, and see no need to add to the
extensive discussions already made regarding the non-
existence of all the requisites for legal compensation to
take place.
But petitioner has adopted a novel theory,
contending that since respondent Court found that private
respondent is "an obligor of PNB and the latter, as
aforesaid, has become an obligor of private respondent
(resulting in legal compensation), the (h)onorable
respondent court should have ordered private respondent
to pay PNB what the latter is bound by the trial court's
decision to return the former.[7]
By this simplistic approach, petitioner in effect
seeks to render nugatory the decisions of the trial court
and the appellate Court, and have this Court validate its
original misdeed, thereby making a mockery of the entire
judicial process of this country. What the petitioner bank
is effectively saying is that since the respondent Court of
Appeals ruled that petitioner bank could not do a shortcut
and simply intercept funds being coursed through it, for
transmittal to another bank, and eventuall owe some
amount of money to the petitioner, and because
respondent Court ordered petitioner bank to return the
intercepted amount to said individual, who in turn was
found by the appellate Court to be indebted to petitioner
bank, THEREFORE, there must now be legal compensation
of the amounts each owes the other, and hence, there
is no need for petitioner bank toactually return the
amount, and finally, that petitioner bank ends up in
exactly the same position as when it first took the
improper and unwarranted shortcut by intercepting the
said money transfer, notwithstanding the assailed Decision
saying that this could not be done!
We see in this petition a clever ploy to use this
Court to validate or legalize an improper act of the
petitioner bank, with the not impossible intention of using
this case as a precedent for similar acts of interception in
the future. This piratical attitude of the nation's premier
bank deserves a warning that it should not abuse the
justice system in its collection efforts, particularly since we
are aware that if the petitioner bank had been in good
faith, it could have easily disposed of this controversy in
ten minutes flat by means of an exchange of checks with
private respondent for the same amount. The litigation
could have ended there, but it did not. Instead, this plainly
unmeritorious case had to clog our docket and take up the
valuable time of this Court.
WHEREFORE, the instant petition is herewith
DENIED for being plainly unmeritorious, and the assailed
Decision is AFFIRMED in toto. Costs against petitioner.
SO ORDERED.
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CKH 272 SCRA nothing to account since under saidlaw, all earnings from the prohibitionagainst the
the export sales of sugar pertained to taking of private property without just
the National Government.On August 9, 1979, the Mirasols compensation.Petitioners now ask
filed a suit for accounting, this Court to exercise its
specific performance, and damages against PNB. power of judicialreview.Jurisprudence has laid down the
following requisites for the exerciseof this power: First,
MIRASOL VS CA [351 SCRA 44; G.R. No.128448; 1 Feb
Issues: there must be before the Court an actual
2001]
casecalling for the exercise of judicial review. Second,
(1) Whether or not the Trial Court has jurisdiction to the question before the Court must be ripe for adjudicatio
Friday, January 30, 2009 Posted by Coffeeholic
declare a statuteunconstitutional without notice to the n. Third, the personchallenging the validity of the act must
WritesLabels: Case Digests
Solicitor General where the parties have agreed to submit have standing to challenge.Fourth, the question of
such issue for the resolution of the constitutionality must have been raised at theearliest
Facts:
TrialCourt.(2) Whether PD 579 and subsequent issuances t opportunity, and lastly, the issue of constitutionality must
The Mirasols are sugarland owners and planters.Philippine hereof areunconstitutional.(3) Whether or not said PD is s bethe very lis mota of the case
National Bank (PNB) financed the Mirasols' sugar producti ubject to judicial review.
on venture FROM 1973- y to be deposited to the account of an individual who
Held: happens to
1975 under a crop loan financingscheme. The Mirasols
signed Credit Agreements, a Chattel Mortgageon Standing
It is settled that Regional Trial Courts have the
Crops, and a Real Estate Mortgage in favor of PNB.
authorityand jurisdiction to consider the constitutionality
TheChattel Mortgage empowered PNB to negotiate and
of a statute, presidential decree, or executive order. The C
sell the latter'ssugar and to apply the proceeds to the
onstitution vests the power of judicial review or the power
payment of their obligations toit.President Marcos issued
to declare a law, treaty,international or executive agreem
PD 579 in November, 1974 authorizingPhilippine Exchange
ent, presidential decree, order,instruction, ordinance, or
Co., Inc. (PHILEX) to purchase sugar allocatedfor export
regulation not only in this Court, but in
and authorized PNB to finance PHILEX's purchases.
allRegional Trial Courts.The purpose of the mandatory
Thedecree directed that whatever profit PHILEX might
notice in Rule 64, Section 3 is toenable the Solicitor
realize was to beremitted to the government. Believing
General to decide whether or not his interventionin the
that the proceeds were morethan enough to pay their
action assailing the validity of a law or treaty is necessary.
obligations, petitioners asked PNB for anaccounting of the
Todeny the Solicitor General such notice would be tantam
proceeds which it ignored. Petitioners continued toavail of
ount todepriving him of his day in court. We must stress
other loans from PNB and to make unfunded
that, contrary to petitioners' stand, the mandatory notice
withdrawalsfrom their accounts with said bank. PNB asked
requirement is not limited toactions involving declaratory
petitioners to settletheir due and demandable accounts.
relief and similar remedies. The ruleitself provides that
As a result, petitioners, conveyedto PNB real properties by
such notice is required in "any action" and not justactions
way of dacion en pago still leaving anunpaid amount. PNB
involving declaratory relief. Where there is no ambiguity
proceeded to extrajudicially foreclose
inthe words used in the rule, there is no room for
themortgaged properties. PNB still had a deficiency claim.
construction. 15 In allactions assailing the validity of a
Petitioners continued to ask PNB to account for the procee
statute, treaty, presidential decree,order, or proclamation,
ds,insisting that said proceeds, if properly liquidated, could
notice to the Solicitor General is mandatory.Petitioners
offset their outstanding obligations. PNB remained
contend that P.D. No. 579 and its implementing
adamant in its stance thatunder P.D. No. 579, there was
issuancesare void for violating the due process clause and

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