JUAN F. VILLARROEL, vs.

BERNARDINO ESTRADA

G.R. No. L-47362 December 19, 1940

FACTS: On May 9 1912, Alejandra F. Callao mother of herein petitioner

obtained from the Sps Mariano Estrada and Severina a loan of 1000 pesos

payable in 6 years. Alejandra died leaving petitioner as the sole heir. The

Sps Mariano Estrada and Severina died as well leaving the respondent as

the sole heir. On Aug 9 1930, petitioner signed a document assuming the

obligation to pay the respondent 1000 plus 12% per annum interest. Hence

the action filed to recover said amount.

The CFI ruled in favor of the respondent ordering the petitioner to pay 1000

plus interest of 12% per annum to be counted from Aug 9 1930.

ISSUE: Whether or not the present action may prosper notwithstanding the

prescription of the action to recover the original debt?

HELD: Yes. The present action is not based on the original debt contracted

by petitioner’s mother – which has already prescribed – but on petitioner’s

undertaking on Aug 9 1930 to assume the original obligation. For the

petitioner who is the sole heir of the original debtor with rights to the latter’s

inheritance, the debt legally contracted by his mother even if it has already

lost enforceability due to prescription, has become a moral obligation which

is a sufficient consideration to make the obligation he voluntarily

assumedon Aug 9 1930 enforceable and legally demandable.

 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-13667 April 29, 1960
PRIMITIVO ANSAY, ETC., ET AL., plaintiffs-appellants,
vs.
THE BOARD OF DIRECTORS OF THE NATIONAL DEVELOPMENT
COMPANY, ET AL., defendants-appellees.
Celso A. Fernandez for appellants.
Juan C. Jimenez, for appellees.
PARAS, C. J.:
On July 25, 1956, appellants filed against appellees in the Court of First
Instance of Manila a complaint praying for a 20% Christmas bonus for the
years 1954 and 1955. The court a quo on appellees' motion to dismiss,
issued the following order:
Considering the motion to dismiss filed on 15 August, 1956, set for
this morning; considering that at the hearing thereof, only
respondents appeared thru counsel and there was no appearance
for the plaintiffs although the court waited for sometime for them;
considering, however, that petitioners have submitted an opposition
which the court will consider together with the arguments presented
by respondents and the Exhibits marked and presented, namely,
Exhibits 1 to 5, at the hearing of the motion to dismiss; considering
that the action in brief is one to compel respondents to declare a
Christmas bonus for petitioners workers in the National
Development Company; considering that the Court does not see
how petitioners may have a cause of action to secure such bonus
because:
(a) A bonus is an act of liberality and the court takes it that it is not
within its judicial powers to command respondents to be liberal;
(b) Petitioners admit that respondents are not under legal duty to
give such bonus but that they had only ask that such bonus be
given to them because it is a moral obligation of respondents to
give that but as this Court understands, it has no power to compel a
party to comply with a moral obligation (Art. 142, New Civil Code.).
IN VIEW WHEREOF, dismissed. No pronouncement as to costs.
A motion for reconsideration of the afore-quoted order was denied. Hence
this appeal.
Appellants contend that there exists a cause of action in their complaint
because their claim rests on moral grounds or what in brief is defined by law
as a natural obligation.
Since appellants admit that appellees are not under legal obligation to give
such claimed bonus; that the grant arises only from a moral obligation or the
natural obligation that they discussed in their brief, this Court feels it urgent
to reproduce at this point, the definition and meaning of natural obligation.
Article 1423 of the New Civil Code classifies obligations into civil or natural.
"Civil obligations are a right of action to compel their performance. Natural
obligations, not being based on positive law but on equity and natural law,
do not grant a right of action to enforce their performance, but after voluntary
fulfillment by the obligor, they authorize the retention of what has been
delivered or rendered by reason thereof".
It is thus readily seen that an element of natural obligation before it can be
cognizable by the court is voluntary fulfillment by the obligor. Certainly
retention can be ordered but only after there has been voluntary
performance. But here there has been no voluntary performance. In fact, the
court cannot order the performance.
At this point, we would like to reiterate what we said in the case of Philippine
Education Co. vs. CIR and the Union of Philippine Education Co.,
Employees (NUL) (92 Phil., 381; 48 Off. Gaz., 5278) —
xxx xxx xxx
From the legal point of view a bonus is not a demandable and
enforceable obligation. It is so when it is made a part of the wage or
salary compensation.
And while it is true that the subsequent case of H. E. Heacock vs. National
Labor Union, et al., 95 Phil., 553; 50 Off. Gaz., 4253, we stated that:

Even if a bonus is not demandable for not forming part of the wage,
salary or compensation of an employee, the same may
nevertheless, be granted on equitable consideration as when it was
given in the past, though withheld in succeeding two years from low
salaried employees due to salary increases.

still the facts in said Heacock case are not the same as in the instant one,
and hence the ruling applied in said case cannot be considered in the
present action.

Premises considered, the order appealed from is hereby affirmed, without

pronouncement as to costs.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48889 May 11, 1989
DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,
vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch
of the Court of First Instance of Iloilo and SPOUSES PATRICIO
CONFESOR and JOVITA VILLAFUERTE, respondents.
GANCAYCO, J.:
The issue posed in this petition for review on certiorari is the validity of a
promissory note which was executed in consideration of a previous
promissory note the enforcement of which had been barred by prescription.
On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte
obtained an agricultural loan from the Agricultural and Industrial Bank (AIB),
now the Development of the Philippines (DBP), in the sum of P2,000.00,
Philippine Currency, as evidenced by a promissory note of said date
whereby they bound themselves jointly and severally to pay the account in
ten (10) equal yearly amortizations. As the obligation remained outstanding
and unpaid even after the lapse of the aforesaid ten-year period, Confesor,
who was by then a member of the Congress of the Philippines, executed a
second promissory note on April 11, 1961 expressly acknowledging said
loan and promising to pay the same on or before June 15, 1961. The new
promissory note reads as follows —
I hereby promise to pay the amount covered by my
promissory note on or before June 15, 1961. Upon my
failure to do so, I hereby agree to the foreclosure of my
mortgage. It is understood that if I can secure a certificate
of indebtedness from the government of my back pay I will
be allowed to pay the amount out of it.
Said spouses not having paid the obligation on the specified date, the DBP
filed a complaint dated September 11, 1970 in the City Court of Iloilo City
against the spouses for the payment of the loan.
After trial on the merits a decision was rendered by the inferior court on
December 27, 1976, the dispositive part of which reads as follows:
WHEREFORE, premises considered, this Court renders
judgment, ordering the defendants Patricio Confesor and
Jovita Villafuerte Confesor to pay the plaintiff Development
Bank of the Philippines, jointly and severally, (a) the sum
of P5,760.96 plus additional daily interest of P l.04 from
September 17, 1970, the date Complaint was filed, until
said amount is paid; (b) the sum of P576.00 equivalent to
ten (10%) of the total claim by way of attorney's fees and
incidental expenses plus interest at the legal rate as of
September 17,1970, until fully paid; and (c) the costs of
the suit.
Defendants-spouses appealed therefrom to the Court of First Instance of
Iloilo wherein in due course a decision was rendered on April 28, 1978
reversing the appealed decision and dismissing the complaint and counter-
claim with costs against the plaintiff.
A motion for reconsideration of said decision filed by plaintiff was denied in
an order of August 10, 1978. Hence this petition wherein petitioner alleges
that the decision of respondent judge is contrary to law and runs counter to
decisions of this Court when respondent judge (a) refused to recognize the
law that the right to prescription may be renounced or waived; and (b) that in
signing the second promissory note respondent Patricio Confesor can bind
the conjugal partnership; or otherwise said respondent became liable in his
personal capacity. The petition is impressed with merit. The right to
prescription may be waived or renounced. Article 1112 of Civil Code
provides:
Art. 1112. Persons with capacity to alienate property may
renounce prescription already obtained, but not the right to
prescribe in the future.
Prescription is deemed to have been tacitly renounced
when the renunciation results from acts which imply the
abandonment of the right acquired.
There is no doubt that prescription has set in as to the first promissory note
of February 10, 1940. However, when respondent Confesor executed the
second promissory note on April 11, 1961 whereby he promised to pay the
amount covered by the previous promissory note on or before June 15,
1961, and upon failure to do so, agreed to the foreclosure of the mortgage,
said respondent thereby effectively and expressly renounced and waived his
right to the prescription of the action covering the first promissory note.
This Court had ruled in a similar case that –
... when a debt is already barred by prescription, it cannot
be enforced by the creditor. But a new contract
recognizing and assuming the prescribed debt would be
valid and enforceable ... . 1
Thus, it has been held —
Where, therefore, a party acknowledges the correctness of
a debt and promises to pay it after the same has
prescribed and with full knowledge of the prescription he
thereby waives the benefit of prescription. 2
This is not a mere case of acknowledgment of a debt that has prescribed but
a new promise to pay the debt. The consideration of the new promissory
note is the pre-existing obligation under the first promissory note. The
statutory limitation bars the remedy but does not discharge the debt.
A new express promise to pay a debt barred ... will take
the case from the operation of the statute of limitations as
this proceeds upon the ground that as a statutory limitation
merely bars the remedy and does not discharge the debt,
there is something more than a mere moral obligation to
support a promise, to wit a – pre-existing debt which is a
sufficient consideration for the new the new promise; upon
this sufficient consideration constitutes, in fact, a new
cause of action. 3
... It is this new promise, either made in express terms or
deduced from an acknowledgement as a legal implication,
which is to be regarded as reanimating the old promise, or
as imparting vitality to the remedy (which by lapse of time
had become extinct) and thus enabling the creditor to
recover upon his original contract. 4
However, the court a quo held that in signing the promissory note alone,
respondent Confesor cannot thereby bind his wife, respondent Jovita
Villafuerte, citing Article 166 of the New Civil Code which provides:
Art. 166. Unless the wife has been declared a non compos
mentis or a spend thrift, or is under civil interdiction or is
confined in a leprosarium, the husband cannot alienate or
encumber any real property of the conjugal partnership
without, the wife's consent. If she ay compel her to refuses
unreasonably to give her consent, the court m grant the
same.
We disagree. Under Article 165 of the Civil Code, the husband is the
administrator of the conjugal partnership. As such administrator, all debts
and obligations contracted by the husband for the benefit of the conjugal
partnership, are chargeable to the conjugal partnership. 5 No doubt, in this
case, respondent Confesor signed the second promissory note for the
benefit of the conjugal partnership. Hence the conjugal partnership is liable
for this obligation.
WHEREFORE, the decision subject of the petition is reversed and set aside
and another decision is hereby rendered reinstating the decision of the City
Court of Iloilo City of December 27, 1976, without pronouncement as to
costs in this instance. This decision is immediately executory and no motion
for extension of time to file motion for reconsideration shall be granted.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 179337 April 30, 2008
JOSEPH SALUDAGA, petitioner,
vs.
FAR EASTERN UNIVERSITY and EDILBERTO C. DE JESUS in his
capacity as President of FEU, respondents.
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court
assails the June 29, 2007 Decision2 of the Court of Appeals in CA-G.R. CV
No. 87050, nullifying and setting aside the November 10, 2004 Decision 3 of
the Regional Trial Court of Manila, Branch 2, in Civil Case No. 98-89483 and
dismissing the complaint filed by petitioner; as well as its August 23, 2007
Resolution4 denying the Motion for Reconsideration.5
The antecedent facts are as follows:
Petitioner Joseph Saludaga was a sophomore law student of respondent Far
Eastern University (FEU) when he was shot by Alejandro Rosete (Rosete),
one of the security guards on duty at the school premises on August 18,
1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical Foundation
(FEU-NRMF) due to the wound he sustained.6Meanwhile, Rosete was
brought to the police station where he explained that the shooting was
accidental. He was eventually released considering that no formal complaint
was filed against him.
Petitioner thereafter filed a complaint for damages against respondents on
the ground that they breached their obligation to provide students with a safe
and secure environment and an atmosphere conducive to learning.
Respondents, in turn, filed a Third-Party Complaint7 against Galaxy
Development and Management Corporation (Galaxy), the agency contracted
by respondent FEU to provide security services within its premises and
Mariano D. Imperial (Imperial), Galaxy's President, to indemnify them for
whatever would be adjudged in favor of petitioner, if any; and to pay
attorney's fees and cost of the suit. On the other hand, Galaxy and Imperial
filed a Fourth-Party Complaint against AFP General Insurance.8
On November 10, 2004, the trial court rendered a decision in favor of
petitioner, the dispositive portion of which reads:
WHEREFORE, from the foregoing, judgment is hereby rendered
ordering:
1. FEU and Edilberto de Jesus, in his capacity as
president of FEU to pay jointly and severally Joseph
Saludaga the amount of P35,298.25 for actual damages
with 12% interest per annum from the filing of the
complaint until fully paid; moral damages of P300,000.00,
exemplary damages of P500,000.00, attorney's fees of
P100,000.00 and cost of the suit;
2. Galaxy Management and Development Corp. and its
president, Col. Mariano Imperial to indemnify jointly and
severally 3rd party plaintiffs (FEU and Edilberto de Jesus
in his capacity as President of FEU) for the above-
mentioned amounts;
3. And the 4th party complaint is dismissed for lack of
cause of action. No pronouncement as to costs.
SO ORDERED.9
Respondents appealed to the Court of Appeals which rendered the assailed
Decision, the decretal portion of which provides, viz:
WHEREFORE, the appeal is hereby GRANTED. The Decision
dated November 10, 2004 is hereby REVERSED and SET ASIDE.
The complaint filed by Joseph Saludaga against appellant Far
Eastern University and its President in Civil Case No. 98-89483 is
DISMISSED.
SO ORDERED.10
Petitioner filed a Motion for Reconsideration which was denied; hence, the
instant petition based on the following grounds:
THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER
CONTRARY TO LAW AND JURISPRUDENCE IN RULING THAT:
5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;
5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR
THE INJURY RESULTING FROM A GUNSHOT WOUND
SUFFERED BY THE PETITIONER FROM THE HANDS OF NO
LESS THAN THEIR OWN SECURITY GUARD IN VIOLATION OF
THEIR BUILT-IN CONTRACTUAL OBLIGATION TO PETITIONER,
BEING THEIR LAW STUDENT AT THAT TIME, TO PROVIDE HIM
WITH A SAFE AND SECURE EDUCATIONAL ENVIRONMENT;
5.3. SECURITY GAURD, ALEJANDRO ROSETE, WHO SHOT
PETITIONER WHILE HE WAS WALKING ON HIS WAY TO THE
LAW LIBRARY OF RESPONDENT FEU IS NOT THEIR
EMPLOYEE BY VIRTUE OF THE CONTRACT FOR SECURITY
SERVICES BETWEEN GALAXY AND FEU NOTWITHSTANDING
THE FACT THAT PETITIONER, NOT BEING A PARTY TO IT, IS
NOT BOUND BY THE SAME UNDER THE PRINCIPLE OF
RELATIVITY OF CONTRACTS; and
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN
SELECTING GALAXY AS THE AGENCY WHICH WOULD
PROVIDE SECURITY SERVICES WITHIN THE PREMISES OF
RESPONDENT FEU.11
Petitioner is suing respondents for damages based on the alleged breach of
student-school contract for a safe learning environment. The pertinent
portions of petitioner's Complaint read:
6.0. At the time of plaintiff's confinement, the defendants or any of
their representative did not bother to visit and inquire about his
condition. This abject indifference on the part of the defendants
continued even after plaintiff was discharged from the hospital
when not even a word of consolation was heard from them. Plaintiff
waited for more than one (1) year for the defendants to perform
their moral obligation but the wait was fruitless. This indifference
and total lack of concern of defendants served to exacerbate
plaintiff's miserable condition.
xxxx
11.0. Defendants are responsible for ensuring the safety of its
students while the latter are within the University premises. And
that should anything untoward happens to any of its students while
they are within the University's premises shall be the responsibility
of the defendants. In this case, defendants, despite being legally
and morally bound, miserably failed to protect plaintiff from injury
and thereafter, to mitigate and compensate plaintiff for said injury;
12.0. When plaintiff enrolled with defendant FEU, a contract was
entered into between them. Under this contract, defendants are
supposed to ensure that adequate steps are taken to provide an
atmosphere conducive to study and ensure the safety of the plaintiff
while inside defendant FEU's premises. In the instant case, the
latter breached this contract when defendant allowed harm to befall
upon the plaintiff when he was shot at by, of all people, their
security guard who was tasked to maintain peace inside the
campus.12
In Philippine School of Business Administration v. Court of Appeals,13 we
held that:
When an academic institution accepts students for enrollment,
there is established a contract between them, resulting in bilateral
obligations which both parties are bound to comply with. For its
part, the school undertakes to provide the student with an
education that would presumably suffice to equip him with the
necessary tools and skills to pursue higher education or a
profession. On the other hand, the student covenants to abide by
the school's academic requirements and observe its rules and
regulations.
Institutions of learning must also meet the implicit or "built-in"
obligation of providing their students with an atmosphere that
promotes or assists in attaining its primary undertaking of imparting
knowledge. Certainly, no student can absorb the intricacies of
physics or higher mathematics or explore the realm of the arts and
other sciences when bullets are flying or grenades exploding in the
air or where there looms around the school premises a constant
 threat to life and limb. Necessarily, the school must ensure that
adequate steps are taken to maintain peace and order within the
campus premises and to prevent the breakdown thereof. 14
It is undisputed that petitioner was enrolled as a sophomore law student in
respondent FEU. As such, there was created a contractual obligation
between the two parties. On petitioner's part, he was obliged to comply with
the rules and regulations of the school. On the other hand, respondent FEU,
as a learning institution is mandated to impart knowledge and equip its
students with the necessary skills to pursue higher education or a
profession. At the same time, it is obliged to ensure and take adequate steps
to maintain peace and order within the campus.
It is settled that in culpa contractual, the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a corresponding
right of relief.15 In the instant case, we find that, when petitioner was shot
inside the campus by no less the security guard who was hired to maintain
peace and secure the premises, there is a prima facie showing that
respondents failed to comply with its obligation to provide a safe and secure
environment to its students.
In order to avoid liability, however, respondents aver that the shooting
incident was a fortuitous event because they could not have reasonably
foreseen nor avoided the accident caused by Rosete as he was not their
employee;16and that they complied with their obligation to ensure a safe
learning environment for their students by having exercised due diligence in
selecting the security services of Galaxy.
After a thorough review of the records, we find that respondents failed to
discharge the burden of proving that they exercised due diligence in
providing a safe learning environment for their students. They failed to prove
that they ensured that the guards assigned in the campus met the
requirements stipulated in the Security Service Agreement. Indeed, certain
documents about Galaxy were presented during trial; however, no evidence
as to the qualifications of Rosete as a security guard for the university was
offered.
Respondents also failed to show that they undertook steps to ascertain and
confirm that the security guards assigned to them actually possess the
qualifications required in the Security Service Agreement. It was not proven
that they examined the clearances, psychiatric test results, 201 files, and
other vital documents enumerated in its contract with Galaxy. Total reliance
on the security agency about these matters or failure to check the papers
stating the qualifications of the guards is negligence on the part of
respondents. A learning institution should not be allowed to completely
relinquish or abdicate security matters in its premises to the security agency
it hired. To do so would result to contracting away its inherent obligation to
ensure a safe learning environment for its students.
Consequently, respondents' defense of force majeure must fail. In order
for force majeure to be considered, respondents must show that no
negligence or misconduct was committed that may have occasioned the
loss. An act of God cannot be invoked to protect a person who has failed to
take steps to forestall the possible adverse consequences of such a loss.
One's negligence may have concurred with an act of God in producing
damage and injury to another; nonetheless, showing that the immediate or
proximate cause of the damage or injury was a fortuitous event would not
exempt one from liability. When the effect is found to be partly the result of a
person's participation - whether by active intervention, neglect or failure to
act - the whole occurrence is humanized and removed from the rules
applicable to acts of God.17
Article 1170 of the Civil Code provides that those who are negligent in the
performance of their obligations are liable for damages. Accordingly, for
breach of contract due to negligence in providing a safe learning
environment, respondent FEU is liable to petitioner for damages. It is
essential in the award of damages that the claimant must have satisfactorily
proven during the trial the existence of the factual basis of the damages and
its causal connection to defendant's acts.18
In the instant case, it was established that petitioner spent P35,298.25 for
his hospitalization and other medical expenses.19 While the trial court
correctly imposed interest on said amount, however, the case at bar involves
an obligation arising from a contract and not a loan or forbearance of money.
As such, the proper rate of legal interest is six percent (6%) per annum of
the amount demanded. Such interest shall continue to run from the filing of
the complaint until the finality of this Decision.20 After this Decision becomes
final and executory, the applicable rate shall be twelve percent (12%) per
annum until its satisfaction.
The other expenses being claimed by petitioner, such as transportation
expenses and those incurred in hiring a personal assistant while
recuperating were however not duly supported by receipts. 21 In the absence
thereof, no actual damages may be awarded. Nonetheless, temperate
damages under Art. 2224 of the Civil Code may be recovered where it has
been shown that the claimant suffered some pecuniary loss but the amount
thereof cannot be proved with certainty. Hence, the amount of P20,000.00
as temperate damages is awarded to petitioner.
As regards the award of moral damages, there is no hard and fast rule in the
determination of what would be a fair amount of moral damages since each
case must be governed by its own peculiar circumstances. 22 The testimony
of petitioner about his physical suffering, mental anguish, fright, serious
anxiety, and moral shock resulting from the shooting incident23 justify the
award of moral damages. However, moral damages are in the category of
an award designed to compensate the claimant for actual injury suffered and
not to impose a penalty on the wrongdoer. The award is not meant to enrich
the complainant at the expense of the defendant, but to enable the injured
party to obtain means, diversion, or amusements that will serve to obviate
the moral suffering he has undergone. It is aimed at the restoration, within
the limits of the possible, of the spiritual status quo ante, and should be
proportionate to the suffering inflicted. Trial courts must then guard against
the award of exorbitant damages; they should exercise balanced restrained
and measured objectivity to avoid suspicion that it was due to passion,
prejudice, or corruption on the part of the trial court. 24 We deem it just and
reasonable under the circumstances to award petitioner moral damages in
the amount of P100,000.00.
Likewise, attorney's fees and litigation expenses in the amount of
P50,000.00 as part of damages is reasonable in view of Article 2208 of the
Civil Code.25 However, the award of exemplary damages is deleted
considering the absence of proof that respondents acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
We note that the trial court held respondent De Jesus solidarily liable with
respondent FEU. In Powton Conglomerate, Inc. v. Agcolicol,26 we held that:
[A] corporation is invested by law with a personality separate and
distinct from those of the persons composing it, such that, save for
certain exceptions, corporate officers who entered into contracts in
behalf of the corporation cannot be held personally liable for the
liabilities of the latter. Personal liability of a corporate director,
trustee or officer along (although not necessarily) with the
corporation may so validly attach, as a rule, only when - (1) he
assents to a patently unlawful act of the corporation, or when he is
guilty of bad faith or gross negligence in directing its affairs, or
when there is a conflict of interest resulting in damages to the
corporation, its stockholders or other persons; (2) he consents to
the issuance of watered down stocks or who, having knowledge
thereof, does not forthwith file with the corporate secretary his
written objection thereto; (3) he agrees to hold himself personally
and solidarily liable with the corporation; or (4) he is made by a
specific provision of law personally answerable for his corporate
action.27
None of the foregoing exceptions was established in the instant case; hence,
respondent De Jesus should not be held solidarily liable with respondent
FEU.
Incidentally, although the main cause of action in the instant case is the
breach of the school-student contract, petitioner, in the alternative, also
holds respondents vicariously liable under Article 2180 of the Civil Code,
which provides:
Art. 2180. The obligation imposed by Article 2176 is demandable
not only for one's own acts or omissions, but also for those of
persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business or industry.
xxxx
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
We agree with the findings of the Court of Appeals that respondents cannot
be held liable for damages under Art. 2180 of the Civil Code because
respondents are not the employers of Rosete. The latter was employed by
Galaxy. The instructions issued by respondents' Security Consultant to
Galaxy and its security guards are ordinarily no more than requests
commonly envisaged in the contract for services entered into by a principal
and a security agency. They cannot be construed as the element of control
as to treat respondents as the employers of Rosete.28
As held in Mercury Drug Corporation v. Libunao:29
 In Soliman, Jr. v. Tuazon,30 we held that where the security agency
recruits, hires and assigns the works of its watchmen or security
guards to a client, the employer of such guards or watchmen is
such agency, and not the client, since the latter has no hand in
selecting the security guards. Thus, the duty to observe the
diligence of a good father of a family cannot be demanded from the
said client:
… [I]t is settled in our jurisdiction that where the security
agency, as here, recruits, hires and assigns the work of its
watchmen or security guards, the agency is the employer
of such guards or watchmen. Liability for illegal or harmful
acts committed by the security guards attaches to the
employer agency, and not to the clients or customers of
such agency. As a general rule, a client or customer of a
security agency has no hand in selecting who among the
pool of security guards or watchmen employed by the
agency shall be assigned to it; the duty to observe the
diligence of a good father of a family in the selection of the
guards cannot, in the ordinary course of events, be
demanded from the client whose premises or property are
protected by the security guards.
xxxx
The fact that a client company may give instructions or directions to
the security guards assigned to it, does not, by itself, render the
client responsible as an employer of the security guards concerned
and liable for their wrongful acts or omissions.31
We now come to respondents' Third Party Claim against Galaxy.
In Firestone Tire and Rubber Company of the Philippines v.
Tempengko,32 we held that:
The third-party complaint is, therefore, a procedural device whereby
a 'third party' who is neither a party nor privy to the act or deed
complained of by the plaintiff, may be brought into the case with
leave of court, by the defendant, who acts as third-party plaintiff to
enforce against such third-party defendant a right for contribution,
indemnity, subrogation or any other relief, in respect of the plaintiff's
claim. The third-party complaint is actually independent of and
separate and distinct from the plaintiff's complaint. Were it not for
this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the
defendant against the third-party. But the Rules permit defendant to
bring in a third-party defendant or so to speak, to litigate his
separate cause of action in respect of plaintiff's claim against a
third-party in the original and principal case with the object of
avoiding circuitry of action and unnecessary proliferation of law
suits and of disposing expeditiously in one litigation the entire
subject matter arising from one particular set of facts. 33
Respondents and Galaxy were able to litigate their respective claims and
defenses in the course of the trial of petitioner's complaint. Evidence duly
supports the findings of the trial court that Galaxy is negligent not only in the
selection of its employees but also in their supervision. Indeed, no
administrative sanction was imposed against Rosete despite the shooting
incident; moreover, he was even allowed to go on leave of absence which
led eventually to his disappearance.34 Galaxy also failed to monitor
petitioner's condition or extend the necessary assistance, other than the
P5,000.00 initially given to petitioner. Galaxy and Imperial failed to make
good their pledge to reimburse petitioner's medical expenses.
For these acts of negligence and for having supplied respondent FEU with
an unqualified security guard, which resulted to the latter's breach of
obligation to petitioner, it is proper to hold Galaxy liable to respondent FEU
for such damages equivalent to the above-mentioned amounts awarded to
petitioner.
Unlike respondent De Jesus, we deem Imperial to be solidarily liable with
Galaxy for being grossly negligent in directing the affairs of the security
agency. It was Imperial who assured petitioner that his medical expenses
will be shouldered by Galaxy but said representations were not fulfilled
because they presumed that petitioner and his family were no longer
interested in filing a formal complaint against them.35
WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of the
Court of Appeals in CA-G.R. CV No. 87050 nullifying the Decision of the trial
court and dismissing the complaint as well as the August 23, 2007
Resolution denying the Motion for Reconsideration are REVERSED and
SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2, in
Civil Case No. 98-89483 finding respondent FEU liable for damages for
breach of its obligation to provide students with a safe and secure learning
atmosphere, is AFFIRMED with the following MODIFICATIONS:
a. respondent Far Eastern University (FEU) is ORDERED to pay petitioner
actual damages in the amount of P35,298.25, plus 6% interest per annum
from the filing of the complaint until the finality of this Decision. After this
decision becomes final and executory, the applicable rate shall be twelve
percent (12%) per annum until its satisfaction;

b. respondent FEU is also ORDERED to pay petitioner temperate damages

in the amount of P20,000.00; moral damages in the amount of P100,000.00;
and attorney's fees and litigation expenses in the amount of P50,000.00;

c. the award of exemplary damages is DELETED.

The Complaint against respondent Edilberto C. De Jesus is DISMISSED.

The counterclaims of respondents are likewise DISMISSED.

Galaxy Development and Management Corporation (Galaxy) and its

president, Mariano D. Imperial are ORDEREDto jointly and severally pay
respondent FEU damages equivalent to the above-mentioned amounts
awarded to petitioner.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-36840 May 22, 1973
PEOPLE'S CAR INC., plaintiff-appellant,
vs.
COMMANDO SECURITY SERVICE AGENCY, defendant-appellee.
TEEHANKEE, J.:
In this appeal from the adverse judgment of the Davao court of first instance
limiting plaintiff-appellant's recovery under its complaint to the sum of
P1,000.00 instead of the actual damages of P8,489.10 claimed and suffered
by it as a direct result of the wrongful acts of defendant security agency's
guard assigned at plaintiff's premises in pursuance of their "Guard Service
Contract", the Court finds merit in the appeal and accordingly reverses the
trial court's judgment.
The appeal was certified to this Court by a special division of the Court of
Appeals on a four-to-one vote as per its resolution of April 14, 1973 that
"Since the case was submitted to the court a quo for decision on the strength
of the stipulation of facts, only questions of law can be involved in the
present appeal."
The Court has accepted such certification and docketed this appeal on the
strength of its own finding from the records that plaintiff's notice of appeal
was expressly to this Court (not to the appellate court)" on pure questions of
law"1 and its record on appeal accordingly prayed that" the corresponding
records be certified and forwarded to the Honorable Supreme Court." 2 The
trial court so approved the same3 on July 3, 1971 instead of having required
the filing of a petition for review of the judgment sought to be appealed from
directly with this Court, in accordance with the provisions of Republic Act
5440. By some unexplained and hitherto undiscovered error of the clerk of
court, furthermore, the record on appeal was erroneously forwarded to the
appellate court rather than to this Court.
The parties submitted the case for judgment on a stipulation of facts. There
is thus no dispute as to the factual bases of plaintiff's complaint for recovery
of actual damages against defendant, to wit, that under the subsisting
"Guard Service Contract" between the parties, defendant-appellee as a duly
licensed security service agency undertook in consideration of the payments
made by plaintiff to safeguard and protect the business premises of (plaintiff)
from theft, pilferage, robbery, vandalism and all other unlawful acts of any
person or person prejudicial to the interest of (plaintiff)." 4
On April 5, 1970 at around 1:00 A.M., however, defendant's security guard
on duty at plaintiff's premises, "without any authority, consent, approval,
knowledge or orders of the plaintiff and/or defendant brought out of the
compound of the plaintiff a car belonging to its customer, and drove said car
for a place or places unknown, abandoning his post as such security guard
on duty inside the plaintiff's compound, and while so driving said car in one
of the City streets lost control of said car, causing the same to fall into a ditch
along J.P. Laurel St., Davao City by reason of which the plaintiff's complaint
for qualified theft against said driver, was blottered in the office of the Davao
City Police Department."5
As a result of these wrongful acts of defendant's security guard, the car of
plaintiff's customer, Joseph Luy, which had been left with plaintiff for
servicing and maintenance, "suffered extensive damage in the total amount
of P7,079."6 besides the car rental value "chargeable to defendant" in the
sum of P1,410.00 for a car that plaintiff had to rent and make available to its
said customer to enable him to pursue his business and occupation for the
period of forty-seven (47) days (from April 25 to June 10, 1970) that it took
plaintiff to repair the damaged car,7 or total actual damages incurred by
plaintiff in the sum of P8,489.10.
Plaintiff claimed that defendant was liable for the entire amount under
paragraph 5 of their contract whereunder defendant assumed "sole
responsibility for the acts done during their watch hours" by its guards,
whereas defendant contended, without questioning the amount of the actual
damages incurred by plaintiff, that its liability "shall not exceed one thousand
(P1,000.00) pesos per guard post" under paragraph 4 of their contract.
The parties thus likewise stipulated on this sole issue submitted by them for
adjudication, as follows:
Interpretation of the contract, as to the extent of the liability
of the defendant to the plaintiff by reason of the acts of the
employees of the defendant is the only issue to be
resolved.
The defendant relies on Par. 4 of the contract to support
its contention while the plaintiff relies on Par. 5 of the
same contract in support of its claims against the
defendant. For ready reference they are quoted
hereunder:
'Par. 4. — Party of the Second Part
(defendant) through the negligence of its
guards, after an investigation has been
conducted by the Party of the First Part
(plaintiff) wherein the Party of the
Second Part has been duly represented
shall assume full responsibilities for any
loss or damages that may occur to any
property of the Party of the First Part for
which it is accountable, during the watch
hours of the Party of the Second Part,
provided the same is reported to the
Party of the Second Part within twenty-
four (24) hours of the occurrence,
except where such loss or damage is
due to force majeure, provided however
that after the proper investigation to be
made thereof that the guard on post is
found negligent and that the amount of
the loss shall not exceed ONE
THOUSAND (P1,000.00) PESOS per
guard post.'
'Par. 5 — The party of the Second Part
assumes the responsibility for the
proper performance by the guards
employed, of their duties and (shall) be
solely responsible for the acts done
during their watch hours, the Party of
the First Part being specifically released
from any and all liabilities to the former's
employee or to the third parties arising
from the acts or omissions done by the
guard during their tour of
duty.' ...8
The trial court, misreading the above-quoted contractual provisions, held that
"the liability of the defendant in favor of the plaintiff falls under paragraph 4 of
the Guard Service Contract" and rendered judgment "finding the defendant
liable to the plaintiff in the amount of P1,000.00 with costs."
Hence, this appeal, which, as already indicated, is meritorious and must be
granted.
Paragraph 4 of the contract, which limits defendant's liability for the amount
of loss or damage to any property of plaintiff to "P1,000.00 per guard post,"
is by its own terms applicable only for loss or damage 'through
the negligenceof its guards ... during the watch hours" provided that the
same is duly reported by plaintiff within 24 hours of the occurrence and the
guard's negligence is verified after proper investigation with the attendance
of both contracting parties. Said paragraph is manifestly inapplicable to the
stipulated facts of record, which involve neither property of plaintiff that has
been lost or damaged at its premises nor mere negligence of defendant's
security guard on duty.
Here, instead of defendant, through its assigned security guards, complying
with its contractual undertaking 'to safeguard and protect the business
premises of (plaintiff) from theft, robbery, vandalism and all other unlawful
acts of any person or persons," defendant's own guard on duty unlawfully
and wrongfully drove out of plaintiffs premises a customer's car, lost control
of it on the highway causing it to fall into a ditch, thereby directly causing
plaintiff to incur actual damages in the total amount of P8,489.10.
Defendant is therefore undoubtedly liable to indemnify plaintiff for the entire
damages thus incurred, since under paragraph 5 of their contract it
"assumed the responsibility for the proper performance by the guards
employed of their duties and (contracted to) be solely responsible for the
acts done during their watch hours" and "specifically released (plaintiff) from
any and all liabilities ... to the third parties arising from the acts or omissions
done by the guards during their tour of duty." As plaintiff had duly discharged
its liability to the third party, its customer, Joseph Luy, for the undisputed
damages of P8,489.10 caused said customer, due to the wanton and
unlawful act of defendant's guard, defendant in turn was clearly liable under
the terms of paragraph 5 of their contract to indemnify plaintiff in the same
amount.
The trial court's approach that "had plaintiff understood the liability of the
defendant to fall under paragraph 5, it should have told Joseph Luy, owner
of the car, that under the Guard Service Contract, it was not liable for the
damage but the defendant and had Luy insisted on the liability of the plaintiff,
the latter should have challenged him to bring the matter to court. If Luy
accepted the challenge and instituted an action against the plaintiff, it should
have filed a third-party complaint against the Commando Security Service
Agency. But if Luy instituted the action against the plaintiff and the
defendant, the plaintiff should have filed a crossclaim against the
latter,"9 was unduly technical and unrealistic and untenable.

Plaintiff was in law liable to its customer for the damages caused the
customer's car, which had been entrusted into its custody. Plaintiff therefore
was in law justified in making good such damages and relying in turn on
defendant to honor its contract and indemnify it for such undisputed
damages, which had been caused directly by the unlawful and wrongful acts
of defendant's security guard in breach of their contract. As ordained in
Article 1159, Civil Code, "obligations arising from contracts have the force of
law between the contracting parties and should be complied with in good
faith."

Plaintiff in law could not tell its customer, as per the trial court's view, that
"under the Guard Service Contract it was not liable for the damage but the
defendant" — since the customer could not hold defendant to account for the
damages as he had no privity of contract with defendant. Such an approach
of telling the adverse party to go to court, notwithstanding his plainly valid
claim, aside from its ethical deficiency among others, could hardly create
any goodwill for plaintiff's business, in the same way that defendant's
baseless attempt to evade fully discharging its contractual liability to plaintiff
cannot be expected to have brought it more business. Worse, the
administration of justice is prejudiced, since the court dockets are unduly
burdened with unnecessary litigation.

ACCORDINGLY, the judgment appealed from is hereby reversed and

judgment is hereby rendered sentencing defendant-appellee to pay plaintiff-
appellant the sum of P8,489.10 as and by way of reimbursement of the
stipulated actual damages and expenses, as well as the costs of suit in both
instances. It is so ordered.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-23749 April 29, 1977
FAUSTINO CRUZ, plaintiff-appellant,
vs.
J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA,
INC., defendants-appellees.
BARREDO, J.:
Appeal from the order dated August 13, 1964 of the Court of First Instance
of Quezon City in Civil Case No. Q-7751, Faustino Cruz vs. J.M. Tuason &
Co., Inc., and Gregorio Araneta, Inc., dismissing the complaint of appellant
Cruz for the recovery of improvements he has made on appellees' land and
to compel appellees to convey to him 3,000 square meters of land on three
grounds: (1) failure of the complaint to state a cause of action; (2) the cause
of action of plaintiff is unenforceable under the Statute of Frauds; and (3) the
action of the plaintiff has already prescribed.
Actually, a perusal of plaintiff-appellant's complaint below shows that he
alleged two separate causes of action, namely: (1) that upon request of the
Deudors (the family of Telesforo Deudor who laid claim on the land in
question on the strength of an "informacion posesoria" ) plaintiff made
permanent improvements valued at P30,400.00 on said land having an area
of more or less 20 quinones and for which he also incurred expenses in the
amount of P7,781.74, and since defendants-appellees are being benefited
by said improvements, he is entitled to reimbursement from them of said
amounts and (2) that in 1952, defendants availed of plaintiff's services as an
intermediary with the Deudors to work for the amicable settlement of Civil
Case No. Q-135, then pending also in the Court of First Instance of Quezon
City, and involving 50 quinones of land, of Which the 20 quinones
aforementioned form part, and notwithstanding his having performed his
services, as in fact, a compromise agreement entered into on March 16,
1963 between the Deudors and the defendants was approved by the court,
the latter have refused to convey to him the 3,000 square meters of land
occupied by him, (a part of the 20 quinones above) which said defendants
had promised to do "within ten years from and after date of signing of the
compromise agreement", as consideration for his services.
Within the Period allowed by the rules, the defendants filed separate motions
to dismiss alleging three Identical grounds: (1) As regards that
improvements made by plaintiff, that the complaint states no cause of action,
the agreement regarding the same having been made by plaintiff with the
Deudors and not with the defendants, hence the theory of plaintiff based on
Article 2142 of the Code on unjust enrichment is untenable; and (2) anent
the alleged agreement about plaintiffs services as intermediary in
consideration of which, defendants promised to convey to him 3,000 square
meters of land, that the same is unenforceable under the Statute of Frauds,
there being nothing in writing about it, and, in any event, (3) that the action of
plaintiff to compel such conveyance has already prescribed.
Plaintiff opposed the motion, insisting that Article 2142 of the applicable to
his case; that the Statute of Frauds cannot be invoked by defendants, not
only because Article 1403 of the Civil Code refers only to "sale of real
property or of an interest therein" and not to promises to convey real
property like the one supposedly promised by defendants to him, but also
because, he, the plaintiff has already performed his part of the agreement,
hence the agreement has already been partly executed and not merely
executory within the contemplation of the Statute; and that his action has not
prescribed for the reason that defendants had ten years to comply and only
after the said ten years did his cause of action accrue, that is, ten years after
March 16, 1963, the date of the approval of the compromise agreement, and
his complaint was filed on January 24, 1964.
Ruling on the motion to dismiss, the trial court issued the herein impugned
order of August 13, 1964:
In the motion, dated January 31, 1964, defendant
Gregorio Araneta, Inc. prayed that the complaint against it
be dismissed on the ground that (1) the claim on which the
action is founded is unenforceable under the provision of
the Statute of Frauds; and (2) the plaintiff's action, if any
has already prescribed. In the other motion of February
11, 1964, defendant J. M. Tuason & Co., Inc. sought the
dismissal of the plaintiffs complaint on the ground that it
states no cause of action and on the Identical grounds
stated in the motion to dismiss of defendant Gregorio
Araneta, Inc. The said motions are duly opposed by the
plaintiff.
From the allegations of the complaint, it appears that, by
virtue of an agreement arrived at in 1948 by the plaintiff
and the Deudors, the former assisted the latter in clearing,
improving, subdividing and selling the large tract of land
consisting of 50 quinones covered by the informacion
posesoria in the name of the late Telesforo Deudor and
incurred expenses, which are valued approximately at
P38,400.00 and P7,781.74, respectively; and, for the
reasons that said improvements are being used and
enjoyed by the defendants, the plaintiff is seeking the
reimbursement for the services and expenses stated
above from the defendants.
Defendant J. M. Tuason & Co., Inc. claimed that, insofar
as the plaintiffs claim for the reimbursement of the
amounts of P38,400.00 and P7,781.74 is concerned, it is
not a privy to the plaintiff's agreement to assist the
Deudors n improving the 50 quinones. On the other hand,
the plaintiff countered that, by holding and utilizing the
improvements introduced by him, the defendants are
unjustly enriching and benefiting at the expense of the
plaintiff; and that said improvements constitute a lien or
charge of the property itself
On the issue that the complaint insofar as it claims the
reimbursement for the services rendered and expenses
incurred by the plaintiff, states no cause of action, the
Court is of the opinion that the same is well-founded. It is
found that the defendants are not parties to the supposed
express contract entered into by and between the plaintiff
and the Deudors for the clearing and improvement of the
50 quinones. Furthermore in order that the alleged
improvement may be considered a lien or charge on the
property, the same should have been made in good faith
and under the mistake as to the title. The Court can take
judicial notice of the fact that the tract of land supposedly
improved by the plaintiff had been registered way back in
1914 in the name of the predecessors-in-interest of
defendant J. M. Tuason & Co., Inc. This fact is confirmed
in the decision rendered by the Supreme Court on July 31,
1956 in Case G. R. No. L-5079 entitled J.M. Tuason & Co.
Inc. vs. Geronimo Santiago, et al., Such being the case,
the plaintiff cannot claim good faith and mistake as to the
title of the land.
On the issue of statute of fraud, the Court believes that
same is applicable to the instant case. The allegation in
par. 12 of the complaint states that the defendants
promised and agreed to cede, transfer and convey unto
the plaintiff the 3,000 square meters of land in
consideration of certain services to be rendered then. it is
clear that the alleged agreement involves an interest in
real property. Under the provisions of See. 2(e) of Article
1403 of the Civil Code, such agreement is not enforceable
as it is not in writing and subscribed by the party charged.
On the issue of statute of limitations, the Court holds that
the plaintiff's action has prescribed. It is alleged in par. 11
of the complaint that, sometime in 1952, the defendants
approached the plaintiff to prevail upon the Deudors to
enter to a compromise agreement in Civil Case No. Q-135
and allied cases. Furthermore, par. 13 and 14 of the
complaint alleged that the plaintiff acted as emissary of
both parties in conveying their respective proposals and
couter-proposals until the final settlement was effected on
March 16, 1953 and approved by Court on April 11, 1953.
In the present action, which was instituted on January 24,
1964, the plaintiff is seeking to enforce the supposed
agreement entered into between him and the defendants
in 1952, which was already prescribed.
WHEREFORE, the plaintiffs complaint is hereby ordered
DISMISSED without pronouncement as to costs.
SO ORDERED. (Pp. 65-69, Rec. on Appeal,)
On August 22, 1964, plaintiff's counsel filed a motion for reconsideration
dated August 20, 1964 as follows:
Plaintiff through undersigned counsel and to this
Honorable Court, respectfully moves to reconsider its
Order bearing date of 13 August 1964, on the following
grounds:
1. THAT THE COMPLAINT STATES A SUFFICIENT
CAUSE OF ACTION AGAINST DEFENDANTS IN SO
FAR AS PLAINTIFF'S CLAIM PAYMENT OF SERVICES
AND REIMBURSEMENT OF HIS EXPENSES, IS
CONCERNED;
II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE
3,000 SQ. MS., THE SAME HAS NOT PRESCRIBED
AND THE STATUTE OF FRAUDS IS NOT APPLICABLE
THERETO;
ARGUMENT
Plaintiff's complaint contains two (2) causes of action —
the first being an action for sum of money in the amount of
P7,781.74 representing actual expenses and P38,400.00
as reasonable compensation for services in improving the
50 quinones now in the possession of defendants. The
second cause of action deals with the 3,000 sq. ms. which
defendants have agreed to transfer into Plaintiff for
services rendered in effecting the compromise between
the Deudors and defendants;
Under its order of August 3, 1964, this Honorable Court
dismissed the claim for sum of money on the ground that
the complaint does not state a cause of action against
defendants. We respectfully submit:
1. THAT THE COMPLAINT STATES A SUFFICIENT
CAUSE OF ACTION AGAINST DEFENDANTS IN SO
FAR AS PLAINTIFF'S CLAIM FOR PAYMENT OF
SERVICES AND REIMBURSEMENT OF HIS EXPENSES
IS CONCERNED.
Said this Honorable Court (at p. 2, Order):
ORDER
xxx xxx xxx
On the issue that the complaint, in so far as it claims the
reimbursement for the services rendered and expenses
incurred by the plaintiff, states no cause of action, the
Court is of the opinion that the same is well-founded. It is
found that the defendants are not parties to the supposed
express contract entered into by and between the plaintiff
and the Deudors for the clearing and improvement of the
50 quinones. Furthermore, in order that the alleged
improvement may he considered a lien or charge on the
property, the same should have been made in good faith
and under the mistake as to title. The Court can take
judicial notice of the fact that the tract of land supposedly
improved by the plaintiff had been registered way back in
1914 in the name of the predecessors-in-interest of
defendant J. M. Tuason & Co., Inc. This fact is confirmed
in the decision rendered by the Supreme Court on July 31,
1956 in case G. R. No. L-5079 entitled 'J M. Tuason &
Co., Inc. vs, Geronimo Santiago, et al.' Such being the
case, the plaintiff cannot claim good faith and mistake as
to the title of the land.
The position of this Honorable Court (supra) is that the
complaint does not state a cause of action in so far as the
claim for services and expenses is concerned because the
contract for the improvement of the properties was solely
between the Deudors and plaintiff, and defendants are not
privies to it. Now, plaintiff's theory is that defendants are
nonetheless liable since they are utilizing and enjoying the
benefit's of said improvements. Thus under paragraph 16
of "he complaint, it is alleged:
(16) That the services and personal
expenses of plaintiff mentioned in
paragraph 7 hereof were rendered and
in fact paid by him to improve, as they in
fact resulted in considerable
improvement of the 50 quinones, and
defendants being now in possession of
and utilizing said improvements should
reimburse and pay plaintiff for such
services and expenses.
Plaintiff's cause of action is premised inter alia, on the
theory of unjust enrichment under Article 2142 of the civil
Code:
 ART. 2142. Certain lawful voluntary and
unilateral acts give rise to the juridical
relation of quasi-contract to the end that
no one shill be unjustly enriched or
benefited at the expense of another.
In like vein, Article 19 of the same Code enjoins that:
ART. 19. Every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give
every-one his due and observe honesty and good faith.
We respectfully draw the attention of this Honorable Court
to the fact that ARTICLE 2142 (SUPRA) DEALS WITH
QUASI-CONTRACTS or situations WHERE THERE IS
NO CONTRACT BETWEEN THE PARTIES TO THE
ACTION. Further, as we can readily see from the title
thereof (Title XVII), that the Same bears the designation
'EXTRA CONTRACTUAL OBLIGATIONS' or obligations
which do not arise from contracts. While it is true that
there was no agreement between plaintiff and defendants
herein for the improvement of the 50 quinones since the
latter are presently enjoying and utilizing the benefits
brought about through plaintiff's labor and expenses,
defendants should pay and reimburse him therefor under
the principle that 'no one may enrich himself at the
expense of another.' In this posture, the complaint states a
cause of action against the defendants.
II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE
3,000 SQ. MS. THE SAME HAS NOT PRESCRIBED AND
THE STATUTE OF FRAUDS IS NOT APPLICABLE
THERETO.
The Statute of Frauds is CLEARLY inapplicable to this
case:
At page 2 of this Honorable Court's order dated 13 August
1964, the Court ruled as follows:
ORDER
xxx xxx xxx
On the issue of statute of fraud, the
Court believes that same is applicable to
the instant Case, The allegation in par.
12 of the complaint states that the
defendants promised and agree to cede,
transfer and convey unto the plaintiff,
3,000 square meters of land in
consideration of certain services to be
rendered then. It is clear that the alleged
agreement involves an interest in real
property. Under the provisions of Sec.
2(e) of Article 1403 of the Civil Code,
such agreement is not enforceable as it
is not in writing and subscribed by the
party charged.
To bring this issue in sharper focus, shall reproduce not
only paragraph 12 of the complaint but also the other
pertinent paragraphs therein contained. Paragraph 12
states thus:
COMPLAINT
xxx xxx xxx
12). That plaintiff conferred with the aforesaid
representatives of defendants several times and on these
occasions, the latter promised and agreed to cede,
transfer and convey unto plaintiff the 3,000 sq. ms. (now
known as Lots 16-B, 17 and 18) which plaintiff was then
occupying and continues to occupy as of this writing, for
and in consideration of the following conditions:
(a) That plaintiff succeed in convincing
the DEUDORS to enter into a
compromise agreement and that such
agreement be actually entered into by
and between the DEUDORS and
defendant companies;
 (b) That as of date of signing the
compromise agreement, plaintiff shall be
the owner of the 3,000 sq. ms. but the
documents evidencing his title over this
property shall be executed and
delivered by defendants to plaintiff
within ten (10) years from and after date
of signing of the compromise
agreement;
(c) That plaintiff shall, without any
monetary expense of his part, assist in
clearing the 20 quinones of its
occupants;
13). That in order to effect a compromise between the
parties. plaintiff not only as well acted as emissary of both
parties in conveying their respective proposals and
counter- proposals until succeeded in convinzing the
DEUDORS to settle with defendants amicably. Thus, on
March 16, 1953, a Compromise Agreement was entered
into by and between the DEUDORS and the defendant
companies; and on April 11, 1953, this agreement was
approved by this Honorable Court;
14). That in order to comply with his other obligations
under his agreement with defendant companies, plaintiff
had to confer with the occupants of the property, exposing
himself to physical harm, convincing said occupants to
leave the premises and to refrain from resorting to
physical violence in resisting defendants' demands to
vacate;
That plaintiff further assisted defendants'
employees in the actual demolition and
transferof all the houses within the
perimeter of the 20 quinones until the
end of 1955, when said area was totally
cleared and the houses transferred to
another area designated by the
defendants as 'Capt. Cruz Block' in
Masambong, Quezon City. (Pars. 12, 13
and 14, Complaint; Emphasis supplied)
From the foregoing, it is clear then the agreement between
the parties mentioned in paragraph 12 (supra) of the
complaint has already been fully EXECUTED ON ONE
PART, namely by the plaintiff. Regarding the applicability
of the statute of frauds (Art. 1403, Civil Code), it has been
uniformly held that the statute of frauds IS APPLICABLE
ONLY TO EXECUTORY CONTRACTS BUT NOT
WHERE THE CONTRACT HAS BEEN PARTLY
EXECUTED:
SAME ACTION TO ENFORCE. — The
statute of frauds has been uniformly
interpreted to be applicable to executory
and not to completed or contracts.
Performance of the contracts takes it out
of the operation of the statute. ...
The statute of the frauds is not
applicable to contracts which are either
totally or partially performed, on the
theory that there is a wide field for the
commission of frauds in executory
contracts which can only be prevented
by requiring them to be in writing, a facts
which is reduced to a minimum in
executed contracts because the
intention of the parties becomes
apparent buy their execution and
execution, in mots cases, concluded the
right the parties. ... The partial
performance may be proved by either
documentary or oral evidence. (At pp.
564-565, Tolentino's Civil Code of the
Philippines, Vol. IV, 1962 Ed.; Emphasis
supplied).
Authorities in support of the foregoing rule are legion.
Thus Mr. Justice Moran in his 'Comments on the Rules of
Court', Vol. III, 1974 Ed., at p. 167, states:
2 THE STATUTE OF FRAUDS IS
APPLICABLE ONLY TO EXECUTORY
CONTRACTS: CONTRACTS WHICH
 ARE EITHER TOTALLY OR
PARTIALLY PERFORMED ARE
WITHOUT THE STATUE. The statute of
frauds is applicable only to executory
contracts. It is neither applicable to
executed contracts nor to contracts
partially performed. The reason is
simple. In executory contracts there is a
wide field for fraud because unless they
be in writing there is no palpable
evidence of the intention of the
contracting parties. The statute has
been enacted to prevent fraud. On the
other hand the commission of fraud in
executed contracts is reduced to
minimum in executed contracts because
(1) the intention of the parties is made
apparent by the execution and (2)
execution concludes, in most cases, the
rights of the parties. (Emphasis
supplied)
Under paragraphs 13 and 14 of the complaint (supra) one
can readily see that the plaintiff has fulfilled ALL his
obligation under the agreement between him defendants
concerning the 3,000 sq. ms. over which the latter had
agreed to execute the proper documents of transfer. This
fact is further projected in paragraph 15 of the complaint
where plaintiff states;
15). That in or about the middle of
1963, after all the conditions stated in
paragraph 12 hereof had been fulfilled
and fully complied with, plaintiff
demanded of said defendants that they
execute the Deed of Conveyance in his
favor and deliver the title certificate in
his name, over the 3,000 sq. ms. but
defendants failed and refused and
continue to fail and refuse to heed his
demands. (par. 15, complaint; Emphasis
supplied).
In view of the foregoing, we respectfully submit that this
Honorable court erred in holding that the statute of frauds
is applicable to plaintiff's claim over the 3,000 sq. ms.
There having been full performance of the contract on
plaintiff's part, the same takes this case out of the context
of said statute.
Plaintiff's Cause of Action had NOT Prescribed:
With all due respect to this Honorable court, we also
submit that the Court committed error in holding that this
action has prescribed:
ORDER
xxx xxx xxx
On the issue of the statute of limitations,
the Court holds that the plaintiff's action
has prescribed. It is alleged in par. III of
the complaint that, sometime in 1952,
the defendants approached the plaintiff
to prevail upon the Deudors to enter into
a compromise agreement in Civil Case
No. Q-135 and allied cases.
Furthermore, pars. 13 and 14 of the
complaint alleged that plaintiff acted as
emissary of both parties in conveying
their respective proposals and counter-
proposals until the final settlement was
affected on March 16, 1953 and
approved by the Court on April 11,
1953. In the present actin, which was
instituted on January 24, 1964, the
plaintiff is seeking to enforce the
supposed agreement entered into
between him and the defendants in
1952, which has already proscribed. (at
p. 3, Order).
The present action has not prescribed, especially when we
consider carefully the terms of the agreement between
plaintiff and the defendants. First, we must draw the
attention of this Honorable Court to the fact that this is an
action to compel defendants to execute a Deed of
Conveyance over the 3,000 sq. ms. subject of their
agreement. In paragraph 12 of the complaint, the terms
and conditions of the contract between the parties are
spelled out. Paragraph 12 (b) of the complaint states:
(b) That as of date of signing the
compromise agreement, plaintiff shall be
the owner of the 3,000 sq. ms. but the
documents evidencing his title over this
property shall be executed and
delivered by defendants to
plaintiff within ten (10) years from and
after date of signing of the compromise
agreement. (Emphasis supplied).
The compromise agreement between defendants and the
Deudors which was conclude through the efforts of
plaintiff, was signed on 16 March 1953. Therefore, the
defendants had ten (10) years signed on 16 March 1953.
Therefore, the defendants had ten (10) years from said
date within which to execute the deed of conveyance in
favor of plaintiff over the 3,000 sq. ms. As long as the 10
years period has not expired, plaintiff had no right to
compel defendants to execute the document and the latter
were under no obligation to do so. Now, this 10-year
period elapsed on March 16, 1963. THEN and ONLY
THEN does plaintiff's cause of action plaintiff on March 17,
1963. Thus, under paragraph 15, of the complaint (supra)
plaintiff made demands upon defendants for the execution
of the deed 'in or about the middle of 1963.
Since the contract now sought to be enforced was not
reduced to writing, plaintiff's cause of action expires on
March 16, 1969 or six years from March 16, 1963 WHEN
THE CAUSE OF ACTION ACCRUED (Art. 1145, Civil
Code).
In this posture, we gain respectfully submit that this
Honorable Court erred in holding that plaintiff's action has
prescribed.
PRAYER
WHEREFORE, it is respectfully prayed that " Honorable
Court reconsider its Order dated August 13, 1964; and
issue another order denying the motions to dismiss of
defendants G. Araneta, Inc. and J. M. Tuason Co. Inc. for
lack of merit. (Pp. 70-85, Record on Appeal.)
Defendants filed an opposition on the main ground that "the arguments
adduced by the plaintiff are merely reiterations of his arguments contained in
his Rejoinder to Reply and Opposition, which have not only been refuted in
herein defendant's Motion to Dismiss and Reply but already passed upon by
this Honorable Court."
On September 7, 1964, the trial court denied the motion for reconsiderations
thus:
After considering the plaintiff's Motion for Reconsideration
of August 20, 1964 and it appearing that the grounds
relied upon in said motion are mere repetition of those
already resolved and discussed by this Court in the order
of August 13, 1964, the instant motion is hereby denied
and the findings and conclusions arrived at by the Court in
its order of August 13, 1964 are hereby reiterated and
affirmed.
SO ORDERED. (Page 90, Rec. on Appeal.)
Under date of September 24, 1964, plaintiff filed his record on appeal.
In his brief, appellant poses and discusses the following assignments of
error:
I. THAT THE LOWER COURT ERRED IN DISMISSING
THE COMPLAINT ON THE GROUND THAT
APPELLANT'S CLAIM OVER THE 3,000 SQ. MS. IS
ALLEGEDLY UNENFORCEABLE UNDER THE STATUTE
OF FRAUDS;
II. THAT THE COURT A QUO FURTHER COMMITTED
ERROR IN DISMISSING APPELLANT'S COMPLAINT ON
THE GROUND THAT HIS CLAIM OVER THE 3,000 SQ.
 MS. IS ALLEGEDLY BARRED BY THE STATUTE OF
LIMITATIONS; and
III. THAT THE LOWER COURT ERRED IN DISMISSING
THE COMPLAINT FOR FAILURE TO STATE A CAUSE
OF ACTION IN SO FAR AS APPELLANT'S CLAIM FOR
REIMBURSEMENT OF EXPENSES AND FOR
SERVICES RENDERED IN THE IMPROVEMENT OF
THE FIFTY (50) QUINONES IS CONCERNED.
We agree with appellant that the Statute of Frauds was erroneously applied
by the trial court. It is elementary that the Statute refers to specific kinds of
transactions and that it cannot apply to any that is not enumerated therein.
And the only agreements or contracts covered thereby are the following:
(1) Those entered into in the name of another person by
one who has been given no authority or legal
representation, or who has acted beyond his powers;
(2) Those do not comply with the Statute of Frauds as set
forth in this number, In the following cases an agreement
hereafter made shall be unenforceable by action, unless
the same, or some note or memorandum thereof, be in
writing, and subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence of its
contents:
(a) An agreement that by its terms is not
to be performed within a year from the
making thereof;
(b) A special promise to answer for the
debt, default, or miscarriage of another;
(c) An agreement made in consideration
of marriage, other than a mutual
promise to marry;
(d) An agreement for the sale of goods,
chattels or things in action, at a price not
less than five hundred pesos, unless the
buyer accept and receive part of such
goods and chattels, or the evidences, or
some of them of such things in action, or
pay at the time some part of the
purchase money; but when a sale is
made by auction and entry is made by
the auctioneer in his sales book, at the
time of the sale, of the amount and kind
of property sold, terms of sale, price,
names of the purchasers and person on
whose account the sale is made, it is a
sufficient memorandum:
(e) An agreement for the leasing for a
longer period than one year, or for the
sale of real property or of an interest
therein:
(f) a representation as to the credit of a
third person.
(3) Those where both parties are incapable of giving
consent to a contract. (Art. 1403, civil Code.)
In the instant case, what appellant is trying to enforce is the delivery to him
of 3,000 square meters of land which he claims defendants promised to do
in consideration of his services as mediator or intermediary in effecting a
compromise of the civil action, Civil Case No. 135, between the defendants
and the Deudors. In no sense may such alleged contract be considered as
being a "sale of real property or of any interest therein." Indeed, not all
dealings involving interest in real property come under the Statute.
Moreover, appellant's complaint clearly alleges that he has already fulfilled
his part of the bargains to induce the Deudors to amicably settle their
differences with defendants as, in fact, on March 16, 1963, through his
efforts, a compromise agreement between these parties was approved by
the court. In other words, the agreement in question has already been
partially consummated, and is no longer merely executory. And it is likewise
a fundamental principle governing the application of the Statute that the
contract in dispute should be purely executory on the part of both parties
thereto.
We cannot, however, escape taking judicial notice, in relation to the
compromise agreement relied upon by appellant, that in several cases We
have decided, We have declared the same rescinded and of no effect. In J.
M. Tuason & Co., Inc. vs. Bienvenido Sanvictores, 4 SCRA 123, the Court
held:
It is also worthy of note that the compromise between
Deudors and Tuason, upon which Sanvictores predicates
his right to buy the lot he occupies, has been validly
rescinded and set aside, as recognized by this Court in its
decision in G.R. No. L-13768, Deudor vs. Tuason,
promulgated on May 30, 1961.
We repeated this observation in J.M. Tuason & Co., Inc. vs. Teodosio
Macalindong, 6 SCRA 938. Thus, viewed from what would be the ultimate
conclusion of appellant's case, We entertain grave doubts as to whether or
not he can successfully maintain his alleged cause of action against
defendants, considering that the compromise agreement that he invokes did
not actually materialize and defendants have not benefited therefrom, not to
mention the undisputed fact that, as pointed out by appellees, appellant's
other attempt to secure the same 3,000 square meters via the judicial
enforcement of the compromise agreement in which they were supposed to
be reserved for him has already been repudiated by the courts. (pp. 5-7.
Brief of Appellee Gregorio Araneta, Inc.)
As regards appellant's third assignment of error, We hold that the allegations
in his complaint do not sufficiently Appellants' reliance. on Article 2142 of
Civil Code is misplaced. Said article provides:
Certain lawful, voluntary and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one
shall be unjustly enriched or benefited at the expense of
another.
From the very language of this provision, it is obvious that a presumed
qauasi-contract cannot emerge as against one party when the subject mater
thereof is already covered by an existing contract with another party.
Predicated on the principle that no one should be allowed to unjustly enrich
himself at the expense of another, Article 2124 creates the legal fiction of a
quasi-contract precisely because of the absence of any actual agreement
between the parties concerned. Corollarily, if the one who claims having
enriched somebody has done so pursuant to a contract with a third party, his
cause of action should be against the latter, who in turn may, if there is any
ground therefor, seek relief against the party benefited. It is essential that the
act by which the defendant is benefited must have been voluntary and
unilateral on the part of the plaintiff. As one distinguished civilian puts it, "The
act is voluntary. because the actor in quasi-contracts is not bound by any
pre-existing obligation to act. It is unilateral, because it arises from the sole
will of the actor who is not previously bound by any reciprocal or bilateral
agreement. The reason why the law creates a juridical relations and imposes
certain obligation is to prevent a situation where a person is able to benefit
or take advantage of such lawful, voluntary and unilateral acts at the
expense of said actor." (Ambrosio Padilla, Civil Law, Vol. VI, p. 748, 1969
ed.) In the case at bar, since appellant has a clearer and more direct
recourse against the Deudors with whom he had entered into an agreement
regarding the improvements and expenditures made by him on the land of
appellees. it Cannot be said, in the sense contemplated in Article 2142, that
appellees have been enriched at the expense of appellant.
In the ultimate. therefore, Our holding above that appellant's first two
assignments of error are well taken cannot save the day for him. Aside from
his having no cause of action against appellees, there is one plain error of
omission. We have found in the order of the trial court which is as good a
ground as any other for Us to terminate this case favorably to appellees. In
said order Which We have quoted in full earlier in this opinion, the trial court
ruled that "the grounds relied upon in said motion are mere repetitions of
those already resolved and discussed by this Court in the order of August
13, 1964", an observation which We fully share. Virtually, therefore.
appellant's motion for reconsideration was ruled to be pro-forma. Indeed, a
cursory reading of the record on appeal reveals that appellant's motion for
reconsideration above-quoted contained exactly the same arguments and
manner of discussion as his February 6, 1964 "Opposition to Motion to
Dismiss" of defendant Gregorio Araneta, Inc. ((pp. 17-25, Rec. on Appeal)
as well as his February 17, 1964 "Opposition to Motion to Dismiss of
Defendant J. M. Tuason & Co." (pp. 33-45, Rec. on Appeal and his February
29, 1964 "Rejoinder to Reply Oil Defendant J. M. Tuason & Co." (pp. 52-64,
Rec. on Appeal) We cannot see anything in said motion for reconsideration
that is substantially different from the above oppositions and rejoinder he
had previously submitted and which the trial court had already considered
when it rendered its main order of dismissal. Consequently, appellant's
motion for reconsideration did not suspend his period for appeal. (Estrada
vs. Sto. Domingo, 28 SCRA 890, 905-6.) And as this point was covered by
appellees' "Opposition to Motion for Reconsideration" (pp. 8689), hence,
within the frame of the issues below, it is within the ambit of Our authority as
the Supreme Court to consider the same here even if it is not discussed in
the briefs of the parties. (Insular Life Assurance Co., Ltd. Employees
Association-NATU vs. Insular Life Assurance Co., Ltd. [Resolution en
banc of March 10, 1977 in G. R. No. L-25291).

Now, the impugned main order was issued on August 13, 1964, while the
appeal was made on September 24, 1964 or 42 days later. Clearly, this is
beyond the 30-day reglementary period for appeal. Hence, the subject order
of dismissal was already final and executory when appellant filed his appeal.

WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No

costs.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-9188 December 4, 1914
GUTIERREZ HERMANOS, plaintiff-appellee,
vs.
ENGRACIO ORENSE, defendant-appellant.
William A. Kincaid, Thos. L. Hartigan, and Ceferino M. Villareal for appellant.
Rafael de la Sierra for appellee.
TORRES, J.:
Appeal through bill of exceptions filed by counsel for the appellant from the
judgment on April 14, 1913, by the Honorable P. M. Moir, judge, wherein he
sentenced the defendant to make immediate delivery of the property in
question, through a public instrument, by transferring and conveying to the
plaintiff all his rights in the property described in the complaint and to pay it
the sum of P780, as damages, and the costs of the suit.
On March 5, 1913, counsel for Gutierrez Hermanos filed a complaint,
afterwards amended, in the Court of First Instance of Albay against Engacio
Orense, in which he set forth that on and before February 14, 1907, the
defendant Orense had been the owner of a parcel of land, with the buildings
and improvements thereon, situated in the pueblo of Guinobatan, Albay, the
location, area and boundaries of which were specified in the complaint; that
the said property has up to date been recorded in the new property registry
in the name of the said Orense, according to certificate No. 5, with the
boundaries therein given; that, on February 14, 1907, Jose Duran, a nephew
of the defendant, with the latter's knowledge and consent, executed before a
notary a public instrument whereby he sold and conveyed to the plaintiff
company, for P1,500, the aforementioned property, the vendor Duran
reserving to himself the right to repurchase it for the same price within a
period of four years from the date of the said instrument; that the plaintiff
company had not entered into possession of the purchased property, owing
to its continued occupancy by the defendant and his nephew, Jose Duran,
by virtue of a contract of lease executed by the plaintiff to Duran, which
contract was in force up to February 14, 1911; that the said instrument of
sale of the property, executed by Jose Duran, was publicly and freely
confirmed and ratified by the defendant Orense; that, in order to perfect the
title to the said property, but that the defendant Orense refused to do so,
without any justifiable cause or reason, wherefore he should be compelled to
execute the said deed by an express order of the court, for Jose Duran is
notoriously insolvent and cannot reimburse the plaintiff company for the
price of the sale which he received, nor pay any sum whatever for the losses
and damages occasioned by the said sale, aside from the fact that the
plaintiff had suffered damage by losing the present value of the property,
which was worth P3,000; that, unless such deed of final conveyance were
executed in behalf of the plaintiff company, it would be injured by the fraud
perpetrated by the vendor, Duran, in connivance with the defendant; that the
latter had been occupying the said property since February 14, 1911, and
refused to pay the rental thereof, notwithstanding the demand made upon
him for its payment at the rate of P30 per month, the just and reasonable
value for the occupancy of the said property, the possession of which the
defendant likewise refused to deliver to the plaintiff company, in spite of the
continuous demands made upon him, the defendant, with bad faith and to
the prejudice of the firm of Gutierrez Hermanos, claiming to have rights of
ownership and possession in the said property. Therefore it was prayed that
judgment be rendered by holding that the land and improvements in
question belong legitimately and exclusively to the plaintiff, and ordering the
defendant to execute in the plaintiff's behalf the said instrument of transfer
and conveyance of the property and of all the right, interest, title and share
which the defendant has therein; that the defendant be sentenced to pay
P30 per month for damages and rental of the property from February 14,
1911, and that, in case these remedies were not granted to the plaintiff, the
defendant be sentenced to pay to it the sum of P3,000 as damages, together
with interest thereon since the date of the institution of this suit, and to pay
the costs and other legal expenses.
The demurrer filed to the amended complaint was overruled, with exception
on the part of the defendant, whose counsel made a general denial of the
allegations contained in the complaint, excepting those that were admitted,
and specifically denied paragraph 4 thereof to the effect that on February 14,
1907, Jose Duran executed the deed of sale of the property in favor of the
plaintiff with the defendant's knowledge and consent.1awphil.net
As the first special defense, counsel for the defendant alleged that the facts
set forth in the complaint with respect to the execution of the deed did not
constitute a cause of action, nor did those alleged in the other form of action
for the collection of P3,000, the value of the realty.
As the second special defense, he alleged that the defendant was the lawful
owner of the property claimed in the complaint, as his ownership was
recorded in the property registry, and that, since his title had been registered
under the proceedings in rem prescribed by Act No. 496, it was conclusive
against the plaintiff and the pretended rights alleged to have been acquired
by Jose Duran prior to such registration could not now prevail; that the
defendant had not executed any written power of attorney nor given any
verbal authority to Jose Duran in order that the latter might, in his name and
representation, sell the said property to the plaintiff company; that the
defendant's knowledge of the said sale was acquired long after the
execution of the contract of sale between Duran and Gutierrez Hermanos,
and that prior thereto the defendant did not intentionally and deliberately
perform any act such as might have induced the plaintiff to believe that
Duran was empowered and authorized by the defendant and which would
warrant him in acting to his own detriment, under the influence of that belief.
Counsel therefore prayed that the defendant be absolved from the complaint
and that the plaintiff be sentenced to pay the costs and to hold his peace
forever.
After the hearing of the case and an examination of the evidence introduced
by both parties, the court rendered the judgment aforementioned, to which
counsel for the defendant excepted and moved for a new trial. This motion
was denied, an exception was taken by the defendant and, upon
presentation of the proper bill of exceptions, the same was approved,
certified and forwarded to the clerk of his court.
This suit involves the validity and efficacy of the sale under right of
redemption of a parcel of land and a masonry house with the nipa roof
erected thereon, effected by Jose Duran, a nephew of the owner of the
property, Engracio Orense, for the sum of P1,500 by means of a notarial
instrument executed and ratified on February 14, 1907.
After the lapse of the four years stipulated for the redemption, the defendant
refused to deliver the property to the purchaser, the firm of Gutierrez
Hermanos, and to pay the rental thereof at the rate of P30 per month for its
use and occupation since February 14, 1911, when the period for its
repurchase terminated. His refusal was based on the allegations that he had
been and was then the owner of the said property, which was registered in
his name in the property registry; that he had not executed any written power
of attorney to Jose Duran, nor had he given the latter any verbal
authorization to sell the said property to the plaintiff firm in his name; and
that, prior to the execution of the deed of sale, the defendant performed no
act such as might have induced the plaintiff to believe that Jose Duran was
empowered and authorized by the defendant to effect the said sale.
The plaintiff firm, therefore, charged Jose Duran, in the Court of First
Instance of the said province, with estafa, for having represented himself in
the said deed of sale to be the absolute owner of the aforesaid land and
improvements, whereas in reality they did not belong to him, but to the
defendant Orense. However, at the trial of the case Engracio Orense, called
as a witness, being interrogated by the fiscal as to whether he and
consented to Duran's selling the said property under right of redemption to
the firm of Gutierrez Hermanos, replied that he had. In view of this statement
by the defendant, the court acquitted Jose Duran of the charge of estafa.
As a result of the acquittal of Jose Duran, based on the explicit testimony of
his uncle, Engacio Orense, the owner of the property, to the effect that he
had consented to his nephew Duran's selling the property under right of
repurchase to Gutierrez Hermanos, counsel for this firm filed a complainant
praying, among other remedies, that the defendant Orense be compelled to
execute a deed for the transfer and conveyance to the plaintiff company of
all the right, title and interest with Orense had in the property sold, and to
pay to the same the rental of the property due from February 14, 1911.itc-alf
Notwithstanding the allegations of the defendant, the record in this case
shows that he did give his consent in order that his nephew, Jose Duran,
might sell the property in question to Gutierrez Hermanos, and that he did
thereafter confirm and ratify the sale by means of a public instrument
executed before a notary.
It having been proven at the trial that he gave his consent to the said sale, it
follows that the defendant conferred verbal, or at least implied, power of
agency upon his nephew Duran, who accepted it in the same way by selling
the said property. The principal must therefore fulfill all the obligations
contracted by the agent, who acted within the scope of his authority. (Civil
Code, arts. 1709, 1710 and 1727.)
Even should it be held that the said consent was granted subsequently to
the sale, it is unquestionable that the defendant, the owner of the property,
approved the action of his nephew, who in this case acted as the manager of
his uncle's business, and Orense'r ratification produced the effect of an
express authorization to make the said sale. (Civil Code, arts. 1888 and
1892.)
Article 1259 of the Civil Code prescribes: "No one can contract in the name
of another without being authorized by him or without his legal
representation according to law.
A contract executed in the name of another by one who has neither
his authorization nor legal representation shall be void, unless it
should be ratified by the person in whose name it was executed
before being revoked by the other contracting party.
The sworn statement made by the defendant, Orense, while testifying as a
witness at the trial of Duran for estafa, virtually confirms and ratifies the sale
of his property effected by his nephew, Duran, and, pursuant to article 1313
of the Civil Code, remedies all defects which the contract may have
contained from the moment of its execution.
The contract of sale of the said property contained in the notarial instrument
of February 14, 1907, is alleged to be invalid, null and void under the
provisions of paragraph 5 of section 335 of the Code of Civil Procedure,
because the authority which Orense may have given to Duran to make the
said contract of sale is not shown to have been in writing and signed by
Orense, but the record discloses satisfactory and conclusive proof that the
defendant Orense gave his consent to the contract of sale executed in a
public instrument by his nephew Jose Duran. Such consent was proven in a
criminal action by the sworn testimony of the principal and presented in this
civil suit by other sworn testimony of the same principal and by other
evidence to which the defendant made no objection. Therefore the principal
is bound to abide by the consequences of his agency as though it had
actually been given in writing (Conlu vs. Araneta and Guanko, 15 Phil. Rep.,
387; Gallemit vs. Tabiliran, 20 Phil. Rep., 241; Kuenzle & Streiff vs. Jiongco,
22 Phil. Rep., 110.)

The sale of the said property made by Duran to Gutierrez Hermanos was The repeated and successive statements made by the defendant Orense in
indeed null and void in the beginning, but afterwards became perfectly valid two actions, wherein he affirmed that he had given his consent to the sale of
and cured of the defect of nullity it bore at its execution by the confirmation his property, meet the requirements of the law and legally excuse the lack of
solemnly made by the said owner upon his stating under oath to the judge written authority, and, as they are a full ratification of the acts executed by
that he himself consented to his nephew Jose Duran's making the said sale. his nephew Jose Duran, they produce the effects of an express power of
Moreover, pursuant to article 1309 of the Code, the right of action for agency.
nullification that could have been brought became legally extinguished from
the moment the contract was validly confirmed and ratified, and, in the
present case, it is unquestionable that the defendant did confirm the said The judgment appealed from in harmony with the law and the merits of the
contract of sale and consent to its execution. case, and the errors assigned thereto have been duly refuted by the
foregoing considerations, so it should be affirmed.
On the testimony given by Engacio Orense at the trial of Duran for estafa,
the latter was acquitted, and it would not be just that the said testimony,
expressive of his consent to the sale of his property, which determined the
acquittal of his nephew, Jose Duran, who then acted as his business
manager, and which testimony wiped out the deception that in the beginning
appeared to have been practiced by the said Duran, should not now serve in
passing upon the conduct of Engracio Orense in relation to the firm of
Gutierrez Hermanos in order to prove his consent to the sale of his property,
for, had it not been for the consent admitted by the defendant Orense, the
plaintiff would have been the victim of estafa.

If the defendant Orense acknowledged and admitted under oath that he had
consented to Jose Duran's selling the property in litigation to Gutierrez
Hermanos, it is not just nor is it permissible for him afterward to deny that
admission, to the prejudice of the purchaser, who gave P1,500 for the said
property.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-44546 January 29, 1988
RUSTICO ADILLE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO,
TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA ASEJO and
SANTIAGO ASEJO, respondents.
SARMIENTO, J.:
In issue herein are property and property rights, a familiar subject of
controversy and a wellspring of enormous conflict that has led not only to
protracted legal entanglements but to even more bitter consequences, like
strained relationships and even the forfeiture of lives. It is a question that
likewise reflects a tragic commentary on prevailing social and cultural values
and institutions, where, as one observer notes, wealth and its accumulation
are the basis of self-fulfillment and where property is held as sacred as life
itself. "It is in the defense of his property," says this modern thinker, that one
"will mobilize his deepest protective devices, and anybody that threatens his
possessions will arouse his most passionate enmity." 1
The task of this Court, however, is not to judge the wisdom of values; the
burden of reconstructing the social order is shouldered by the political
leadership-and the people themselves.
The parties have come to this Court for relief and accordingly, our
responsibility is to give them that relief pursuant to the decree of law.
The antecedent facts are quoted from the decision 2 appealed from:
xxx xxx xxx
... [T]he land in question Lot 14694 of Cadastral Survey of
Albay located in Legaspi City with an area of some 11,325
sq. m. originally belonged to one Felisa Alzul as her own
private property; she married twice in her lifetime; the first,
with one Bernabe Adille, with whom she had as an only
child, herein defendant Rustico Adille; in her second
marriage with one Procopio Asejo, her children were
herein plaintiffs, — now, sometime in 1939, said Felisa
sold the property in pacto de retro to certain 3rd persons,
period of repurchase being 3 years, but she died in 1942
without being able to redeem and after her death, but
during the period of redemption, herein defendant
repurchased, by himself alone, and after that, he executed
a deed of extra-judicial partition representing himself to be
the only heir and child of his mother Felisa with the
consequence that he was able to secure title in his name
alone also, so that OCT. No. 21137 in the name of his
mother was transferred to his name, that was in 1955; that
was why after some efforts of compromise had failed, his
half-brothers and sisters, herein plaintiffs, filed present
case for partition with accounting on the position that he
was only a trustee on an implied trust when he redeemed,-
and this is the evidence, but as it also turned out that one
of plaintiffs, Emeteria Asejo was occupying a portion,
defendant counterclaimed for her to vacate that, —
Well then, after hearing the evidence, trial Judge
sustained defendant in his position that he was and
became absolute owner, he was not a trustee, and
therefore, dismissed case and also condemned plaintiff
occupant, Emeteria to vacate; it is because of this that
plaintiffs have come here and contend that trial court erred
in:
I. ... declaring the defendant absolute owner of the
property;
II. ... not ordering the partition of the property; and
III. ... ordering one of the plaintiffs who is in possession of
the portion of the property to vacate the land, p. 1
Appellant's brief.
which can be reduced to simple question of whether or not on the basis of
evidence and law, judgment appealed from should be maintained. 3
xxx xxx xxx
The respondent Court of appeals reversed the trial Court, 4 and ruled for the
plaintiffs-appellants, the private respondents herein. The petitioner now
appeals, by way of certiorari, from the Court's decision.
We required the private respondents to file a comment and thereafter,
having given due course to the petition, directed the parties to file their
briefs. Only the petitioner, however, filed a brief, and the private respondents
having failed to file one, we declared the case submitted for decision.
The petition raises a purely legal issue: May a co-owner acquire exclusive
ownership over the property held in common?
Essentially, it is the petitioner's contention that the property subject of
dispute devolved upon him upon the failure of his co-heirs to join him in its
redemption within the period required by law. He relies on the provisions of
Article 1515 of the old Civil Article 1613 of the present Code, giving the
vendee a retro the right to demand redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by a co-owner with aspect to his
share alone. 5 While the records show that the petitioner redeemed the
property in its entirety, shouldering the expenses therefor, that did not make
him the owner of all of it. In other words, it did not put to end the existing
state of co-ownership.
Necessary expenses may be incurred by one co-owner, subject to his right
to collect reimbursement from the remaining co-owners. 6 There is no doubt
that redemption of property entails a necessary expense. Under the Civil
Code:
ART. 488. Each co-owner shall have a right to compel the
other co-owners to contribute to the expenses of
preservation of the thing or right owned in common and to
the taxes. Any one of the latter may exempt himself from
this obligation by renouncing so much of his undivided
interest as may be equivalent to his share of the expenses
and taxes. No such waiver shall be made if it is prejudicial
to the co-ownership.
The result is that the property remains to be in a condition of co-ownership.
While a vendee a retro, under Article 1613 of the Code, "may not be
compelled to consent to a partial redemption," the redemption by one co-heir
or co-owner of the property in its totality does not vest in him ownership over
it. Failure on the part of all the co-owners to redeem it entitles the vendee a
retro to retain the property and consolidate title thereto in his name. 7 But the
provision does not give to the redeeming co-owner the right to the entire
property. It does not provide for a mode of terminating a co-ownership.
Neither does the fact that the petitioner had succeeded in securing title over
the parcel in his name terminate the existing co-ownership. While his half-
brothers and sisters are, as we said, liable to him for reimbursement as and
for their shares in redemption expenses, he cannot claim exclusive right to
the property owned in common. Registration of property is not a means of
acquiring ownership. It operates as a mere notice of existing title, that is, if
there is one.
The petitioner must then be said to be a trustee of the property on behalf of
the private respondents. The Civil Code states:
ART. 1456. If property is acquired through mistake or
fraud, the person obtaining it is, by force of law,
considered a trustee of an implied trust for the benefit of
the person from whom the property comes.
We agree with the respondent Court of Appeals that fraud attended the
registration of the property. The petitioner's pretension that he was the sole
heir to the land in the affidavit of extrajudicial settlement he executed
preliminary to the registration thereof betrays a clear effort on his part to
defraud his brothers and sisters and to exercise sole dominion over the
property. The aforequoted provision therefore applies.
It is the view of the respondent Court that the petitioner, in taking over the
property, did so either on behalf of his co-heirs, in which event, he had
constituted himself a negotiorum gestor under Article 2144 of the Civil Code,
or for his exclusive benefit, in which case, he is guilty of fraud, and must act
as trustee, the private respondents being the beneficiaries, under the Article
1456. The evidence, of course, points to the second alternative the petitioner
having asserted claims of exclusive ownership over the property and having
acted in fraud of his co-heirs. He cannot therefore be said to have assume
the mere management of the property abandoned by his co-heirs, the
situation Article 2144 of the Code contemplates. In any case, as the
respondent Court itself affirms, the result would be the same whether it is
one or the other. The petitioner would remain liable to the Private
respondents, his co-heirs.
This Court is not unaware of the well-established principle that prescription
bars any demand on property (owned in common) held by another (co-
owner) following the required number of years. In that event, the party in
possession acquires title to the property and the state of co-ownership is
ended . 8 In the case at bar, the property was registered in 1955 by the
petitioner, solely in his name, while the claim of the private respondents was
presented in 1974. Has prescription then, set in?
We hold in the negative. Prescription, as a mode of terminating a relation of
co-ownership, must have been preceded by repudiation (of the co-
ownership). The act of repudiation, in turn is subject to certain conditions: (1)
a co-owner repudiates the co-ownership; (2) such an act of repudiation is
clearly made known to the other co-owners; (3) the evidence thereon is clear
and conclusive, and (4) he has been in possession through open,
continuous, exclusive, and notorious possession of the property for the
period required by law. 9
enforce a constructive trust prescribes in ten years, 12 reckoned from the
date of the registration of the property, 13 we, as we said, are not prepared to
count the period from such a date in this case. We note the petitioner's sub
rosa efforts to get hold of the property exclusively for himself beginning with
his fraudulent misrepresentation in his unilateral affidavit of extrajudicial
settlement that he is "the only heir and child of his mother Feliza with the
consequence that he was able to secure title in his name
also." 14 Accordingly, we hold that the right of the private respondents
commenced from the time they actually discovered the petitioner's act of
defraudation. 15 According to the respondent Court of Appeals, they "came
to know [of it] apparently only during the progress of the litigation." 16 Hence,
prescription is not a bar.
Moreover, and as a rule, prescription is an affirmative defense that must be
pleaded either in a motion to dismiss or in the answer otherwise it is deemed
waived, 17 and here, the petitioner never raised that defense. 18 There are
recognized exceptions to this rule, but the petitioner has not shown why they
apply.
WHEREFORE, there being no reversible error committed by the respondent
Court of Appeals, the petition is DENIED. The Decision sought to be
reviewed is hereby AFFIRMED in toto. No pronouncement as to costs.

The instant case shows that the petitioner had not complied with these SO ORDERED,
requisites. We are not convinced that he had repudiated the co-ownership;
on the contrary, he had deliberately kept the private respondents in the dark Yap (Chairman), Melencio
by feigning sole heirship over the estate under dispute. He cannot therefore
be said to have "made known" his efforts to deny the co-ownership.
Moreover, one of the private respondents, Emeteria Asejo, is occupying a
portion of the land up to the present, yet, the petitioner has not taken pains
to eject her therefrom. As a matter of fact, he sought to recover possession
of that portion Emeteria is occupying only as a counterclaim, and only after
the private respondents had first sought judicial relief.

It is true that registration under the Torrens system is constructive notice of

title, 10 but it has likewise been our holding that the Torrens title does not
furnish a shield for fraud. 11 It is therefore no argument to say that the act of
registration is equivalent to notice of repudiation, assuming there was one,
notwithstanding the long-standing rule that registration operates as a
universal notice of title.

For the same reason, we cannot dismiss the private respondents' claims
commenced in 1974 over the estate registered in 1955. While actions to
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 82670 September 15, 1989
DOMETILA M. ANDRES, doing business under the name and style
"IRENE'S WEARING APPAREL," petitioner,
vs.
MANUFACTURERS HANOVER & TRUST CORPORATION and COURT
OF APPEALS, respondents.
Roque A. Tamayo for petitioner.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private
respondent.
CORTES, J.:
Assailed in this petition for review on certiorari is the judgment of the Court
of Appeals, which, applying the doctrine of solutio indebiti, reversed the
decision of the Regional Trial Court, Branch CV, Quezon City by deciding in
favor of private respondent.
Petitioner, using the business name "Irene's Wearing Apparel," was
engaged in the manufacture of ladies garments, children's wear, men's
apparel and linens for local and foreign buyers. Among its foreign buyers
was Facets Funwear, Inc. (hereinafter referred to as FACETS) of the United
States.
In the course of the business transaction between the two, FACETS from
time to time remitted certain amounts of money to petitioner in payment for
the items it had purchased. Sometime in August 1980, FACETS instructed
the First National State Bank of New Jersey, Newark, New Jersey, U.S.A.
(hereinafter referred to as FNSB) to transfer $10,000.00 to petitioner via
Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to
as PNB).
Acting on said instruction, FNSB instructed private respondent
Manufacturers Hanover and Trust Corporation to effect the above-
mentioned transfer through its facilities and to charge the amount to the
account of FNSB with private respondent. Although private respondent was
able to send a telex to PNB to pay petitioner $10,000.00 through the
Pilipinas Bank, where petitioner had an account, the payment was not
effected immediately because the payee designated in the telex was only
"Wearing Apparel." Upon query by PNB, private respondent sent PNB
another telex dated August 27, 1980 stating that the payment was to be
made to "Irene's Wearing Apparel." On August 28, 1980, petitioner received
the remittance of $10,000.00 through Demand Draft No. 225654 of the PNB.
Meanwhile, on August 25, 1980, after learning about the delay in the
remittance of the money to petitioner, FACETS informed FNSB about the
situation. On September 8, 1980, unaware that petitioner had already
received the remittance, FACETS informed private respondent about the
delay and at the same time amended its instruction by asking it to effect the
payment through the Philippine Commercial and Industrial Bank (hereinafter
referred to as PCIB) instead of PNB.
Accordingly, private respondent, which was also unaware that petitioner had
already received the remittance of $10,000.00 from PNB instructed the PCIB
to pay $10,000.00 to petitioner. Hence, on September 11, 1980, petitioner
received a second $10,000.00 remittance.
Private respondent debited the account of FNSB for the second $10,000.00
remittance effected through PCIB. However, when FNSB discovered that
private respondent had made a duplication of the remittance, it asked for a
recredit of its account in the amount of $10,000.00. Private respondent
complied with the request.
Private respondent asked petitioner for the return of the second remittance
of $10,000.00 but the latter refused to pay. On May 12, 1982 a complaint
was filed with the Regional Trial Court, Branch CV, Quezon City which was
decided in favor of petitioner as defendant. The trial court ruled that Art.
2154 of the New Civil Code is not applicable to the case because the second
remittance was made not by mistake but by negligence and petitioner was
not unjustly enriched by virtue thereof [Record, p. 234]. On appeal, the Court
of Appeals held that Art. 2154 is applicable and reversed the RTC decision.
The dispositive portion of the Court of Appeals' decision reads as follows:
WHEREFORE, the appealed decision is hereby
REVERSED and SET ASIDE and another one entered in
 favor of plaintiff-appellant and against defendant-appellee
Domelita (sic) M. Andres, doing business under the name
and style "Irene's Wearing Apparel" to reimburse and/or
return to plaintiff-appellant the amount of $10,000.00, its
equivalent in Philippine currency, with interests at the legal
rate from the filing of the complaint on May 12, 1982 until
the whole amount is fully paid, plus twenty percent (20%)
of the amount due as attomey's fees; and to pay the costs.
With costs against defendant-appellee.
SO ORDERED. [Rollo, pp. 29-30.]
Thereafter, this petition was filed. The sole issue in this case is whether or
not the private respondent has the right to recover the second $10,000.00
remittance it had delivered to petitioner. The resolution of this issue would
hinge on the applicability of Art. 2154 of the New Civil Code which provides
that:
Art. 2154. If something received when there is no right to
demand it, and it was unduly delivered through mistake,
the obligation to return it arises.
This provision is taken from Art. 1895 of the Spanish Civil Code which
provided that:
Art. 1895. If a thing is received when there was no right to
claim it and which, through an error, has been unduly
delivered, an obligation to restore it arises.
In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr.
Justice Bocobo explained the nature of this article thus:
Article 1895 [now Article 2154] of the Civil Code
abovequoted, is therefore applicable. This legal provision,
which determines the quasi-contract of solution indebiti, is
one of the concrete manifestations of the ancient principle
that no one shall enrich himself unjustly at the expense of
another. In the Roman Law Digest the maxim was
formulated thus: "Jure naturae acquum est, neminem cum
alterius detrimento et injuria fieri locupletiorem." And the
Partidas declared: "Ninguno non deue enriquecerse
tortizeramente con dano de otro." Such axiom has grown
through the centuries in legislation, in the science of law
and in court decisions. The lawmaker has found it one of
the helpful guides in framing statutes and codes. Thus, it
is unfolded in many articles scattered in the Spanish Civil
Code. (See for example, articles, 360, 361, 464, 647, 648,
797, 1158, 1163, 1295, 1303, 1304, 1893 and 1895, Civil
Code.) This time-honored aphorism has also been
adopted by jurists in their study of the conflict of rights. It
has been accepted by the courts, which have not
hesitated to apply it when the exigencies of right and
equity demanded its assertion. It is a part of that affluent
reservoir of justice upon which judicial discretion draws
whenever the statutory laws are inadequate because they
do not speak or do so with a confused voice. [at p. 632.]
For this article to apply the following requisites must concur: "(1) that he who
paid was not under obligation to do so; and, (2) that payment was made by
reason of an essential mistake of fact" [City of Cebu v. Piccio, 110 Phil. 558,
563 (1960)].
It is undisputed that private respondent delivered the second $10,000.00
remittance. However, petitioner contends that the doctrine of solutio indebiti,
does not apply because its requisites are absent.
First, it is argued that petitioner had the right to demand and therefore to
retain the second $10,000.00 remittance. It is alleged that even after the two
$10,000.00 remittances are credited to petitioner's receivables from
FACETS, the latter allegedly still had a balance of $49,324.00. Hence, it is
argued that the last $10,000.00 remittance being in payment of a pre-
existing debt, petitioner was not thereby unjustly enriched.
The contention is without merit.
The contract of petitioner, as regards the sale of garments and other textile
products, was with FACETS. It was the latter and not private respondent
which was indebted to petitioner. On the other hand, the contract for the
transmittal of dollars from the United States to petitioner was entered into by
private respondent with FNSB. Petitioner, although named as the payee was
not privy to the contract of remittance of dollars. Neither was private
respondent a party to the contract of sale between petitioner and FACETS.
There being no contractual relation between them, petitioner has no right to
apply the second $10,000.00 remittance delivered by mistake by private
respondent to the outstanding account of FACETS.
Petitioner next contends that the payment by respondent bank of the second
$10,000.00 remittance was not made by mistake but was the result of
negligence of its employees. In connection with this the Court of Appeals
made the following finding of facts:
The fact that Facets sent only one remittance of
$10,000.00 is not disputed. In the written interrogatories
sent to the First National State Bank of New Jersey
through the Consulate General of the Philippines in New
York, Adelaide C. Schachel, the investigation and
reconciliation clerk in the said bank testified that a request
to remit a payment for Facet Funwear Inc. was made in
August, 1980. The total amount which the First National
State Bank of New Jersey actually requested the plaintiff-
appellant Manufacturers Hanover & Trust Corporation to
remit to Irene's Wearing Apparel was US $10,000.00. Only
one remittance was requested by First National State
Bank of New Jersey as per instruction of Facets Funwear
(Exhibit "J", pp. 4-5).
That there was a mistake in the second remittance of US
$10,000.00 is borne out by the fact that both remittances
have the same reference invoice number which is 263 80.
(Exhibits "A-1- Deposition of Mr. Stanley Panasow" and
"A-2-Deposition of Mr. Stanley Panasow").
Plaintiff-appellant made the second remittance on the
wrong assumption that defendant-appellee did not receive
the first remittance of US $10,000.00. [Rollo, pp. 26-27.]
It is evident that the claim of petitioner is anchored on the appreciation of the
attendant facts which petitioner would have this Court review. The Court
holds that the finding by the Court of Appeals that the second $10,000.00
remittance was made by mistake, being based on substantial evidence, is
final and conclusive. The rule regarding questions of fact being raised with
this Court in a petition for certiorari under Rule 45 of the Revised Rules of
Court has been stated in Remalante v. Tibe, G.R. No. 59514, February 25,
1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law
may be raised in a petition for certiorari under Rule 45 of
the Revised Rules of Court. "The jurisdiction of the
Supreme Court in cases brought to it from the Court of
Appeals is limited to reviewing and revising the errors of
law imputed to it, its findings of fact being conclusive"
[Chan v. Court of Appeals, G.R. No. L-27488, June 30,
1970, 33 SCRA 737, reiterating a long line of decisions].
This Court has emphatically declared that "it is not the
function of the Supreme Court to analyze or weigh such
evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been committed by
the lower court" [Tiongco v. De la Merced, G.R. No. L-
24426, July 25, 1974, 58 SCRA 89; Corona v. Court of
Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA
865; Baniqued v. Court of Appeals, G. R. No. L-47531,
February 20, 1984, 127 SCRA 596]. "Barring, therefore, a
showing that the findings complained of are totally devoid
of support in the record, or that they are so glaringly
erroneous as to constitute serious abuse of discretion,
such findings must stand, for this Court is not expected or
required to examine or contrast the oral and documentary
evidence submitted by the parties" [Santa Ana, Jr. v.
Hernandez, G.R. No. L-16394, December 17, 1966, 18
SCRA 9731. [at pp. 144-145.]
Petitioner invokes the equitable principle that when one of two innocent
persons must suffer by the wrongful act of a third person, the loss must be
borne by the one whose negligence was the proximate cause of the loss.
The rule is that principles of equity cannot be applied if there is a provision of
law specifically applicable to a case [Phil. Rabbit Bus Lines, Inc. v. Arciaga,
G.R. No. L-29701, March 16, 1987,148 SCRA 433; Zabat, Jr. v. Court of
Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA 587; Rural Bank of
Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18, 1985, 135 SCRA
409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case of De
Garcia v. Court of Appeals, G.R. No. L-20264, January 30, 1971, 37 SCRA
129, citing Aznar v. Yapdiangco, G.R. No. L-18536, March 31, 1965, 13
SCRA 486, held:
... The common law principle that where one of two
innocent persons must suffer by a fraud perpetrated by
another, the law imposes the loss upon the party who, by
his misplaced confidence, has enabled the fraud to be
 committed, cannot be applied in a case which is covered
by an express provision of the new Civil Code, specifically
Article 559. Between a common law principle and a
statutory provision, the latter must prevail in this
jurisdiction. [at p. 135.]

Having shown that Art. 2154 of the Civil Code, which embodies the doctrine
of solutio indebiti, applies in the case at bar, the Court must reject the
common law principle invoked by petitioner.

Finally, in her attempt to defeat private respondent's claim, petitioner makes

much of the fact that from the time the second $10,000.00 remittance was
made, five hundred and ten days had elapsed before private respondent
demanded the return thereof. Needless to say, private respondent instituted
the complaint for recovery of the second $10,000.00 remittance well within
the six years prescriptive period for actions based upon a quasi-contract [Art.
1145 of the New Civil Code].

WHEREFORE, the petition is DENIED and the decision of the Court of

Appeals is hereby AFFIRMED.

SO ORDERED.
 Republic of the Philippines On August 11, 1958, the plaintiff Gonzalo Puyat & Sons, Inc., filed an action
SUPREME COURT for refund of Retail DealerlsTaxes paid by it, corresponding to the first
Manila Quarter of 1950 up to the third Quarter of 1956, amounting to P33,785.00,
against the City of Manila and its City Treasurer.The case was submitted on
EN BANC the following stipulation of facts, to wit--

G.R. No. L-17447 April 30, 1963
GONZALO PUYAT & SONS, INC., plaintiff-appelle,
vs.
CITY OF MANILA AND MARCELO SARMIENTO, as City Treasurer of
Manila, defendants-appellants
Feria, Manglapus & Associates for plainttiff-appelle.Asst. City Fiscal Manuel
T. Reyes for defendants-appellants.
PAREDES, J.:
This is an appeal from the judgment of the CFI of Manila, the dispostive
portion of which reads:
"xxx Of the payments made by the plaintiff, only that made on
October 25, 1950 in the amount of P1,250.00 has prescribed
Payments made in 1951 and thereafter are still recoverable since
the extra-judicial demand made on October 30, 1956 was well
within the six-year prescriptive period of the New CivilCode.
"1. That the plaintiff is a corporation duly organized and existing
according to the laws of the Philippines, with offices at Manila; while
defendant City Manila is a Municipal Corporation duly organized in
accordance with the laws of the Philippines, and defendant
Marcelino Sarmiento is the dulyqualified incumbent City Treasurer
of Manila;
"2. That plaintiff is engaged in the business of manufacturing and
selling all kinds of furniture at its factory at 190 Rodriguez-Arias,
San Miguel, Manila, and has a display room located at 604-606
Rizal Avenue, Manila, wherein it displays the various kind of
furniture manufactured by it and sells some goods imported by it,
such as billiard balls, bowling balls and other accessories;
"3. That acting pursuant to the provisions of Sec. 1. group II, of
Ordinance No. 3364, defendant City Treasurer of Manilaassessed
from plaintiff retail dealer's tax corresponding to the quarters
hereunder stated on the sales of furniture manufactured and sold
by it at its factory site, all of which assessments plaintiff paid
without protest in the erroneous belief that it was liable therefor, on
the dates and in the amount enumerated herein below:

In view of the foregoing considerations, judgment is hereby Amount

rendered in favor of the plaintiff, ordering the defendants to refund Date
Period O.R. No. Assessed
the amount of P29,824.00, without interest. No costs. Paid
and Paid.

Wherefore, the parties respectfully pray that the foregoing Jan.

stipulation of facts be admitted and approved by this Honorable First Quarter 1950 25, 436271X P1,255.00
Court, without prejudice to the parties adducing other evidence to 1950
prove their case not covered by this stipulation of
Apr.
facts. 1äwphï1.ñët Second Quarter
25, 215895X 1,250.00
1950
1950
Defendants' counterclaim is hereby dismissed for not having been
substantiated." Jul.
Third Quarter 1950 25, 243321X 1,250.00
1950
 "6. That on October 30, 1956, the plaintiff filed with defendant City
Oct.
Treasurer of Manila, a formal request for refund of the retail dealer's
Fourth Quarter 1950 25, 271165X 1,250.00
taxes unduly paid by it as aforestated in paragraph 3, hereof.
1950

(Follows the assessment for different quarters in 1951, "7. That on July 24, 1958, the defendant City Treasurer of
1952, Maniladefinitely denied said request for refund.
1953, 1954 and 1955, fixing the same amount
quarterly.) x x x.. "8. Hence on August 21, 1958, plaintiff filed the present complaint.
Jan.
First Quarter 1956 25, 823047X 1,250.00 "9. Based on the above stipulation of facts, the legal issues to be
1956 resolved by this Honorable Court are: (1) the period of prescription
applicable in matters of refund of municipal taxes errenously paid
Apr. by a taxpayer and (2) refund of taxes not paid under protest. x x x."
Second Quarter
25, 855949X 1,250.00
1956
1956 Said judgment was directly appealed to this Court on two dominant issues to
wit: (1) Whether or not the amounts paid by plaintiff-appelle, as retail dealer's
Jul.
taxes under Ordinance 1925, as amended by Ordinance No. 3364of the City
Third Quarter 1956 25, 880789X 1,250.00
of Manila, without protest, are refundable;(2) Assuming arguendo, that
1956
plaintiff-appellee is entitled to the refund of the retail taxes in question,
whether or not the claim for refund filed in October 1956, in so far as said
TOTAL ............. P33,785.00 claim refers to taxes paid from 1950 to 1952 has already prescribed. .
===========
Under the first issue, defendants-appellants contend tht the taxes in question
were voluntarily paid by appellee company and since, in this jurisdiction, in
"4. That plaintiff, being a manufacturer of various kinds of furniture, order that a legal basis arise for claim of refund of taxes erroneously
is exempt from the payment of taxes imposed under the provisions assessed, payment thereof must be made under protest, and this being a
of Sec. 1, Group II, of Ordinance No. 3364,which took effect on condition sine qua non, and no protest having been made, -- verbally or in
September 24, 1956, on the sale of the various kinds of furniture writing, therebyindicating that the payment was voluntary, the action must
manufactured by it pursuant to the provisions of Sec. 18(n) of fail. Cited in support of the above contention, are the cases of Zaragoza vs.
Republic Act No. 409 (Revised Charter of Manila), as restated in Alfonso, 46 Phil. 160-161, and Gavino v. Municipality of Calapan, 71 Phil.
Section 1 of Ordinance No.3816. 438..

"5. That, however, plaintiff, is liable for the payment of taxes
prescribed in Section 1, Group II or Ordinance No. 3364mas
amended by Sec. 1, Group II of Ordinance No. 3816, which took
effect on September 24, 1956, on the sales of imported billiard
balls, bowling balls and other accessories at its displayroom. The
taxes paid by the plaintiff on the sales of said article are as follows:
xxx xxx xxx
In refutation of the above stand of appellants, appellee avers tht the
payments could not have been voluntary.At most, they were paid
"mistakenly and in good faith"and "without protest in the erroneous belief
that it was liable thereof." Voluntariness is incompatible with protest and
mistake. It submits that this is a simple case of "solutio indebiti"..
Appellants do not dispute the fact that appellee-companyis exempted from
the payment of the tax in question.This is manifest from the reply of
appellant City Treasurer stating that sales of manufactured products at the
factory site are not taxable either under the Wholesalers Ordinance or under
the Retailers' Ordinance. With this admission, it would seem clear that the
taxes collected from appellee were paid, thru an error or mistake, which
places said act of payment within the pale of the new Civil Code provision on
solutio indebiti. The appellant City of Manila, at the very start,
notwithstanding the Ordinance imposing the Retailer's Tax, had no right to
demand payment thereof..
"If something is received when there is no right to demand it, and it was
unduly delivered through mistake, the obligationto retun it arises" (Art. 2154,
NCC)..
Appelle categorically stated that the payment was not voluntarily made, (a
fact found also by the lower court),but on the erronoues belief, that they
were due. Under this circumstance, the amount paid, even without protest is
recoverable. "If the payer was in doubt whether the debt was due, he may
recover if he proves that it was not due" (Art. 2156, NCC). Appellee had duly
proved that taxes were not lawfully due. There is, therefore, no doubt that
the provisions of solutio indebtiti, the new Civil Code, apply to the admitted
facts of the case..
With all, appellant quoted Manresa as saying: "x x x De la misma opinion
son el Sr. Sanchez Roman y el Sr. Galcon, et cual afirma que si la paga se
hizo por error de derecho, ni existe el cuasi-contrato ni esta obligado a la
restitucion el que cobro, aunque no se debiera lo que se pago" (Manresa,
Tomo 12, paginas 611-612). This opinion, however, has already lost its
persuasiveness, in view of the provisions of the Civil Code, recognizing
"error de derecho" as a basis for the quasi-contract, of solutio indebiti. .
"Payment by reason of a mistake in the contruction or application of a
doubtful or difficult question of law may come within the scope of the
preceding article" (Art. 21555)..
There is no gainsaying the fact that the payments made by appellee was
due to a mistake in the construction of a doubtful question of law. The
reason underlying similar provisions, as applied to illegal taxation, in the
United States, is expressed in the case of Newport v. Ringo, 37 Ky. 635,
636; 10 S.W. 2, in the following manner:.
"It is too well settled in this state to need the citation of authority that if
money be paid through a clear mistake of law or fact, essentially affecting
the rights of the parties, and which in law or conscience was not payable,
and should not be retained by the party receiving it, it may be recovered.
Both law and sound morality so dictate. Especially should this be the rule as
to illegal taxation. The taxpayer has no voice in the impositionof the burden.
He has the right to presume that the taxing power has been lawfully
exercised. He should not be required to know more than those in authority
over him, nor should he suffer loss by complying with what he bona fide
believe to be his duty as a good citizen. Upon the contrary, he should be
promoted to its ready performance by refunding to him any legal exaction
paid by him in ignorance of its illegality; and, certainly, in such a case, if be
subject to a penalty for nonpayment, his compliance under belief of its
legality, and without awaitinga resort to judicial proceedings should not be
regrded in law as so far voluntary as to affect his right of recovery.".
"Every person who through an act or performance by another, or any other
means, acquires or comes into possession of something at the expense of
the latter without just or legal grounds, shall return the same to him"(Art. 22,
Civil Code). It would seems unedifying for the government, (here the City of
Manila), that knowing it has no right at all to collect or to receive money for
alleged taxes paid by mistake, it would be reluctant to return the same. No
one should enrich itself unjustly at the expense of another (Art. 2125, Civil
Code)..
Admittedly, plaintiff-appellee paid the tax without protest.Equally admitted is
the fact that section 76 of the Charter of Manila provides that "No court shall
entertain any suit assailing the validity of tax assessed under this article until
the taxpayer shall have paid, under protest the taxes assessed against him,
xx". It should be noted, however, that the article referred to in said section is
Article XXI, entitled Department of Assessment and the sections thereunder
manifestly show that said article and its sections relate to asseessment,
collection and recovery of real estate taxes only. Said section 76, therefor, is
not applicable to the case at bar, which relates to the recover of retail dealer
taxes..
In the opinion of the Secretary of Justice (Op. 90,Series of 1957, in a
question similar to the case at bar, it was held that the requiredment of
protest refers only to the payment of taxes which are directly imposed by the
charter itself, that is, real estate taxes, which view was sustained by judicial
and administrative precedents, one of which is the case of Medina, et al., v.
City of Baguio, G.R. No. L-4269, Aug. 29, 1952. In other words, protest is
not necessary for the recovery of retail dealer's taxes, like the present,
because they are not directly imposed by the charter. In the Medina case,
the Charter of Baguio (Chap. 61, Revised Adm. Code), provides that "no
court shall entertain any suit assailing the validity of a tax assessed unde
this charter until the tax-payer shall have paid, under protest, the taxes
assessed against him (sec.25474[b], Rev. Adm. Code), a proviso similar to
section 76 of the Manila Charter. The refund of specific taxes paid under a
void ordinance was ordered, although it did not appear that payment thereof
was made under protest..

In a recent case, We said: "The appellants argue that the sum the refund of
which is sought by the appellee, was not paid under protest and hence is not
refundable. Again, the trial court correctly held that being unauthorized, it is
not a tax assessed under the Charter of the Appellant City of Davao and for
that reason, no protest is necessary for a claim or demand for its refund"
(Citing the Medina case, supra; East Asiatic Co., Ltd. v. City of Davao, G.R.
No. L-16253, Aug. 21, 1962). Lastly, being a case of solutio indebiti, protest
is not required as a condition sine qua non for its application..

The next issue in discussion is that of prescription. Appellants maintain that

article 1146 (NCC), which provides for a period of four (4) years (upon injury
to the rights of the plaintiff), apply to the case. On the other hand, appellee
contends that provisions of Act 190 (Code of Civ. Procedure) should apply,
insofar as payments made before the effectivity of the New Civil Code on
August 30, 1950, the period of which is ten (10) years, (Sec. 40,Act No. 190;
Osorio v. Tan Jongko, 51 O.G. 6211) and article 1145 (NCC), for payments
made after said effectivity, providing for a period of six (6) years (upon quasi-
contracts like solutio indebiti). Even if the provisionsof Act No. 190 should
apply to those payments made before the effectivity of the new Civil Code,
because "prescription already runnig before the effectivity of this Code shall
be governed by laws previously in force x x x" (art. 1116, NCC), for
payments made after said effectivity,providing for a period of six (6) years
(upon quasi-contracts like solutio indebiti). Even if the provisions of Act No.
190should apply to those payments made before the effectivity of the new
Civil Code, because "prescription already running before the effectivity of of
this Code shall be govern by laws previously in force xxx " (Art. 1116, NCC),
Still payments made before August 30, 1950 are no longer recoverable in
view of the second paragraph of said article (1116), which provides:"but if
since the time this Code took effect the entire period herein required for
prescription should elapse the present Code shall be applicable even though
by the former laws a longer period might be required". Anent the payments
made after August 30, 1950, it is abvious that the action has prescribed with
respect to those made before October 30, 1950 only, considering the fact
that the prescription of action is interrupted xxx when is a writteen extra-
judicial demand x x x" (Art. 1155, NCC), and the written demand in the case
at bar was made on October 30, 1956 (Stipulation of Facts).MODIFIED in
the sense that only payments made on or after October 30, 1950 should be
refunded, the decision appealed from is affirmed, in all other respects. No
costs. .

Bengzon, C.J., Ba
 On 29 December 2004, petitioner filed an Application for VAT Zero-Rate with
the Bureau of Internal Revenue (BIR) in accordance with Section 108(B)(3)
of the National Internal Revenue Code (NIRC) of 1997, as amended. The
application was duly approved by the BIR. Thus, petitioner ’s sale of electr
icity to the NPC from 1 January 2005 to 31 October 2005 was declared to be
Republic of the Philippines entitled to the benefit of effectively zero-rated value added tax (VAT).7
SUPREME COURT
Manila
Petitioner filed its administrative claims for the issuance of tax credit
certificates for its alleged unutilized input taxes on its purchase of capital
FIRST DIVISION goods and alleged unutilized input taxes on its local purchases and/or
importation of goods and services, other than capital goods, pursuant to
G.R. Nos. 198729-30 January 15, 2014 Sections 112(A) and (B) of the NIRC of 1997, as amended, with BIR
Revenue District Office (RDO) No. 55 of Laguna, as follows:8
CBK POWER COMPANY LIMITED, Petitioner,
vs.
Period Covered Date Of Filing
COMMISSIONER OF INTERNAL REVENUE, Respondent.
1st quarter of 2005 30-Jun-05
DECISION
2nd quarter of 2005 15-Sep-05
SERENO, CJ: 3rd quarter of 2005 28-Oct-05

This is a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules
of Civil Procedure filed by CBK Power Company Limited (petitioner). The Alleging inaction of the Commissioner of Internal Revenue (CIR), petitioner
Petition assails the Decision2 dated 27 June 2011 and Resolution3 dated 16 filed a Petition for Review with the CTA on 18 April 2007.
September 2011 of the Court of Tax Appeals En Banc (CTA En Banc in
C.T.A. EB Nos. 658 and 659. The assailed Decision and Resolution THE CTA SPECIAL SECOND DIVISION RULING
reversed and set aside the Decision4 dated 3 March 2010 and
Resolution5 dated 6 July 2010 rendered by the CTA Special Second Division
After trial on the merits, the CTA Special Second Division rendered a
in C.T.A. Case No. 7621, which partly granted the claim of petitioner for the
issuance of a tax credit certificate representing the latter's alleged unutilized Decision on 3 March 2010. Applying Commissioner of Internal Revenue v.
Mirant Pagbilao Corporation (Mirant),9 the court
input taxes on local purchases of goods and services attributable to
effectively zero-rated sales to National Power Corporation (NPC) for the
second and third quarters of 2005. a quo ruled that petitioner had until the following dates within which to file
both administrative and judicial claims:
The Facts
Taxable Quarter Last Day to
Petitioner is engaged, among others, in the operation, maintenance, and File Claim for
management of the Kalayaan II pumped-storage hydroelectric power plant, 2005 Close of the quarter Refund
the new Caliraya Spillway, Caliraya, Botocan; and the Kalayaan I
hydroelectric power plants and their related facilities located in the Province 1st quarter 31-Mar-05 31-Mar-07
of Laguna.6
2nd quarter 30-Jun-05 30-Jun-07

3rd quarter 30-Sep-05 30-Sep-07
Accordingly, petitioner timely filed its administrative claims for the three
quarters of 2005. However, considering that the judicial claim was filed on 18
April 2007, the CTA Division denied the claim for the first quarter of 2005 for
having been filed out of time.
After an evaluation of petitioner’s claim for the second and third quarters of
2005, the court a quo partly granted the claim and ordered the issuance of a
tax credit certificate in favor of petitioner in the reduced amount of
₱27,170,123.36.
The parties filed their respective Motions for Partial Reconsideration, which
were both denied by the CTA Division.
THE CTA EN BANC RULING
On appeal, relying on Commissioner of Internal Revenue v. Aichi Forging
Company of Asia, Inc. (Aichi),10 the CTA En Banc ruled that petitioner’s
judicial claim for the first, second, and third quarters of 2005 were belatedly
filed.
The CTA Special Second Division Decision and Resolution were reversed
and set aside, and the Petition for Review filed in CTA Case No. 7621 was
dismissed. Petitioner’s Motion for Reconsideration was likewise denied for
lack of merit.
Hence, this Petition.ISSUE
Petitioner’s assigned errors boil down to the principal issue of the applicable
prescriptive period on its claim for refund of unutilized input VAT for the first
to third quarters of 2005.11
THE COURT’S RULING
The pertinent provision of the NIRC at the time when petitioner filed its claim
for refund provides:
SEC. 112. Refunds or Tax Credits of Input Tax. –
(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered
person, whose sales are zero-rated or effectively zero-rated may,
within two (2) years after the close of the taxable quarter when the
sales were made, apply for the issuance of a tax credit certificate or
refund of creditable input tax due or paid attributable to such sales,
except transitional input tax, to the extent that such input tax has
not been applied against output tax: Provided, however, That in the
case of zero-rated sales under Section 106(A)(2)(a)(1),(2) and (B)
and Section 108 (B)(1) and (2), the acceptable foreign currency
exchange proceeds thereof had been duly accounted for in
accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP): Provided, further, That where the taxpayer is
engaged in zero-rated or effectively zero-rated sale and also in
taxable or exempt sale of goods or properties or services, and the
amount of creditable input tax due or paid cannot be directly and
entirely attributed to any one of the transactions, it shall be
allocated proportionately on the basis of the volume of sales.
xxxx
(D) Period within which Refund or Tax Credit of Input Taxes shall
be Made. - In proper cases, the Commissioner shall grant a refund
or issue the tax credit certificate for creditable input taxes within
one hundred twenty (120) days from the date of submission of
complete documents in support of the application filed in
accordance with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the
failure on the part of the Commissioner to act on the application within the
period prescribed above, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim or after the expiration of
the one hundred twenty day-period, appeal the decision or the unacted claim
with the Court of Tax Appeals.
Petitioner’s sales to NPC are effectively zero-rated
As aptly ruled by the CTA Special Second Division, petitioner’s sales to NPC
are effectively subject to zero percent (0%) VAT. The NPC is an entity with a
special charter, which categorically exempts it from the payment of any tax,
whether direct or indirect, including VAT. Thus, services rendered to NPC by
a VAT-registered entity are effectively zero-rated. In fact, the BIR itself
approved the application for zero-rating on 29 December 2004, filed by
petitioner for its sales to NPC covering January to October 2005. 12 As a
consequence, petitioner claims for the refund of the alleged excess input tax
attributable to its effectively zero-rated sales to NPC.
In Panasonic Communications Imaging Corporation of the Philippines v.
Commissioner of Internal Revenue,13 this Court ruled:
Under the 1997 NIRC, if at the end of a taxable quarter the seller charges
output taxes equal to the input taxes that his suppliers passed on to him, no
payment is required of him. It is when his output taxes exceed his input
taxes that he has to pay the excess to the BIR. If the input taxes exceed the
output taxes, however, the excess payment shall be carried over to the
succeeding quarter or quarters. Should the input taxes result from zero-rated
or effectively zero-rated transactions or from the acquisition of capital goods,
any excess over the output taxes shall instead be refunded to the taxpayer.
The crux of the controversy arose from the proper application of the
prescriptive periods set forth in Section 112 of the NIRC of 1997, as
amended, and the interpretation of the applicable jurisprudence.
Although the ponente in this case expressed a different view on the
mandatory application of the 120+30 day period as prescribed in Section
112, with the finality of the Court’s pronouncement on the consolidated tax
cases Commissioner of Internal Revenue v. San Roque Power Corporation,
Taganito Mining Corporation v. Commissioner of Internal Revenue, and
Philex Mining Corporation v. Commissioner of Internal Revenue 14 (hereby
collectively referred as San Roque), we are constrained to apply the
dispositions therein to the facts herein which are similar.
Administrative Claim
Section 112(A) provides that after the close of the taxable quarter when the
sales were made, there is a two-year prescriptive period within which a VAT-
registered person whose sales are zero-rated or effectively zero-rated may
2nd quarter 2005
apply for the issuance of a tax credit certificate or refund of creditable input
tax.
Our VAT Law provides for a mechanism that would allow VAT-registered
persons to recover the excess input taxes over the output taxes they had
paid in relation to their sales. For the refund or credit of excess or unutilized
input tax, Section 112 is the governing law. Given the distinctive nature of
creditable input tax, the law under Section 112 (A) provides for a different
reckoning point for the two-year prescriptive period, specifically for the
refund or credit of that tax only.
We agree with petitioner that Mirant was not yet in existence when their
administrative claim was filed in 2005; thus, it should not retroactively be
applied to the instant case.
However, the fact remains that Section 112 is the controlling provision for
the refund or credit of input tax during the time that petitioner filed its claim
with which they ought to comply. It must be emphasized that the Court
merely clarified in Mirant that Sections 204 and 229, which prescribed a
different starting point for the two-year prescriptive limit for filing a claim for a
refund or credit of excess input tax, were not applicable. Input tax is neither
an erroneously paid nor an illegally collected internal revenue tax. 15
Section 112(A) is clear that for VAT-registered persons whose sales are
zero-rated or effectively zero-rated, a claim for the refund or credit of
creditable input tax that is due or paid, and that is attributable to zero-rated
or effectively zero-rated sales, must be filed within two years after the close
of the taxable quarter when such sales were made. The reckoning frame
would always be the end of the quarter when the pertinent sale or
transactions were made, regardless of when the input VAT was paid. 16
Pursuant to Section 112(A), petitioner’s administrative claims were filed well
within the two-year period from the close of the taxable quarter when the
effectively zero-rated sales were made, to wit:
Period Covered Close of the Last day to File Administrative Date of Filing
Taxable Claim
Quarter
1st quarter 2005 31-Mar-05 31-Mar-07 30-Jun-05
30-Jun-05 30-Jun-07 15-Sep-05
3rd quarter 2005 30-Sep-05 30-Sep-07 28-Oct-05
Judicial Claim
Section 112(D) further provides that the CIR has to decide on an
administrative claim within one hundred twenty (120) days from the date of
submission of complete documents in support thereof.
Bearing in mind that the burden to prove entitlement to a tax refund is on the
taxpayer, it is presumed that in order to discharge its burden, petitioner had
attached complete supporting documents necessary to prove its entitlement
to a refund in its application, absent any evidence to the contrary.
Thereafter, the taxpayer affected by the CIR’s decision or inaction may
appeal to the CTA within 30 days from the receipt of the decision or from the
expiration of the 120-day period within which the claim has not been acted
upon.
Considering further that the 30-day period to appeal to the CTA is dependent
on the 120-day period, compliance with both periods is jurisdictional. The
period of 120 days is a prerequisite for the commencement of the 30-day
period to appeal to the CTA.
Prescinding from San Roque in the consolidated case Mindanao II
Geothermal Partnership v. Commissioner of Internal Revenue and Mindanao
I Geothermal Partnership v. Commissioner of Internal Revenue, 17 this Court
has ruled thus:
Notwithstanding a strict construction of any claim for tax exemption or
refund, the Court in San Roque recognized that BIR Ruling No. DA-489-03
constitutes equitable estoppel in favor of taxpayers. BIR Ruling No. DA-489-
03 expressly states that the "taxpayer-claimant need not wait for the lapse of
the 120-day period before it could seek judicial relief with the CTA by way of
Period Covered
Petition for Review." This Court discussed BIR Ruling No. DA-489-03 and its
effect on taxpayers, thus:
1st quarter 2005
Taxpayers should not be prejudiced by an erroneous interpretation by the
2nd quarter 2005
Commissioner, particularly on a difficult question of law. The abandonment
of the Atlas doctrine by Mirant and Aichi is proof that the reckoning of3rd
the quarter 2005
prescriptive periods for input VAT tax refund or credit is a difficult question of
law. The abandonment of the Atlas doctrine did not result in Atlas, or other
taxpayers similarly situated, being made to return the tax refund or credit
they received or could have received under Atlas prior to its abandonment.
This Court is applying Mirant and Aichi prospectively. Absent fraud, bad faith
or misrepresentation, the reversal by this Court of a general interpretative
rule issued by the Commissioner, like the reversal of a specific BIR ruling
under Section 246, should also apply prospectively. x x x.
xxxx
Thus, the only issue is whether BIR Ruling No. DA-489-03 is a general
interpretative rule applicable to all taxpayers or a specific ruling applicable
only to a particular taxpayer. BIR Ruling No. DA-489-03 is a general
interpretative rule because it was a response to a query made, not by a
particular taxpayer, but by a government agency asked with processing tax
refunds and credits, that is, the One Stop Shop Inter-Agency Tax Credit and
Drawback Center of the Department of Finance. This government agency is
also the addressee, or the entity responded to, in BIR Ruling No. DA-489-03.
Thus, while this government agency mentions in its query to the
Commissioner the administrative claim of Lazi Bay Resources Development,
Inc., the agency was in fact asking the Commissioner what to do in cases
like the tax claim of Lazi Bay Resources Development, Inc., where the
taxpayer did not wait for the lapse of the 120-day period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative
rule.1âwphi1 Thus, all taxpayers can rely on BIR Ruling No. DA-489-03 from
the time of its issuance on 10 December 2003 up to its reversal by this Court
in Aichi on 6 October 2010, where this Court held that the 120+30 day
periods are mandatory and jurisdictional. (Emphasis supplied)
In applying the foregoing to the instant case, we consider the following
pertinent dates:
1âwphi1
Administrative Expiration of 120- Last day to file Judicial Claim Filed
Claim Filed days Judicial Claim
30-Jun-05 28-Oct-05 27-Nov-05 18-Apr-07
15-Sep-05 13-Jan-06 13-Feb-06
28-Oct-05 26-Feb-06 28-Mar-06
It must be emphasized that this is not a case of premature filing of a judicial
claim. Although petitioner did not file its judicial claim with the CTA prior to
the expiration of the 120-day waiting period, it failed to observe the 30-day
prescriptive period to appeal to the CTA counted from the lapse of the 120-
day period.
Petitioner is similarly situated as Philex in the same case, San Roque, 18 in
which this Court ruled:
Unlike San Roque and Taganito, Philex’s case is not one of premature filing
but of late filing. Philex did not file any petition with the CTA within the 120-
day period. Philex did not also file any petition with the CTA within 30 days
after the expiration of the 120-day period. Philex filed its judicial claim long
after the expiration of the 120-day period, in fact 426 days after the lapse of
the 120-day period. In any event, whether governed by jurisprudence before,
during, or after the Atlas case, Philex’s judicial claim will have to be rejected
because of late filing. Whether the two-year prescriptive period is counted
from the date of payment of the output VAT following the Atlas doctrine, or
from the close of the taxable quarter when the sales attributable to the input
VAT were made following the Mirant and Aichi doctrines, Philex’s judicial
claim was indisputably filed late.
The Atlas doctrine cannot save Philex from the late filing of its judicial claim.
The inaction of the Commissioner on Philex’s claim during the 120-day
period is, by express provision of law, "deemed a denial" of Philex’s claim.
Philex had 30 days from the expiration of the 120-day period to file its
judicial claim with the CTA. Philex’s failure to do so rendered the "deemed a
denial" decision of the Commissioner final and inappealable. The right to
appeal to the CTA from a decision or "deemed a denial" decision of the
Commissioner is merely a statutory privilege, not a constitutional right. The
exercise of such statutory privilege requires strict compliance with the
conditions attached by the statute for its exercise. Philex failed to comply
with the statutory conditions and must thus bear the consequences.
(Emphases in the original)
Likewise, while petitioner filed its administrative and judicial claims during
the period of applicability of BIR Ruling No. DA-489-03, it cannot claim the
benefit of the exception period as it did not file its judicial claim prematurely,
but did so long after the lapse of the 30-day period following the expiration of
the 120-day period. Again, BIR Ruling No. DA-489-03 allowed premature
filing of a judicial claim, which means non-exhaustion of the 120-day period
for the Commissioner to act on an administrative claim,19 but not its late
filing.
As this Court enunciated in San Roque , petitioner cannot rely on Atlas
either, since the latter case was promulgated only on 8 June 2007.
Moreover, the doctrine in Atlas which reckons the two-year period from the
date of filing of the return and payment of the tax, does not interpret −
expressly or impliedly − the 120+30 day periods. 20 Simply stated, Atlas
referred only to the reckoning of the prescriptive period for filing an
administrative claim.
For failure of petitioner to comply with the 120+30 day mandatory and
jurisdictional period, petitioner lost its right to claim a refund or credit of its
alleged excess input VAT.
With regard to petitioner’s argument that Aichi should not be applied
retroactively, we reiterate that even without that ruling, the law is explicit on
the mandatory and jurisdictional nature of the 120+30 day period.
Also devoid of merit is the applicability of the principle of solutio indebiti to
the present case. According to this principle, if something is received when
there is no right to demand it, and it was unduly delivered through mistake,
the obligation to return it arises. In that situation, a creditor-debtor
relationship is created under a quasi-contract, whereby the payor becomes
the creditor who then has the right to demand the return of payment made
by mistake, and the person who has no right to receive the payment
becomes obligated to return it.21 The quasi-contract of solutio indebiti is
based on the ancient principle that no one shall enrich oneself unjustly at the
expense of another.22
There is solutio indebiti when:
(1) Payment is made when there exists no binding relation between
the payor, who has no duty to pay, and the person who received
the payment; and
(2) Payment is made through mistake, and not through liberality or
some other cause.23
Though the principle of solutio indebiti may be applicable to some instances
of claims for a refund, the elements thereof are wanting in this case.
First, there exists a binding relation between petitioner and the CIR, the
former being a taxpayer obligated to pay VAT.
Second, the payment of input tax was not made through mistake, since
petitioner was legally obligated to pay for that liability. The entitlement to a
refund or credit of excess input tax is solely based on the distinctive nature
of the VAT system. At the time of payment of the input VAT, the amount paid
was correct and proper.24
Finally, equity, which has been aptly described as "a justice outside legality,"
is applied only in the absence of, and never against, statutory law or judicial
rules of procedure.25 Section 112 is a positive rule that should preempt and
prevail over all abstract arguments based only on equity. Well-settled is the
rule that tax refunds or credits, just like tax exemptions, are strictly construed
against the taxpayer.26 The burden is on the taxpayer to show strict
compliance with the conditions for the grant of the tax refund or credit. 27

WHEREFORE, premises considered, the instant Petition is DENIED.

SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12191 October 14, 1918
JOSE CANGCO, plaintiff-appellant,
vs.
MANILA RAILROAD CO., defendant-appellee.
Ramon Sotelo for appellant.
Kincaid & Hartigan for appellee.
FISHER, J.:
At the time of the occurrence which gave rise to this litigation the plaintiff,
Jose Cangco, was in the employment of Manila Railroad Company in the
capacity of clerk, with a monthly wage of P25. He lived in the pueblo of San
Mateo, in the province of Rizal, which is located upon the line of the
defendant railroad company; and in coming daily by train to the company's
office in the city of Manila where he worked, he used a pass, supplied by the
company, which entitled him to ride upon the company's trains free of
charge. Upon the occasion in question, January 20, 1915, the plaintiff arose
from his seat in the second class-car where he was riding and, making, his
exit through the door, took his position upon the steps of the coach, seizing
the upright guardrail with his right hand for support.
On the side of the train where passengers alight at the San Mateo station
there is a cement platform which begins to rise with a moderate gradient
some distance away from the company's office and extends along in front of
said office for a distance sufficient to cover the length of several coaches. As
the train slowed down another passenger, named Emilio Zuñiga, also an
employee of the railroad company, got off the same car, alighting safely at
the point where the platform begins to rise from the level of the ground.
When the train had proceeded a little farther the plaintiff Jose Cangco
stepped off also, but one or both of his feet came in contact with a sack of
watermelons with the result that his feet slipped from under him and he fell
violently on the platform. His body at once rolled from the platform and was
drawn under the moving car, where his right arm was badly crushed and
lacerated. It appears that after the plaintiff alighted from the train the car
moved forward possibly six meters before it came to a full stop.
The accident occurred between 7 and 8 o'clock on a dark night, and as the
railroad station was lighted dimly by a single light located some distance
away, objects on the platform where the accident occurred were difficult to
discern especially to a person emerging from a lighted car.
The explanation of the presence of a sack of melons on the platform where
the plaintiff alighted is found in the fact that it was the customary season for
harvesting these melons and a large lot had been brought to the station for
the shipment to the market. They were contained in numerous sacks which
has been piled on the platform in a row one upon another. The testimony
shows that this row of sacks was so placed of melons and the edge of
platform; and it is clear that the fall of the plaintiff was due to the fact that his
foot alighted upon one of these melons at the moment he stepped upon the
platform. His statement that he failed to see these objects in the darkness is
readily to be credited.
The plaintiff was drawn from under the car in an unconscious condition, and
it appeared that the injuries which he had received were very serious. He
was therefore brought at once to a certain hospital in the city of Manila
where an examination was made and his arm was amputated. The result of
this operation was unsatisfactory, and the plaintiff was then carried to
another hospital where a second operation was performed and the member
was again amputated higher up near the shoulder. It appears in evidence
that the plaintiff expended the sum of P790.25 in the form of medical and
surgical fees and for other expenses in connection with the process of his
curation.
Upon August 31, 1915, he instituted this proceeding in the Court of First
Instance of the city of Manila to recover damages of the defendant company,
founding his action upon the negligence of the servants and employees of
the defendant in placing the sacks of melons upon the platform and leaving
them so placed as to be a menace to the security of passenger alighting
from the company's trains. At the hearing in the Court of First Instance, his
Honor, the trial judge, found the facts substantially as above stated, and
drew therefrom his conclusion to the effect that, although negligence was
attributable to the defendant by reason of the fact that the sacks of melons
were so placed as to obstruct passengers passing to and from the cars,
nevertheless, the plaintiff himself had failed to use due caution in alighting
from the coach and was therefore precluded form recovering. Judgment was
accordingly entered in favor of the defendant company, and the plaintiff
appealed.
It can not be doubted that the employees of the railroad company were guilty
of negligence in piling these sacks on the platform in the manner above
stated; that their presence caused the plaintiff to fall as he alighted from the
train; and that they therefore constituted an effective legal cause of the
injuries sustained by the plaintiff. It necessarily follows that the defendant
company is liable for the damage thereby occasioned unless recovery is
barred by the plaintiff's own contributory negligence. In resolving this
problem it is necessary that each of these conceptions of liability, to-wit, the
primary responsibility of the defendant company and the contributory
negligence of the plaintiff should be separately examined.
It is important to note that the foundation of the legal liability of the defendant
is the contract of carriage, and that the obligation to respond for the damage
which plaintiff has suffered arises, if at all, from the breach of that contract by
reason of the failure of defendant to exercise due care in its performance.
That is to say, its liability is direct and immediate, differing essentially, in
legal viewpoint from that presumptive responsibility for the negligence of its
servants, imposed by article 1903 of the Civil Code, which can be rebutted
by proof of the exercise of due care in their selection and supervision. Article
1903 of the Civil Code is not applicable to obligations arising ex contractu,
but only to extra-contractual obligations — or to use the technical form of
expression, that article relates only to culpa aquiliana and not to culpa
contractual.
Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of
the Civil Code, clearly points out this distinction, which was also recognized
by this Court in its decision in the case of Rakes vs. Atlantic, Gulf and Pacific
Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa clearly
points out the difference between "culpa, substantive and independent,
which of itself constitutes the source of an obligation between persons not
formerly connected by any legal tie" and culpa considered as an accident in
the performance of an obligation already existing . . . ."
In the Rakes case (supra) the decision of this court was made to rest
squarely upon the proposition that article 1903 of the Civil Code is not
applicable to acts of negligence which constitute the breach of a contract.
Upon this point the Court said:
The acts to which these articles [1902 and 1903 of the Civil Code]
are applicable are understood to be those not growing out of pre-
existing duties of the parties to one another. But where relations
already formed give rise to duties, whether springing from contract
or quasi-contract, then breaches of those duties are subject to
article 1101, 1103, and 1104 of the same code. (Rakes vs. Atlantic,
Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)
This distinction is of the utmost importance. The liability, which, under the
Spanish law, is, in certain cases imposed upon employers with respect to
damages occasioned by the negligence of their employees to persons to
whom they are not bound by contract, is not based, as in the English
Common Law, upon the principle of respondeat superior — if it were, the
master would be liable in every case and unconditionally — but upon the
principle announced in article 1902 of the Civil Code, which imposes upon all
persons who by their fault or negligence, do injury to another, the obligation
of making good the damage caused. One who places a powerful automobile
in the hands of a servant whom he knows to be ignorant of the method of
managing such a vehicle, is himself guilty of an act of negligence which
makes him liable for all the consequences of his imprudence. The obligation
to make good the damage arises at the very instant that the unskillful
servant, while acting within the scope of his employment causes the injury.
The liability of the master is personal and direct. But, if the master has not
been guilty of any negligence whatever in the selection and direction of the
servant, he is not liable for the acts of the latter, whatever done within the
scope of his employment or not, if the damage done by the servant does not
amount to a breach of the contract between the master and the person
injured.
It is not accurate to say that proof of diligence and care in the selection and
control of the servant relieves the master from liability for the latter's acts —
on the contrary, that proof shows that the responsibility has never existed.
As Manresa says (vol. 8, p. 68) the liability arising from extra-
contractual culpa is always based upon a voluntary act or omission which,
without willful intent, but by mere negligence or inattention, has caused
damage to another. A master who exercises all possible care in the selection
of his servant, taking into consideration the qualifications they should
possess for the discharge of the duties which it is his purpose to confide to
them, and directs them with equal diligence, thereby performs his duty to
third persons to whom he is bound by no contractual ties, and he incurs no
liability whatever if, by reason of the negligence of his servants, even within
the scope of their employment, such third person suffer damage. True it is
that under article 1903 of the Civil Code the law creates a presumption that
he has been negligent in the selection or direction of his servant, but the
presumption is rebuttable and yield to proof of due care and diligence in this
respect.
The supreme court of Porto Rico, in interpreting identical provisions, as
found in the Porto Rico Code, has held that these articles are applicable to
cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20 Porto
Rico Reports, 215.)
This distinction was again made patent by this Court in its decision in the
case of Bahia vs. Litonjua and Leynes, (30 Phil. rep., 624), which was an
action brought upon the theory of the extra-contractual liability of the
defendant to respond for the damage caused by the carelessness of his
employee while acting within the scope of his employment. The Court, after
citing the last paragraph of article 1903 of the Civil Code, said:
From this article two things are apparent: (1) That when an injury is
caused by the negligence of a servant or employee there instantly
arises a presumption of law that there was negligence on the part
of the master or employer either in selection of the servant or
employee, or in supervision over him after the selection, or both;
and (2) that that presumption is juris tantum and not juris et de jure,
and consequently, may be rebutted. It follows necessarily that if the
employer shows to the satisfaction of the court that in selection and
supervision he has exercised the care and diligence of a good
father of a family, the presumption is overcome and he is relieved
from liability.
This theory bases the responsibility of the master ultimately on
his own negligence and not on that of his servant. This is the
notable peculiarity of the Spanish law of negligence. It is, of course,
in striking contrast to the American doctrine that, in relations with
strangers, the negligence of the servant in conclusively the
negligence of the master.
The opinion there expressed by this Court, to the effect that in case of extra-
contractual culpa based upon negligence, it is necessary that there shall
have been some fault attributable to the defendant personally, and that the
last paragraph of article 1903 merely establishes a rebuttable presumption,
is in complete accord with the authoritative opinion of Manresa, who says
(vol. 12, p. 611) that the liability created by article 1903 is imposed by reason
of the breach of the duties inherent in the special relations of authority or
superiority existing between the person called upon to repair the damage
and the one who, by his act or omission, was the cause of it.
On the other hand, the liability of masters and employers for the negligent
acts or omissions of their servants or agents, when such acts or omissions
cause damages which amount to the breach of a contact, is not based upon
a mere presumption of the master's negligence in their selection or control,
and proof of exercise of the utmost diligence and care in this regard does not
relieve the master of his liability for the breach of his contract.
Every legal obligation must of necessity be extra-contractual or contractual.
Extra-contractual obligation has its source in the breach or omission of those
mutual duties which civilized society imposes upon it members, or which
arise from these relations, other than contractual, of certain members of
society to others, generally embraced in the concept of status. The legal
rights of each member of society constitute the measure of the
corresponding legal duties, mainly negative in character, which the existence
of those rights imposes upon all other members of society. The breach of
these general duties whether due to willful intent or to mere inattention, if
productive of injury, give rise to an obligation to indemnify the injured party.
The fundamental distinction between obligations of this character and those
which arise from contract, rests upon the fact that in cases of non-
contractual obligation it is the wrongful or negligent act or omission itself
which creates the vinculum juris, whereas in contractual relations
the vinculum exists independently of the breach of the voluntary duty
assumed by the parties when entering into the contractual relation.
With respect to extra-contractual obligation arising from negligence, whether
of act or omission, it is competent for the legislature to elect — and our
Legislature has so elected — whom such an obligation is imposed is morally
culpable, or, on the contrary, for reasons of public policy, to extend that
liability, without regard to the lack of moral culpability, so as to include
responsibility for the negligence of those person who acts or mission are
imputable, by a legal fiction, to others who are in a position to exercise an
absolute or limited control over them. The legislature which adopted our Civil
Code has elected to limit extra-contractual liability — with certain well-
defined exceptions — to cases in which moral culpability can be directly
imputed to the persons to be charged. This moral responsibility may consist
in having failed to exercise due care in the selection and control of one's
agents or servants, or in the control of persons who, by reason of their
status, occupy a position of dependency with respect to the person made
liable for their conduct.
The position of a natural or juridical person who has undertaken by contract
to render service to another, is wholly different from that to which article
1903 relates. When the sources of the obligation upon which plaintiff's cause
of action depends is a negligent act or omission, the burden of proof rests
upon plaintiff to prove the negligence — if he does not his action fails. But
when the facts averred show a contractual undertaking by defendant for the
benefit of plaintiff, and it is alleged that plaintiff has failed or refused to
perform the contract, it is not necessary for plaintiff to specify in his
pleadings whether the breach of the contract is due to willful fault or to
negligence on the part of the defendant, or of his servants or agents. Proof
of the contract and of its nonperformance is sufficient prima facie to warrant
a recovery.
As a general rule . . . it is logical that in case of extra-contractual
culpa, a suing creditor should assume the burden of proof of its
existence, as the only fact upon which his action is based; while on
the contrary, in a case of negligence which presupposes the
existence of a contractual obligation, if the creditor shows that it
exists and that it has been broken, it is not necessary for him to
prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]).
As it is not necessary for the plaintiff in an action for the breach of a contract
to show that the breach was due to the negligent conduct of defendant or of
his servants, even though such be in fact the actual cause of the breach, it is
obvious that proof on the part of defendant that the negligence or omission
of his servants or agents caused the breach of the contract would not
constitute a defense to the action. If the negligence of servants or agents
could be invoked as a means of discharging the liability arising from
contract, the anomalous result would be that person acting through the
medium of agents or servants in the performance of their contracts, would
be in a better position than those acting in person. If one delivers a valuable
watch to watchmaker who contract to repair it, and the bailee, by a personal
negligent act causes its destruction, he is unquestionably liable. Would it be
logical to free him from his liability for the breach of his contract, which
involves the duty to exercise due care in the preservation of the watch, if he
shows that it was his servant whose negligence caused the injury? If such a
theory could be accepted, juridical persons would enjoy practically complete
immunity from damages arising from the breach of their contracts if caused
by negligent acts as such juridical persons can of necessity only act through
agents or servants, and it would no doubt be true in most instances that
reasonable care had been taken in selection and direction of such servants.
If one delivers securities to a banking corporation as collateral, and they are
lost by reason of the negligence of some clerk employed by the bank, would
it be just and reasonable to permit the bank to relieve itself of liability for the
breach of its contract to return the collateral upon the payment of the debt by
proving that due care had been exercised in the selection and direction of
the clerk?
This distinction between culpa aquiliana, as the source of an obligation,
and culpa contractual as a mere incident to the performance of a contract
has frequently been recognized by the supreme court of Spain.
(Sentencias of June 27, 1894; November 20, 1896; and December 13,
1896.) In the decisions of November 20, 1896, it appeared that plaintiff's
action arose ex contractu, but that defendant sought to avail himself of the
provisions of article 1902 of the Civil Code as a defense. The Spanish
Supreme Court rejected defendant's contention, saying:
These are not cases of injury caused, without any pre-existing
obligation, by fault or negligence, such as those to which article
1902 of the Civil Code relates, but of damages caused by the
defendant's failure to carry out the undertakings imposed by the
contracts . . . .
A brief review of the earlier decision of this court involving the liability of
employers for damage done by the negligent acts of their servants will show
that in no case has the court ever decided that the negligence of the
defendant's servants has been held to constitute a defense to an action for
damages for breach of contract.
In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the
owner of a carriage was not liable for the damages caused by the
negligence of his driver. In that case the court commented on the fact that no
evidence had been adduced in the trial court that the defendant had been
negligent in the employment of the driver, or that he had any knowledge of
his lack of skill or carefulness.
In the case of Baer Senior & Co's Successors vs. Compania Maritima (6
Phil. Rep., 215), the plaintiff sued the defendant for damages caused by the
loss of a barge belonging to plaintiff which was allowed to get adrift by the
negligence of defendant's servants in the course of the performance of a
contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that if
the "obligation of the defendant grew out of a contract made between it and
the plaintiff . . . we do not think that the provisions of articles 1902 and 1903
are applicable to the case."
In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued
the defendant to recover damages for the personal injuries caused by the
negligence of defendant's chauffeur while driving defendant's automobile in
which defendant was riding at the time. The court found that the damages
were caused by the negligence of the driver of the automobile, but held that
the master was not liable, although he was present at the time, saying:
. . . unless the negligent acts of the driver are continued for a length
of time as to give the owner a reasonable opportunity to observe
them and to direct the driver to desist therefrom. . . . The act
complained of must be continued in the presence of the owner for
such length of time that the owner by his acquiescence, makes the
driver's acts his own.
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage &
Taxicab Co. (33 Phil. Rep., 8), it is true that the court rested its conclusion as
to the liability of the defendant upon article 1903, although the facts
disclosed that the injury complaint of by plaintiff constituted a breach of the
duty to him arising out of the contract of transportation. The express ground
of the decision in this case was that article 1903, in dealing with the liability
of a master for the negligent acts of his servants "makes the distinction
between private individuals and public enterprise;" that as to the latter the
law creates a rebuttable presumption of negligence in the selection or
direction of servants; and that in the particular case the presumption of
negligence had not been overcome.
It is evident, therefore that in its decision Yamada case, the court treated
plaintiff's action as though founded in tort rather than as based upon the
breach of the contract of carriage, and an examination of the pleadings and
of the briefs shows that the questions of law were in fact discussed upon this
theory. Viewed from the standpoint of the defendant the practical result must
have been the same in any event. The proof disclosed beyond doubt that the
defendant's servant was grossly negligent and that his negligence was the
proximate cause of plaintiff's injury. It also affirmatively appeared that
defendant had been guilty of negligence in its failure to exercise proper
discretion in the direction of the servant. Defendant was, therefore, liable for
the injury suffered by plaintiff, whether the breach of the duty were to be
regarded as constituting culpa aquiliana or culpa contractual. As Manresa
points out (vol. 8, pp. 29 and 69) whether negligence occurs an incident in
the course of the performance of a contractual undertaking or its itself the
source of an extra-contractual undertaking obligation, its essential
characteristics are identical. There is always an act or omission productive of
damage due to carelessness or inattention on the part of the defendant.
Consequently, when the court holds that a defendant is liable in damages for
having failed to exercise due care, either directly, or in failing to exercise
proper care in the selection and direction of his servants, the practical result
is identical in either case. Therefore, it follows that it is not to be inferred,
because the court held in the Yamada case that defendant was liable for the
damages negligently caused by its servants to a person to whom it was
bound by contract, and made reference to the fact that the defendant was
negligent in the selection and control of its servants, that in such a case the
court would have held that it would have been a good defense to the action,
if presented squarely upon the theory of the breach of the contract, for
defendant to have proved that it did in fact exercise care in the selection and
control of the servant.
The true explanation of such cases is to be found by directing the attention
to the relative spheres of contractual and extra-contractual obligations. The
field of non- contractual obligation is much more broader than that of
contractual obligations, comprising, as it does, the whole extent of juridical
human relations. These two fields, figuratively speaking, concentric; that is to
say, the mere fact that a person is bound to another by contract does not
relieve him from extra-contractual liability to such person. When such a
contractual relation exists the obligor may break the contract under such
conditions that the same act which constitutes the source of an extra-
contractual obligation had no contract existed between the parties.
The contract of defendant to transport plaintiff carried with it, by implication,
the duty to carry him in safety and to provide safe means of entering and
leaving its trains (civil code, article 1258). That duty, being contractual, was
direct and immediate, and its non-performance could not be excused by
proof that the fault was morally imputable to defendant's servants.
The railroad company's defense involves the assumption that even granting
that the negligent conduct of its servants in placing an obstruction upon the
platform was a breach of its contractual obligation to maintain safe means of
approaching and leaving its trains, the direct and proximate cause of the
injury suffered by plaintiff was his own contributory negligence in failing to
wait until the train had come to a complete stop before alighting. Under the
doctrine of comparative negligence announced in the Rakes case (supra), if
the accident was caused by plaintiff's own negligence, no liability is imposed
upon defendant's negligence and plaintiff's negligence merely contributed to
his injury, the damages should be apportioned. It is, therefore, important to
ascertain if defendant was in fact guilty of negligence.
It may be admitted that had plaintiff waited until the train had come to a full
stop before alighting, the particular injury suffered by him could not have
occurred. Defendant contends, and cites many authorities in support of the
contention, that it is negligence per se for a passenger to alight from a
moving train. We are not disposed to subscribe to this doctrine in its
absolute form. We are of the opinion that this proposition is too badly stated
and is at variance with the experience of every-day life. In this particular
instance, that the train was barely moving when plaintiff alighted is shown
conclusively by the fact that it came to stop within six meters from the place
where he stepped from it. Thousands of person alight from trains under
these conditions every day of the year, and sustain no injury where the
company has kept its platform free from dangerous obstructions. There is no
reason to believe that plaintiff would have suffered any injury whatever in
alighting as he did had it not been for defendant's negligent failure to perform
its duty to provide a safe alighting place.
We are of the opinion that the correct doctrine relating to this subject is that
expressed in Thompson's work on Negligence (vol. 3, sec. 3010) as follows:
The test by which to determine whether the passenger has been
guilty of negligence in attempting to alight from a moving railway
train, is that of ordinary or reasonable care. It is to be considered
whether an ordinarily prudent person, of the age, sex and condition
of the passenger, would have acted as the passenger acted under
the circumstances disclosed by the evidence. This care has been
defined to be, not the care which may or should be used by the
prudent man generally, but the care which a man of ordinary
prudence would use under similar circumstances, to avoid injury."
(Thompson, Commentaries on Negligence, vol. 3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by this court in
Picart vs. Smith (37 Phil. rep., 809), we may say that the test is this; Was
there anything in the circumstances surrounding the plaintiff at the time he
alighted from the train which would have admonished a person of average
prudence that to get off the train under the conditions then existing was
dangerous? If so, the plaintiff should have desisted from alighting; and his
failure so to desist was contributory negligence.1awph!l.net
As the case now before us presents itself, the only fact from which a
conclusion can be drawn to the effect that plaintiff was guilty of contributory
negligence is that he stepped off the car without being able to discern clearly
the condition of the platform and while the train was yet slowly moving. In
considering the situation thus presented, it should not be overlooked that the
plaintiff was, as we find, ignorant of the fact that the obstruction which was
caused by the sacks of melons piled on the platform existed; and as the
defendant was bound by reason of its duty as a public carrier to afford to its
passengers facilities for safe egress from its trains, the plaintiff had a right to
assume, in the absence of some circumstance to warn him to the contrary,
that the platform was clear. The place, as we have already stated, was dark,
or dimly lighted, and this also is proof of a failure upon the part of the
defendant in the performance of a duty owing by it to the plaintiff; for if it
were by any possibility concede that it had right to pile these sacks in the
path of alighting passengers, the placing of them adequately so that their
presence would be revealed.
As pertinent to the question of contributory negligence on the part of the
plaintiff in this case the following circumstances are to be noted: The
company's platform was constructed upon a level higher than that of the
roadbed and the surrounding ground. The distance from the steps of the car
to the spot where the alighting passenger would place his feet on the
platform was thus reduced, thereby decreasing the risk incident to stepping
off. The nature of the platform, constructed as it was of cement material, also
assured to the passenger a stable and even surface on which to alight.
Furthermore, the plaintiff was possessed of the vigor and agility of young
manhood, and it was by no means so risky for him to get off while the train
was yet moving as the same act would have been in an aged or feeble
person. In determining the question of contributory negligence in performing
such act — that is to say, whether the passenger acted prudently or
recklessly — the age, sex, and physical condition of the passenger are
circumstances necessarily affecting the safety of the passenger, and should
be considered. Women, it has been observed, as a general rule are less
capable than men of alighting with safety under such conditions, as the
nature of their wearing apparel obstructs the free movement of the limbs.
Again, it may be noted that the place was perfectly familiar to the plaintiff as
it was his daily custom to get on and of the train at this station. There could,
therefore, be no uncertainty in his mind with regard either to the length of the
step which he was required to take or the character of the platform where he
was alighting. Our conclusion is that the conduct of the plaintiff in
undertaking to alight while the train was yet slightly under way was not
characterized by imprudence and that therefore he was not guilty of
contributory negligence.
The evidence shows that the plaintiff, at the time of the accident, was
earning P25 a month as a copyist clerk, and that the injuries he has suffered
have permanently disabled him from continuing that employment. Defendant
has not shown that any other gainful occupation is open to plaintiff. His
expectancy of life, according to the standard mortality tables, is
approximately thirty-three years. We are of the opinion that a fair
compensation for the damage suffered by him for his permanent disability is
the sum of P2,500, and that he is also entitled to recover of defendant the
additional sum of P790.25 for medical attention, hospital services, and other
incidental expenditures connected with the treatment of his injuries.

The decision of lower court is reversed, and judgment is hereby rendered

plaintiff for the sum of P3,290.25, and for the costs of both instances. So
ordered.

Arellano, C.J., Torres, Street and Avanceña, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 34840 September 23, 1931
NARCISO GUTIERREZ, plaintiff-appellee,
vs.
BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL
GUTIERREZ, ABELARDO VELASCO, and SATURNINO
CORTEZ, defendants-appellants.
L.D. Lockwood for appellants Velasco and Cortez.
San Agustin and Roxas for other appellants.
Ramon Diokno for appellee.
MALCOLM, J.:
This is an action brought by the plaintiff in the Court of First Instance of
Manila against the five defendants, to recover damages in the amount of
P10,000, for physical injuries suffered as a result of an automobile accident.
On judgment being rendered as prayed for by the plaintiff, both sets of
defendants appealed.
On February 2, 1930, a passenger truck and an automobile of private
ownership collided while attempting to pass each other on the Talon bridge
on the Manila South Road in the municipality of Las Piñas, Province of Rizal.
The truck was driven by the chauffeur Abelardo Velasco, and was owned by
Saturnino Cortez. The automobile was being operated by Bonifacio
Gutierrez, a lad 18 years of age, and was owned by Bonifacio's father and
mother, Mr. and Mrs. Manuel Gutierrez. At the time of the collision, the father
was not in the car, but the mother, together will several other members of
the Gutierrez family, seven in all, were accommodated therein. A passenger
in the autobus, by the name of Narciso Gutierrez, was en route from San
Pablo, Laguna, to Manila. The collision between the bus and the automobile
resulted in Narciso Gutierrez suffering a fracture right leg which required
medical attendance for a considerable period of time, and which even at the
date of the trial appears not to have healed properly.
It is conceded that the collision was caused by negligence pure and simple.
The difference between the parties is that, while the plaintiff blames both
sets of defendants, the owner of the passenger truck blames the automobile,
and the owner of the automobile, in turn, blames the truck. We have given
close attention to these highly debatable points, and having done so, a
majority of the court are of the opinion that the findings of the trial judge on
all controversial questions of fact find sufficient support in the record, and so
should be maintained. With this general statement set down, we turn to
consider the respective legal obligations of the defendants.
In amplification of so much of the above pronouncement as concerns the
Gutierrez family, it may be explained that the youth Bonifacio was in
incompetent chauffeur, that he was driving at an excessive rate of speed,
and that, on approaching the bridge and the truck, he lost his head and so
contributed by his negligence to the accident. The guaranty given by the
father at the time the son was granted a license to operate motor vehicles
made the father responsible for the acts of his son. Based on these facts,
pursuant to the provisions of article 1903 of the Civil Code, the father alone
and not the minor or the mother, would be liable for the damages caused by
the minor.
We are dealing with the civil law liability of parties for obligations which arise
from fault or negligence. At the same time, we believe that, as has been
done in other cases, we can take cognizance of the common law rule on the
same subject. In the United States, it is uniformly held that the head of a
house, the owner of an automobile, who maintains it for the general use of
his family is liable for its negligent operation by one of his children, whom he
designates or permits to run it, where the car is occupied and being used at
the time of the injury for the pleasure of other members of the owner's family
than the child driving it. The theory of the law is that the running of the
machine by a child to carry other members of the family is within the scope
of the owner's business, so that he is liable for the negligence of the child
because of the relationship of master and servant. (Huddy On Automobiles,
6th ed., sec. 660; Missell vs. Hayes [1914], 91 Atl., 322.) The liability of
Saturnino Cortez, the owner of the truck, and of his chauffeur Abelardo
Velasco rests on a different basis, namely, that of contract which, we think,
has been sufficiently demonstrated by the allegations of the complaint, not
controverted, and the evidence. The reason for this conclusion reaches to
the findings of the trial court concerning the position of the truck on the
bridge, the speed in operating the machine, and the lack of care employed
by the chauffeur. While these facts are not as clearly evidenced as are those
which convict the other defendant, we nevertheless hesitate to disregard the
points emphasized by the trial judge. In its broader aspects, the case is one
of two drivers approaching a narrow bridge from opposite directions, with
neither being willing to slow up and give the right of way to the other, with
the inevitable result of a collision and an accident.

The defendants Velasco and Cortez further contend that there existed
contributory negligence on the part of the plaintiff, consisting principally of
his keeping his foot outside the truck, which occasioned his injury. In this
connection, it is sufficient to state that, aside from the fact that the defense of
contributory negligence was not pleaded, the evidence bearing out this
theory of the case is contradictory in the extreme and leads us far afield into
speculative matters.

The last subject for consideration relates to the amount of the award. The
appellee suggests that the amount could justly be raised to P16,517, but
naturally is not serious in asking for this sum, since no appeal was taken by
him from the judgment. The other parties unite in challenging the award of
P10,000, as excessive. All facts considered, including actual expenditures
and damages for the injury to the leg of the plaintiff, which may cause him
permanent lameness, in connection with other adjudications of this court,
lead us to conclude that a total sum for the plaintiff of P5,000 would be fair
and reasonable. The difficulty in approximating the damages by monetary
compensation is well elucidated by the divergence of opinion among the
members of the court, three of whom have inclined to the view that P3,000
would be amply sufficient, while a fourth member has argued that P7,500
would be none too much.

In consonance with the foregoing rulings, the judgment appealed from will be
modified, and the plaintiff will have judgment in his favor against the
defendants Manuel Gutierrez, Abelardo Velasco, and Saturnino Cortez,
jointly and severally, for the sum of P5,000, and the costs of both instances.

Avanceña, C.J., Johnson, Street, Villamor, Ostrand, Romualdez, and

Imperial, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-3756 June 30, 1952
SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE
FILIPINAS, plaintiff-appellee,
vs.
NATIONAL COCONUT CORPORATION, defendant-appellant.
First Assistant Corporate Counsel Federico C. Alikpala and Assistant
Attorney Augusto Kalaw for appellant.
Ramirez and Ortigas for appellee.
LABRADOR, J.:
This is an action to recover the possession of a piece of real property (land
and warehouses) situated in Pandacan Manila, and the rentals for its
occupation and use. The land belongs to the plaintiff, in whose name the title
was registered before the war. On January 4, 1943, during the Japanese
military occupation, the land was acquired by a Japanese corporation by the
name of Taiwan Tekkosho for the sum of P140,00, and thereupon title
thereto issued in its name (transfer certificate of title No. 64330, Register of
Deeds, Manila). After liberation, more specifically on April 4, 1946, the Alien
Property Custodian of the United States of America took possession, control,
and custody thereof under section 12 of the Trading with the Enemy Act, 40
Stat., 411, for the reason that it belonged to an enemy national. During the
year 1946 the property was occupied by the Copra Export Management
Company under a custodianship agreement with United States Alien
Property Custodian (Exhibit G), and when it vacated the property it was
occupied by the defendant herein. The Philippine Government made
representations with the Office Alien Property Custodian for the use of
property by the Government (see Exhibits 2, 2-A, 2-B, and 1). On March 31,
1947, the defendant was authorized to repair the warehouse on the land,
and actually spent thereon the repairs the sum of P26,898.27. In 1948,
defendant leased one-third of the warehouse to one Dioscoro Sarile at a
monthly rental of P500, which was later raised to P1,000 a month. Sarile did
not pay the rents, so action was brought against him. It is not shown,
however, if the judgment was ever executed.
Plaintiff made claim to the property before the Alien Property Custodian of
the United States, but as this was denied, it brought an action in court (Court
of First Instance of Manila, civil case No. 5007, entitled "La Sagrada Orden
Predicadores de la Provinicia del Santisimo Rosario de Filipinas," vs.
Philippine Alien Property Administrator, defendant, Republic of the
Philippines, intervenor) to annul the sale of property of Taiwan Tekkosho,
and recover its possession. The Republic of the Philippines was allowed to
intervene in the action. The case did not come for trial because the parties
presented a joint petition in which it is claimed by plaintiff that the sale in
favor of the Taiwan Tekkosho was null and void because it was executed
under threats, duress, and intimidation, and it was agreed that the title
issued in the name of the Taiwan Tekkosho be cancelled and the original
title of plaintiff re-issued; that the claims, rights, title, and interest of the Alien
Property Custodian be cancelled and held for naught; that the occupant
National Coconut Corporation has until February 28, 1949, to recover its
equipment from the property and vacate the premises; that plaintiff, upon
entry of judgment, pay to the Philippine Alien Property Administration the
sum of P140,000; and that the Philippine Alien Property Administration be
free from responsibility or liability for any act of the National Coconut
Corporation, etc. Pursuant to the agreement the court rendered judgment
releasing the defendant and the intervenor from liability, but reversing to the
plaintiff the right to recover from the National Coconut Corporation
reasonable rentals for the use and occupation of the premises. (Exhibit A-1.)
The present action is to recover the reasonable rentals from August, 1946,
the date when the defendant began to occupy the premises, to the date it
vacated it. The defendant does not contest its liability for the rentals at the
rate of P3,000 per month from February 28, 1949 (the date specified in the
judgment in civil case No. 5007), but resists the claim therefor prior to this
date. It interposes the defense that it occupied the property in good faith,
under no obligation whatsoever to pay rentals for the use and occupation of
the warehouse. Judgment was rendered for the plaintiff to recover from the
defendant the sum of P3,000 a month, as reasonable rentals, from August,
1946, to the date the defendant vacates the premises. The judgment
declares that plaintiff has always been the owner, as the sale of Japanese
purchaser was void ab initio; that the Alien Property Administration never
acquired any right to the property, but that it held the same in trust until the
determination as to whether or not the owner is an enemy citizen. The trial
court further declares that defendant can not claim any better rights than its
predecessor, the Alien Property Administration, and that as defendant has
used the property and had subleased portion thereof, it must pay reasonable
rentals for its occupation.
Against this judgment this appeal has been interposed, the following
assignment of error having been made on defendant-appellant's behalf:
The trial court erred in holding the defendant liable for rentals or
compensation for the use and occupation of the property from the
middle of August, 1946, to December 14, 1948.
1. Want to "ownership rights" of the Philippine Alien Property
Administration did not render illegal or invalidate its grant to the
defendant of the free use of property.
2. the decision of the Court of First Instance of Manila declaring the
sale by the plaintiff to the Japanese purchaser null and void ab
initio and that the plaintiff was and has remained as the legal owner
of the property, without legal interruption, is not conclusive.
3. Reservation to the plaintiff of the right to recover from the
defendant corporation not binding on the later;
4. Use of the property for commercial purposes in itself alone does
not justify payment of rentals.
5. Defendant's possession was in good faith.
6. Defendant's possession in the nature of usufruct.
In reply, plaintiff-appellee's counsel contends that the Philippine Allien
Property Administration (PAPA) was a mere administrator of the owner (who
ultimately was decided to be plaintiff), and that as defendant has used it for
commercial purposes and has leased portion of it, it should be responsible
therefore to the owner, who had been deprived of the possession for so
many years. (Appellee's brief, pp. 20, 23.)
We can not understand how the trial court, from the mere fact that plaintiff-
appellee was the owner of the property and the defendant-appellant the
occupant, which used for its own benefit but by the express permission of
the Alien Property Custodian of the United States, so easily jumped to the
conclusion that the occupant is liable for the value of such use and
occupation. If defendant-appellant is liable at all, its obligations, must arise
from any of the four sources of obligations, namley, law, contract or quasi-
contract, crime, or negligence. (Article 1089, Spanish Civil Code.)
Defendant-appellant is not guilty of any offense at all, because it entered the
premises and occupied it with the permission of the entity which had the
legal control and administration thereof, the Allien Property Administration.
Neither was there any negligence on its part. There was also no privity (of
contract or obligation) between the Alien Property Custodian and the Taiwan
Tekkosho, which had secured the possession of the property from the
plaintiff-appellee by the use of duress, such that the Alien Property
Custodian or its permittee (defendant-appellant) may be held responsible for
the supposed illegality of the occupation of the property by the said Taiwan
Tekkosho. The Allien Property Administration had the control and
administration of the property not as successor to the interests of the enemy
holder of the title, the Taiwan Tekkosho, but by express provision of law
(Trading with the Enemy Act of the United States, 40 Stat., 411; 50 U.S.C.A.,
189). Neither is it a trustee of the former owner, the plaintiff-appellee herein,
but a trustee of then Government of the United States (32 Op. Atty. Gen.
249; 50 U.S.C.A. 283), in its own right, to the exclusion of, and against the
claim or title of, the enemy owner. (Youghioheny & Ohio Coal Co. vs.
Lasevich [1920], 179 N.W., 355; 171 Wis., 347; U.S.C.A., 282-283.) From
August, 1946, when defendant-appellant took possession, to the late of
judgment on February 28, 1948, Allien Property Administration had the
absolute control of the property as trustee of the Government of the United
States, with power to dispose of it by sale or otherwise, as though it were the
absolute owner. (U.S vs. Chemical Foundation [C.C.A. Del. 1925], 5 F. [2d],
191; 50 U.S.C.A., 283.) Therefore, even if defendant-appellant were liable to
the Allien Property Administration for rentals, these would not accrue to the
benefit of the plaintiff-appellee, the owner, but to the United States
Government.
But there is another ground why the claim or rentals can not be made
against defendant-appellant. There was no agreement between the Alien
Property Custodian and the defendant-appellant for the latter to pay rentals
on the property. The existence of an implied agreement to that effect is
contrary to the circumstances. The copra Export Management Company,
which preceded the defendant-appellant, in the possession and use of the
property, does not appear to have paid rentals therefor, as it occupied it by
what the parties denominated a "custodianship agreement," and there is no
provision therein for the payment of rentals or of any compensation for its
custody and or occupation and the use. The Trading with the Enemy Act, as
originally enacted, was purely a measure of conversation, hence, it is very
unlikely that rentals were demanded for the use of the property. When the
National coconut Corporation succeeded the Copra Export Management
Company in the possession and use of the property, it must have been also
free from payment of rentals, especially as it was Government corporation,
and steps where then being taken by the Philippine Government to secure
the property for the National Coconut Corporation. So that the circumstances
do not justify the finding that there was an implied agreement that the
defendant-appellant was to pay for the use and occupation of the premises
at all.

The above considerations show that plaintiff-appellee's claim for rentals

before it obtained the judgment annulling the sale of the Taiwan Tekkosho
may not be predicated on any negligence or offense of the defendant-
appellant, or any contract, express or implied, because the Allien Property
Administration was neither a trustee of plaintiff-appellee, nor a privy to the
obligations of the Taiwan Tekkosho, its title being based by legal provision of
the seizure of enemy property. We have also tried in vain to find a law or
provision thereof, or any principle in quasi contracts or equity, upon which
the claim can be supported. On the contrary, as defendant-appellant entered
into possession without any expectation of liability for such use and
occupation, it is only fair and just that it may not be held liable therefor. And
as to the rents it collected from its lessee, the same should accrue to it as a
possessor in good faith, as this Court has already expressly held.
(Resolution, National Coconut Corporation vs. Geronimo, 83 Phil. 467.)

Lastly, the reservation of this action may not be considered as vesting a new
right; if no right to claim for rentals existed at the time of the reservation, no
rights can arise or accrue from such reservation alone.

Wherefore, the part of the judgment appealed from, which sentences

defendant-appellant to pay rentals from August, 1946, to February 28, 1949,
is hereby reversed. In all other respects the judgment is affirmed. Costs of
this appeal shall be against the plaintiff-appellee.
THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner,
vs
ANA GRACE ROSALES AND YO YUK TO, Respondents.
G.R. No. 183204 January 13, 2014
PONENTE: Del Castillo
FACTS:
Petitioner Metrobank is a domestic banking corporation duly
organized and existing under the laws of the Philippines. Respondent Rosales
is the owner of a travel agency while Yo Yuk To is her mother.
In 2000, respondents opened a Joint Peso Account10 with
petitioner’s Pritil-Tondo Branch.
In May 2002, respondent Rosales accompanied her client Liu Chiu
Fang, a Taiwanese National applying for a retiree’s visa from the Philippine
Leisure and Retirement Authority (PLRA), to petitioner’s branch in Escolta to
open a savings account. Since Liu Chiu Fang could speak only in Mandarin,
respondent Rosales acted as an interpreter for her.
On March 3, 2003, respondents opened with petitioner’s Pritil-
Tondo Branch a Joint Dollar Account with an initial deposit of
US$14,000.00.
On July 31, 2003, petitioner issued a “Hold Out” order against
respondents’ accounts.
On September 3, 2003, petitioner, through its Special Audit
Department Head Antonio Ivan Aguirre, filed before the Office of the
Prosecutor of Manila a criminal case for Estafa through False Pretences,
Misrepresentation, Deceit, and Use of Falsified Documents.
Respondent Rosales, however, denied taking part in the fraudulent
and unauthorized withdrawal from the dollar account of Liu Chiu Fang.
On December 15, 2003, the Office of the City Prosecutor of Manila
issued a Resolution dismissing the criminal case for lack of probable cause.
On September 10, 2004, respondents filed before the RTC of Manila a
complaint for Breach of Obligation and Contract with Damages.
ISSUE:
Whether Metrobank breached its contract with respondents.
HELD:
YES. The Court held that Metrobank’s reliance on the “Hold Out”
clause in the Application and Agreement for Deposit Account is misplaced.
Bank deposits, which are in the nature of a simple loan or
mutuum, must be paid upon demand by the depositor.
The “Hold Out” clause applies only if there is a valid and existing
obligation arising from any of the sources of obligation enumerated in Article
1157 of the CivilCode, to wit: law, contracts, quasi-contracts, delict, and quasi-
delict. In this case, petitioner failed to show that respondents have an
obligation to it under any law, contract, quasi-contract, delict, or quasi-delict.
And although a criminal case was filed by petitioner against respondent
Rosales, this is not enough reason for petitioner to issue a “Hold Out” order as
the case is still pending and no final judgment of conviction has been rendered
against respondent Rosales.
In fact, it is significant to note that at the time petitioner issued the
“Hold Out” order, the criminal complaint had not yet been filed. Thus,
considering that respondent Rosales is not liable under any of the five sources
of obligation, there was no legal basis for petitioner to issue the “Hold Out”
order. Accordingly, we agree with the findings of the RTC and the CA that the
“Hold Out” clause does not apply in the instant case. In view of the foregoing,
the Court found that petitioner is guilty of breach of contract when it
unjustifiably refused to release respondents’ deposit despite demand. Having
breached its contract with respondents, petitioner is liable for damages.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178610 November 17, 2010
HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF
RETIREMENT PLAN, Retirement Trust Fund, Inc.) Petitioner,
vs.
SPOUSES BIENVENIDO AND EDITHA BROQUEZA, Respondents.
DECISION
CARPIO, J.:
G.R. No. 178610 is a petition for review1 assailing the Decision2 promulgated
on 30 March 2006 by the Court of Appeals (CA) in CA-G.R. SP No. 62685.
The appellate court granted the petition filed by Fe Gerong (Gerong) and
Spouses Bienvenido and Editha Broqueza (spouses Broqueza) and
dismissed the consolidated complaints filed by Hongkong and Shanghai
Banking Corporation, Ltd. - Staff Retirement Plan (HSBCL-SRP) for recovery
of sum of money. The appellate court reversed and set aside the
Decision3 of Branch 139 of the Regional Trial Court of Makati City (RTC) in
Civil Case No. 00-787 dated 11 December 2000, as well as its Order4 dated
5 September 2000. The RTC’s decision affirmed the Decision5 dated 28
December 1999 of Branch 61 of the Metropolitan Trial Court (MeTC) of
Makati City in Civil Case No. 52400 for Recovery of a Sum of Money.
The Facts
The appellate court narrated the facts as follows:
Petitioners Gerong and [Editha] Broqueza (defendants below) are
employees of Hongkong and Shanghai Banking Corporation (HSBC). They
are also members of respondent Hongkong Shanghai Banking Corporation,
Ltd. Staff Retirement Plan (HSBCL-SRP, plaintiff below). The HSBCL-SRP
is a retirement plan established by HSBC through its Board of Trustees for
the benefit of the employees.
On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the
amount of Php175,000.00. On December 12, 1991, she again applied and
was granted an appliance loan in the amount of Php24,000.00. On the other
hand, petitioner Gerong applied and was granted an emergency loan in the
amount of Php35,780.00 on June 2, 1993. These loans are paid through
automatic salary deduction.
Meanwhile [in 1993], a labor dispute arose between HSBC and its
employees. Majority of HSBC’s employees were terminated, among whom
are petitioners Editha Broqueza and Fe Gerong. The employees then filed
an illegal dismissal case before the National Labor Relations Commission
(NLRC) against HSBC. The legality or illegality of such termination is now
pending before this appellate Court in CA G.R. CV No. 56797,
entitled Hongkong Shanghai Banking Corp. Employees Union, et al. vs.
National Labor Relations Commission, et al.
Because of their dismissal, petitioners were not able to pay the monthly
amortizations of their respective loans. Thus, respondent HSBCL-SRP
considered the accounts of petitioners delinquent. Demands to pay the
respective obligations were made upon petitioners, but they failed to pay. 6
HSBCL-SRP, acting through its Board of Trustees and represented by
Alejandro L. Custodio, filed Civil Case No. 52400 against the spouses
Broqueza on 31 July 1996. On 19 September 1996, HSBCL-SRP filed Civil
Case No. 52911 against Gerong. Both suits were civil actions for recovery
and collection of sums of money.
The Metropolitan Trial Court’s Ruling
On 28 December 1999, the MeTC promulgated its Decision 7 in favor of
HSBCL-SRP. The MeTC ruled that the nature of HSBCL-SRP’s demands for
payment is civil and has no connection to the ongoing labor dispute. Gerong
and Editha Broqueza’s termination from employment resulted in the loss of
continued benefits under their retirement plans. Thus, the loans secured by
their future retirement benefits to which they are no longer entitled are
reduced to unsecured and pure civil obligations. As unsecured and pure
obligations, the loans are immediately demandable.
The dispositive portion of the MeTC’s decision reads:
WHEREFORE, premises considered and in view of the foregoing, the Court
finds that the plaintiff was able to prove by a preponderance of evidence the
existence and immediate demandability of the defendants’ loan obligations
as judgment is hereby rendered in favor of the plaintiff and against the
defendants in both cases, ordering the latter:
1. In Civil Case No. 52400, to pay the amount of Php116,740.00 at
six percent interest per annum from the time of demand and in Civil
Case No. 52911, to pay the amount of Php25,344.12 at six percent
per annum from the time of the filing of these cases, until the
amount is fully paid;
2. To pay the amount of Php20,000.00 each as reasonable
attorney’s fees;
3. Cost of suit.
SO ORDERED.8
Gerong and the spouses Broqueza filed a joint appeal of the MeTC’s
decision before the RTC. Gerong’s case was docketed Civil Case No. 00-
786, while the spouses Broqueza’s case was docketed as Civil Case No. 00-
787.
The Regional Trial Court’s Ruling
The RTC initially denied the joint appeal because of the belated filing of
Gerong and the spouses Broqueza’s memorandum. The RTC later
reconsidered the order of denial and resolved the issues in the interest of
justice.
On 11 December 2000, the RTC affirmed the MeTC’s decision in toto. 9
The RTC ruled that Gerong and Editha Broqueza’s termination from
employment disqualified them from availing of benefits under their retirement
plans. As a consequence, there is no longer any security for the loans.
HSBCL-SRP has a legal right to demand immediate settlement of the unpaid
balance because of Gerong and Editha Broqueza’s continued default in
payment and their failure to provide new security for their loans. Moreover,
the absence of a period within which to pay the loan allows HSBCL-SRP to
demand immediate payment. The loan obligations are considered pure
obligations, the fulfillment of which are demandable at once.
Gerong and the spouses Broqueza then filed a Petition for Review under
Rule 42 before the CA.
The Ruling of the Court of Appeals
On 30 March 2006, the CA rendered its Decision10 which reversed the 11
December 2000 Decision of the RTC. The CA ruled that the HSBCL-SRP’s
complaints for recovery of sum of money against Gerong and the spouses
Broqueza are premature as the loan obligations have not yet matured. Thus,
no cause of action accrued in favor of HSBCL-SRP. The dispositive portion
of the appellate court’s Decision reads as follows:
WHEREFORE, the assailed Decision of the RTC is REVERSED and SET
ASIDE. A new one is hereby rendered DISMISSING the consolidated
complaints for recovery of sum of money.
SO ORDERED.11
HSBCL-SRP filed a motion for reconsideration which the CA denied for lack
of merit in its Resolution12 promulgated on 19 June 2007.
On 6 August 2007, HSBCL-SRP filed a manifestation withdrawing the
petition against Gerong because she already settled her obligations. In a
Resolution13 of this Court dated 10 September 2007, this Court treated the
manifestation as a motion to withdraw the petition against Gerong, granted
the motion, and considered the case against Gerong closed and terminated.
Issues
HSBCL-SRP enumerated the following grounds to support its Petition:
I. The Court of Appeals has decided a question of substance in a
way not in accord with law and applicable decisions of this
Honorable Court; and
II. The Court of Appeals has departed from the accepted and usual
course of judicial proceedings in reversing the decision of the
Regional Trial Court and the Metropolitan Trial Court. 14
The Court’s Ruling
The petition is meritorious. We agree with the rulings of the MeTC and the
RTC.
The Promissory Notes uniformly provide:
PROMISSORY NOTE
P_____ Makati, M.M. ____ 19__
FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to pay to
THE HSBC RETIREMENT PLAN (hereinafter called the "PLAN") at its office
in the Municipality of Makati, Metro Manila, on or before until fully paid the
sum of PESOS ___ (P___) Philippine Currency without discount, with
interest from date hereof at the rate of Six per cent (6%) per annum, payable
monthly.
I/WE agree that the PLAN may, upon written notice, increase the interest
rate stipulated in this note at any time depending on prevailing conditions.
I/WE hereby expressly consent to any extensions or renewals hereof for a
portion or whole of the principal without notice to the other(s), and in such a
case our liability shall remain joint and several.1avvphi1
In case collection is made by or through an attorney, I/WE jointly and
severally agree to pay ten percent (10%) of the amount due on this note (but
in no case less than P200.00) as and for attorney’s fees in addition to
expenses and costs of suit.
In case of judicial execution, I/WE hereby jointly and severally waive our
rights under the provisions of Rule 39, Section 12 of the Rules of Court. 15
In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the
Civil Code:
Art. 1179. Every obligation whose performance does not depend upon a
future or uncertain event, or upon a past event unknown to the parties,
is demandable at once.
x x x. (Emphasis supplied.)
We affirm the findings of the MeTC and the RTC that there is no date of
payment indicated in the Promissory Notes. The RTC is correct in ruling that
since the Promissory Notes do not contain a period, HSBCL-SRP has the
right to demand immediate payment. Article 1179 of the Civil Code applies.
The spouses Broqueza’s obligation to pay HSBCL-SRP is a pure obligation.
The fact that HSBCL-SRP was content with the prior monthly check-off from
Editha Broqueza’s salary is of no moment. Once Editha Broqueza defaulted
in her monthly payment, HSBCL-SRP made a demand to enforce a pure
obligation.
In their Answer, the spouses Broqueza admitted that prior to Editha
Broqueza’s dismissal from HSBC in December 1993, she "religiously paid
the loan amortizations, which HSBC collected through payroll check-off."16 A
definite amount is paid to HSBCL-SRP on a specific date. Editha Broqueza
authorized HSBCL-SRP to make deductions from her payroll until her loans
are fully paid. Editha Broqueza, however, defaulted in her monthly loan
payment due to her dismissal. Despite the spouses Broqueza’s
protestations, the payroll deduction is merely a convenient mode of payment
and not the sole source of payment for the loans. HSBCL-SRP never agreed
that the loans will be paid only through salary deductions. Neither did
HSBCL-SRP agree that if Editha Broqueza ceases to be an employee of
HSBC, her obligation to pay the loans will be suspended. HSBCL-SRP can
immediately demand payment of the loans at anytime because the obligation
to pay has no period. Moreover, the spouses Broqueza have already
incurred in default in paying the monthly installments.
Finally, the enforcement of a loan agreement involves "debtor-creditor
relations founded on contract and does not in any way concern employee
relations. As such it should be enforced through a separate civil action in the
regular courts and not before the Labor Arbiter."17
WHEREFORE, we GRANT the petition. The Decision of the Court of
Appeals in CA-G.R. SP No. 62685 promulgated on 30 March 2006
is REVERSED and SET ASIDE. The decision of Branch 139 of the Regional
Trial Court of Makati City in Civil Case No. 00-787, as well as the decision of
Branch 61 of the Metropolitan Trial Court of Makati City in Civil Case No.
52400 against the spouses Bienvenido and Editha Broqueza,
are AFFIRMED. Costs against respondents.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-29900 June 28, 1974
IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA,
Deceased, GEORGE PAY, petitioner-appellant,
vs.
SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.
Florentino B. del Rosario for petitioner-appellant.
Manuel V. San Jose for oppositor-appellee.
FERNANDO, J.:p
There is no difficulty attending the disposition of this appeal by petitioner on
questions of law. While several points were raised, the decisive issue is
whether a creditor is barred by prescription in his attempt to collect on a
promissory note executed more than fifteen years earlier with the debtor
sued promising to pay either upon receipt by him of his share from a certain
estate or upon demand, the basis for the action being the latter alternative.
The lower court held that the ten-year period of limitation of actions did
apply, the note being immediately due and demandable, the creditor
admitting expressly that he was relying on the wording "upon demand." On
the above facts as found, and with the law being as it is, it cannot be said
that its decision is infected with error. We affirm.
From the appealed decision, the following appears: "The parties in this case
agreed to submit the matter for resolution on the basis of their pleadings and
annexes and their respective memoranda submitted. Petitioner George Pay
is a creditor of the Late Justo Palanca who died in Manila on July 3, 1963.
The claim of the petitioner is based on a promissory note dated January 30,
1952, whereby the late Justo Palanca and Rosa Gonzales Vda. de Carlos
Palanca promised to pay George Pay the amount of P26,900.00, with
interest thereon at the rate of 12% per annum. George Pay is now before
this Court, asking that Segundina Chua vda. de Palanca, surviving spouse of
the late Justo Palanca, he appointed as administratrix of a certain piece of
property which is a residential dwelling located at 2656 Taft Avenue, Manila,
covered by Tax Declaration No. 3114 in the name of Justo Palanca,
assessed at P41,800.00. The idea is that once said property is brought
under administration, George Pay, as creditor, can file his claim against the
administratrix."1 It then stated that the petition could not prosper as there
was a refusal on the part of Segundina Chua Vda. de Palanca to be
appointed as administratrix; that the property sought to be administered no
longer belonged to the debtor, the late Justo Palanca; and that the rights of
petitioner-creditor had already prescribed. The promissory note, dated
January 30, 1962, is worded thus: " `For value received from time to time
since 1947, we [jointly and severally promise to] pay to Mr. [George Pay] at
his office at the China Banking Corporation the sum of [Twenty Six
Thousand Nine Hundred Pesos] (P26,900.00), with interest thereon at the
rate of 12% per annum upon receipt by either of the undersigned of cash
payment from the Estate of the late Don Carlos Palanca or upon demand'. . .
. As stated, this promissory note is signed by Rosa Gonzales Vda. de Carlos
Palanca and Justo Palanca."2 Then came this paragraph: "The Court has
inquired whether any cash payment has been received by either of the
signers of this promissory note from the Estate of the late Carlos Palanca.
Petitioner informed that he does not insist on this provision but that petitioner
is only claiming on his right under the promissory note ." 3 After which, came
the ruling that the wording of the promissory note being "upon demand," the
obligation was immediately due. Since it was dated January 30, 1952, it was
clear that more "than ten (10) years has already transpired from that time
until to date. The action, therefore, of the creditor has definitely
prescribed."4 The result, as above noted, was the dismissal of the petition.
In an exhaustive brief prepared by Attorney Florentino B. del Rosario,
petitioner did assail the correctness of the rulings of the lower court as to the
effect of the refusal of the surviving spouse of the late Justo Palanca to be
appointed as administratrix, as to the property sought to be administered no
longer belonging to the debtor, the late Justo Palanca, and as to the rights of
petitioner-creditor having already prescribed. As noted at the outset, only the
question of prescription need detain us in the disposition of this appeal.
Likewise, as intimated, the decision must be affirmed, considering the clear
tenor of the promissory note.
From the manner in which the promissory note was executed, it would
appear that petitioner was hopeful that the satisfaction of his credit could he
realized either through the debtor sued receiving cash payment from the
estate of the late Carlos Palanca presumptively as one of the heirs, or, as
expressed therein, "upon demand." There is nothing in the record that would
indicate whether or not the first alternative was fulfilled. What is undeniable
is that on August 26, 1967, more than fifteen years after the execution of the
promissory note on January 30, 1952, this petition was filed. The defense
interposed was prescription. Its merit is rather obvious. Article 1179 of the
Civil Code provides: "Every obligation whose performance does not depend
upon a future or uncertain event, or upon a past event unknown to the
parties, is demandable at once." This used to be Article 1113 of the Spanish
Civil Code of 1889. As far back as Floriano v. Delgado,5 a 1908 decision, it
has been applied according to its express language. The well-known
Spanish commentator, Manresa, on this point, states: "Dejando con acierto,
el caracter mas teorico y grafico del acto, o sea la perfeccion de este, se fija,
para determinar el concepto de la obligacion pura, en el distinctive de esta, y
que es consecuencia de aquel: la exigibilidad immediata."6

The obligation being due and demandable, it would appear that the filing of
the suit after fifteen years was much too late. For again, according to the
Civil Code, which is based on Section 43 of Act No. 190, the prescriptive
period for a written contract is that of ten years. 7 This is another instance
where this Court has consistently adhered to the express language of the
applicable norm.8 There is no necessity therefore of passing upon the other
legal questions as to whether or not it did suffice for the petition to fail just
because the surviving spouse refuses to be made administratrix, or just
because the estate was left with no other property. The decision of the lower
court cannot be overturned.

WHEREFORE, the lower court decision of July 24, 1968 is affirmed. Costs
against George Pay.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16570 March 9, 1922
SMITH, BELL & CO., LTD., plaintiff-appellant,
vs.
VICENTE SOTELO MATTI, defendant-appellant.
Ross and Lawrence and Ewald E. Selph for plaintiff-appellant.
Ramon Sotelo for defendant-appellant.
ROMUALDEZ, J.:
In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente
Sotelo, entered into contracts whereby the former obligated itself to sell, and
the latter to purchase from it, two steel tanks, for the total price of twenty-one
thousand pesos (P21,000), the same to be shipped from New York and
delivered at Manila "within three or four months;" two expellers at the price of
twenty five thousand pesos (P25,000) each, which were to be shipped from
San Francisco in the month of September, 1918, or as soon as possible; and
two electric motors at the price of two thousand pesos (P2,000) each, as to
the delivery of which stipulation was made, couched in these words:
"Approximate delivery within ninety days. — This is not guaranteed."
The tanks arrived at Manila on the 27th of April, 1919: the expellers on the
26th of October, 1918; and the motors on the 27th of February, 1919.
The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of
these goods, but Mr. Sotelo refused to receive them and to pay the prices
stipulated.
The plaintiff brought suit against the defendant, based on four separate
causes of action, alleging, among other facts, that it immediately notified the
defendant of the arrival of the goods, and asked instructions from him as to
the delivery thereof, and that the defendant refused to receive any of them
and to pay their price. The plaintiff, further, alleged that the expellers and the
motors were in good condition. (Amended complaint, pages 16-30, Bill of
Exceptions.)
In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil
Refining and By-Products Co., Inc., denied the plaintiff's allegations as to the
shipment of these goods and their arrival at Manila, the notification to the
defendant, Mr. Sotelo, the latter's refusal to receive them and pay their price,
and the good condition of the expellers and the motors, alleging as special
defense that Mr. Sotelo had made the contracts in question as manager of
the intervenor, the Manila Oil Refining and By-Products Co., Inc which fact
was known to the plaintiff, and that "it was only in May, 1919, that it notified
the intervenor that said tanks had arrived, the motors and the expellers
having arrived incomplete and long after the date stipulated." As a
counterclaim or set-off, they also allege that, as a consequence of the
plaintiff's delay in making delivery of the goods, which the intervenor
intended to use in the manufacture of cocoanut oil, the intervenor suffered
damages in the sums of one hundred sixteen thousand seven hundred
eighty-three pesos and ninety-one centavos (P116,783.91) for the
nondelivery of the tanks, and twenty-one thousand two hundred and fifty
pesos (P21,250) on account of the expellers and the motors not having
arrived in due time.
The case having been tried, the court below absolved the defendants from
the complaint insofar as the tanks and the electric motors were concerned,
but rendered judgment against them, ordering them to "receive the aforesaid
expellers and pay the plaintiff the sum of fifty thousand pesos (P50,00), the
price of the said goods, with legal interest thereon from July 26, 1919, and
costs."
Both parties appeal from this judgment, each assigning several errors in the
findings of the lower court.
The principal point at issue in this case is whether or not, under the contracts
entered into and the circumstances established in the record, the plaintiff
has fulfilled, in due time, its obligation to bring the goods in question to
Manila. If it has, then it is entitled to the relief prayed for; otherwise, it must
be held guilty of delay and liable for the consequences thereof.
To solve this question, it is necessary to determine what period was fixed for
the delivery of the goods.
As regards the tanks, the contracts A and B (pages 61 and 62 of the record)
are similar, and in both of them we find this clause:
To be delivered within 3 or 4 months — The promise or indication
of shipment carries with it absolutely no obligation on our part —
 Government regulations, railroad embargoes, lack of vessel space,
the exigencies of the requirement of the United States Government,
or a number of causes may act to entirely vitiate the indication of
shipment as stated. In other words, the order is accepted on the
basis of shipment at Mill's convenience, time of shipment being
merely an indication of what we hope to accomplish.
In the contract Exhibit C (page 63 of the record), with reference to the
expellers, the following stipulation appears:
The following articles, hereinbelow more particularly described, to
be shipped at San Francisco within the month of September /18, or
as soon as possible. — Two Anderson oil expellers . . . .
And in the contract relative to the motors (Exhibit D, page 64, rec.) the
following appears:
Approximate delivery within ninety days. — This is not guaranteed.
— This sale is subject to our being able to obtain Priority
Certificate, subject to the United States Government requirements
and also subject to confirmation of manufactures.
In all these contracts, there is a final clause as follows:
The sellers are not responsible for delays caused by fires, riots on
land or on the sea, strikes or other causes known as "Force
Majeure" entirely beyond the control of the sellers or their
representatives.
Under these stipulations, it cannot be said that any definite date was fixed
for the delivery of the goods. As to the tanks, the agreement was that the
delivery was to be made "within 3 or 4 months," but that period was subject
to the contingencies referred to in a subsequent clause. With regard to the
expellers, the contract says "within the month of September, 1918," but to
this is added "or as soon as possible." And with reference to the motors, the
contract contains this expression, "Approximate delivery within ninety days,"
but right after this, it is noted that "this is not guaranteed."
The oral evidence falls short of fixing such period.
From the record it appears that these contracts were executed at the time of
the world war when there existed rigid restrictions on the export from the
United States of articles like the machinery in question, and maritime, as well
as railroad, transportation was difficult, which fact was known to the parties;
hence clauses were inserted in the contracts, regarding "Government
regulations, railroad embargoes, lack of vessel space, the exigencies of the
requirements of the United States Government," in connection with the tanks
and "Priority Certificate, subject to the United State Government
requirements," with respect to the motors. At the time of the execution of the
contracts, the parties were not unmindful of the contingency of the United
States Government not allowing the export of the goods, nor of the fact that
the other foreseen circumstances therein stated might prevent it.
Considering these contracts in the light of the civil law, we cannot but
conclude that the term which the parties attempted to fix is so uncertain that
one cannot tell just whether, as a matter of fact, those articles could be
brought to Manila or not. If that is the case, as we think it is, the obligations
must be regarded as conditional.
Obligations for the performance of which a day certain has been
fixed shall be demandable only when the day arrives.
A day certain is understood to be one which must necessarily
arrive, even though its date be unknown.
If the uncertainty should consist in the arrival or non-arrival of the
day, the obligation is conditional and shall be governed by the rules
of the next preceding section. (referring to pure and conditional
obligations). (Art. 1125, Civ. Code.)
And as the export of the machinery in question was, as stated in the
contract, contingent upon the sellers obtaining certificate of priority and
permission of the United States Government, subject to the rules and
regulations, as well as to railroad embargoes, then the delivery was subject
to a condition the fulfillment of which depended not only upon the effort of
the herein plaintiff, but upon the will of third persons who could in no way be
compelled to fulfill the condition. In cases like this, which are not expressly
provided for, but impliedly covered, by the Civil Code, the obligor will be
deemed to have sufficiently performed his part of the obligation, if he has
done all that was in his power, even if the condition has not been fulfilled in
reality.
In such cases, the decisions prior to the Civil Code have held that
the obligee having done all that was in his power, was entitled to
enforce performance of the obligation. This performance, which is
 fictitious — not real — is not expressly authorized by the Code,
which limits itself only to declare valid those conditions and the
obligation thereby affected; but it is neither disallowed, and the
Code being thus silent, the old view can be maintained as a
doctrine. (Manresa's commentaries on the Civil Code [1907], vol. 8,
page 132.)
The decisions referred to by Mr. Manresa are those rendered by the
supreme court of Spain on November 19, 1896, and February 23, 1871.
In the former it is held:
First. That when the fulfillment of the conditions does not depend
on the will of the obligor, but on that of a third person who can in no
way be compelled to carry it out, and it is found by the lower court
that the obligor has done all in his power to comply with the
obligation, the judgment of the said court, ordering the other party
to comply with his part of the contract, is not contrary to the law of
contracts, or to Law 1, Tit. I, Book 10, of the "Novísima
Recopilación," or Law 12, Tit. 11, of Partida 5, when in the said
finding of the lower court, no law or precedent is alleged to have
been violated. (Jurisprudencia Civil published by the directors of
the Revista General de Legislacion y Jurisprudencia [1866], vol. 14,
page 656.)
In the second decision, the following doctrine is laid down:
Second. That when the fulfillment of the condition does not depend
on the will of the obligor, but on that of a third person, who can in
no way be compelled to carry it out, the obligor's part of the contract
is complied withalf Belisario not having exercised his right of
repurchase reserved in the sale of Basilio Borja mentioned in
paragraph (13) hereof, the affidavit of Basilio Borja for
the consolidacion de dominio was presented for record in the
registry of deeds and recorded in the registry on the same date.
(32) The Maximo Belisario left a widow, the opponent Adelina
Ferrer and three minor children, Vitaliana, Eugenio, and Aureno
Belisario as his only heirs.
(33) That in the execution and sales thereunder, in which C. H.
McClure appears as the judgment creditor, he was represented by
the opponent Peter W. Addison, who prepared and had charge of
publication of the notices of the various sales and that in none of
the sales was the notice published more than twice in a newspaper.
The claims of the opponent-appellant Addison have been very fully
and ably argued by his counsel but may, we think, be disposed of in
comparatively few words. As will be seen from the foregoing
statement of facts, he rest his title (1) on the sales under the
executions issued in cases Nos. 435, 450, 454, and 499 of the
court of the justice of the peace of Dagupan with the priority of
inscription of the last two sales in the registry of deeds, and (2) on a
purchase from the Director of Lands after the land in question had
been forfeited to the Government for non-payment of taxes under
Act No. 1791.
The sheriff's sales under the execution mentioned are fatally
defective for what of sufficient publication of the notice of sale.
Section 454 of the Code of civil Procedure reads in part as follows:
SEC. 454. Before the sale of property on execution, notice thereof
must be given, as follows:
1. In case of perishable property, by posing written notice of the
time and place of the sale in three public places of the municipality
or city where the sale is to take place, for such time as may be
reasonable, considering the character and condition of the property;
2. * * * * * * *
3. In cases of real property, by posting a similar notice particularly
describing the property, for twenty days in three public places of the
municipality or city where the property is situated, and also where
the property is to be sold, and publishing a copy thereof once a
week, for the same period, in some newspaper published or having
general circulation in the province, if there be one. If there are
newspaper published in the province in both the Spanish and
English languages, then a like publication for a like period shall be
made in one newspaper published in the Spanish language, and in
one published in the English language: Provided, however, That
such publication in a newspaper will not be required when the
assessed valuation of the property does not exceed four hundred
pesos;
 4. * * * * * * *
Examining the record, we find that in cases Nos. 435 and 450 the sales took
place on October 14, 1916; the notice first published gave the date of the
sale as October 15th, but upon discovering that October 15th was a Sunday,
the date was changed to October 14th. The correct notice was published
twice in a local newspaper, the first publication was made on October 7th
and the second and last on October 14th, the date of the sale itself. The
newspaper is a weekly periodical published every Saturday afternoon.
In case No. 454 there were only two publications of the notice in a
newspaper, the first publication being made only fourteen days before the
date of the sale. In case No. 499, there were also only two publications, the
first of which was made thirteen days before the sale. In the last case the
sale was advertised for the hours of from 8:30 in the morning until 4:30 in the
afternoon, in violation of section 457 of the Code of Civil Procedure. In cases
Nos. 435 and 450 the hours advertised were from 9:00 in the morning until
4.30 in the afternoon. In all of the cases the notices of the sale were
prepared by the judgment creditor or his agent, who also took charged of the
publication of such notices.
In the case of Campomanes vs. Bartolome and Germann & Co. (38 Phil.,
808), this court held that if a sheriff sells without the notice prescribe by the
Code of Civil Procedure induced thereto by the judgment creditor and the
purchaser at the sale is the judgment creditor, the sale is absolutely void and
not title passes. This must now be regarded as the settled doctrine in this
jurisdiction whatever the rule may be elsewhere.
It appears affirmatively from the evidence in the present case that there is a
newspaper published in the province where the sale in question took place
and that the assessed valuation of the property disposed of at each sale
exceeded P400. Comparing the requirements of section 454, supra, with
what was actually done, it is self-evident that notices of the sales mentioned
were not given as prescribed by the statute and taking into consideration
that in connection with these sales the appellant Addison was either the
judgment creditor or else occupied a position analogous to that of a
judgment creditor, the sales must be held invalid.
The conveyance or reconveyance of the land from the Director of Lands is
equally invalid. The provisions of Act No. 1791 pertinent to the purchase or
repurchase of land confiscated for non-payment of taxes are found in section
19 of the Act and read:
. . . In case such redemption be not made within the time above
specified the Government of the Philippine Islands shall have an
absolute, indefeasible title to said real property. Upon the expiration
of the said ninety days, if redemption be not made, the provincial
treasurer shall immediately notify the Director of Lands of the
forfeiture and furnish him with a description of the property, and
said Director of Lands shall have full control and custody thereof to
lease or sell the same or any portion thereof in the same manner as
other public lands are leased or sold: Provided, That the original
owner, or his legal representative, shall have the right to
repurchase the entire amount of his said real property, at any time
before a sale or contract of sale has been made by the director of
Lands to a third party, by paying therefore the whole sum due
thereon at the time of ejectment together with a penalty of ten per
centum . . . .
The appellant Addison repurchased under the final proviso of the section
quoted and was allowed to do so as the successor in interest of the original
owner under the execution sale above discussed. As we have seen, he
acquired no rights under these sales, was therefore not the successor of the
original owner and could only have obtained a valid conveyance of such
titles as the Government might have by following the procedure prescribed
by the Public Land Act for the sale of public lands. he is entitled to
reimbursement for the money paid for the redemption of the land, with
interest, but has acquired no title through the redemption.
The question of the priority of the record of the sheriff's sales over that of the
sale from Belisario to Borja is extensively argued in the briefs, but from our
point of view is of no importance; void sheriff's or execution sales cannot be
validated through inscription in the Mortgage Law registry.
The opposition of Adelina Ferrer must also be overruled. She maintained
that the land in question was community property of the marriage of Eulalio
Belisario and Paula Ira: that upon the death of Paula Ira inealed from is
modified, and the defendant Mr. Vicente Sotelo Matti, sentenced to accept
and receive from the plaintiff the tanks, the expellers and the motors in
question, and to pay the plaintiff the sum of ninety-six thousand pesos
(P96,000), with legal interest thereon from July 17, 1919, the date of the
filing of the complaint, until fully paid, and the costs of both instances. So
ordered.