Ybiernas v Tanco-Gabaldon

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CivPro:
Anticipatory Breach Doctrine.
BLOSSOM AND COMPANY, INC vs.
MANILA GAS CORPORATION

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-32958 November 8, 1930

BLOSSOM AND COMPANY, INC., plaintiff-appellant,

vs.
MANILA GAS CORPORATION, defendant-appellee.

Harvey and O'Brien for appellant.

Ross, Lawrence and Selph and John B. Miller for appellee.

STATEMENT

In its complaint filed March 3, 1927, the plaintiff alleges that on September 10, 1918, it entered
into a contract with the defendant in which the plaintiff promised and undertook to purchase and
receive from the defendant and the defendant agreed to sell and deliver to the plaintiff, for a
period of four years, three tons of water gas tar per month from September to January 1, 1919
and twenty tons per month after January 1, 1919, for the remaining period of the contract; one-
half ton of coal gas tar a month from September to January 1, 1919, and six tons per month after
January 1, 1919, for the remainder of the contract, delivery to be made at the plant of the
defendant in the City of Manila, without containers and at the price of P65 per ton for each kind
of gas tar, it being agreed that this price should prevail only so long as the raw materials — coal
and crude oil —used by the defendant in the manufacture of gas should cost the defendant the
same price as that prevailing at the time of the contract, and that in the event of an increase or
decrease in the cost of raw material there would be a corresponding increase or decrease in the
price of the tar. That on January 31, 1919, this contract was amended so that it should continue to
remain in force for a period of ten years from January 1, 1919, and it was agreed that the plaintiff
should not be obliged to take the qualities of the tars required during the year 1919, but that it
might purchase tars in such quantities as it could use to advantage at the stipulated price. That
after the year 1919 the plaintiff would take at least the quantities specified in the contract of
September 10, 1918, to be taken from and after January 1, 1919, and that at its option it would
have the right to take any quantity of water gas tar in excess of the minimum quantity specified
in that contract and up to the total amount of output of that tar of defendant's plant and also to
take any quantity of coal gas tar in excess of the minimum quantity specified in that contract and
up to 50 per cent of defendant's entire output of coal gas tar, and that by giving the defendant
ninety days' notice, it would have the right at its option to take the entire output of defendant's
coal gas tar, except such as it might need for its own use in and about its plant. That in
consideration of this modification of the contract of September 10, 1918, plaintiff agreed to
purchase from the defendant of certain piece of land lying adjacent to its plant at the price of P5
per square meter, the proof of which is evidenced by Exhibit C. That pursuant to Exhibit C,
defendant sold and conveyed the land to the plaintiff which in turn executed a mortgage thereon
to the defendant for P17,140.20, to secure the payment of the balance of the purchase price.

It is then alleged:

VIII. That about the last part of July, 1920 the defendant herein, the Manila Gas
Corporation willfully, and deliberately breached its said contract, Exhibit C, with the
plaintiff by ceasing to deliver any coal and water gas tar to it thereunder solely because of
the increased price of its tar products and its desire to secure better prices therefor than
plaintiff was obliged to pay to it, notwithstanding the frequent and urgent demands made
by the plaintiff upon it to comply with its aforesaid contract by continuing to deliver the
coal and water gas tar to the plaintiff thereunder, but the said defendant flatly refused to
make any deliveries under said contract, and finally on November 23, 1923, the plaintiff
was forced to commence action against the defendant herein in the Court of First Instance
of Manila, being case No. 25352, of that court entitled 'Blossom & Co., plaintiff, vs.
Manila Gas Corporation, defendant,' to recover the damages which it had up to that time
suffered by reason of such flagrant violation of said contract on the part of the defendant
herein, and to obtain the specific performance of the said contract and after due trial of
that action, judgment was entered therein in favor of the plaintiff herein and against the
said defendant, the Manila Gas Corporation, for the sum of P26,119.08, as the damages
suffered by this plaintiff by the defendant's breach of said contract from July, 1920, up to
and including September, 1923, with legal interest thereon from November 23, 1923, and
for the costs but the court refused to order the said defendant to resume the delivery of
the coal and water gas tar to the plaintiff under said contract, but left the plaintiff with its
remedy for damages against said defendant for the subsequent breaches of said contract,
which said decision, as shown by the copy attached hereto as Exhibit G, and made a part
hereof, was affirmed by our Supreme Court on March 3, 1926;

IX. That after the defendant had willfully and deliberately violated its said contract as
herein-before alleged, and the plaintiff suffered great damage by reason thereof, the
plaintiff claimed the right to off- set its damages against the balance due from it to said
defendant on account of the purchase of said land from the defendant, and immediately
thereupon and notwithstanding said defendant was justly indebted to the plaintiff at that
 time as shown by the judgment of the Court Exhibit G, in more that four times the
amount due to it from the plaintiff, the said defendant caused to be presented against the
plaintiff a foreclosure action, known as the Manila Gas Corporation versus Blossom &
Company, No. 24267, of the Court of First Instance of Manila, and obtained judgment
therein ordering that Blossom & Company pay the last installment and interest due on
said land or else the land and improvements placed thereon by the plaintiff would be sold
as provided by law in such cases to satisfy the same, and the said defendant proceeded
with the sale of said property under said judgment and did everything in its power to sell
the same for the sole purpose of crushing and destroying the plaintiff's business and thus
rendering it impossible for the plaintiff herein to continue with its said contract in the
event that said defendant might in the future consider it more profitable to resume
performance of the same, but fortunately the plaintiff was able to redeem its property as
well as to comply with its contract and continued demanding that the defendant
performed its said contract and deliver to it the coal and water gas tar required thereby.

That the defendant made no deliveries under its contract, Exhibit C, from July, 1920 to March
26, 1926, or until after the Supreme Court affirmed the judgment of the lower court for damages
in the sum of P26, 119.08. 1

It is then alleged that:

. . . On March 26, 1926 the said defendant offered to resume delivery to the plaintiff from
that date of the minimum monthly quantities of tars stated in its contract ,and the plaintiff
believing that the said defendant was at least going to try to act in good faith in the
further performance of its said contract, commenced to accept deliveries of said tars from
it, and at once ascertained that the said defendant was deliberately charging it prices
much higher than the contract price, and while the plaintiff accepted deliveries of the
minimum quantities of tars stated in said contract up to and including January, 1927,
(although it had demanded deliveries of larger quantities thereunder, as hereinafter
alleged) and paid the increased prices demanded by the defendant, in the belief that it was
its duty to minimize the damages as much as possible which the defendant would be
required to pay to it by reason of its violation of said contract, it has in all cases done so
under protest and with the express reservation of the right to demand from the said
defendant an adjustment of the prices charged in violation of its contract, and the right to
the payment of the losses which it had and would suffer by reason of its refusal to make
additional deliveries under said contract, and it also has continuously demanded that the
said defendant furnish to it statements supported by its invoices showing the cost prices if
its raw materials — coal and crude oil — upon which the contract price of the tars in
question is fixed, which is the only way the plaintiff has to calculate the true price of said
tars, but said defendant has and still refuses to furnish such information, and will continue
to refuse to do so, unless ordered to furnish such information to the plaintiff by the court,
and the plaintiff believes from the information which it now has and so alleges that the
said defendant has overcharged it on the deliveries of said tars mentioned in the sum of at
least P10,000, all in violation of the rights of the plaintiff under its said contract with the
defendant.
That on January 31, 1926 and pursuant to Exhibit C. plaintiff notified the defendant in writing
that commencing with the month of August, 1926 it desired to take delivery of 50 per cent of
defendant's coal tar production for that month and that on November 1, 1926, it desired to take
the entire output of defendant's coal gas tar, but that the defendant refused and still refuses to
make such deliveries unless plaintiff would take all of its water gas tar production with the
desired quantity of coal gas tar which refusal was a plain violation of the contract. That on
January 29, 1927, and in accord with Exhibit C, plaintiff notified the defendant in writing that
within ninety days after the initial delivery to it of its total coal gas tar production or in February,
1927, it would require 50 per cent of its total water gas tar production and that in April 1927, it
would require the total output of the defendant of both coal and water gas tars, and that it refused
to make either of such deliveries.

It is then alleged:

XIV. That as shown by the foregoing allegations of this complaint, it is apparent that
notwithstanding the plaintiff in this case has at all times faithfully performed all the terms
and conditions of said contract, Exhibit C, on its part of be performed, and has at all times
and is now ready, able and willing to accept and pay for the deliveries of said coal and
water gas tars required by said contract and the notices given pursuant thereto, the said
defendant, the Manila Gas Corporation, does not intend to comply with its said contract,
Exhibit C, and deliver to the plaintiff at the times and under the terms and conditions
stated therein the quantities of coal and water gas tars required by said contract, and the
several notices given pursuant thereto, and that it is useless for the plaintiff to insist
further upon its performance of the said contract, and for that reason he only feasible
course for the plaintiff to pursue is to ask the court for the rescission of said contract and
for the full damages which the plaintiff has suffered from September, 1923, and will
suffer for the remainder of said contract by reason of the defendant's failure and refusal to
perform the same, and the plaintiff has so notified the said defendant.

That since September, 1923, by reason of the bad faith of the defendant, the plaintiff has been
damaged in the sum of P300,000, for which it prays a corresponding judgment, and that the
contract, Exhibit C, be rescinded and declared void and without force and effect.

After the filing and overruling of its demurrer, the defendant filed an answer in the nature of a
general and specific denial and on April 10, 1928, and upon stipulation of the parties, the court
appointed W. W. Larkin referee, "to take the evidence and, upon completion of the trial, to report
his findings of law and fact to the court."

July 18, 1928, the defendant filed an amended answer in which it alleged as an affirmative
defense, first, that the complaint does not state facts sufficient to constitute cause of action the
reason that a prior adjudication has been had of all the issues involved in this action, and, second,
"that on or about the 16th day of June, 1925, in an action brought in the Court of First Instance of
the City on Manila, Philippine Islands, before the Honorable Geo. R. Harvey, Judge, by Blossom
& Company, plaintiff, vs. Manila Gas Corporation, defendant, being civil case No. 25353, of
said court, for the same cause of action as that set fourth in the complaint herein, said plaintiff
recovered judgment upon the merits thereof, against said defendant decreeing a breach of the
contract sued upon herein, and awarding damages therefor in the sum of P26,119.08 with legal
interest from November 23, 1923, and costs of suit, which judgment was upon appeal affirmed
by the Supreme Court of the Philippine Islands, in case G. R. No. 24777 of said court, on the 3d
day of March, 1926 and reported in volume 48 Philippines Reports at page 848," and it prays that
plaintiff's complaint be dismissed with costs.

After the evidence was taken the referee made an exhaustive report of sixty-pages in which he
found that the plaintiff was entitled to P56,901.53 damages, with legal interest from the date of
the filing on the complaint, to which both parties filed numerous exceptions

In its decision the court says:

Incidental references have been made to the referee's report. It was admirably prepared.
Leaving aside the question of damages and the facts upon which the referee assessed
them, the facts are not in dispute — at least not in serious dispute. They appear in the
documentary evidence and this decision is based upon documents introduced into
evidence by plaintiff. If I could have agreed with the referee in respect to the question of
law, I should have approved his report in toto. If defendant is liable for the damages
accruing from November 23, 1923, the date the first complaint was filed, to April 1st,
1926, the date of resumption of relations; and if defendant, after such resumption of
relations, again violated the contract, the damages assessed by the referee, are, to my way
of thinking, as fair as could be estimated. He went to tremendous pains in figuring out the
details upon which he based his decision. Unfortunately, I cannot agree with his legal
conclusions and the report is set aside except wherein specifically approved.

It is unnecessary to resolve specifically the many exceptions made by both partied to the
referee's report. It would take much time to do so. Much time has already been spent in
preparing this decision. Since both parties have informed me that in case of adverse
judgment ,and appeal would be taken, I desire to conclude the case so that delay will be
avoided.

Let judgment be entered awarding damages to plaintiff in the sum of P2,219.60, with
costs.

From which plaintiff only appealed and assigns twenty-four different errors, of which the
following are material to this opinion:

I. The trial court erred in holding that this suit in so far as the damages from November,
1923, to March 31, 1926, are concerned , is res adjudicata.

II. The trial court erred in holding that the defendant repudiated the contract in question
as a whole, and that the plaintiff when it brought its first suit to collect damages had
already elected and consented to the dissolution of the contract, and its choice once made,
being final, it was estopped to claim that the contract was alive when that suit was
brought.
 xxx xxx xxx

VII. The trial court erred in refusing to sustain plaintiff's third exception to the legal
interpretation placed on the contract in this case by the referee with reference to quantity
of tars and his conclusion with respect to the terms thereof that:

"1. Plaintiff must take and defendant must deliver either the minimum or maximum
quantity of water gas tar and not any quantity from the minimum to the maximum and/or

"2. Plaintiff must take either the minimum and any quantity up to fifty per cent of entire
output of coal gas tar.

"3. With ninety days' notice by plaintiff to defendant the former must take and the latter
must deliver total output of both tars, except such as might be needed by defendant for
use in and about its plants and not any quantity from the minimum up to total output of
both tars." (See page 47, Referee's report.)

And in holding that the option contained in said contract, taking into consideration the
purposes of both parties in entering into the contract, was a claimed by defendant: all the
water gas tar and 50 per cent of the coal gas tar upon immediate notice and all tars upon
ninety day's notice.

VIII. The trial court erred in refusing to sustain plaintiff's fourth exception to the finding
and conclusion of the referee that from the correspondence between the parties it was
apparent that plaintiff did not make a right use of its option, and that the letter of June 25,
1926, and the subsequent demands, with exception of the letter of July 31, 1926, were not
made in pursuance to the terms of the contract, and that defendant had no liability in
refusing to comply therewith, and in allowing plaintiff damages only for the failure of the
defendant to deliver quantities shown in Exhibits Ref. 21 and 22. (See pages 51, 52,
Referee's report.)

IX. The trial court erred in finding and holding that the demands of plaintiff for additional
tars under its contract with the defendant were extravagant and not made in good faith,
and that when it wrote to defendant that it desired maximum quantities of coal gas tars
and only minimum of water gas tars, but with the reservation of going back to minimum
quantities of both at any time it chose, it announced its intention f breaching the contract,
and defendant was under no obligation to deliver maximum quantities of either tars, and
since this was the efficient cause of the failure of defendant to deliver or plaintiff to
accept tars, the blame is attribute to plaintiff, and it cannot recover for a rescission.

xxx xxx xxx

XXIII. The trial court erred in refusing to sustain plaintiff's seventeenth exception to the
finding and conclusion of the referee that the plaintiff is entitled to recover from the
defendant only the following sums:
 Water gas tar (Exhibit Ref. 21) P38,134.60
Coal gas tar (Exhibit Ref. 22) 16,547.33
Overcharges on deliveries (Exhibit Ref.
2,219.60
23)

or a total of 56,901.53

with interest, and in not awarding to the plaintiff as damages in this case the sum of
P319,253.40, with legal interest thereon from the date of filing the complaint in this case,
in the manner and form computed but it, and in awarding damages to the plaintiff for the
sum of only P2,219.60. with costs.

xxx xxx xxx

JOHNS, J.:

In this action plaintiff seeks to recover damages from the defendant which it claims to have
sustained after September, 1923, arising from, and growing out of, its original contract of
September 10, 1918, as modified on January 1, 1919, to continue for a period of ten years from
that date.

In paragraph VIII of its complaint, plaintiff alleges that about the last part of July, 1920, the
defendant "willfully and deliberately breached its said contract," and that it "flatly refused to
make any deliveries under said contract, and finally on November 23, 1923," it was forced to
commence action in the Court of First Instance against the defendant known as case No. 25352,
to recover the damages which it had then sustained by reason of such flagrant violation of said
contract on the part of the defendant, in which judgment was rendered in favor of the plaintiff
and against the defendant for P26,1119.08, as damages suffered by this plaintiff by the
defendant's breach of said contract from July 1920, up to and including September, 1923, with
legal interest thereon from November 23, 1923, and for the costs," in which the court refused to
order the defendant to resume the delivery of the coal and water gas tar to the plaintiff, in accord
with said contract, but left it with its remedy for damages against the defendant for any
subsequent breaches of the contract. A copy of that judgment, which was later affirmed by this
court, is attached to, marked Exhibit G, and made a part of, the complaint in this action.

In their respective briefs, opposing counsel have much to say about the purpose and intent of the
judgment, and it is vigorously asserted that it was never intended that it should be or become a
bar to another action by the plaintiff to recover any damages it may have sustained after
September, 1923, during the remainder of the ten-year period of that contract. Be that as it may,
it must be conceded that the question as to what would be the legal force and effect of that
judgment in that case was never presented to, or decided by, the lower court or this court. In the
very nature of things, neither court in that case would have the power to pass upon or decided the
legal force and effect of its own judgment, for the simple reason that it would be premature and
outside of the issues of any pleading, and could not be raised or presented until after the
judgment became final and then only by an appropriate plea, as in this case.

Plaintiff specifically alleges that the defendant willfully and deliverately breached the contract
and "flatly refused to make any deliveries under said contract," by reason of. which it was forced
to and commenced its former action in which it was awarded P26,119.08 damages against the
defendant by reason of its breach of the contract from July, 1920, to September, 1923.

In the final analysis, plaintiff in this action seeks to recover damages growing out of, and arising
from, other and different breaches of that same contract after November, 1923, for the remainder
of the ten-year period, and the question is thus squarely presented as to whether the rendition of
the former judgment is a bar to the right of the plaintiff to recover damages from and after
September, 1923, arising from, and growing out of, breaches of the original contract of
September 10, 1918, as modified on January 1, 1919. That is to say, whether the plaintiff, in a
former action, having recovered judgment for the damages which it sustained by reason of a
breach of its contract by the defendant up to September, 1923, can now in this action recover
damages it may have sustained after September, 1923, arising from, and growing out of, a breach
of the same contract, upon and for which it recovered its judgment in the former action.

In the former action in which the judgment was rendered, it is alleged in the compliant:

"7. That about the last part of July or the first part of August, 1920, the Manila Gas
Corporation, the defendant herein, without any cause ceased delivering coal and water
gas tar to the plaintiff herein; and that from that time up to the present date, the plaintiff
corporation, Blossom & Company, has frequently and urgently demanded of the
defendant, the Manila Gas Corporation, that it comply with its aforesaid contract Exhibit
A by continuing to deliver coal and water gas tar to this plaintiff — but that the said
defendant has refused and still refuses, to deliver to the plaintiff any coal and water gas
tar whatsoever under the said contract Exhibit A, since the said month of July 1920.

"9. That owing to the bad faith of the said Manila Gas Corporation, defendant herein, in
not living up to its said contract Exhibit A, made with this plaintiff, and refusing now to
carry out the terms of the same, be delivering to this plaintiff the coal and water gas tar
mentioned in the said Exhibit A, has caused to this plaintiff great and irreparable
damages amounting to the sum total of one hundred twenty- four thousand eight hundred
forty eight pesos and seventy centavos (P124,848,70);and that the said defendant
corporation has refused, and still refuses, to pay to this plaintiff the whole or any part of
the aforesaid sum.

"10. That the said contract Exhibit A, was to be in force until January 1, 1929, that is to
say ten (10) years counted from January 1, 1929; and that unless the defendant again
commence to furnish and supply this plaintiff with coal and water gas tar, as provided for
in the said contract Exhibit A, the damages already suffered by this plaintiff will
continually increase and become larger and larger in the course of years preceding the
termination of the said contract on January 1, 1929."
In that action plaintiff prays for judgment against the defendant:

"(a) That upon trial of this this cause judgment be rendered in favor of the plaintiff and
against the defendant for the sum of P124,8484.70), with legal interest thereon from
November 23, 1923;

"(b) That the court specifically order the defendant to resume the delivery of the coal and
water gas tar to the plaintiff under the terms of the said contract Exhibit A of this
complaint."

In the final analysis, plaintiff must stand or fall on its own pleadings, and tested by that rule it
must be admitted that the plaintiff's original cause of action, in which it recovered judgment for
damages, was founded on the ten-year contract, and that the damages which it then recovered
were recovered for a breach of that contract.

Both actions are founded on one and the same contract. By the terms of the original contract of
September 10, 1018, the defendant was to sell and the plaintiff was to purchase three tons of
water gas tar per month form September to January 1, 1919, and twenty tons of water gas tar per
month after January 1, 1919, one-half ton of coal gas tar per month from September to January 1,
1919, and six tons of coal gas tar per month after January 1, 1919. That from and after January 1,
1919, plaintiff would take at least the quantities specified in the contract of September 10, 1918,
and that at its option, it would have the right to take the total output of water gas tar of
defendant's plant and 50 per cent of the gross output of its coal gas tar, and upon giving ninety
days' notice, it would have the right to the entire output of coal gas tar, except such as the
defendant might need for its own use. That is to say, the contract provided for the delivery to the
plaintiff from month to month of the specified amounts of the different tars as ordered and
requested by the plaintiff. In other words, under plaintiff's own theory, the defendant was to
make deliveries from month to month of the tars during the period of ten years, and it is alleged
in both complaints that the defendant broke its contract, and in bad faith refused to make any
more deliveries.

In 34 Corpus Juris, p. 839, it is said:

As a general rule a contract to do several things at several times in its nature, so as to

authorize successive actions; and a judgment recovered for a single breach of a
continuing contract or covenant is no bar to a suit for a subsequent breach thereof. But
where the covenant or contract is entire, and the breach total, there can be only one
action, and plaintiff must therein recover all his damages.

In the case of Rhoelm vs, Horst, 178 U. U., 1; 44 Law. ed., 953, that court said:

An unqualified and positive refusal to perform a contract, though the performance thereof
is not yet due, may, if the renunciation goes to the whole contract, be treated as a
complete breach which will entitle the injured party to bring his action at once.

15 Ruling Case Law, 966, 967, sec. 441 says:

 Similarly if there is a breach by the vendor of a contract for the sale of goods to be
delivered and paid for in installments, and the vendee maintains an action therefor and
recovers damages, he cannot maintain a subsequent action to recover for the failure to
deliver later installments.

In Pakas vs. Hollingshead, 184 N. Y., 211; 77 N. E., 40; 3 L. R. A. (N. S.), 1024, the syllabus
says:

Upon refusal, by the seller, after partial performance, longer to comply with his contract
to sell and deliver a quantity of articles in installments the buyer cannot keep the contract
in force and maintain actions for breaches as they occur but must recover all his damages
in one suit.

And on page 1044 of its opinion, the court say:

The learned counsel for the plaintiff contends that the former judgment did not constitute
a bar to the present action but that the plaintiff had the right to elect to waive or disregard
the breach, keep the contract in force, and maintain successive actions for time to time as
the installments of goods were to be delivered, however numerous these actions might be.
It is said that this contention is supported in reason and justice, and has the sanction of
authority at least in other jurisdictions. We do not think that the contention can be
maintained. There is not as it seems to us any judicial authority in this state that gives it
any substantial support. On the contrary, we think that the cases, so far as we have been
able to examine them, are all the other way, and are to the effect that, inasmuch as there
was a total breach of the contract by the defendant's refusal to deliver, the plaintiff cannot
split up his demand and maintain successive actions, but must either recover all his
damages in the first suit or wait until the contract matured or the time for the delivery of
all the goods had arrived. In other words, there can be but one action for damages for a
total breach of an entire contract to deliver goods, and the fact that they were to be
delivered in installment from time to time does not change the general rule.

The case of L. Bucki & Son Lumber Co. vs. Atlantic Lumber Co. (109 Federal, 411), of the
United States Circuit Court of Appeals for the Fifth Circuit, is very similar.

The syllabus says:

1. CONTRACTS — CONSTRUCTION —ENTIRE CONTRACT. —A contract was

made for the sale of a large quantity of logs to be delivered in monthly installments
during a period of eight years, payments to be made also in installments at times having
relation tot he deliveries. It contained stipulations as to such payments, and guaranties as
to the average size of the logs to be delivered in each installment. Held, that it was an
entire contract, and not a number of separate and independent agreements for the sale of
the quantity to be delivered and paid for each month, although there might be breaches of
the minor stipulations and warranties with reference thereto which would warrant suits
without a termination of the contract.
 2. JUDGMENTS — MATTERS CONCLUDED —ACTION FOR BREACH OF
INDIVISIBLE CONTRACT. — The seller declared the contract terminated for alleged
breaches by the purchaser, and brought suit for general and special damages the latter
covering payments due for installments of logs delivered. By way of set-off and
recoupment against this demand, the purchaser pleaded breaches of the warranty as to the
size of the logs delivered during the months for which payment had not been made. Held,
that the judgment in such action was conclusive as to all claims or demands or either
party against the other growing out of the entire contract, and was a bar to a subsequent
suit brought by the purchaser to recover for other breaches of the same warranty in
relation to deliveries made in previous months.

On page 415 of the opinion, the court says:

When the contract was ended, the claims of each party for alleged breaches and damages
therefor constituted an indivisible demand; and when the same, or any part of the same,
was pleaded, litigation had, and final judgment rendered, such suit and judgment
constitute a bar to subsequent demands which were or might have been litigated (Baird
vs. U. S., 96 U. S., 430; 24 L. ed., 703.)

In Watts vs. Weston (238 Federal, 149), Circuit Court of Appeals, Second Circuit, the syllabus
says:

1. JUDGMENTS — 593 — JUDGMENT AS BAR — MATTERS CONCLUDED. —

Where a continuing contract was terminated by the absolute refusal of the party whose
action was necessary to further perform, a claim for damages on account of the breach
constituted as indivisible demand, and when the same or any part of the same was
pleaded, litigated, and final judgment rendered, such suit and judgment constitute a bar to
subsequent demands which were or might have been litigated therein.

And on page 150 of the opinion, the court says:

It is enough to show the lack of merit in the present contention to point out as an
inexorable rule of law that, when Kneval's contract was discharged by his total
repudiation thereof, Watt's claims for breaches and damages therefor constituted an
indivisible demand, and when the same, or any part of the same, was pleaded, litigation
had and final judgment rendered, such suit and judgment constitute a bar to subsequent
demands which were or might have been litigated." (Bucki, etc., Co. vs. Atlantic, etc.,
Co., 109 Fed. at page 415; 48 C. C. A., 459; Cf. Landon vs. Bulkley, 95 Fed., 344; 337 C.
C. A., 96.)

The rule is usually applied in cases of alleged or supposed successive breaches, and
consequently severable demands for damages; but if the contract has been discharged by
breach, if suit for damages is all that is left, the rule is applicable, and every demand
arising form that contract and possessed by any given plaintiff must be presented (at least
as against any given defendant) in one action; what the plaintiff does not advance he
foregoes by conclusive presumption.
Inn Abbott vs. 76 Land and Water Co. (118 Pac., 425; 161 Cal., 42), at page 428, the court said:

In Fish vs. Folley, 6 Hill (N. Y.), 54, it was held, in accord with the rule we have
discussed, that, where the defendant had covenanted that plaintiff should have a continual
supply of water for his mill from a dam, and subsequently totally failed to perform for
nine years, and plaintiff brought an action for the breach and recovered damages
sustained by him to that time, the judgment was a bar to a second action arising from
subsequent failure to perform, on the theory that, although he covenant was a continuing
one in one sense, it was an entire contract, and a total breach put an end to it, and gave
plaintiff the right to sue for an equivalent in damages.

In such a case it is no warrant for a second action that the party may not be able to
actually prove in the first action all the items of the demand, or that all the damage may
not then have been actually suffered. He is bound to prove in the first action not only
such damages as has been actually suffered, but also such prospective damage by reason
of the breach as he may be legally entitled to, for the judgment he recovers in such action
will be a conclusive adjudication as to the total damage on account of the breach.

It will thus be seen that, where there is a complete and total breach of a continuous contract for a
term of years, the recovery of a judgment for damages by reason of the breach is a bar to another
action on the same contract for and on account of the continuous breach.

In the final analysis is, there is no real dispute about any material fact, and the important and
decisive question is the legal construction of the pleadings in the former case and in this case,
and of the contract between the plaintiff and the defendant of January 1, 1920.

The complaint on the former case specifically alleges that the defendant "has refused and still
refuses, to deliver to the plaintiff any coal and water gas tar whatsoever under the said contract
Exhibit A, since the said month of July, 1920." " That owing to the bad faith of the said Manila
Gas Corporation, defendant herein, in not living up to its said contract Exhibit A, made with this
plaintiff, and refusing now to carry out the terms of the same." That is a specific allegation not
only a breach of the contract since the month of July, 1920, but of the faith of the defendant in its
continuous refusal to make deliveries of any coal and water gas tar. That amended complaint was
filed on July 11, 1924, or four years after the alleged bad faith in breaking the contract.

Having recovered damages against it, covering a period of four years, upon the theory that the
defendant broke the contract, and in bad faith refused to make deliveries of either of the tars,
how can the plaintiff now claim and assert that the contract is still in fierce and effect? In the
instant case the plaintiff alleges and relies upon the ten year contract on January 11, 1920, which
in bad faith was broken by the defendant. If the contract was then broken, how can it be enforced
in this action?

It is admitted that the defendant never made any deliveries of any tar from July, 1920, to April,
1936. Also that it made nine deliveries to plaintiff of the minimum quantities of coal and water
gas tar from April 7, 1926, to January 5, 1927.
Plaintiff contends that such deliveries were made under and in continuation of the old contract.

March 26, 1926, after the decision of this court affirming the judgment in the original action,
plaintiff wrote the defendant:

. . . It is our desire to take deliveries of at least the minimum quantities set forth therein
and shall appreciate to have you advise us how soon you will be in a position to make
deliveries; . . .

. . . In view of the fact that you have only effected settlement up to November 23, 1923,
please inform us what adjustment you are willing to make for the period of time that has
since elapsed without your complying with the contract.

In response to which on March 31, 1926, the defendant wrote this letter to the plaintiff:

In reply to your letter of March 26th, 1926, in regard to tar, we beg to advise you that we
are prepared to furnish the minimum quantities of coal and water gas tars as per your
letter, viz: twenty tons of water gas tar and six tons of coal gas tar. The price figured on
present costs of raw materials is P39.01 ) Thirty-nine and 01/100 Pesos) per ton of water
gas and P33.59 (Thirty-three and 59/100 Pesos) per ton of coal tar.

We shall expect you to take delivery and pay for the above amount of tars at our factory
on or before April 7th prox.

Thereafter we shall be ready to furnish equal amounts on the first of each month. Kindly
make your arrangements accordingly.

On January 29, 1927, the plaintiff wrote the defendant that:

On July 31st last, we made demand upon you, under the terms of our tar contract for 50
per cent of your total coal tar production for that month and also served notice on you
that beginning 90 days from August 1st we would require you total output of coal tar
monthly; this in addition to the 20 tons of water gas tar provided for in the contract to be
taken monthly.

xxx xxx xxx

We are here again on your for your total output of coal tar immediately and the regular
minimum monthly quantity of water gas tar. In this connection we desire to advise you
that within 90 days of your initial delivery to us of your total coal tar output we will
require 50 per cent of your total water gas tar output, and, further, that two months
thereafter we will require your total output of both tars.

February 2, 1927, the defendant wrote the plaintiff:

 Replying to your letter of Jan. 29, we would sat that we have already returned to you the
check enclosed there with. As we have repeatedly informed you we disagree with you as
to the construction of your contract and insist that you take the whole output of both tars
if you wish to secure the whole of the coal tar.

With regard to your threat of further suits we presume that you will act as advised. If you
make it necessary we shall do the same.lawphil.net

From an analysis of these letters it clearly appears that the plaintiff then sought to reply upon and
enforce the contract of January 1, 1920, and that defendant denied plaintiff's construction of the
contract, and insisted "that you take the whole output of both tars if you wish to secure the whole
of the coal tar."

February 28, 1927, the plaintiff wrote the defendant:

In view of your numerous violations of and repeated refusal and failure to comply with
the terms and provisions of our contract dated January 30-31, 1919, for the delivery to us
of water and coal gas tars, etc., we will commence action," which it did.

The record tends to show that tars which the defendant delivered after April 7, 1926, were not
delivered under the old contract of January 1, 1920, and that at all times since July 1920, the
defendant has consistently refused to make any deliveries of any tars under that contract.

The referee found as a fact that plaintiff was entitled to P2,219.60 for and on account of
overcharges which the defendant made for the deliveries of fifty-four tons of coal gas tar, and
one hundred eighty tons of water gas tar after April, 1926, and upon that point the lower says:

The fourth charge that plaintiff makes is meritorious. The price was to be fixed on the
basis of raw materials. The charge for deliveries during 1926 were too high. In this I
agree with entirely with the referee and adopt his findings of fact and calculations. (See
Referee's report, p. 83) The referee awarded for overcharge during the period aforesaid,
the sum of P2,219.60. The defendant was trying to discharge plaintiff from buying tars
and made the price of raw material appear as high as possible.

That finding is sustained upon the theory that the defendant broke its contract which it made with
the plaintiff for the sale and delivery of the tars on and after April, 1926.

After careful study of the many important questions presented on this appeal in the exhaustive
brief of the appellant, we are clearly of the opinion that, as found by the lower court, the plea of
res judicata must be sustained. The judgment of the lower court is affirmed.

It is so ordered, with costs against the appellant.

Johnson, Street, Malcolm, Villamor, Ostrand, Romualdez, and Villa-Real, JJ., concur.
Footnotes
1
48 Phil., 848.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 178925 June 1, 2011

MANUEL YBIERNAS, VICENTE YBIERNAS, MARIA CORAZON ANGELES,

VIOLETA YBIERNAS, and VALENTIN YBIERNAS, Petitioners,
vs.
ESTER TANCO-GABALDON, MANILA BAY SPINNING MILLS, INC., and THE
SHERIFF OF THE REGIONAL TRIAL COURT OF PASIG CITY, BRANCH 163,
Respondents.

DECISION

NACHURA, J.:

This petition for review on certiorari assails the Court of Appeals (CA) Resolutions1 dated
January 31, 2007 and July 16, 2007. The assailed Resolutions granted respondents’ motion for
new trial of a case for quieting of title and damages, decided in petitioners’ favor by the trial
court in a summary judgment.

The facts of the case are, as follows:

Estrella Mapa Vda. de Ybiernas (Estrella) owned a parcel of land located in Talisay, Negros
Occidental, and covered by Transfer Certificate of Title (TCT) No. T-83976. On April 28, 1988,
Estrella executed a Deed of Absolute Sale2 over the property in favor of her heirs, Dionisio
Ybiernas (Dionisio) and petitioners Manuel Ybiernas, Vicente Ybiernas, and Maria Corazon
Angeles.

On June 30, 1989, the Regional Trial Court (RTC), Branch 47, Bacolod City issued an Order in
Cadastral Case No. 10, LRC (G.L.R.O.) Rec. No. 97, Lot 713-C-B, Psd-220027, Talisay
Cadastre, directing the registration and annotation of the Deed of Absolute Sale on the title.
Thus, on July 5, 1989, the Deed of Absolute Sale and the said RTC Order were annotated on the
title, as follows:

Entry No. 334150; Order; Dionisio M. Ybiernas; Order issued by the RTC of Negros Occ. to
register and annotate the deed of sale on this title without need of presenting the owner’s
duplicate. Date of order-June 30, 1989; Date of prescription-July 5, 1989 at 10:45 a.m.

Entry No. 334151; Sale; Dionisio Ybiernas, et al; Deed of absolute sale of this property for the
sum of ₱650,000.00 in favor of Dionisio Ybiernas, Vicente M. Ybiernas, Manuel M. Ybiernas
and Maria Corazon Y. Angeles in undivided equal share to each; doc. no. 437, page 89, book VI,
series of 1988 of the not. reg. of Mr. Indalecio P. Arriola of Iloilo City. Date of instrument-April
28, 1988; Date of inscription-July 5, 1989 at 10:45 a.m.3

On October 29, 1991, respondents Ester Tanco-Gabaldon and Manila Bay Spinning Mills, Inc.
filed with the RTC of Pasig City a Complaint4 for sum of money and damages, amounting to
₱6,000,000.00, against Estrella and three other individuals. The Complaint alleged that the
defendants were guilty of fraud when they misrepresented to herein respondents that they own a
parcel of land in Quezon City, and that the title over the said property is free from liens and
encumbrances.1avvphi1

Upon respondents’ motion, the Pasig City RTC, in an Order5 dated November 6, 1991, ordered
the issuance of a writ of preliminary attachment upon filing of a bond. The sheriff issued the
corresponding writ of attachment and levied the subject property.6 On November 13, 1991, the
notice of attachment was annotated on TCT No. T-83976 as Entry No. 346816.7

When Estrella’s heirs learned about the levy, Dionisio filed, on January 14, 1992, an Affidavit of
Third-Party Claim, asserting the transfer of ownership to them.8 Respondents, however, filed an
indemnity bond; thus, the sheriff refused to lift the levy.

The Pasig City RTC resolved the Complaint for sum of money in favor of respondents, and
Estrella, et al. were ordered to pay ₱6,000,000.00, plus legal interest and damages. Respondents,
however, elevated the case all the way up to this Court, questioning the interest rate. This Court
eventually denied the appeal in a Minute Resolution dated November 20, 2002, which became
final and executory on April 14, 2003.9

In the meantime, Dionisio died and was succeeded by his heirs, petitioners Valentin Ybiernas
and Violeta Ybiernas.

On November 28, 2001, petitioners filed with the RTC of Bacolod City a Complaint for Quieting
of Title and Damages,10 claiming that the levy was invalid because the property is not owned by
any of the defendants in the Pasig City RTC case. They averred that the annotation of the RTC
Order and the Deed of Absolute Sale on TCT No. T-83976 serves as notice to the whole world
that the property is no longer owned by Estrella.

In their Answer with Counterclaims,11 respondents contended that (a) the case constituted an
interference in the proceeding of the Pasig City RTC, a co-equal court; (b) petitioners should
have filed their claims against the indemnity bond filed by respondents; and (c) petitioners were
guilty of forum-shopping, considering that the case actually sought a relief similar to the third-
party claim.

During pre-trial, the parties admitted, among others, the "[e]xistence of the Order dated June 30,
1989 by RTC Branch 47, Bacolod City, in Cad. Case No. 10 concerning the same TCT No. T-
83976."12

On July 30, 2004, petitioners filed a motion for summary judgment. The RTC initially denied the
motion in the Order dated December 23, 2004.13 Upon petitioners’ motion for reconsideration,
the RTC granted the motion for summary judgment in the decision14 dated December 27, 2005.
The RTC made the following pronouncement:

A consideration of the issues defined by the parties during the pre-trial x x x shows quite clearly
that they are issues that may already be properly resolved now at this stage of the proceedings in
this case, as they, other than the amount of damages, are quite apparently pure questions of law,
the factual antecedents for these issues having already been admitted by the parties.

As to issue No. 1 [whether ownership has been transferred to petitioners], it is a fact well-
established, as admitted by the parties and shown by the annotation as Entry No. 334151 on said
TCT No. T-8[39]76, that the said Deed of Absolute Sale, dated April 28, 1988 over the subject
property by Estrella Mapa Vda. de Ybiernas in favor of Dionisio Ybiernas, Vicente Ybiernas,
Manuel Ybiernas and Maria Corazon Y. Angeles, was validly annotated as such Entry No.
334151, inscribed on July 5, 1989, on said TCT No. T-83976 registered in the name of Estrella
M. Ybiernas.

Neither the defendants nor anyone else has challenged the validity of the judicial proceedings
before RTC, Branch 47, Bacolod City, which issued in Cadastral Case No. 10, the said Order
dated June 30, 1989, which directed the registration and annotation of the said Deed of Absolute
Sale dated April 28, 1988 on said TCT No. T-83976, and which led to the annotation under said
Entry No. 334151 on said TCT No. T-83976.15

Thus, the dispositive portion of the December 27, 2005 RTC decision reads:

WHEREFORE, except as to the amount of damages, a summary judgment is hereby rendered in

favor of the plaintiffs and against the defendants, and as prayed for by the plaintiffs in their
complaint:

1. The levy on attachment made by herein defendant Sheriff of RTC, Branch 163, Pasig
City on said TCT No. T-83976, issued by the Registrar of Deeds of the Province of
Negros Occidental, covering the Subject Property, is hereby DECLARED INVALID;
and, consequently,

2. Entry No. 346816 on the same TCT No. T-83976 is hereby CANCELLED and
DISSOLVED.
SO ORDERED.16

Respondents filed a notice of appeal,17 and it was granted by the RTC.

While the appeal was pending in the CA, respondents filed a motion for new trial,18 claiming that
they have discovered on May 9, 2006 that Cadastral Case No. 10 did not exist and the April 28,
1988 Deed of Sale was simulated. Attached to the motion were the affidavit19 of Atty. Gerely C.
Rico, who conducted the research in Bacolod City in behalf of the law office representing
respondents, and the following certifications:

a. Certification dated 09 May 2006 issued by Ildefonso M. Villanueva, Jr., Clerk of Court
VI of the RTC of Bacolod City, stating that: "no cadastral case involving Lot 713-C-1-B,
Psd-220027, Talisay Cadastre, was filed with this office sometime on 30 June 1989 and
raffled to Branch 47 of this court which was then presided by Judge Enrique T. Jocson."20

b. Certification dated 09 May 2006 issued by Atty. Mehafee G. Sideno, Clerk of Court V
of the RTC of Bacolod City, Branch 47, stating that: "as per records of this court, no
Cadastral Case No. 10, LRC, GLRO Rec. 97, Lot No. 713-C-1-B, Psd 220027, filed by
Dionisio Ybiernas was filed and docketed in this office."21

c. Certification dated 11 July 2006 issued by Estrella M. Domingo, OIC Archives

Division of the National Archives Office, stating that: "no copy is on file with this Office
of a DEED OF SALE allegedly executed by and among ESTRELLA MAPA VDA. DE
YBIERNAS, DIONISIO YBIERNAS, VICENTE M. YBIERNAS, JR., MANUEL
YBIERNAS and MARIA CORAZON ANGELES, ratified on April 28, 1988 before
INDALECIO P. ARRIOLA, a notary public for and within Iloilo City and acknowledged
as Doc. No. 437; Page No. 89; Book No. VI; Series of 1988."22

Respondents argued that they have satisfied all the requisites for the grant of a new trial based on
newly discovered evidence: (1) they discovered the evidence after the trial court rendered its
judgment on

December 27, 2005; (2) they could not have discovered and produced the evidence during the
trial with reasonable diligence; and (3) the evidence was material, not merely cumulative,
corroborative, or impeaching, and was of such weight that, if admitted, would probably change
the judgment. On the second requisite, respondents explained that they could not have
discovered the evidence with reasonable diligence because they relied in good faith on the
veracity of the RTC Order dated June 30, 1989, based on the principle that the issuance of a
court order, as an act of a public officer, enjoys the presumption of regularity. On the third
requisite, respondents pointed out that, if the nonexistence of Cadastral Case No. 10 and the
invalidity of the Order dated June 30, 1989 were allowed to be proven by the newly discovered
evidence, the action for quieting of title would probably be dismissed, as respondents’ levy
would be declared superior to petitioners’ claim.23

In their Comment/Opposition, petitioners argued that (a) the questioned decision was a partial
summary judgment which could not be the subject of a motion for new trial; (b) the existence of
Cadastral Case No. 10 was an admitted fact which could not be questioned in a motion for new
trial; and (c) there was no newly discovered evidence that would warrant a new trial.24

The CA did not agree with petitioners. Hence, on January 31, 2007, it granted respondents’
motion for new trial, thus:

WHEREFORE, premises considered, the defendants-appellants having satisfied all the elements
necessary to justify the filing of a Motion for New Trial which appears to be meritorious and in
the higher interest of substantial justice, the said motion is GRANTED. ACCORDINGLY, let a

new trial of the Quieting of Title case be held and let said case be REMANDED to the Court a
quo for said purpose.

SO ORDERED.25

At the outset, the CA noted that the RTC summary judgment was a proper subject of an appeal
because it was a final adjudication on the merits of the case, having completely disposed of all
the issues except as to the amount of damages. The CA concluded that respondents properly
availed of a motion for new trial because such remedy could be availed of at any time after the
appeal from the lower court had been perfected and before the CA loses jurisdiction over the
case. According to the CA, respondents were able to show that they obtained the new evidence
only after the trial of the case and after the summary judgment had been rendered. The CA also
held that respondents never admitted during the pre-trial the existence of Cadastral Case No. 10;
they only admitted the existence of the Order dated June 30, 1989 in Cadastral Case No. 10.

On July 16, 2007, the CA denied petitioners’ motion for reconsideration.26

Petitioners subsequently filed this petition for review on certiorari, raising the following issues:

A.

WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN RULING

THAT THE QUESTIONED DECISION OF THE RTC IS A PROPER SUBJECT OF
AN APPEAL AND A MOTION FOR NEW TRIAL UNDER RULE 53 OF THE RULES
OF COURT.

B.

WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING

TO RULE THAT A MOTION FOR NEW TRIAL IS AN IMPROPER REMEDY TO
QUESTION ADMITTED FACTS.

C.
 WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING
TO RULE THAT NO NEWLY DISCOVERED EVIDENCE WAS ADDUCED TO
WARRANT A NEW TRIAL.27

Petitioners posit that no appeal could be taken from the trial court’s decision because it did not
completely dispose of all the issues in the case; it failed to settle the issue on damages.
Petitioners categorize the decision as a partial summary judgment, which in Guevarra, et al. v.
Hon. Court of Appeals, et al.,28 reiterated in GSIS v. Philippine Village Hotel, Inc.,29 the Court
pronounced as not a final and an appealable judgment, hence, interlocutory and clearly an
improper subject of an appeal. Petitioners theorize then that the appeal could not have been
perfected and the CA could not have acquired jurisdiction over the case, including the motion for
new trial. Accordingly, they conclude that the motion for new trial should have been denied
outright for being violative of Section 1,30 Rule 53 of the Rules of Court, which provides that the
motion for new trial may be filed after the appeal has been perfected. Petitioners argue that,
pursuant to Section 4, Rule 35 of the Rules of Court, trial should proceed instead to settle the
issue on damages. Petitioners point out that the case cited by the CA in its Decision, Bell Carpets
International Trading Corporation v. Court of Appeals,31 is not applicable to the case because,
unlike in the present case, the trial court’s ruling completely disposed of all the issues in that
case.

In addition, petitioners insist that respondents already admitted the existence of Cadastral Case
No. 10 by its admission of the existence of the Order dated June 30, 1989. They maintain that
respondents cannot admit the existence of an order and yet deny the existence of the proceedings
from which the order emanates. Respondents’ judicial admission that the court Order existed
necessarily carried with it the admission that the cadastral proceedings where the Order was
issued likewise existed. Petitioners aver that respondents are bound by their judicial admission
and they cannot be allowed to present evidence to contradict the same.

Petitioners next argue that the purported newly discovered pieces of evidence have no probative
value. Petitioners say that the certifications are self-serving and inconclusive opinions of court
employees, who did not even indicate the period when they occupied their positions and state
whether they had the authority to issue such certifications and whether they had personal
knowledge of the documents archived during the year that the deed of sale was executed.
According to petitioners, the certifications cannot overcome the presumption of regularity in the
issuance of the Order dated June 30, 1989. At most, the certifications would simply show that the
records of Cadastral Case No. 10 could no longer be found in the records; hence, they would
have no bearing on the result of the case.

Petitioners also emphasize that respondents failed to meet the burden of proving that the newly
discovered pieces of evidence presented comply with the requisites to justify the holding of a
new trial. They contend that respondents could have discovered and presented in court the
certifications during trial had they exercised reasonable diligence.

Petitioners’ arguments are untenable.

The issue of whether the RTC judgment is a final judgment is indeed crucial. If the judgment
were not final, it would be an improper subject of an appeal. Hence, no appeal would have been
perfected before the CA, and the latter would not have acquired jurisdiction over the entire case,
including the motion for new trial. But more importantly, only a final judgment or order, as
opposed to an interlocutory order, may be the subject of a motion for new trial.

A final judgment or order is one that finally disposes of a case, leaving nothing more for the
court to do in respect thereto, such as an adjudication on the merits which, on the basis of the
evidence presented at the trial, declares categorically what the rights and obligations of the
parties are and which party is in the right, or a judgment or order that dismisses an action on the
ground of res judicata or prescription, for instance.32 Just like any other judgment, a summary
judgment that satisfies the requirements of a final judgment will be considered as such.

A summary judgment is granted to settle expeditiously a case if, on motion of either party, there
appears from the pleadings, depositions, admissions, and affidavits that no important issues of
fact are involved, except the amount of damages.33 The RTC judgment in this case fully
determined the rights and obligations of the parties relative to the case for quieting of title and
left no other issue unresolved, except the amount of damages. Hence, it is a final judgment.

In leaving out the determination of the amount of damages, the RTC did not remove its summary
judgment from the category of final judgments. In fact, under Section 3,34 Rule 35 of the Rules
of Court, a summary judgment may not be rendered on the amount of damages, although such
judgment may be rendered on the issue of the right to damages.35

In Jugador v. De Vera,36 the Court distinguished between the determination of the amount of
damages and the issue of the right to damages itself in case of a summary judgment. The Court
elucidated on this point, thus:

[A] summary judgment may be rendered except as to the amount of damages. In other words,
such judgment may be entered on the issue relating to the existence of the right to damages.
Chief Justice Moran pertinently observes that "if there is any real issue as to the amount of
damages, the c[o]urt, after rendering summary judgment, may proceed to assess the amount
recoverable."37

It is therefore reasonable to distinguish the present case from GSIS v. Philippine Village Hotel,
Inc.38 In that case, the summary judgment specifically stated that "[t]rial on the issu[e] of
damages shall resume." Evidently, there remained an unresolved issue on the right to damages.
Here, the trial court, in stating that "except as to the amount of damages, a summary judgment is
hereby rendered in favor of the plaintiffs and against the defendants," had, in effect, resolved all
issues, including the right to

damages in favor of the plaintiffs (petitioners). What remained undetermined was only the
amount of damages.

On the issue of whether respondents are proscribed from presenting evidence that would
disprove the existence of Cadastral Case No. 10, we likewise sustain the CA.
A judicial admission is an admission, verbal or written, made by a party in the course of the
proceedings in the same case, which dispenses with the need for proof with respect to the matter
or fact admitted. It may be contradicted only by a showing that it was made through palpable
mistake or that no such admission was made.39

During the pre-trial, respondents categorically admitted the existence of the Order dated June 30,
1989 only. The Court cannot extend such admission to the existence of Cadastral Case No. 10,
considering the circumstances under which the admission was made. In construing an admission,
the court should consider the purpose for which the admission is used and the surrounding
circumstances and statements.40 Respondents have constantly insisted that, in making the
admission, they relied in good faith on the veracity of the Order which was presented by
petitioners. Moreover, they relied on the presumption that the Order has been issued by Judge
Enrique T. Jocson in the regular performance of his duties. It would therefore be prejudicial and
unfair to respondents if they would be prevented from proving that the Order is in fact spurious
by showing that there was no Cadastral Case No. 10 before the RTC, Branch 47, of Bacolod
City.

Finally, we find that a new trial based on newly discovered evidence is warranted. New trial is a
remedy that seeks to "temper the severity of a judgment or prevent the failure of justice." Thus,
the Rules allows the courts to grant a new trial when there are errors of law or irregularities
prejudicial to the substantial rights of the accused committed during the trial, or when there
exists newly discovered evidence.41 The grant or denial of a new trial is, generally speaking,
addressed to the sound discretion of the court which cannot be interfered with unless a clear
abuse thereof is shown.421avvphi1

This Court has repeatedly held that before a new trial may be granted on the ground of newly
discovered evidence, it must be shown (1) that the evidence was discovered after trial; (2) that
such evidence could not have been discovered and produced at the trial even with the exercise of
reasonable diligence; (3) that it is material, not merely cumulative, corroborative, or impeaching;
and (4) the evidence is of such weight that it would probably change the judgment if admitted. If
the alleged newly discovered evidence could have been very well presented during the trial with
the exercise of reasonable diligence, the same cannot be considered newly discovered.43

The only contentious element in the case is whether the evidence could have been discovered
with the exercise of reasonable diligence. In Custodio v. Sandiganbayan,44 the Court expounded
on the due diligence requirement, thus:

The threshold question in resolving a motion for new trial based on newly discovered evidence is
whether the [proffered] evidence is in fact a "newly discovered evidence which could not have
been discovered by due diligence." The question of whether evidence is newly discovered has
two aspects: a temporal one, i.e., when was the evidence discovered, and a predictive one, i.e.,
when should or could it have been discovered. It is to the latter that the requirement of due
diligence has relevance. We have held that in order that a particular piece of evidence may be
properly regarded as newly discovered to justify new trial, what is essential is not so much the
time when the evidence offered first sprang into existence nor the time when it first came to the
knowledge of the party now submitting it; what is essential is that the offering party had
exercised reasonable diligence in seeking to locate such evidence before or during trial but had
nonetheless failed to secure it.

The Rules do not give an exact definition of due diligence, and whether the movant has exercised
due diligence depends upon the particular circumstances of each case. Nonetheless, it has been
observed that the phrase is often equated with "reasonable promptness to avoid prejudice to the
defendant." In other words, the concept of due diligence has both a time component and a good
faith component. The movant for a new trial must not only act in a timely fashion in gathering
evidence in support of the motion; he must act reasonably and in good faith as well. Due
diligence contemplates that the defendant acts reasonably and in good faith to obtain the
evidence, in light of the totality of the circumstances and the facts known to him.45

As previously stated, respondents relied in good faith on the veracity of the Order dated June 30,
1989 which petitioners presented in court. It was only practical for them to do so, if only to
expedite the proceedings. Given this circumstance, we hold that respondents exercised
reasonable diligence in obtaining the evidence. The certifications therefore qualify as newly
discovered evidence.

The question of whether the certifications presented by respondents have any probative value is
left to the judgment and discretion of the trial court which will be hearing the case anew.

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Resolutions
dated January 31, 2007 and July 16, 2007 are AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

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Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice