FIRST DIVISION

G.R. No. 90634-35 June 6, 1990

CARMELCRAFT CORPORATION &/OR CARMEN V. YULO, President and General Manager, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CARMELCRAFT EMPLOYEES UNION, PROGRESSIVE FEDERATION OF LABOR, represented by its
Local President GEORGE OBANA, respondents.

Tee, Tomas & Associates for petitioners.

Raul E. Espinosa for private respondents.

CRUZ, J.:

The Court is appalled by the degree of bad faith that has characterized the petitioners' treatment of their employees. It borders on puredisdain.
And on top of this, they now have the temerity to seek from us a relief to which they are clearly not entitled. The petition must be dismissed.

The record shows that after its registration as a labor union, the Camelcraft Employees Union sought but did not get recognition from the
petitioners. Consequently, it filed a petition for certification election in June 1987. On July 13, 1987, Camelcraft Corporation, through its
president and general manager, Carmen Yulo, announced in a meeting with the employees that it would cease operations on August 13, 1987,
due to serious financial losses. Operations did cease as announced. On August 17, 1987, the union filed a complaint with the Department of
Labor against the petitioners for illegal lockout, unfair labor practice and damages, followed the next day with another complaint for payment
of unpaid wages, emergency cost of living allowances, holiday pay, and other benefits. On November 29, 1988, the Labor Arbiter declared the
shutdown illegal and violative of the employees' right to self-organization. The claim for unpaid benefits was also granted. 1 After reviewing the
decision on appeal, the respondent NLRC declared:

WHEREFORE, premises considered, the appealed decision is modified. In addition to the underpayment in their wages, emergency living
allowance, 13th month pay, legal holiday pay and premium pay for holidays for a period of three years, the respondents are ordered to pay
complainants their separation pay equivalent to one-month pay for every year of service, a fraction of six months or more shall be considered
as one (1) whole year.

The rest of the disposition stand. 2

We do not find that the above decision is tainted with grave abuse of discretion. On the contrary, it is comformable to the pertinent laws and
the facts clearly established at the hearing.

The reason invoked by the petitioner company to justify the cessation of its operations is hardly credible; in fact, it is preposterous when
viewed in the light of the other relevent circumstances. Its justification is that it sustained losses in the amount of P 1,603.88 as of December
31, 1986 . 3 There is no report, however, of its operations during the period after that date, that is, during the succeeding seven and a half
months before it decided to close its business. Significantly, the company is capitalized at P 3 million . 4 Considering such a substantial
investment, we hardly think that a loss of the paltry sum of less than P 2,000.00 could be considered serious enough to call for the closure of
the company.

We agree with the public respondent that the real reason for the decision of the petitioners to cease operations was the establishment of
respondent Carmelcraft Employees Union. It was apparently unwelcome to the corporation, which would rather shut down than deal with the
union. There is the allegation from the private respondent that the company had suggested that it might decide not to close the business if the
employees were to affiliate with another union which the management preferred. 5 This allegation has not been satisfactorily disproved. At any
rate, the finding of the NLRC is more believable than the ground invoked by the petitioners. Notably, this justification was made only eight
months after the alleged year-end loss and shortly after the respondent union filed a petition for certification election.

The act of the petitioners was an unfair labor practice prohibited by Article 248 of the Labor Code, to wit:

ART. 248. Unfair labor practices of employers.-It shall be unlawful for an employer to commit any of the following unfair labor practice:

(a) To interfere with, restrain or coerce employees in the exercise of their right to self-organization;
More importantly, it was a defiance of the constitutional provision guaranteeing to workers the right to self-organization and to enter into
collective bargaining with management through the labor union of their own choice and confidence. 6

The determination to cease operations is a prerogative of management that is usually not interfered with by the State as no business can be
required to continue operating at a loss simply to maintain the workers in employment. 7 That would be a taking of property without due
process of law which the employer has a right to resist. But where it is manifest that the closure is motivated not by a desire to avoid further
losses but to discourage the workers from organizing themselves into a union for more effective negotiations with the management, the State
is bound to intervene.

And, indeed, even without such motivation, the closure cannot be justified because the claimed losses are obviously not serious. In this
situation, the employees are entitled to separation pay at the rate of one-half month for every year of service under Art. 283 of the Labor Code.

The contention of the petitioners that the employees are estopped from claiming the alleged unpaid wages and other compensation must also
be rejected. This claim is based on the waivers supposedly made by the complainants on the understanding that "the management will
implement prospectively all benefits under existing labor standard laws." The petitioners argue that this assurance provided the consideration
that made the quitclaims executed by the employees valid. They add that the waivers were made voluntarily and contend that the contract
should be respected as the law between the parties.

Even if voluntarily executed, agreements are invalid if they are contrary to public policy. This is elementary. The protection of labor is one of the
policies laid down by the Constitution not only by specific provision but also as part of social justice. The Civil Code itself provides:

ART. 6. Rights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a third
person with a right recognized by law.

ART. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or public policy.

The subordinate position of the individual employee vis-a-vis management renders him especially vulnerable to its blandishments and
importunings, and even intimidations, that may result in his improvidently if reluctantly signing over benefits to which he is clearly entitled.
Recognizing this danger, we have consistently held that quitclaims of the workers' benefits win not estop them from asserting them just the
same on the ground that public policy prohibits such waivers.

That the employee has signed a satisfaction receipt does not result in a waiver; the law does not consider as valid any agreement to receive less
compensation than what a worker is entitled to recover. A deed of release or quitclaim cannot bar an employee from demanding benefits to
which he is legally entitled. 8

Release and quitclaim is inequitable and incongruous to the declared public policy of the State to afford protection to labor and to assure the
rights of workers to security of tenure. 9

We find also untenable the contention of Carmen Yulo that she is not liable for the acts of the petitioner company, assuming it had acted
illegally, because the Carmelcraft Corporation is a distinct and separate entity with a legal personality of its own. Yulo claims she is only an
agent of the company carrying out the decisions of its board of directors. We do not agree. Our finding is that she is in fact and legal effect the
corporation, being not only its president and general manager but also its owner. 10

Moreover, and this is a no less important consideration, she is raising this issue only at this tardy hour, when she should have invoked this
argument earlier, when the case was being heard before the labor arbiter and later m the NLRC. It is too late now to shunt these responsibilities
to the company after she herself had been found liable.

All told, the conduct of the petitioners toward the employees has been less than commendable. Indeed, it is reprehensible. First, the company
inveigled them to waive their claims to compensation due them on the promise that future benefits would be paid (and to make matters worse,
there is no showing that they were indeed paid). Second, it refused to recognize the respondent union, suggesting to the employees that they
join another union acceptable to management. Third, it threatened the employees with the closure of the company and then actually did so
when the employees insisted on their demands. All these acts reflect on the bona fides of the petitioners and unmistakably indicate their ill will
toward the employees.

The petitioners obviously regard the private respondents as mere servants simply because they are paid employees. That is a mistake. Laborers
are not just hired help to be exploited, without the right to defend and improve their interest . The working class is an equal partner of
management and should always be treated as such.
The more labor is prevented from pursuing its legitimate demands for its protection and enhancement, the more it is likely to lose faith in our
free institutions and to incline toward Ideologies offering a more if deceptive regime. One way of disabusing our working men and women of
this delusion is to assure them that under our form of government, the interests of labor deserve and will get proper recognition from an
enlightened and compassionate management, no less than the total sympathy of a solicitous State.

WHEREFORE, the petition is DISMISSED and the challenged decision is AFFIRMED, with costs against the petitioner. It is so ordered.

Cui vs Arellano University

TITLE: Emetrio Cui v Arellano University

CITATION: GR NO. L15127, May 30, 1961 | 112 Phil 135

FACTS:

Emetrio Cui took his preparatory law course at Arellano University. He then enrolled in its College of Law from first year (SY1948-1949) until
first semester of his 4th year. During these years, he was awarded scholarship grants of the said university amounting to a total of
P1,033.87. He then transferred and took his last semester as a law student at Abad Santos University. To secure permission to take the bar, he
needed his transcript of records from Arellano University. The defendant refused to issue the TOR until he had paid back the P1,033.87
scholarship grant which Emetrio refunded as he could not take the bar without Arellano’s issuance of his TOR.

On August 16, 1949, the Director of Private Schools issued Memorandum No. 38 addressing all heads of private schools, colleges and
universities. Part of the memorandum states that “the amount in tuition and other fees corresponding to these scholarships should not be
subsequently charged to the recipient students when they decide to quit school or to transfer to another institution. Scholarships should not
be offered merely to attract and keep students in a school”.

ISSUE: Whether or not Emetrio Cui can refund the P1,033.97 payment for the scholarship grant provided by Arellano University.

HELD:

The memorandum of the Director of Private Schools is not a law where the provision set therein was advisory and not mandatory in
nature. Moreover, the stipulation in question, asking previous students to pay back the scholarship grant if they transfer before graduation, is
contrary to public policy, sound policy and good morals or tends clearly to undermine the security of individual rights and hence, null and
void.

The court sentenced the defendant to pay Cui the sum of P1,033.87 with interest thereon at the legal rate from Sept.1, 1954, date of the
institution of this case as well as the costs and dismissing defendant’s counterclaim.
 POLO S. PANTALEON, G.R. No. 174269

Petitioner,

Present:

- versus - CARPIO MORALES, J.,

Acting Chairperson,

VELASCO, JR.,

AMERICAN EXPRESS INTERNATIONAL, INC., LEONARDO-DE CASTRO,

Respondent. BRION, and

*BERSAMIN, JJ.

Promulgated:

August 25, 2010

x----------------------------------------------------------------------------------------x

RESOLUTION

BRION, J.:

We resolve the motion for reconsideration filed by respondent American Express International, Inc. (AMEX) dated June 8, 2009,[1] seeking
to reverse our Decision datedMay 8, 2009 where we ruled that AMEX was guilty of culpable delay in fulfilling its obligation to its cardholder –
petitioner Polo Pantaleon. Based on this conclusion, we held AMEX liable for moral and exemplary damages, as well as attorney’s fees and
costs of litigation.[2]

FACTUAL ANTECEDENTS

The established antecedents of the case are narrated below.

 AMEX is a resident foreign corporation engaged in the business of providing credit services through the operation of a charge card system.
Pantaleon has been an AMEX cardholder since 1980.[3]

In October 1991, Pantaleon, together with his wife (Julialinda), daughter (Regina), and son (Adrian Roberto), went on a guided European tour.
On October 25, 1991, the tour group arrived in Amsterdam. Due to their late arrival, they postponed the tour of the city for the following day.[4]

The next day, the group began their sightseeing at around 8:50 a.m. with a trip to the Coster Diamond House (Coster). To have enough time for
take a guided city tour ofAmsterdam before their departure scheduled on that day, the tour group planned to leave Coster by 9:30 a.m. at the
latest.

While at Coster, Mrs. Pantaleon decided to purchase some diamond pieces worth a total of US$13,826.00. Pantaleon presented his American
Express credit card to the sales clerk to pay for this purchase. He did this at around 9:15 a.m. The sales clerk swiped the credit card and asked
Pantaleon to sign the charge slip, which was then electronically referred to AMEX’s Amsterdam office at 9:20 a.m.[5]

At around 9:40 a.m., Coster had not received approval from AMEX for the purchase so Pantaleon asked the store clerk to cancel the sale.
The store manager, however, convinced Pantaleon to wait a few more minutes. Subsequently, the store manager informed Pantaleon that
AMEX was asking for bank references; Pantaleon responded by giving the names of his Philippine depository banks.

At around 10 a.m., or 45 minutes after Pantaleon presented his credit card, AMEX still had not approved the purchase. Since the city tour
could not begin until the Pantaleons were onboard the tour bus, Coster decided to release at around 10:05 a.m. the purchased items to
Pantaleon even without AMEX’s approval.

When the Pantaleons finally returned to the tour bus, they found their travel companions visibly irritated. This irritation intensified when the
tour guide announced that they would have to cancel the tour because of lack of time as they all had to be in Calais, Belgium by 3 p.m. to catch
the ferry to London.[6]

From the records, it appears that after Pantaleon’s purchase was transmitted for approval to AMEX’s Amsterdam office at 9:20 a.m.; was
referred to AMEX’s Manilaoffice at 9:33 a.m.; and was approved by the Manila office at 10:19 a.m. At 10:38 a.m., AMEX’s Manila office finally
transmitted the Approval Code to AMEX’s Amsterdamoffice. In all, it took AMEX a total of 78 minutes to approve Pantaleon’s purchase and to
transmit the approval to the jewelry store.[7]

After the trip to Europe, the Pantaleon family proceeded to the United States. Again, Pantaleon experienced delay in securing approval for
purchases using his American Express credit card on two separate occasions. He experienced the first delay when he wanted to purchase golf
equipment in the amount of US$1,475.00 at the Richard Metz Golf Studio in New York on October 30, 1991. Another delay occurred when he
wanted to purchase children’s shoes worth US$87.00 at the Quiency Market in Boston onNovember 3, 1991.

Upon return to Manila, Pantaleon sent AMEX a letter demanding an apology for the humiliation and inconvenience he and his family
experienced due to the delays in obtaining approval for his credit card purchases. AMEX responded by explaining that the delay in Amsterdam
was due to the amount involved – the charged purchase of US$13,826.00 deviated from Pantaleon’s established charge purchase
pattern. Dissatisfied with this explanation, Pantaleon filed an action for damages against the credit card company with the Makati City Regional
Trial Court (RTC).

On August 5, 1996, the RTC found AMEX guilty of delay, and awarded Pantaleon P500,000.00 as moral damages, P300,000.00 as exemplary
damages, P100,000.00 as attorney’s fees, and P85,233.01 as litigation expenses.

On appeal, the CA reversed the awards.[8] While the CA recognized that delay in the nature of mora accipiendi or creditor’s default attended
AMEX’s approval of Pantaleon’s purchases, it disagreed with the RTC’s finding that AMEX had breached its contract, noting that the delay was
not attended by bad faith, malice or gross negligence. The appellate court found that AMEX exercised diligent efforts to effect the approval of
Pantaleon’s purchases; the purchase at Coster posed particularly a problem because it was at variance with Pantaleon’s established charge
pattern. As there was no proof that AMEX breached its contract, or that it acted in a wanton, fraudulent or malevolent manner, the appellate
court ruled that AMEX could not be held liable for any form of damages.

Pantaleon questioned this decision via a petition for review on certiorari with this Court.

In our May 8, 2009 decision, we reversed the appellate court’s decision and held that AMEX was guilty of mora solvendi, or debtor’s
default. AMEX, as debtor, had an obligation as the credit provider to act on Pantaleon’s purchase requests, whether to approve or disapprove
them, with “timely dispatch.” Based on the evidence on record, we found that AMEX failed to timely act on Pantaleon’s purchases.

Based on the testimony of AMEX’s credit authorizer Edgardo Jaurique, the approval time for credit card charges would be three to four seconds
under regular circumstances. In Pantaleon’s case, it took AMEX 78 minutes to approve the Amsterdam purchase. We attributed this delay to
AMEX’s Manila credit authorizer, Edgardo Jaurique, who had to go over Pantaleon’s past credit history, his payment record and his credit and
bank references before he approved the purchase. Finding this delay unwarranted, we reinstated the RTC decision and awarded Pantaleon
moral and exemplary damages, as well as attorney’s fees and costs of litigation.

THE MOTION FOR RECONSIDERATION

In its motion for reconsideration, AMEX argues that this Court erred when it found AMEX guilty of culpable delay in complying with its
obligation to act with timely dispatch on Pantaleon’s purchases. While AMEX admits that it normally takes seconds to approve charge
purchases, it emphasizes that Pantaleon experienced delay inAmsterdam because his transaction was not a normal one. To recall, Pantaleon
sought to charge in a single transaction jewelry items purchased from Coster in the total amount of US$13,826.00 or P383,746.16. While the
total amount of Pantaleon’s previous purchases using his AMEX credit card did exceed US$13,826.00, AMEX points out that these purchases
were made in a span of more than 10 years, not in a single transaction.

Because this was the biggest single transaction that Pantaleon ever made using his AMEX credit card, AMEX argues that the transaction
necessarily required the credit authorizer to carefully review Pantaleon’s credit history and bank references. AMEX maintains that it did this
not only to ensure Pantaleon’s protection (to minimize the possibility that a third party was fraudulently using his credit card), but also to
protect itself from the risk that Pantaleon might not be able to pay for his purchases on credit. This careful review, according to AMEX, is also in
keeping with the extraordinary degree of diligence required of banks in handling its transactions. AMEX concluded that in these lights, the
thorough review of Pantaleon’s credit record was motivated by legitimate concerns and could not be evidence of any ill will, fraud, or
negligence by AMEX.
AMEX further points out that the proximate cause of Pantaleon’s humiliation and embarrassment was his own decision to proceed with the
purchase despite his awareness that the tour group was waiting for him and his wife. Pantaleon could have prevented the humiliation had he
cancelled the sale when he noticed that the credit approval for the Coster purchase was unusually delayed.

In his Comment dated February 24, 2010, Pantaleon maintains that AMEX was guilty of mora solvendi, or delay on the part of the debtor, in
complying with its obligation to him. Based on jurisprudence, a just cause for delay does not relieve the debtor in delay from the consequences
of delay; thus, even if AMEX had a justifiable reason for the delay, this reason would not relieve it from the liability arising from its failure to
timely act on Pantaleon’s purchase.

In response to AMEX’s assertion that the delay was in keeping with its duty to perform its obligation with extraordinary diligence, Pantaleon
claims that this duty includes the timely or prompt performance of its obligation.

As to AMEX’s contention that moral or exemplary damages cannot be awarded absent a finding of malice, Pantaleon argues that evil motive or
design is not always necessary to support a finding of bad faith; gross negligence or wanton disregard of contractual obligations is sufficient
basis for the award of moral and exemplary damages.

OUR RULING

We GRANT the motion for reconsideration.

Brief historical background

A credit card is defined as “any card, plate, coupon book, or other credit device existing for the purpose of obtaining money, goods, property,
labor or services or anything of value on credit.”[9] It traces its roots to the charge card first introduced by the Diners Club in New York City in
1950.[10] American Express followed suit by introducing its own charge card to the American market in 1958.[11]

In the Philippines, the now defunct Pacific Bank was responsible for bringing the first credit card into the country in the 1970s.[12] However, it
was only in the early 2000s that credit card use gained wide acceptance in the country, as evidenced by the surge in the number of credit card
holders then.[13]

Nature of Credit Card Transactions

To better understand the dynamics involved in credit card transactions, we turn to the United States case of Harris Trust & Savings Bank v.
McCray[14] which explains:
The bank credit card system involves a tripartite relationship between the issuer bank, the cardholder, and merchants participating in the
system. The issuer bank establishes an account on behalf of the person to whom the card is issued, and the two parties enter into an
agreement which governs their relationship. This agreement provides that the bank will pay for cardholder’s account the amount of
merchandise or services purchased through the use of the credit card and will also make cash loans available to the cardholder. It also states
that the cardholder shall be liable to the bank for advances and payments made by the bank and that the cardholder’s obligation to pay the
bank shall not be affected or impaired by any dispute, claim, or demand by the cardholder with respect to any merchandise or service
purchased.

The merchants participating in the system agree to honor the bank’s credit cards. The bank irrevocably agrees to honor and pay the sales slips
presented by the merchant if the merchant performs his undertakings such as checking the list of revoked cards before accepting the card.
x x x.

These slips are forwarded to the member bank which originally issued the card. The cardholder receives a statement from the bank periodically
and may then decide whether to make payment to the bank in full within a specified period, free of interest, or to defer payment and
ultimately incur an interest charge.

We adopted a similar view in CIR v. American Express International, Inc. (Philippine branch),[15] where we also recognized that credit card issuers
are not limited to banks. We said:

Under RA 8484, the credit card that is issued by banks in general, or by non-banks in particular, refers to “any card x x x or other credit device
existing for the purpose of obtaining x x x goods x x x or services x x x on credit;” and is being used “usually on a revolving basis.” This
means that the consumer-credit arrangement that exists between the issuer and the holder of the credit card enables the latter to procure
goods or services “on a continuing basis as long as the outstanding balance does not exceed a specified limit.” The card holder is, therefore,
given “the power to obtain present control of goods or service on a promise to pay for them in the future.”

Business establishments may extend credit sales through the use of the credit card facilities of a non-bank credit card company to avoid
the risk of uncollectible accounts from their customers. Under this system, the establishments do not deposit in their bank accounts the credit
card drafts that arise from the credit sales. Instead, they merely record their receivables from the credit card company and periodically send
the drafts evidencing those receivables to the latter.

The credit card company, in turn, sends checks as payment to these business establishments, but it does not redeem the drafts at full
price. The agreement between them usually provides for discounts to be taken by the company upon its redemption of the drafts. At the end
of each month, it then bills its credit card holders for their respective drafts redeemed during the previous month. If the holders fail to pay the
amounts owed, the company sustains the loss.

Simply put, every credit card transaction involves three contracts, namely: (a) the sales contract between the credit card holder and the
merchant or the business establishment which accepted the credit card; (b) the loan agreement between the credit card issuer and the credit
card holder; and lastly, (c) the promise to pay between the credit card issuer and the merchant or business establishment.[16]
Credit card issuer – cardholder relationship

When a credit card company gives the holder the privilege of charging items at establishments associated with the issuer, [17] a necessary
question in a legal analysis is – when does this relationship begin? There are two diverging views on the matter. In City Stores Co. v.
Henderson,[18] another U.S. decision, held that:

The issuance of a credit card is but an offer to extend a line of open account credit. It is unilateral and supported by no consideration. The offer
may be withdrawn at any time, without prior notice, for any reason or, indeed, for no reason at all, and its withdrawal breaches no duty – for
there is no duty to continue it – and violates no rights.

Thus, under this view, each credit card transaction is considered a separate offer and acceptance.

Novack v. Cities Service Oil Co.[19] echoed this view, with the court ruling that the mere issuance of a credit card did not create a contractual
relationship with the cardholder.

On the other end of the spectrum is Gray v. American Express Company[20] which recognized the card membership agreement itself as a
binding contract between the credit card issuer and the card holder. Unlike in the Novack and the City Stores cases, however, the cardholder
in Gray paid an annual fee for the privilege of being an American Express cardholder.

In our jurisdiction, we generally adhere to the Gray ruling, recognizing the relationship between the credit card issuer and the credit card
holder as a contractual one that is governed by the terms and conditions found in the card membership agreement.[21] This contract provides
the rights and liabilities of a credit card company to its cardholders and vice versa.

We note that a card membership agreement is a contract of adhesion as its terms are prepared solely by the credit card issuer, with the
cardholder merely affixing his signature signifying his adhesion to these terms.[22] This circumstance, however, does not render the agreement
void; we have uniformly held that contracts of adhesion are “as binding as ordinary contracts, the reason being that the party who adheres to
the contract is free to reject it entirely.”[23] The only effect is that the terms of the contract are construed strictly against the party who drafted
it.[24]

On AMEX’s obligations to Pantaleon

We begin by identifying the two privileges that Pantaleon assumes he is entitled to with the issuance of his AMEX credit card, and on
which he anchors his claims. First, Pantaleon presumes that since his credit card has no pre-set spending limit, AMEX has the obligation to
approve all his charge requests. Conversely, even if AMEX has no such obligation, at the very least it is obliged to act on his charge requests
within a specific period of time.
i. Use of credit card a mere offer to enter into loan agreements

Although we recognize the existence of a relationship between the credit card issuer and the credit card holder upon the acceptance by the
cardholder of the terms of the card membership agreement (customarily signified by the act of the cardholder in signing the back of the credit
card), we have to distinguish this contractual relationship from the creditor-debtor relationship which only arises after the credit card issuer
has approved the cardholder’s purchase request. The first relates merely to an agreement providing for credit facility to the cardholder. The
latter involves the actual credit on loan agreement involving three contracts, namely: the sales contract between the credit card holder and the
merchant or the business establishment which accepted the credit card; the loan agreement between the credit card issuer and the credit card
holder; and thepromise to pay between the credit card issuer and the merchant or business establishment.

From the loan agreement perspective, the contractual relationship begins to exist only upon the meeting of the offer[25] and acceptance of the
parties involved. In more concrete terms, when cardholders use their credit cards to pay for their purchases, they merely offer to enter into
loan agreements with the credit card company. Only after the latter approves the purchase requests that the parties enter into binding loan
contracts, in keeping with Article 1319 of the Civil Code, which provides:

Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

This view finds support in the reservation found in the card membership agreement itself, particularly paragraph 10, which clearly states
that AMEX “reserve[s] the right to deny authorization for any requested Charge.” By so providing, AMEX made its position clear that it has no
obligation to approve any and all charge requests made by its card holders.

ii. AMEX not guilty of culpable delay

Since AMEX has no obligation to approve the purchase requests of its credit cardholders, Pantaleon cannot claim that AMEX defaulted in its
obligation. Article 1169 of the Civil Code, which provides the requisites to hold a debtor guilty of culpable delay, states:

Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation. x x x.

The three requisites for a finding of default are: (a) that the obligation is demandable and liquidated; (b) the debtor delays performance; and (c)
the creditor judicially or extrajudicially requires the debtor’s performance.[26]

Based on the above, the first requisite is no longer met because AMEX, by the express terms of the credit card agreement, is not obligated to
approve Pantaleon’s purchase request. Without a demandable obligation, there can be no finding of default.
Apart from the lack of any demandable obligation, we also find that Pantaleon failed to make the demand required by Article 1169 of the Civil
Code.

As previously established, the use of a credit card to pay for a purchase is only an offer to the credit card company to enter a loan agreement
with the credit card holder.Before the credit card issuer accepts this offer, no obligation relating to the loan agreement exists between
them. On the other hand, a demand is defined as the “assertion of a legal right; xxx an asking with authority, claiming or challenging as
due.”[27] A demand presupposes the existence of an obligation between the parties.

Thus, every time that Pantaleon used his AMEX credit card to pay for his purchases, what the stores transmitted to AMEX were his offers to
execute loan contracts. These obviously could not be classified as the demand required by law to make the debtor in default, given that no
obligation could arise on the part of AMEX until after AMEX transmitted its acceptance of Pantaleon’s offers. Pantaleon’s act of “insisting on
and waiting for the charge purchases to be approved by AMEX”[28] is not the demand contemplated by Article 1169 of the Civil Code.

For failing to comply with the requisites of Article 1169, Pantaleon’s charge that AMEX is guilty of culpable delay in approving his purchase
requests must fail.

iii. On AMEX’s obligation to act on the offer within a specific period of time

Even assuming that AMEX had the right to review his credit card history before it approved his purchase requests, Pantaleon insists that AMEX
had an obligation to act on his purchase requests, either to approve or deny, in “a matter of seconds” or “in timely dispatch.” Pantaleon
impresses upon us the existence of this obligation by emphasizing two points: (a) his card has no pre-set spending limit; and (b) in his twelve
years of using his AMEX card, AMEX had always approved his charges in a matter of seconds.

Pantaleon’s assertions fail to convince us.

We originally held that AMEX was in culpable delay when it acted on the Coster transaction, as well as the two other transactions in the United
States which took AMEX approximately 15 to 20 minutes to approve. This conclusion appears valid and reasonable at first glance, comparing
the time it took to finally get the Coster purchase approved (a total of 78 minutes), to AMEX’s “normal” approval time of three to four seconds
(based on the testimony of Edgardo Jaurigue, as well as Pantaleon’s previous experience). We come to a different result, however, after a
closer look at the factual and legal circumstances of the case.

AMEX’s credit authorizer, Edgardo Jaurigue, explained that having no pre-set spending limit in a credit card simply means that the charges
made by the cardholder are approved based on his ability to pay, as demonstrated by his past spending, payment patterns, and personal
resources.[29] Nevertheless, every time Pantaleon charges a purchase on his credit card, the credit card company still has to determine
whether it will allow this charge, based on his past credit history. This right to review a card holder’s credit history, although not specifically
set out in the card membership agreement, is a necessary implication of AMEX’s right to deny authorization for any requested charge.

As for Pantaleon’s previous experiences with AMEX (i.e., that in the past 12 years, AMEX has always approved his charge requests in three or
four seconds), this record does not establish that Pantaleon had a legally enforceable obligation to expect AMEX to act on his charge requests
within a matter of seconds. For one, Pantaleon failed to present any evidence to support his assertion that AMEX acted on purchase requests in
a matter of three or four seconds as an established practice. More importantly, even if Pantaleon did prove that AMEX, as a matter of practice
or custom, acted on its customers’ purchase requests in a matter of seconds, this would still not be enough to establish a legally demandable
right; as a general rule, a practice or custom is not a source of a legally demandable or enforceable right.[30]

We next examine the credit card membership agreement, the contract that primarily governs the relationship between AMEX and Pantaleon.
Significantly, there is no provision in this agreement that obligates AMEX to act on all cardholder purchase requests within a specifically
defined period of time. Thus, regardless of whether the obligation is worded was to “act in a matter of seconds” or to “act in timely dispatch,”
the fact remains that no obligation exists on the part of AMEX to act within a specific period of time. Even Pantaleon admits in his testimony
that he could not recall any provision in the Agreement that guaranteed AMEX’s approval of his charge requests within a matter of minutes.[31]

Nor can Pantaleon look to the law or government issuances as the source of AMEX’s alleged obligation to act upon his credit card purchases
within a matter of seconds. As the following survey of Philippine law on credit card transactions demonstrates, the State does not require credit
card companies to act upon its cardholders’ purchase requests within a specific period of time.

Republic Act No. 8484 (RA 8484), or the Access Devices Regulation Act of 1998, approved on February 11, 1998, is the controlling legislation
that regulates the issuance and use of access devices,[32] including credit cards. The more salient portions of this law include the imposition of
the obligation on a credit card company to disclose certain important financial information[33] to credit card applicants, as well as a definition of
the acts that constitute access device fraud.

As financial institutions engaged in the business of providing credit, credit card companies fall under the supervisory powers of the Bangko
Sentral ng Pilipinas (BSP).[34] BSP Circular No. 398 dated August 21, 2003 embodies the BSP’s policy when it comes to credit cards –

The Bangko Sentral ng Pilipinas (BSP) shall foster the development of consumer credit through innovative products such as credit cards under
conditions of fair and sound consumer credit practices. The BSP likewise encourages competition and transparency to ensure more efficient
delivery of services and fair dealings with customers. (Emphasis supplied)

Based on this Circular, “x x x [b]efore issuing credit cards, banks and/or their subsidiary credit card companies must exercise proper diligence
by ascertaining that applicants possess good credit standing and are financially capable of fulfilling their credit commitments.”[35] As the above-
quoted policy expressly states, the general intent is to foster “fair and sound consumer credit practices.”

Other than BSP Circular No. 398, a related circular is BSP Circular No. 454, issued on September 24, 2004, but this circular merely enumerates
the unfair collection practices of credit card companies – a matter not relevant to the issue at hand.

In light of the foregoing, we find and so hold that AMEX is neither contractually bound nor legally obligated to act on its cardholders’
purchase requests within any specific period of time, much less a period of a “matter of seconds” that Pantaleon uses as his standard. The
standard therefore is implicit and, as in all contracts, must be based on fairness and reasonableness, read in relation to the Civil Code provisions
on human relations, as will be discussed below.

AMEX acted with good faith

Thus far, we have already established that: (a) AMEX had neither a contractual nor a legal obligation to act upon Pantaleon’s purchases within a
specific period of time; and (b) AMEX has a right to review a cardholder’s credit card history. Our recognition of these entitlements, however,
does not give AMEX an unlimited right to put off action on cardholders’ purchase requests for indefinite periods of time. In acting on
cardholders’ purchase requests, AMEX must take care not to abuse its rights and cause injury to its clients and/or third persons. We cite in this
regard Article 19, in conjunction with Article 21, of the Civil Code, which provide:

Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due and
observe honesty and good faith.

Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.

Article 19 pervades the entire legal system and ensures that a person suffering damage in the course of another’s exercise of right or
performance of duty, should find himself without relief.[36] It sets the standard for the conduct of all persons, whether artificial or natural, and
requires that everyone, in the exercise of rights and the performance of obligations, must: (a) act with justice, (b) give everyone his due, and (c)
observe honesty and good faith. It is not because a person invokes his rights that he can do anything, even to the prejudice and disadvantage of
another.[37]

While Article 19 enumerates the standards of conduct, Article 21 provides the remedy for the person injured by the willful act, an action for
damages. We explained how these two provisions correlate with each other in GF Equity, Inc. v. Valenzona:[38]

[Article 19], known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which must be observed
not only in the exercise of one's rights but also in the performance of one's duties. These standards are the following: to act with justice; to give
everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a primordial limitation on all rights; that in their
exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by itself legal because recognized or granted
by law as such, may nevertheless become the source of some illegality. When a right is exercised in a manner which does not conform with
the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be
held responsible. But while Article 19 lays down a rule of conduct for the government of human relations and for the maintenance of social
order, it does not provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would be proper.

In the context of a credit card relationship, although there is neither a contractual stipulation nor a specific law requiring the credit card
issuer to act on the credit card holder’s offer within a definite period of time, these principles provide the standard by which to judge AMEX’s
actions.

According to Pantaleon, even if AMEX did have a right to review his charge purchases, it abused this right when it unreasonably delayed
the processing of the Coster charge purchase, as well as his purchase requests at the Richard Metz’ Golf Studio and Kids’ Unlimited Store; AMEX
should have known that its failure to act immediately on charge referrals would entail inconvenience and result in humiliation, embarrassment,
anxiety and distress to its cardholders who would be required to wait before closing their transactions.[39]

It is an elementary rule in our jurisdiction that good faith is presumed and that the burden of proving bad faith rests upon the party alleging
it.[40] Although it took AMEX some time before it approved Pantaleon’s three charge requests, we find no evidence to suggest that it acted with
deliberate intent to cause Pantaleon any loss or injury, or acted in a manner that was contrary to morals, good customs or public policy. We
give credence to AMEX’s claim that its review procedure was done to ensure Pantaleon’s own protection as a cardholder and to prevent the
possibility that the credit card was being fraudulently used by a third person.

Pantaleon countered that this review procedure is primarily intended to protect AMEX’s interests, to make sure that the cardholder making the
purchase has enough means to pay for the credit extended. Even if this were the case, however, we do not find any taint of bad faith in such
motive. It is but natural for AMEX to want to ensure that it will extend credit only to people who will have sufficient means to pay for their
purchases. AMEX, after all, is running a business, not a charity, and it would simply be ludicrous to suggest that it would not want to earn profit
for its services. Thus, so long as AMEX exercises its rights, performs its obligations, and generally acts with good faith, with no intent to cause
harm, even if it may occasionally inconvenience others, it cannot be held liable for damages.

We also cannot turn a blind eye to the circumstances surrounding the Coster transaction which, in our opinion, justified the wait. In Edgardo
Jaurigue’s own words:

Q 21: With reference to the transaction at the Coster Diamond House covered by Exhibit H, also Exhibit 4 for the defendant, the approval came
at 2:19 a.m. after the request was relayed at 1:33 a.m., can you explain why the approval came after about 46 minutes, more or less?
A21: Because we have to make certain considerations and evaluations of [Pantaleon’s] past spending pattern with [AMEX] at that time before
approving plaintiff’s request because [Pantaleon] was at that time making his very first single charge purchase of US$13,826 [this is below the
US$16,112.58 actually billed and paid for by the plaintiff because the difference was already automatically approved by [AMEX] office in
Netherland[s] and the record of [Pantaleon’s] past spending with [AMEX] at that time does not favorably support his ability to pay for such
purchase. In fact, if the foregoing internal policy of [AMEX] had been strictly followed, the transaction would not have been approved at all
considering that the past spending pattern of the plaintiff with [AMEX] at that time does not support his ability to pay for such purchase.[41]

x x x x

Q: Why did it take so long?

A: It took time to review the account on credit, so, if there is any delinquencies [sic] of the cardmember. There are factors on deciding the
charge itself which are standard measures in approving the authorization. Now in the case of Mr. Pantaleon although his account is single
charge purchase of US$13,826. [sic] this is below the US$16,000. plus actually billed x x x we would have already declined the charge outright
and asked him his bank account to support his charge. But due to the length of his membership as cardholder we had to make a decision on
hand.[42]

As Edgardo Jaurigue clarified, the reason why Pantaleon had to wait for AMEX’s approval was because he had to go over Pantaleon’s credit card
history for the past twelve months.[43] It would certainly be unjust for us to penalize AMEX for merely exercising its right to review Pantaleon’s
credit history meticulously.

Finally, we said in Garciano v. Court of Appeals that “the right to recover [moral damages] under Article 21 is based on equity, and he who
comes to court to demand equity, must come with clean hands. Article 21 should be construed as granting the right to recover damages to
injured persons who are not themselves at fault.”[44] As will be discussed below, Pantaleon is not a blameless party in all this.

Pantaleon’s action was the proximate cause for his injury

Pantaleon mainly anchors his claim for moral and exemplary damages on the embarrassment and humiliation that he felt when the
European tour group had to wait for him and his wife for approximately 35 minutes, and eventually had to cancel the Amsterdam city tour.
After thoroughly reviewing the records of this case, we have come to the conclusion that Pantaleon is the proximate cause for this
embarrassment and humiliation.

As borne by the records, Pantaleon knew even before entering Coster that the tour group would have to leave the store by 9:30 a.m. to have
enough time to take the city tour of Amsterdam before they left the country. After 9:30 a.m., Pantaleon’s son, who had boarded the bus ahead
of his family, returned to the store to inform his family that they were the only ones not on the bus and that the entire tour group was waiting
for them. Significantly, Pantaleon tried to cancel the sale at 9:40 a.m. because he did not want to cause any inconvenience to the tour group.
However, when Coster’s sale manager asked him to wait a few more minutes for the credit card approval, he agreed, despite the knowledge
that he had already caused a 10-minute delay and that the city tour could not start without him.
In Nikko Hotel Manila Garden v. Reyes,[45] we ruled that a person who knowingly and voluntarily exposes himself to danger cannot claim
damages for the resulting injury:

The doctrine of volenti non fit injuria (“to which a person assents is not esteemed in law as injury”) refers to self-inflicted injury or to the
consent to injury which precludes the recovery of damages by one who has knowingly and voluntarily exposed himself to danger, even if he is
not negligent in doing so.

This doctrine, in our view, is wholly applicable to this case. Pantaleon himself testified that the most basic rule when travelling in a tour group
is that you must never be a cause of any delay because the schedule is very strict.[46] When Pantaleon made up his mind to push through with his
purchase, he must have known that the group would become annoyed and irritated with him. This was the natural, foreseeable consequence of
his decision to make them all wait.

We do not discount the fact that Pantaleon and his family did feel humiliated and embarrassed when they had to wait for AMEX to
approve the Coster purchase inAmsterdam. We have to acknowledge, however, that Pantaleon was not a helpless victim in this scenario – at
any time, he could have cancelled the sale so that the group could go on with the city tour. But he did not.

More importantly, AMEX did not violate any legal duty to Pantaleon under the circumstances under the principle of damnum absque injuria, or
damages without legal wrong, loss without injury.[47] As we held in BPI Express Card v. CA:[48]

We do not dispute the findings of the lower court that private respondent suffered damages as a result of the cancellation of his credit card.
However, there is a material distinction between damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt, or
harm which results from the injury; and damages are the recompense or compensation awarded for the damage suffered. Thus, there can be
damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty. In such cases, the
consequences must be borne by the injured person alone, the law affords no remedy for damages resulting from an act which does not
amount to a legal injury or wrong. These situations are often called damnum absque injuria.

In other words, in order that a plaintiff may maintain an action for the injuries of which he complains, he must establish that such injuries
resulted from a breach of duty which the defendant owed to the plaintiff - a concurrence of injury to the plaintiff and legal responsibility by the
person causing it. The underlying basis for the award of tort damages is the premise that an individual was injured in contemplation of
law. Thus, there must first be a breach of some duty and the imposition of liability for that breach before damages may be awarded; and the
breach of such duty should be the proximate cause of the injury.

Pantaleon is not entitled to damages

Because AMEX neither breached its contract with Pantaleon, nor acted with culpable delay or the willful intent to cause harm, we find the
award of moral damages to Pantaleon unwarranted.

Similarly, we find no basis to award exemplary damages. In contracts, exemplary damages can only be awarded if a defendant acted “in a
wanton, fraudulent, reckless, oppressive or malevolent manner.”[49] The plaintiff must also show that he is entitled to moral, temperate, or
compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded.[50]
As previously discussed, it took AMEX some time to approve Pantaleon’s purchase requests because it had legitimate concerns on the amount
being charged; no malicious intent was ever established here. In the absence of any other damages, the award of exemplary damages clearly
lacks legal basis.

Neither do we find any basis for the award of attorney’s fees and costs of litigation. No premium should be placed on the right to litigate and
not every winning party is entitled to an automatic grant of attorney's fees.[51] To be entitled to attorney’s fees and litigation costs, a party must
show that he falls under one of the instances enumerated inArticle 2208 of the Civil Code.[52] This, Pantaleon failed to do. Since we eliminated
the award of moral and exemplary damages, so must we delete the award for attorney's fees and litigation expenses.

Lastly, although we affirm the result of the CA decision, we do so for the reasons stated in this Resolution and not for those found in the
CA decision.

WHEREFORE, premises considered, we SET ASIDE our May 8, 2009 Decision and GRANT the present motion for reconsideration. The Court of
Appeals Decision dated August 18, 2006 is hereby AFFIRMED. No costs.

SO ORDERED.

[G.R. No. 156966. May 7, 2004]

PILIPINO TELEPHONE CORPORATION, petitioner, vs. DELFINO TECSON, respondent.

DECISION

VITUG, J.:

The facts, by and large, are undisputed.

On various dates in 1996, Delfino C. Tecson applied for six (6) cellular phone subscriptions with petitioner Pilipino Telephone Corporation
(PILTEL), a company engaged in the telecommunications business, which applications were each approved and covered, respectively, by six
mobiline service agreements.

On 05 April 2001, respondent filed with the Regional Trial Court of Iligan City, Lanao Del Norte, a complaint against petitioner for a “Sum of
Money and Damages.” Petitioner moved for the dismissal of the complaint on the ground of improper venue, citing a common provision in the
mobiline service agreements to the effect that -
“Venue of all suits arising from this Agreement or any other suit directly or indirectly arising from the relationship between PILTEL and
subscriber shall be in the proper courts of Makati, Metro Manila. Subscriber hereby expressly waives any other venues.”[1]

In an order, dated 15 August 2001, the Regional Trial Court of Iligan City, Lanao del Norte, denied petitioner’s motion to dismiss and required it
to file an answer within 15 days from receipt thereof.

Petitioner PILTEL filed a motion for the reconsideration, through registered mail, of the order of the trial court. In its subsequent order, dated
08 October 2001, the trial court denied the motion for reconsideration.

Petitioner filed a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure before the Court of Appeals.

The Court of Appeals, in its decision of 30 April 2002, saw no merit in the petition and affirmed the assailed orders of the trial court. Petitioner
moved for a reconsideration, but the appellate court, in its order of 21 January 2003, denied the motion.

There is merit in the instant petition.

Section 4, Rule 4, of the Revised Rules of Civil Procedure[2] allows the parties to agree and stipulate in writing, before the filing of an action, on
the exclusive venue of any litigation between them. Such an agreement would be valid and binding provided that the stipulation on the chosen
venue is exclusive in nature or in intent, that it is expressed in writing by the parties thereto, and that it is entered into before the filing of the
suit. The provision contained in paragraph 22 of the “Mobile Service Agreement,” a standard contract made out by petitioner PILTEL to its
subscribers, apparently accepted and signed by respondent, states that the venue of all suits arising from the agreement, or any other suit
directly or indirectly arising from the relationship between PILTEL and subscriber, “shall be in the proper courts of Makati, Metro Manila.” The
added stipulation that the subscriber “expressly waives any other venue”[3] should indicate, clearly enough, the intent of the parties to consider
the venue stipulation as being preclusive in character.

The appellate court, however, would appear to anchor its decision on the thesis that the subscription agreement, being a mere contract of
adhesion, does not bind respondent on the venue stipulation.

Indeed, the contract herein involved is a contract of adhesion. But such an agreement is not per se inefficacious. The rule instead is that,
should there be ambiguities in a contract of adhesion, such ambiguities are to be construed against the party that prepared it. If, however, the
stipulations are not obscure, but are clear and leave no doubt on the intention of the parties, the literal meaning of its stipulations must be held
controlling.[4]

A contract of adhesion is just as binding as ordinary contracts. It is true that this Court has, on occasion, struck down such contracts as being
assailable when the weaker party is left with no choice by the dominant bargaining party and is thus completely deprived of an opportunity to
bargain effectively. Nevertheless, contracts of adhesion are not prohibited even as the courts remain careful in scrutinizing the factual
circumstances underlying each case to determine the respective claims of contending parties on their efficacy.

In the case at bar, respondent secured six (6) subscription contracts for cellular phones on various dates. It would be difficult to assume that,
during each of those times, respondent had no sufficient opportunity to read and go over the terms and conditions embodied in the
agreements. Respondent continued, in fact, to acquire in the pursuit of his business subsequent subscriptions and remained a subscriber of
petitioner for quite sometime.

In Development Bank of the Philippines vs. National Merchandising Corporation,[5] the contracting parties, being of age and businessmen of
experience, were presumed to have acted with due care and to have signed the assailed documents with full knowledge of their import. The
situation would be no less true than that which obtains in the instant suit. The circumstances in Sweet Lines, Inc. vs. Teves,[6] wherein this Court
invalidated the venue stipulation contained in the passage ticket, would appear to be rather peculiar to that case. There, the Court took note of
an acute shortage in inter-island vessels that left passengers literally scrambling to secure accommodations and tickets from crowded and
congested counters. Hardly, therefore, were the passengers accorded a real opportunity to examine the fine prints contained in the tickets, let
alone reject them.

A contract duly executed is the law between the parties, and they are obliged to comply fully and not selectively with its terms. A contract of
adhesion is no exception.[7]

WHEREFORE, the instant petition is GRANTED, and the questioned decision and resolution of the Court of Appeals in CA-G.R. SP No. 68104 are
REVERSED and SET ASIDE. Civil Case No. 5572 pending before the Regional Trial Court of Iligan City, Branch 4, is DISMISSED without prejudice
to the filing of an appropriate complaint by respondent against petitioner with the court of proper venue. No costs.

SO ORDERED.
[G.R. No. 88880. April 30, 1991.]

PHILIPPINE NATIONAL BANK, Petitioner, v. THE HON. COURT OF APPEALS and AMBROSIO PADILLA, Respondents.

The Chief Legal Counsel for Petitioner.

Ambrosio Padilla, Mempin & Reyes Law Offices for Private Respondent.

SYLLABUS
1. COMMERCIAL LAW; BANKING LAWS; RATE OF INTEREST; INCREASE OF INTEREST RATE; NOT TO BE MADE OFTENER THAN ONCE A YEAR. —
PNB, over the objection of the private respondent, and without authority from the Monetary Board, within a period of only four (4) months,
increased the 18% interest rate on the private respondent’s loan obligation three (3) times: (a) to 32% in July 1984; (b) to 41% in October 1984;
and (c) to 48% in November 1984. Those increases were null and void. Although Section 2, P.D. No. 116 of January 29, 1973, authorizes the
Monetary Board to prescribe the maximum rate or rates of interest for loans or renewal thereof and to change such rate or rates whenever
warranted by prevailing economic and social conditions, it expressly provides that "such changes shall not be made oftener than once every
twelve months. "If the Monetary Board itself was not authorized to make such changes oftener than once a year, even less so may a bank
which is subordinate to the Board.

2. ID.; ID.; ID.; ID.; MAY BE INCREASED WITHIN LIMITS OF LAW; PNB CIRCULARS AND RESOLUTION ARE NEITHER LAWS NOR RESOLUTIONS OF
MONETARY BOARD. — While the private respondent-debtor did agree in the Deed of Real Estate Mortgage (Exh. 5) that the interest rate may
be increased during the life of the contract "to such increase within the rate allowed by law, as the Board of Directors of the MORTGAGEE may
prescribe" (Exh. 5-e-1) or "within the limits allowed by law" (Promissory Notes, Exhs. 2, 3, and 4), no laws was ever passed in July to November
1984 increasing the interest rates on loans or renewals thereof to 32%, 41% and 48% (per annum), and no documents were executed and
delivered by the debtor to effectuate the increases. The PNB relied on its own Board Resolution No. 681 (Exh. 10), PNB Circular No. 40-79-84
(Exh. 13), and PNB Circular No. 40-129-84 (Exh. 15), but those resolution and circulars are neither laws nor resolutions of the Monetary Board.

3. ID.; ID.; ID.; REMOVAL OF USURY LAW CEILING ON INTEREST RATES DOES NOT AUTHORIZE BANKS TO UNILATERALLY AND SUCCESSIVELY
INCREASE INTEREST RATES. — CB Circular No. 905, Series of 1982 (Exh. 11) removed the Usury law ceiling on interest rates — but it did not
authorize the PNB, or any bank for that matter, to unilaterally and successively increase the agreed interest rates from 18% to 48% within a
span of four (4) months, in violation of P.D. 116 which limits such changes to "once every twelve months."cralaw virtua1aw library

4. ID.; ID.; ID.; UNILATERAL ACTION TO INCREASE INTEREST RATES, A VIOLATION OF ARTICLE 1308 OF CIVIL CODE. — Besides violating P.D. 116,
the unilateral action of the PNB in increasing the interest rate on the private respondent’s loan, violated the mutuality of contracts ordained in
Article 1308 of the civil Code: "ART. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of
one of them."cralaw virtua1aw library

5. ID.; ID.; ID.; SUCCESSIVE INCREASE OF INTEREST RATES, A VIOLATION OF ARTICLE 1956 OF CIVIL CODE. — PNB’s successive increases of the
interest rate on the private respondent’s loan, over the latter’s protest, were arbitrary as they violated an express provision of the Credit
Agreement (Exh. 1) Section 9.01 that its terms "may be amended only by an instrument in writing signed by the party to be bound as burdened
by such amendment." The increases imposed by PNB also contravene Art. 1956 of the Civil Code which provides that "no interest shall be due
unless it has been expressly stipulated in writing."

DECISION

GRIÑO-AQUINO, J.:

The Philippine National Bank (PNB) has appealed by certiorari from the decision promulgated on June 27, 1989 by the Court of Appeals in CA-
G.R. CV No. 09791 entitled, "AMBROSIO PADILLA, plaintiff-appellant versus PHILIPPINE NATIONAL BANK, defendant-appellee," reversing the
decision of the trial court which had dismissed the private respondent’s complaint "to annul interest increases." (p. 32, Rollo.) The Court of
Appeals rendered judgment:jgc:chanrobles.com.ph

". . . declaring the questioned increases of interest as unreasonable, excessive and arbitrary and ordering the defendant-appellee [PNB] to
refund to the plaintiff-appellant the amount of interest collected from July, 1984 in excess of twenty-four percent (24%) per annum. Costs
against the defendant-appellee." (pp 14-15, Rollo.)
In July 1982, the private respondent applied for, and was granted by petitioner PNB, a credit line of 321.8 million, secured by a real estate
mortgage, for a term of two (2) years, with 18% interest per annum. Private respondent executed in favor of the PNB a Credit Agreement, two
(2) promissory notes in the amount of P900,000.00 each, and a Real Estate Mortgage Contract.

The Credit Agreement provided that

"9.06 Other Conditions. The Borrowers hereby agree to be bound by the rules and regulations of the Central Bank and the current and general
policies of the Bank and those which the Bank may adopt in the future, which may have relation to or in any way affect the Line, which rules,
regulations and policies are incorporated herein by reference as if set forth herein in full. Promptly upon receipt of a written request from the
Bank, the Borrowers shall execute and deliver such documents and instruments, in form and substance satisfactory to the Bank, in order to
effectuate or otherwise comply with such rules, regulations and policies." (p. 85, Rollo.)

The Promissory Notes, in turn, uniformly authorized the PNB to increase the stipulated 18% interest per annum "within the limits allowed by
law at any time depending on whatever policy it [PNB] may adopt in the future; Provided, that, the interest rate on this note shall be
correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary Board." (pp. 85-86,
Rollo; Emphasis ours.)

The Real Estate Mortgage Contract likewise provided that:jgc:chanrobles.com.ph

"(k) INCREASE OF INTEREST RATE

"The rate of interest charged on the obligation secured by this mortgage as well as the interest on the amount which may have been advanced
by the MORTGAGEE, in accordance with the provisions hereof, shall be subject during the life of this contract to such an increase within the
rate allowed by law, as the Board of Directors of the MORTGAGEE may prescribe for its debtors." (p. 86, Rollo;Emphasis supplied.)

Four (4) months advance interest and incidental expenses/charges were deducted from the loan, the net proceeds of which were released to
the private respondent by crediting or transferring the amount to his current account with the bank.chanrobles.com : virtual law library

On June 20, 1984, PNB informed the private respondent that (1) his credit line of P1.8 million "will expire on July 4, 1984," (2)" [i]f renewal of
the line for another year is intended, please submit soonest possible your request," and (3) the "present policy of the Bank requires at least 30%
reduction of principal before your line can be renewed." (pp. 86-87, Rollo.) Complying, private respondent on June 25, 1984, paid PNB P540,000
00 (30% of P1.8 million) and requested that "the balance of P1,260,000.00 be renewed for another period of two (2) years under the same
arrangement" and that "the increase of the interest rate of my mortgage loan be from 18% to 21%" (p. 87, Rollo.).

On July 4, 1984, private respondent paid PNB P360,000.00.

On July 18, 1984, private respondent reiterated in writing his request that "the increase in the rate of interest from 18% be fixed at 21% of 24%.
(p. 87, Rollo.)

On July 26, 1984, private respondent made an additional payment of P100,000.

On August 10, 1984, PNB informed private respondent that "we can not give due course to your request for preferential interest rate in view of
the following reasons: Existing Loan Policies of the bank requires 32% for loan of more than one year; our present cost of funds has
substantially increased." (pp. 8788, Rollo.)

On August 17, 1984, private respondent further paid PNB P150,000.00.

In a letter dated August 24, 1984 to PNB, private respondent announced that he would "continue making further payments, and instead of a
‘loan of more than one year,’ I shall pay the said loan before the lapse of one year or before July 4, 1985. . . . I reiterate my request that the
increase of my rate of interest from 18% ‘be fixed at 21% or 24%.’" (p. 88, Rollo.)

On September 12, 1984, private respondent paid PNB P160,000.00.

In letters dated September 12, 1984 and September 13, 1984, PNB informed private respondent that "the interest rate on your outstanding
line/loan is hereby adjusted from 32% p.a. to 41% p.a. (35% prime rate + 6%) effective September 6, 1984;" and further explained "why we can
not grant your request for a lower rate of 21% or 24%." (pp. 88-89, Rollo.)
In a letter dated September 24, 1984 to PNB, private respondent registered his protest against the increase of interest rate from 18% to 32% on
July 4, 1984 and from 32% to 41% on September 6, 1984.

On October 15, 1984, private respondent reiterated his request that the interest rate should not be increased from 18% to 32% and from 32%
to 41%. He also attached (as payment) a check for P140,000.00.chanrobles.com.ph : virtual law library

Like rubbing salt on the private respondent’s wound, the petitioner informed private respondent on October 29, 1984, that "the interest rate
on your outstanding line/loan is hereby adjusted from 41% p.a. to 48% p.a. (42% prime rate plus 6% spread) effective 25 October 1984." (p. 89,
Rollo.)

In November 1984, private respondent paid PNB P50,000.00 thus reducing his principal loan obligation to P300,000.00.

On December 18, 1984, private respondent filed in the Regional Trial Court of Manila a complaint against PNB entitled, "AMBROSIO PADILLA v.
PHILIPPINE NATIONAL BANK" (Civil Case No. 84-28391), praying that judgment be rendered:jgc:chanrobles.com.ph

"a. Declaring that the unilateral increase of interest rates from 18% to 32%, then to 41% and again to 48% are illegal, not valid nor binding on
plaintiff, and that an adjustment of his interest rate from 18% to 24% is reasonable, fair and just;

"b. The interest rate on the P900,000.00 released on September 27, 1982 be counted from said date and not from July 4, 1984;

"c. The excess of interest payment collected by defendant bank by debiting plaintiffs current account be refunded to plaintiff or credited to his
current account;

"d. Pending the determination of the merits of this case, a restraining order and or a writ of preliminary injunction be issued (1) to restrain and
or enjoin defendant bank for [sic] collecting from plaintiff and/or debiting his current account with illegal and excessive increases of interest
rates; and (2) to prevent defendant bank from declaring plaintiff in default for non-payment and from instituting any foreclosure proceeding,
extrajudicial or judicial, of the valuable commercial property of plaintiff." (pp. 89-90, Rollo.)

In its answer to the complaint, PNB denied that the increases in interest rates were illegal, unilateral excessive and arbitrary and recited the
reasons justifying said increases.

On March 31, 1985, the private respondent paid the P300,000 balance of his obligation to PNBN (Exh. 5).

The trial court rendered judgment on April 14, 1986, dismissing the complaint because the increases of interest were properly made.

The private respondent appealed to the Court of Appeals. On June 27, 1989, the Court of Appeals reversed the trial court, hence, NB’s recourse
to this Court by a petition for review under Rule 45 of the Rules of Court.

The assignments of error raised in PNB’s petition for review can be resolved into a single legal issue of whether the bank, within the term of the
loan which it granted to the private respondent, may unilaterally change or increase the interest rate stipulated therein at will and as often as it
pleased.

The answer to that question is no.

In the first place, although Section 2, PD. No. 116 of January 29, 1973, authorizes the Monetary Board to prescribe the maximum rate or rates
of interest for loans or renewal thereof and to change such rate or rates whenever warranted by prevailing economic and social conditions, it
expressly provides that "such changes shall not be made oftener than once every twelve months."cralaw virtua1aw library

In this case, PNB, over the objection of the private respondent, and without authority from the Monetary Board, within a period of only four (4)
months, increased the 18% interest rate on the private respondent’s loan obligation three (3) times: (a) to 32% in July 1984; (b) to 41% in
October 1984; and (c) to 48% in November 1984. Those increases were null and void, for if the Monetary Board itself was not authorized to
make such changes oftener than once a year, even less so may a bank which is subordinate to the Board.chanrobles law library : red

Secondly, as pointed out by the Court of Appeals, while the private respondent-debtor did agree in the Deed of Real Estate Mortgage (Exh. 5)
that the interest rate may be increased during the life of the contract "to such increase within the rate allowed by law, as the Board of Directors
of the MORTGAGEE may prescribe" (Exh. 5-e-1) or "within the limits allowed by law" (Promissory Notes, Ex’s. 2, 3, and 4), no law was ever
passed in July to November 1984 increasing the interest rates on loans or renewals thereof to 32%, 41% and 48% (per annum), and no
documents were executed and delivered by the debtor to effectuate the increases. The Court of Appeals observed.

". . . We focus Our attention first of all on the agreement between the parties as embodied in the following instruments, to wit: (1) Exhibit ‘1’ —
Credit Agreement dated July 1, 1982; (2) Exhibit ‘2’ — Promissory Note dated July 5, 1982; (3) Exhibit ‘(3)’ — Promissory Note dated January 3,
1983; (4) Exhibit ‘4’ — Promissory Note, dated December 13, 1983; and (5) Exhibit ‘5’ — Real Estate Mortgage contract dated July 1, 1982.

"Exhibit ‘1’ states in its portion marked Exhibit ‘1-g-1’:chanrob1es virtual 1aw library

‘9 .06 Other Conditions. The Borrowers hereby agree to be bound by the rules and regulations of the Central Bank and the current and general
policies of the Bank and those which the Bank may adopt in the future, which may have relation to or in any way affect the Line, which rules,
regulations and policies are incorporated herein by reference as if set forth herein in full. Promptly upon receipt of a written request from the
Bank, the Borrowers shall execute and deliver such documents and instruments, in form and substance satisfactory to the Bank, in order to
effectuate or otherwise comply with such rules, regulations and policies.’

"Exhibits ‘2,’ ‘3,’ and ‘4’ in their portions respectively marked Exhibits ‘2-B,’ ‘3-B,’ and ‘4-B’ uniformly authorize the defendant bank to increase
the stipulated interest rate of 18% per annum ‘within the limits allowed by law at any time depending on whatever policy it may adopt in the
future: Provided, that, the interest rate on this note shall be correspondingly decreased in the event that the applicable maximum interest rate
is reduced by law or by the Monetary Board.’

"Exhibit ‘5’ in its portion marked Exhibit ‘5-e-1’ stipulates:chanrob1es virtual 1aw library

‘(k) INCREASE OF INTEREST RATE

‘The rate of interest charged on the obligation secured by this mortgage as well as the interest on the amount which may have been advanced
by the MORTGAGEE, in accordance with the provisions hereof, shall be subject during the life of this contract to such an increase within the
rate allowed by law, as the Board of Directors of the MORTGAGEE may prescribe for its debtors.’

"Clearly, then, the agreement between the parties authorized the defendant bank to increase the interest rate beyond the original rate of 18%
per annum but ‘within the limits allowed by law’ or ‘within the rate allowed by law,’ it being declared the obligation of the plaintiff as borrower
to execute and deliver the corresponding documents and instruments to effectuate the increase." (pp. 11-12, Rollo.)

In Banco Filipino Savings and Mortgage Bank v. Navarro, 15 SCRA 346 (1987), this Court disauthorized the bank from raising the interest rate on
the borrowers’ loan from 12% to 17% despite an escalation clause in the loan agreement signed by the debtors authorizing Banco Filipino "to
correspondingly increase the interest rate stipulated in this contract without advance notice to me/us in the event a law should be enacted
increasing the lawful rates of interest that may be charged on this particular kind of loan." (Emphasis supplied.)chanrobles virtual lawlibrary

In the Banco Filipino case, the bank relied on Section 3 of CB Circular No. 494 dated July 1, 1976 (72 O.G. No. 3, p. 676-J) which provided that
"the maximum rate of interest, including commissions premiums, fees and other charges on loans with a maturity of more than 730 days by
banking institution . . . shall be 19%."cralaw virtua1aw library

This Court disallowed the increase for the simple reason that said "Circular No. 494, although it has the effect of law is not a law." Speaking
through Mme. Justice Ameurfina M. Herrera, this Court held:jgc:chanrobles.com.ph

"It is now clear that from March 17, 1980, escalation clauses to be valid should specifically provide: (1) that there can be an increase in interest
if increased by law or by the Monetary Board; and (2) in order for such stipulation to be valid, it must include a provision for reduction of the
stipulated interest ‘in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board.’" p. 111, Rollo.).

In the present case, the PNB relied on its own Board Resolution No. 681 (Exh. 10), PNB Circular No. 40-79-84 (Exh. 13), and PNB Circular No. 40-
129-84 (Exh. 15), but those resolution and circulars are neither laws nor resolutions of the Monetary Board.

CB Circular No. 905, Series of 1982 (Exh. 11) removed the Usury Law ceiling on interest rates —

". . . increases in interest rates are not subject to any ceiling prescribed by the Usury Law."cralaw virtua1aw library

but it did not authorize the PNB, or any bank for that matter, to unilaterally and successively increase the agreed interest rates from 18% to
48% within a span of four (4) months, in violation of PD. 116 which limits such changes to "once every twelve months."cralaw virtua1aw library
Besides violating PD. 116, the unilateral action of the PNB in increasing the interest rate on the private respondent’s loan, violated the
mutuality of contracts ordained in Article 1308 of the Civil Code:jgc:chanrobles.com.ph

"ART. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them."cralaw
virtua1aw library

In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties
based on their essential equality. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will
of one of the contracting parties, is void (Garcia v. Rita Legarda, Inc., 21 SCRA 555). Hence, even assuming that the P1.8 million loan agreement
between the PNB and the private respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will
during the term of the loan, that license would have been null and void for being violative of the principle of mutuality essential in contracts. It
would have invested the loan agreement with the character of a contract of adhesion, where the parties do not bargain on equal footing, the
weaker party’s (the debtor) participation being reduced to the alternative "to take it or leave it" (Qua v. Law Union & Rock Insurance Co., 95
Phil. 85). Such a contract is a veritable trap for the weaker party whom the courts of justice must protect against abuse and imposition.

PNB’S successive increases of the interest rate on the private respondent’s loan, over the latter’s protest, were arbitrary as they violated an
express provision of the Credit Agreement (Exh. 1) Section 9.01 that its terms "may be amended only by an instrument in writing signed by the
party to be bound as burdened by such amendment." The increases imposed by PNB also contravene Art. 1956 of the Civil Code which provides
that "no interest shall be due unless it has been expressly stipulated in writing."cralaw virtua1aw library

The debtor herein never agreed in writing to pay the interest increases fixed by the PNB beyond 24% per annum, hence, he is not bound to pay
a higher rate than that.

That an increase in the interest rate from 18% to 48% within a period of four (4) months is excessive, as found by the Court of Appeals, is
indisputable.

WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. CV No. 09791, the Court resolved to deny the petition
for review for lack of merit, with costs against the petitioner.

SO ORDERED.
DKC HOLDINGS CORPORATION vs COURT OF APPEALS G.R. No. 118248. April 5, 2000 case digest

Concept: Art. 1311

Facts

· The subject of the controversy is a 14,021 square meter parcel of land located in Malinta, Valenzuela, Metro Manila which was originally
owned by private respondent Victor U. Bartolome’s deceased mother, Encarnacion Bartolome, under Transfer Certificate of Title No. B-37615
of the Register of Deeds of Metro Manila, District III. This lot was in front of one of the textile plants of petitioner and, as such, was seen by the
latter as a potential warehouse site.

· March 16, 1988. DKC entered a contract of lease with option to buy with Encarnacion Bartolome (Victor’s deceased mom). DKC was given
the option to lease or lease with purchase the subject land, which option must be exercised within a period of two years counted from the
signing of the Contract. In turn, DKC undertook to pay P3,000.00 a month as consideration for the reservation of its option. Within the two-year
period, DKC shall serve formal written notice upon the lessor Encarnacion Bartolome of its desire to exercise its option. The contract also
provided that in case DKC chose to lease the property, it may take actual possession of the premises. In such an event, the lease shall be for a
period of six years, renewable for another six years, and the monthly rental fee shall be P15,000.00 for the first six years and P18,000.00 for the
next six years, in case of renewal.

· DKC regularly paid Encarnacion until her death in January 1990. DKC then directed its payment to the son of Enacarnacion who is the sole
heir but Victor (Encarnacion’s son) refused the payment.

· January 10, 1990. Victor executed an affidavit of Self Adjudication all over her deceased mom’s properties, including the subject lot. Victor
the dick then cancelled the deed of transfer of DKC and then issued a transfer certificate under his name, what a dick.

· March 14, 1990. DKC sent a notice to Victor the royal douche, stating that they are going to exercise their option to lease, tendering the
amount of P15,000 as rent. Victor the douche, being a dick as he is, refused payment.

· DKC then opened a saving account with the China Banking Corp. under the name of Victor and deposited the P15,000 as rental fee while
also adding another P6000 for reservation fees

· DKC also tried to register and annotate the Contract on the title of Victor the dick to the property. Although respondent Register of Deeds
accepted the required fees, he nevertheless refused to register or annotate the same or even enter it in the day book or primary register.

· April 23, 1990. DKC filed a complaint for specific performance and damages against Victor and the Register of Deeds. DKC prayed for the
surrender and delivery of possession of the subject land in accordance with the Contract terms; the surrender of title for registration and
annotation thereon of the Contract; and the payment of P500,000.00 as actual damages, P500,000.00 as moral damages, P500,000.00 as
exemplary damages and P300,000.00 as attorney’s fees.

· During the May of 1990, some guy named Andres Lonzano filed a motion for intervention with motion to dismiss for he was a tenant-tiller
of the subject property, dude is under the Comprehensive Agrarian Reform Law, the motion was denied by the court, poor guy.

· The lower court then rendered its decision, it dismissed the complaint and ordered DKC to pay Victor for P30,000 as attorney’s fee. On
appeal, the CA affirmed the decision of the lower court

Issue: W/ON the Contract of Lease with Option to Buy entered into by the late Encarnacion Bartolome with petitioner was terminated upon her
death or whether it binds her sole heir, Victor, even after her demise.

Held: No. Article 1311 of the Civil Code and jurisprudence, Victor is bound by the subject Contract of Lease with Option to buy executed by his
predecessor-in-interest. It is futile for Victor to insist that he is not a party to the contract because of the clear provision of Article 1311 of the
Civil Code. Indeed, being an heir of Encarnacion, there is privity of interest between him and his deceased mother. He only succeeds to what
rights his mother had and what is valid and binding against her is also valid and binding as against him. The general rule, therefore, is that heirs
are bound by contracts entered into by their predecessors-in-interest except when the rights and obligations arising therefrom are not
transmissible by (1) their nature, (2) stipulation or (3) provision of law.
TANAY RECREATION CENTER AND DEVELOPMENT CORP. vs. FAUSTO Case Digest

TANAY RECREATION CENTER AND DEVELOPMENT CORP. vs. CATALINA MATIENZO FAUSTO

G.R. No. 140182. April 12, 2005

FACTS: Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a 3,090-square meter property located in Sitio
Gayas, Tanay, Rizal, owned by Catalina Matienzo Fausto, under a Contract of Lease. On this property stands the Tanay Coliseum Cockpit
operated by petitioner. The lease contract provided for a 20-year term, subject to renewal within sixty days prior to its expiration. The contract
also provided that should Fausto decide to sell the property, petitioner shall have the “priority right” to purchase the same.

On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew the lease. However, it was Fausto’s daughter, respondent
Anunciacion F. Pacunayen, who replied, asking that petitioner remove the improvements built thereon, as she is now the absolute owner of the
property. It appears that Fausto had earlier sold the property to Pacunayen and title has already been transferred in her name. Petitioner filed
an Amended Complaint for Annulment of Deed of Sale, Specific Performance with Damages, and Injunction.

In her Answer, respondent claimed that petitioner is estopped from assailing the validity of the deed of sale as the latter acknowledged her
ownership when it merely asked for a renewal of the lease. According to respondent, when they met to discuss the matter, petitioner did not
demand for the exercise of its option to purchase the property, and it even asked for grace period to vacate the premises.

ISSUE: The contention in this case refers to petitioner’s priority right to purchase, also referred to as the right of first refusal.

RULING: When a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to anybody at any price
until after he has made an offer to sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a right that the
lessor's first offer shall be in his favor. Petitioner’s right of first refusal is an integral and indivisible part of the contract of lease and is
inseparable from the whole contract. The consideration for the lease includes the consideration for the right of first refusal and is built into the
reciprocal obligations of the parties.

It was erroneous for the CA to rule that the right of first refusal does not apply when the property is sold to Fausto’s relative. When the terms
of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon. As such, there can be, between the
parties and their successors in interest, no evidence of such terms other than the contents of the written agreement, except when it fails to
express the true intent and agreement of the parties. In this case, the wording of the stipulation giving petitioner the right of first refusal is
plain and unambiguous, and leaves no room for interpretation. It simply means that should Fausto decide to sell the leased property during the
term of the lease, such sale should first be offered to petitioner. The stipulation does not provide for the qualification that such right may be
exercised only when the sale is made to strangers or persons other than Fausto’s kin. Thus, under the terms of petitioner’s right of first refusal,
Fausto has the legal duty to petitioner not to sell the property to anybody, even her relatives, at any price until after she has made an offer to
sell to petitioner at a certain price and said offer was rejected by petitioner.
G.R. No. L-9356 February 18, 1915

C. S. GILCHRIST, plaintiff-appellee,
vs.
E. A. CUDDY, ET AL., defendants.
JOSE FERNANDEZ ESPEJO and MARIANO ZALDARRIAGA, appellants.

C. Lozano for appellants.

Bruce, Lawrence, Ross and Block for appellee.

TRENT, J.:

An appeal by the defendants, Jose Fernandez Espejo and Mariano Zaldarriaga, from a judgment of the Court of First Instance of Iloilo,
dismissing their cross-complaint upon the merits for damages against the plaintiff for the alleged wrongful issuance of a mandatory and a
preliminary injunction.

Upon the application of the appellee an ex parte mandatory injunction was issued on the 22d of May, 1913, directing the defendant, E. A.
Cuddy, to send to the appellee a certain cinematograph film called "Zigomar" in compliance with an alleged contract which had been entered
into between these two parties, and at the time anex parte preliminary injunction was issued restraining the appellants from receiving and
exhibiting in their theater the Zigomar until further orders of the court. On the 26th of that month the appellants appeared and moved the
court to dissolve the preliminary injunction. When the case was called for trial on August 6, the appellee moved for the dismissal of the
complaint "for the reason that there is no further necessity for the maintenance of the injunction." The motion was granted without objection
as to Cuddy and denied as to the appellants in order to give them an opportunity to prove that the injunction were wrongfully issued and the
amount of damages suffered by reason thereof.

The pertinent part of the trial court's findings of fact in this case is as follows:

It appears in this case that Cuddy was the owner of the film Zigomar and that on the 24th of April he rented it to C. S. Gilchrist for a week for
P125, and it was to be delivered on the 26th of May, the week beginning that day. A few days prior to this Cuddy sent the money back to
Gilchrist, which he had forwarded to him in Manila, saying that he had made other arrangements with his film. The other arrangements was the
rental to these defendants Espejo and his partner for P350 for the week and the injunction was asked by Gilchrist against these parties from
showing it for the week beginning the 26th of May.

It appears from the testimony in this case, conclusively, that Cuddy willfully violated his contract, he being the owner of the picture, with
Gilchrist because the defendants had offered him more for the same period. Mr. Espejo at the trial on the permanent injunction on the 26th of
May admitted that he knew that Cuddy was the owner of the film. He was trying to get it through his agents Pathe Brothers in Manila. He is the
agent of the same concern in Iloilo. There is in evidence in this case on the trial today as well as on the 26th of May, letters showing that the
Pathe Brothers in Manila advised this man on two different occasions not to contend for this film Zigomar because the rental price was
prohibitive and assured him also that he could not get the film for about six weeks. The last of these letters was written on the 26th of April,
which showed conclusively that he knew they had to get this film from Cuddy and from this letter that the agent in Manila could not get it, but
he made Cuddy an offer himself and Cuddy accepted it because he was paying about three times as much as he had contracted with Gilchrist
for. Therefore, in the opinion of this court, the defendants failed signally to show the injunction against the defendant was wrongfully procured.

The appellants duly excepted to the order of the court denying their motion for new trial on the ground that the evidence was insufficient to
justify the decision rendered. There is lacking from the record before us the deposition of the defendant Cuddy, which apparently throws light
upon a contract entered into between him and the plaintiff Gilchrist. The contents of this deposition are discussed at length in the brief of the
appellants and an endeavor is made to show that no such contract was entered into. The trial court, which had this deposition before it, found
that there was a contract between Cuddy and Gilchrist. Not having the deposition in question before us, it is impossible to say how strongly it
militates against this findings of fact. By a series of decisions we have construed section 143 and 497 (2) of the Code of Civil Procedure to
require the production of all the evidence in this court. This is the duty of the appellant and, upon his failure to perform it, we decline to
proceed with a review of the evidence. In such cases we rely entirely upon the pleadings and the findings of fact of the trial court and examine
only such assigned errors as raise questions of law. (Ferrer vs. Neri Abejuela, 9 Phil. Rep., 324; Valle vs. Galera, 10 Phil. Rep., 619;
Salvacion vs. Salvacion, 13 Phil. Rep., 366; Breta vs. Smith, Bell & Co., 15 Phil. Rep., 446; Arroyo vs. Yulo, 18 Phil. Rep., 236; Olsen &
Co. vs. Matson, Lord & Belser Co., 19 Phil. Rep., 102; Blum vs. Barretto, 19 Phil. Rep., 161; Cuyugan vs. Aguas, 19 Phil. Rep., 379;
Mapa vs. Chaves, 20 Phil. Rep., 147; Mans vs. Garry, 20 Phil. Rep., 134.) It is true that some of the more recent of these cases make exceptions
to the general rule. Thus, in Olsen & Co. vs. Matson, Lord & Belser Co., (19 Phil. Rep., 102), that portion of the evidence before us tended to
show that grave injustice might result from a strict reliance upon the findings of fact contained in the judgment appealed from. We, therefore,
gave the appellant an opportunity to explain the omission. But we required that such explanation must show a satisfactory reason for the
omission, and that the missing portion of the evidence must be submitted within sixty days or cause shown for failing to do so. The other cases
making exceptions to the rule are based upon peculiar circumstances which will seldom arise in practice and need not here be set forth, for the
reason that they are wholly inapplicable to the present case. The appellants would be entitled to indulgence only under the doctrine of the
Olsen case. But from that portion of the record before us, we are not inclined to believe that the missing deposition would be sufficient to
justify us in reversing the findings of fact of the trial court that the contract in question had been made. There is in the record not only the
positive and detailed testimony of Gilchrist to this effect, but there is also a letter of apology from Cuddy to Gilchrist in which the former enters
into a lengthy explanation of his reasons for leasing the film to another party. The latter could only have been called forth by a broken contract
with Gilchrist to lease the film to him. We, therefore, fail to find any reason for overlooking the omission of the defendants to bring up the
missing portion of the evidence and, adhering to the general rule above referred to, proceed to examine the questions of law raised by the
appellants.

From the above-quoted findings of fact it is clear that Cuddy, a resident of Manila, was the owner of the "Zigomar;" that Gilchrist was the
owner of a cinematograph theater in Iloilo; that in accordance with the terms of the contract entered into between Cuddy and Gilchrist the
former leased to the latter the "Zigomar" for exhibition in his (Gilchrist's) theater for the week beginning May 26, 1913; and that Cuddy willfully
violate his contract in order that he might accept the appellant's offer of P350 for the film for the same period. Did the appellants know that
they were inducing Cuddy to violate his contract with a third party when they induced him to accept the P350? Espejo admitted that he knew
that Cuddy was the owner of the film. He received a letter from his agents in Manila dated April 26, assuring him that he could not get the film
for about six weeks. The arrangement between Cuddy and the appellants for the exhibition of the film by the latter on the 26th of May were
perfected after April 26, so that the six weeks would include and extend beyond May 26. The appellants must necessarily have known at the
time they made their offer to Cuddy that the latter had booked or contracted the film for six weeks from April 26. Therefore, the inevitable
conclusion is that the appellants knowingly induced Cuddy to violate his contract with another person. But there is no specific finding that the
appellants knew the identity of the other party. So we must assume that they did not know that Gilchrist was the person who had contracted
for the film.

The appellants take the position that if the preliminary injunction had not been issued against them they could have exhibited the film in their
theater for a number of days beginning May 26, and could have also subleased it to other theater owners in the nearby towns and, by so doing,
could have cleared, during the life of their contract with Cuddy, the amount claimed as damages. Taking this view of the case, it will be
unnecessary for us to inquire whether the mandatory injunction against Cuddy was properly issued or not. No question is raised with reference
to the issuance of that injunction.

The right on the part of Gilchrist to enter into a contract with Cuddy for the lease of the film must be fully recognized and admitted by all. That
Cuddy was liable in an action for damages for the breach of that contract, there can be no doubt. Were the appellants likewise liable for
interfering with the contract between Gilchrist and Cuddy, they not knowing at the time the identity of one of the contracting parties? The
appellants claim that they had a right to do what they did. The ground upon which the appellants base this contention is, that there was no
valid and binding contract between Cuddy and Gilchrist and that, therefore, they had a right to compete with Gilchrist for the lease of the film,
the right to compete being a justification for their acts. If there had been no contract between Cuddy and Gilchrist this defense would be
tenable, but the mere right to compete could not justify the appellants in intentionally inducing Cuddy to take away the appellee's contractual
rights.

Chief Justice Wells in Walker vs. Cronin (107 Mass., 555), said: "Everyone has a right to enjoy the fruits and advantages of his own enterprise,
industry, skill and credit. He has no right to be free from malicious and wanton interference, disturbance or annoyance. If disturbance or loss
come as a result of competition, or the exercise of like rights by others, it is damnum absque injuria, unless some superior right by contract or
otherwise is interfered with."

In Read vs. Friendly Society of Operative Stonemasons ([1902] 2 K. B., 88), Darling, J., said: "I think the plaintiff has a cause of action against the
defendants, unless the court is satisfied that, when they interfered with the contractual rights of plaintiff, the defendants had a sufficient
justification for their interference; . . . for it is not a justification that `they acted bona fide in the best interests of the society of masons,' i. e., in
their own interests. Nor is it enough that `they were not actuated by improper motives.' I think their sufficient justification for interference with
plaintiff's right must be an equal or superior right in themselves, and that no one can legally excuse himself to a man, of whose contract he has
procured the breach, on the ground that he acted on a wrong understanding of his own rights, or without malice, or bona fide, or in the best
interests of himself, or even that he acted as an altruist, seeking only good of another and careless of his own advantage." (Quoted with
approval in Beekman vs. Marsters, 195 Mass., 205.)

It is said that the ground on which the liability of a third party for interfering with a contract between others rests, is that the interference was
malicious. The contrary view, however, is taken by the Supreme Court of the United States in the case of Angle vs. Railway Co. (151 U. S., 1).
The only motive for interference by the third party in that case was the desire to make a profit to the injury of one of the parties of the
contract. There was no malice in the case beyond the desire to make an unlawful gain to the detriment of one of the contracting parties.
In the case at bar the only motive for the interference with the Gilchrist — Cuddy contract on the part of the appellants was a desire to make a
profit by exhibiting the film in their theater. There was no malice beyond this desire; but this fact does not relieve them of the legal liability for
interfering with that contract and causing its breach. It is, therefore, clear, under the above authorities, that they were liable to Gilchrist for the
damages caused by their acts, unless they are relieved from such liability by reason of the fact that they did not know at the time the identity of
the original lessee (Gilchrist) of the film.

The liability of the appellants arises from unlawful acts and not from contractual obligations, as they were under no such obligations to induce
Cuddy to violate his contract with Gilchrist. So that if the action of Gilchrist had been one for damages, it would be governed by chapter 2, title
16, book 4 of the Civil Code. Article 1902 of that code provides that a person who, by act or omission, causes damages to another when there is
fault or negligence, shall be obliged to repair the damage do done. There is nothing in this article which requires as a condition precedent to the
liability of a tort-feasor that he must know the identity of a person to whom he causes damages. In fact, the chapter wherein this article is
found clearly shows that no such knowledge is required in order that the injured party may recover for the damage suffered.

But the fact that the appellants' interference with the Gilchrist contract was actionable did not of itself entitle Gilchrist to sue out an injunction
against them. The allowance of this remedy must be justified under section 164 of the Code of Civil Procedure, which specifies the circumstance
under which an injunction may issue. Upon the general doctrine of injunction we said in Devesa vs. Arbes (13 Phil. Rep., 273):

An injunction is a "special remedy" adopted in that code (Act No. 190) from American practice, and originally borrowed from English legal
procedure, which was there issued by the authority and under the seal of a court of equity, and limited, as in order cases where equitable relief
is sought, to cases where there is no "plain, adequate, and complete remedy at law," which "will not be granted while the rights between the
parties are undetermined, except in extraordinary cases where material and irreparable injury will be done," which cannot be compensated in
damages, and where there will be no adequate remedy,and which will not, as a rule, be granted, to take property out of the possession of one
party and put it into that of another whose title has not been established by law.

We subsequently affirmed the doctrine of the Devesa case in Palafox vs. Madamba (19 Phil., Rep., 444), and we take this occasion of again
affirming it, believing, as we do, that the indiscriminate use of injunctions should be discouraged.

Does the fact that the appellants did not know at the time the identity of the original lessee of the film militate against Gilchrist's right to a
preliminary injunction, although the appellant's incurred civil liability for damages for such interference? In the examination of the adjudicated
cases, where in injunctions have been issued to restrain wrongful interference with contracts by strangers to such contracts, we have been
unable to find any case where this precise question was involved, as in all of those cases which we have examined, the identity of both of the
contracting parties was known to the tort-feasors. We might say, however, that this fact does not seem to have a controlling feature in those
cases. There is nothing in section 164 of the Code of Civil Procedure which indicates, even remotely, that before an injunction may issue
restraining the wrongful interference with contrast by strangers, the strangers must know the identity of both parties. It would seem that this is
not essential, as injunctions frequently issue against municipal corporations, public service corporations, public officers, and others to restrain
the commission of acts which would tend to injuriously affect the rights of person whose identity the respondents could not possibly have
known beforehand. This court has held that in a proper case injunction will issue at the instance of a private citizen to restrain ultra vires acts of
public officials. (Severino vs. Governor-General, 16 Phil. Rep., 366.) So we proceed to the determination of the main question of whether or not
the preliminary injunction ought to have been issued in this case.

As a rule, injunctions are denied to those who have an adequate remedy at law. Where the choice is between the ordinary and the
extraordinary processes of law, and the former are sufficient, the rule will not permit the use of the latter. (In re Debs, 158 U. S., 564.) If the
injury is irreparable, the ordinary process is inadequate. In Wahle vs.Reinbach (76 Ill., 322), the supreme court of Illinois approved a definition
of the term "irreparable injury" in the following language: "By `irreparable injury' is not meant such injury as is beyond the possibility of repair,
or beyond possible compensation in damages, nor necessarily great injury or great damage, but that species of injury, whether great or small,
that ought not to be submitted to on the one hand or inflicted on the other; and, because it is so large on the one hand, or so small on the
other, is of such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a court of law." (Quoted with
approval in Nashville R. R. Co.vs. McConnell, 82 Fed., 65.)

The case at bar is somewhat novel, as the only contract which was broken was that between Cuddy and Gilchrist, and the profits of the appellee
depended upon the patronage of the public, for which it is conceded the appellants were at liberty to complete by all fair does not deter the
application of remarked in the case of the "ticket scalpers" (82 Fed., 65), the novelty of the facts does not deter the application of equitable
principles. This court takes judicial notice of the general character of a cinematograph or motion-picture theater. It is a quite modern form of
the play house, wherein, by means of an apparatus known as a cinematograph or cinematograph, a series of views representing closely
successive phases of a moving object, are exhibited in rapid sequence, giving a picture which, owing to the persistence of vision, appears to the
observer to be in continuous motion. (The Encyclopedia Britanica, vol. 6, p. 374.) The subjects which have lent themselves to the art of the
photographer in this manner have increased enormously in recent years, as well as have the places where such exhibition are given. The
attendance, and, consequently, the receipts, at one of these cinematograph or motion-picture theaters depends in no small degree upon the
excellence of the photographs, and it is quite common for the proprietor of the theater to secure an especially attractive exhibit as his "feature
film" and advertise it as such in order to attract the public. This feature film is depended upon to secure a larger attendance that if its place on
the program were filled by other films of mediocre quality. It is evident that the failure to exhibit the feature film will reduce the receipts of the
theater.

Hence, Gilchrist was facing the immediate prospect of diminished profits by reason of the fact that the appellants had induced Cuddy to rent to
them the film Gilchrist had counted upon as his feature film. It is quite apparent that to estimate with any decree of accuracy the damages
which Gilchrist would likely suffer from such an event would be quite difficult if not impossible. If he allowed the appellants to exhibit the film
in Iloilo, it would be useless for him to exhibit it again, as the desire of the public to witness the production would have been already satisfied.
In this extremity, the appellee applied for and was granted, as we have indicated, a mandatory injunction against Cuddy requiring him to deliver
the Zigomar to Gilchrist, and a preliminary injunction against the appellants restraining them from exhibiting that film in their theater during
the weeks he (Gilchrist) had a right to exhibit it. These injunction saved the plaintiff harmless from damages due to the unwarranted
interference of the defendants, as well as the difficult task which would have been set for the court of estimating them in case the appellants
had been allowed to carry out their illegal plans. As to whether or not the mandatory injunction should have been issued, we are not, as we
have said, called upon to determine. So far as the preliminary injunction issued against the appellants is concerned, which prohibited them
from exhibiting the Zigomar during the week which Gilchrist desired to exhibit it, we are of the opinion that the circumstances justified the
issuance of that injunction in the discretion of the court.

We are not lacking in authority to support our conclusion that the court was justified in issuing the preliminary injunction against the
appellants. Upon the precise question as to whether injunction will issue to restrain wrongful interference with contracts by strangers to such
contracts, it may be said that courts in the United States have usually granted such relief where the profits of the injured person are derived
from his contractual relations with a large and indefinite number of individuals, thus reducing him to the necessity of proving in an action
against the tort-feasor that the latter was responsible in each case for the broken contract, or else obliging him to institute individual suits
against each contracting party and so exposing him to a multiplicity of suits. Sperry & Hutchinson Co. vs. Mechanics' Clothing Co. (128 Fed.,
800); Sperry & Hutchinson Co. vs. Louis Weber & Co. (161 Fed., 219); Sperry & Hutchinson Co. vs. Pommer (199 Fed., 309); were all cases
wherein the respondents were inducing retail merchants to break their contracts with the company for the sale of the latters' trading stamps.
Injunction issued in each case restraining the respondents from interfering with such contracts.

In the case of the Nashville R. R. Co. vs. McConnell (82 Fed., 65), the court, among other things, said: "One who wrongfully interferes in a
contract between others, and, for the purpose of gain to himself induces one of the parties to break it, is liable to the party injured thereby; and
his continued interference may be ground for an injunction where the injuries resulting will be irreparable."

In Hamby & Toomer vs. Georgia Iron & Coal Co. (127 Ga., 792), it appears that the respondents were interfering in a contract for prison labor,
and the result would be, if they were successful, the shutting down of the petitioner's plant for an indefinite time. The court held that although
there was no contention that the respondents were insolvent, the trial court did not abuse its discretion in granting a preliminary injunction
against the respondents.

In Beekman vs. Marsters (195 Mass., 205), the plaintiff had obtained from the Jamestown Hotel Corporation, conducting a hotel within the
grounds of the Jamestown Exposition, a contract whereby he was made their exclusive agent for the New England States to solicit patronage
for the hotel. The defendant induced the hotel corporation to break their contract with the plaintiff in order to allow him to act also as their
agent in the New England States. The court held that an action for damages would not have afforded the plaintiff adequate relief, and that an
injunction was proper compelling the defendant to desist from further interference with the plaintiff's exclusive contract with the hotel
company.

In Citizens' Light, Heat & Power Co. vs. Montgomery Light & Water Power Co. (171 Fed., 553), the court, while admitting that there are some
authorities to the contrary, held that the current authority in the United States and England is that:

The violation of a legal right committed knowingly is a cause of action, and that it is a violation of a legal right to interfere with contractual
relations recognized by law, if there be no sufficient justification for the interference. (Quinn vs. Leatham, supra, 510; Angle vs. Chicago, etc.,
Ry. Co., 151 U. S., 1; 14 Sup. Ct., 240; 38 L. Ed., 55; Martens vs. Reilly, 109 Wis., 464, 84 N. W., 840; Rice vs. Manley, 66 N. Y., 82; 23 Am. Rep.,
30; Bitterman vs. L. & N. R. R. Co., 207 U. S., 205; 28 Sup. Ct., 91; 52 L. Ed., 171; Beekman vs.Marsters, 195 Mass., 205; 80 N. E., 817; 11 L. R. A.
[N. S.] 201; 122 Am. St. Rep., 232; South Wales Miners' Fed. vs. Glamorgan Coal Co., Appeal Cases, 1905, p. 239.)

See also Nims on Unfair Business Competition, pp. 351- 371.

In 3 Elliot on Contracts, section 2511, it is said: "Injunction is the proper remedy to prevent a wrongful interference with contract by strangers
to such contracts where the legal remedy is insufficient and the resulting injury is irreparable. And where there is a malicious interference with
lawful and valid contracts a permanent injunction will ordinarily issue without proof of express malice. So, an injunction may be issued where
the complainant to break their contracts with him by agreeing to indemnify who breaks his contracts of employment may be adjoined from
including other employees to break their contracts and enter into new contracts with a new employer of the servant who first broke his
contract. But the remedy by injunction cannot be used to restrain a legitimate competition, though such competition would involve the
violation of a contract. Nor will equity ordinarily enjoin employees who have quit the service of their employer from attempting by proper
argument to persuade others from taking their places so long as they do not resort to force or intimidations on obstruct the public
thoroughfares."

Beekman vs. Marster, supra, is practically on all fours with the case at bar in that there was only one contract in question and the profits of the
injured person depended upon the patronage of the public. Hamby & Toomer vs.Georgia Iron & Coal Co., supra, is also similar to the case at bar
in that there was only one contract, the interference of which was stopped by injunction.

For the foregoing reasons the judgment is affirmed, with costs, against the appellants.
THIRD DIVISION

HEIRS OF CIPRIANO REYES: RICARDO REYES, DAYLINDA REYES, G.R. No. 138463
BEATRIZ REYES, JULIAN CUECO, ESPERANSA REYES, VICTORINO
REYES, AND JOVITO REYES,

Petitioners,

Present:

- versus -

JOSE CALUMPANG, GEOFFREY CALUMPANG, AGAPITO AGALA,

LORENZO MANABAN, RESTITUTO MANABAN, OLYMPIA
MANABAN, PELAGIA MANABAN AND FELIPE CUECO, QUISUMBING, J., Chairperson, CARPIO,

Respondents. CARPIO MORALES,

TINGA, and

VELASCO, JR., JJ.

Promulgated:

October 30, 2006

x------------------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

Say not you know another entirely,

‘til you have divided an inheritance with him.

––Johann Kaspar Lavater

Can a party who lost rights of ownership in a parcel of land due to laches be allowed to regain such ownership when one who benefited
from the delay waives such benefit? This is the core issue to be resolved from this Petition for Review on Certiorari[1] that seeks to set aside the
January 26, 1999 Decision[2] of the Court of Appeals (CA) in CA-GR CV No. 54795 which overturned the April 2, 1996 Decision of the Dumaguete
City Regional Trial Court (RTC) in Civil Case No. 9975 declaring null and void the December 27, 1972 Deed of Quitclaim executed by petitioners
Jovito Reyes and Victorino Reyes and ordering respondents to vacate Lot No. 3880 in Tanjay, Negros Oriental, remove their houses from the
said lot, and pay petitioners’ attorney’s fees of PhP 10,000.00. Also challenged is the March 25, 1999 Resolution[3] which denied
petitioners’February 12, 1999 Motion for Reconsideration.[4]

The Facts

It is sad and tedious when relatives bicker over inheritance—when the differences could have been amicably settled and harmony prevail
among relatives. The instant case involves Lot No. 3880 of the Cadastral Survey of Tanjay, Negros Oriental which has a land area of around
25,277 square meters, more or less. Said lot was originally owned by a certain Isidro Reyes, who sired eight children, viz: Victoriana Reyes
Manaban, Telesfora Reyes Manaban, Leonardo Reyes, Juan Reyes, Eduarda Reyes, Miguel Reyes, Eleuteria Reyes, and Hermogenes Reyes.

The protagonists are the descendants, specifically the grandchildren, of the three eldest children of Isidro Reyes, namely, Victoriana, Telesfora
and Leonardo. To better understand the relation of the parties, it is apt to mention the lineal positions of the pertinent heir-litigants whose
names are emphasized for clarity and identity.

1. Daughter Victoriana Reyes Manaban had five children, namely: Antonia Manaban Sta. Cruz, Emerencia Manaban Agala, Juana Manaban
Aguilar, Lope Manaban, and Arcadia Manaban Balsamo. a.) Granddaughter Emerencia Manaban Agala had five children, namely: Agapito
Agala, Cresencio Agala, Nicasia Agala, Filomena Agala, Baldomera Manaban Alido, and Pelagia Manaban Cueco, the last two being illegitimate
children. b.) Granddaughter Antonia Manaban Sta. Cruz had no issue. c.) Granddaughter Juana Manaban Aguilar had eight children,
namely: Fructuoso, Salvadora, Delfin, Rufina, Felomina, Ceferino, Lucia, and Cipriano, all surnamed Aguilar. d.) Grandson Lope Manaban had
seven children, namely: Aniana, Lucas, Isidro, Genera, Abadias, Jose, and Gabriela, all surnamed Manaban. e.) Granddaughter Arcadia
Manaban Balsamo had seven children, namely: Lucrecia, Bienvenida, Gregoria, Antonio, Moises, Marcela, and Maria, all surnamed
Balsamo. Of the grandchildren of Victoriana Reyes Manaban, Agapito Agala and Pelagia Manaban Cueco, are among the respondents in the
instant case. Respondent Felipe Cueco was included among the litigants, being the husband of Pelagia Manaban.

2. Daughter Telesfora Reyes Manaban had only one child, Valentin Manaban who in turn had three children, namely: Olympia
Manaban Mayormita, Restituto Manaban, and Lorenzo Manaban, all of whom are among the respondents in the instant case.

3. Son Leonardo Reyes had six children, namely: Higino Reyes, Policarpio Reyes, Ines Reyes Calumpang, Exaltacion Reyes Agir, Honorata Reyes,
and Sofia Reyes. a.) Grandson Higino Reyes had six children, namely: Victorino, Cipriano, Luis, Ricardo, Jesus, and Daylinda, all surnamed
Reyes. b.) Grandson Policarpio Reyes had three children, namely: Beatriz, Guillermo, and Jovito, all surnamed Reyes. Most of the children of
Higino and Policarpio Reyes are the petitioners in the instant case. c.) Granddaughter Ines Reyes Calumpang on the other hand had five
children, namely: Jose, Pedring, Cesar, Zosima, and Angel, all surnamed Calumpang. Great-grandson Jose Calumpang and his son, Geoffrey
Calumpang, a great-great-grandson of Isidro, are among the respondents in the instant case. d.) Granddaughter Exaltacion Reyes Agir had
seven children, namely: Rafael Agir, Remedios Agir, Cordova Agir Gabas, Natividad Agir, Rogelio Agir, Ramon Agir, and Zenaida Agir Lopez.
The records do not show the heirs of granddaughters Honorata and Sofia Reyes, the last two children of Leonardo Reyes. Likewise, the records
do not mention the heirs of the last five children of Isidro Reyes, namely: Juan, Eduarda, Miguel, Eleuteria, and Hermogenes.

For clarity, a chart showing the family tree originating from Isidro Reyes is provided as follows (with the parties’ names given emphasis):
8. HERMOGENES
With the foregoing perspective on the relational positions of the protagonists, we move on to the factual antecedents:

Among Isidro’s children, it was Leonardo Reyes, in behalf of his seven (7) siblings, who managed the properties of their father. In 1924, a
cadastral survey was conducted pursuant to Act No. 2259. Leonardo, through his representative, Angel Calumpang, filed an answer in the
cadastral court naming all eight children of Isidro Reyes as claimants of the said lot.

However, on July 10, 1949, a certain Dominador Agir filed another claim over the disputed lot, this time naming some grandchildren of
Leonardo Reyes (great-grandchildren of Isidro Reyes), which included most of the children of Higino and Policarpio Reyes as claimants,
namely: Victorino, Cipriano, Luis, Ricardo, and Daylinda all surnamed Reyes, who are the children of Higino Reyes; and Beatriz, Guillermo, and
Jovito all surnamed Reyes, who are the children of Policarpio Reyes. Subsequently, on July 19, 1949, a Decision was rendered in Cadastral Case
No. 12, G.L.R.O. Cad. Rec. No. 31 which covered four (4) lots, among which is Lot No. 3880, whereby the Decision granted judicial confirmation
of the imperfect title of petitioners over said lot. Consequently, Original Certificate of Title (OCT) No. OV-227 was issued on August 5, 1954 in
the name of petitioners, namely: Victorino, Cipriano, Luis, Ricardo, Jesus, Daylinda, Jovito, Guillermo, and Beatriz, all surnamed Reyes.

The nine (9) registered co-owners, however, did not take actual possession of the said lot, and it was Victorino and Cipriano Reyes who paid the
land taxes. The heirs of Telesfora Reyes Manaban and Victoriana Reyes Manaban (daughters of Isidro Reyes) retained possession over a
hectare portion of the said lot where they built their houses and planted various crops and fruit bearing trees. Meanwhile, sometime in 1968,
Jose Calumpang, grandson of Leonardo Reyes and cousin of petitioners, also took possession over a hectare of the said lot, planting it with
sugarcane. Thus, Jose Calumpang and his son Geoffrey continued to plant sugarcane over almost a hectare of the said lot while the heirs of
Telesfora Reyes Manaban and Victoriana Reyes Manaban––the respondents Agalas and Manabans––occupied the rest of the same lot which is
about one hectare.

Sometime in 1972, respondent Agapito Agala (grandson of Victoriana Reyes Manaban) was informed by his cousin Victorino Reyes, one of the
petitioners and registered co-owner of Lot No. 3880, that there was already a title over the said lot. This prompted respondent Agapito Agala
and the other heirs of Telesfora and Victoriana to seek advice from a judge who suggested that they request the registered co-owners to sign a
quitclaim over the said lot.

A conference was allegedly held on December 27, 1972, where three (3) of the registered co-owners––Victorino, Luis, and Jovito all surnamed
Reyes––signed a Deed of Quitclaim,[5] where, for a consideration of one peso (P1.00), they agreed to “release, relinquish and quitclaim” all their
rights over the land “in favor of the legal heirs of the late Victoriana Reyes and Telesfora Reyes.”[6]

The Deed of Quitclaim was annotated on the back of OCT No. OV-227. Thereafter, respondent Agapito Agala had the then Police Constabulary
(PC) summon the other registered co-owners, namely: Cipriano, Ricardo, Daylinda, Guillermo, and Beatriz, to sign another deed of
quitclaim. But the latter allegedly ignored the call, prompting the heirs of Victoriana and Telesfora Reyes to file on June 9, 1975 in Civil Case No.
6238, with the Dumaguete City RTC, Branch 40, a Complaint for Reconveyance of Real Property, Cancellation of Certificate of Title and
Damages against the registered co-owners of the disputed lot who did not sign a deed of quitclaim and Dominador Agir, who filed the amended
answer in the cadastral proceedings in 1949. On April 28, 1987, the trial court dismissed the complaint and ruled in favor of the registered co-
owners of Lot No. 3880. On appeal, the CA upheld the trial court and affirmed the RTC November 29, 1989 Decision.[7] The CA Decision was not
raised for review before this Court, thereby attaining finality.
Consequently, on July 2, 1991, petitioners filed the instant civil case for Recovery of Possession, Declaration of Non-existence of a Document,
Quieting of Title and Damages against Jose Calumpang, Geoffrey Calumpang, Agapito Agala, Lorenzo Manaban, Heirs of Olympia Manaban,
Pelagia Manaban, Felipe Cueco and Heirs of Restituto Manaban (herein respondents) in Dumaguete City RTC. It was docketed as Civil Case No.
9975 and raffled to RTC Branch 44.

In gist, petitioners, as registered owners of Lot No. 3880, alleged that by tolerance they allowed respondents Jose and Geoffrey Calumpang to
cultivate an area of about one hectare of the said property; and also by tolerance allowed respondents Manabans and Agalas to occupy another
hectare portion of the same lot. They further alleged that in December 1972, petitioners Victorino, Luis, and Jovito Reyes got sick; and
believing that they were bewitched by the occupants of the said lot, they signed a Deed of Quitclaim, waiving all their rights and interests over
their respective shares in the disputed lot in favor of the heirs of Victoriana and Telesfora Reyes; and that thereafter, the latter filed Civil Case
No. 6238 in 1987, which was dismissed by the Dumaguete City RTC.

During the hearing of the instant case, petitioners presented their sole witness, Ricardo Reyes, who testified on the identity of OCT No. OV-227,
the character of its possession, existence, and the Decision in the prior Civil Case No. 6238;[8] and the estimated income of the disputed lot, and
the expenses incurred in pursuing the instant case.

On the other hand, respondent-heirs of Victoriana and Telesfora Reyes presented Lorenzo Manaban,[9] who testified on the relationship of
respondents to Victoriana and Telesfora Reyes; that they were in actual and adverse possession of Lot No. 3880; and, the existence and due
execution of the assailed Deed of Quitclaim in their favor which was duly annotated on the back of OCT No. OV-227. Respondents Jose and
Geoffrey Calumpang did not participate in the trial although they filed their answer.

Subsequently, the trial court rendered its judgment on April 2, 1996. The dispositive portion reads:

WHEREFORE, this Court renders judgment declaring NULL and VOID the Deed of Quitclaim dated December 27, 1972 signed by Jovito and
Victorino all surnamed Reyes. Ordering defendants to vacate Lot No. 3880, Cadastral Survey of Tanjay and to remove their house thereon; and
to pay jointly and severally plaintiffs the sum of P10, 000.00, by way of reimbursement for attorney’s fees, and to pay the costs.[10]

Believing that they were the legal and true owners of Lot No. 3880, respondents interposed an appeal to the CA on June 27, 1996, which was
docketed as CA-G.R. CV No. 54795.

The Ruling of the Court of Appeals

For non-payment of the requisite docket fee, the appeal of respondent Jose Calumpang was dismissed by the CA on December 19, 1997,[11] and
a Partial Entry of Judgment for Appellant Jose Calumpang Only[12] was issued on January 23, 1998.

However, the appeal filed by respondents Agalas and Manabans was found to be meritorious, and on January 26, 1999, the CA reversed the
Decision of the trial court and dismissed Civil Case No. 9975. While it ruled that petitioners had a cause of action to institute the case assailing
the Deed of Quitclaim as its validity was not disputed in Civil Case No. 6238, upon review of the evidence adduced, the CA found that
petitioners utterly failed to present evidence substantiating their allegation of fraud and mistake in the execution of the assailed quitclaim. The
CA reasoned out that it was incumbent for petitioners to prove their allegations of fraud and mistake, but they failed to overcome the
presumptions that a person takes ordinary care of one’s concerns and that private transactions have been fair and regular.

Thus, the CA ruled that the trial court had no basis in fact and in law to declare the Deed of Quitclaim null and void, and concluded that it
remained valid and binding to all the signatories. The rights and interests in the shares of Victorino, Luis, and Jovito Reyes over Lot No. 3880
were deemed waived in favor of the heirs of Victoriana and Telesfora Reyes (that is, respondents Agalas and Manabans) who had the right to
retain possession of the lot.

Petitioners registered a Motion for Reconsideration of the January 26, 1999 Decision of the CA, which was however turned down in its March
25, 1999 Resolution, as petitioners were unable to raise new substantial issues which had not been duly considered in arriving at the challenged
judgment.

Hence, the instant petition.

The Issues

In the instant petition, petitioner raises the following assignment of errors for our consideration:

(a) In exercising jurisdiction over the appeal of the defendants when in fact the issues are purely questions of law misfiled in the Court of
Appeals, which should have been filed directly to the Supreme Court at that time;

(b) In reversing the RTC Decision dated April 2, 1993; and in reversing its own resolution dated December 19, 1997;

(c) In declaring that the fraud and mistake in the execution of the waiver was not substantiated, when in fact there is overwhelming evidence
of infirmity of the document as found by the trial court, which should not be disturbed on appeal.

(d) In sweepingly dismissing the complaint, including the claim against the Calumpang defendants, even as the latter did not adduce any
evidence in the trial court, and whose appeal had already been dismissed by the CA Resolution dated December 19, 1997; and the Calumpang
defendants did not also appeal to the Supreme Court from such dismissal.[13]

The Court’s Ruling

The petition is partly meritorious.

First Assignment of Error:

There is a Question of Fact

In the first assignment of error, petitioners argue that the appeal of the heirs of Victoriana and Telesfora Reyes should have been filed before
this Court and not in the CA since it involves only pure questions of law, that is, whether their counterclaims are barred by the judgment in
Cadastral Case No. 12, LRC 311, rendered by the Hon. Roman Ibañez, Judge of the CFI of Negros Oriental, which involves the law on estoppel by
judgment, and Sections 38, 39, and 47 of Act 496.

We disagree.

A question of law exists when the doubt or controversy concerns the correct application of law or jurisprudence to a certain set of facts; or
when the issue does not call for an examination of the probative value of the evidence presented, the truth or falsehood of facts being
admitted. A question of fact exists when the doubt or difference arises as to the truth or falsehood of facts or when the query invites
calibration of the whole evidence considering mainly the credibility of the witnesses, the existence and relevancy of specific surrounding
circumstances, as well as their relation to each other and to the whole, and the probability of the situation.[14]

The appeal before the CA by respondent-heirs of Victoriana and Telesfora Reyes clearly assails the trial court’s decision, inter alia, on the
ground of lack of evidence and questions the factual findings of the trial court. This question is undoubtedly one of fact, falling squarely within
the exclusive appellate jurisdiction of the Court of Appeals.[15]

The second issue “that the CA erred in reversing the April 2, 1993 Decision of the RTC and its resolution dated December 19, 1997” will be
jointly discussed with the fourth issue that “the CA erred in dismissing the complaint including the claim against the Calumpang defendants.”

Third Assignment of Error:

Question of Evidence

In the third assignment of error, petitioners strongly assert that overwhelming evidence of infirmity of the document substantiated the fraud
and mistake in the execution of the questioned waiver or deed of quitclaim.

We are not persuaded.

Petitioners failed to adduce evidence

Petitioners admit the execution of the quitclaim by Victorino, Luis, and Jovito, all surnamed Reyes; however, petitioners allege fraud and
mistake in its execution. But, as correctly held by the appellate court, petitioners failed to present evidence in support of their
allegation. Indeed, even a cursory glance at the records reveals that no evidence was adduced substantiating petitioners’ allegation of fraud
and mistake in the execution of the assailed quitclaim, neither from the documentary evidence formally offered[16] nor from the testimonial
evidence of petitioners’ sole witness, Ricardo Reyes, who testified on the identity of some documents to prove ownership, the character of the
possession of the subject lot, and the existence of the Decision in Civil Case No. 6238.

Basic is the rule of actori incumbit onus probandi, or the burden of proof lies with the plaintiff. Differently stated, upon the plaintiff in a civil
case, the burden of proof never parts.[17] In the case at bar, petitioners must therefore establish their case by a preponderance of
evidence,[18] that is, evidence that has greater weight, or is more convincing than that which is offered in opposition to it[19]––which petitioners
utterly failed to do so. Besides, it is an age-old rule in civil cases that one who alleges a fact has the burden of proving it and a mere allegation is
not evidence.[20] Fraud is never presumed, but must be established by clear and convincing evidence.[21] Thus, by admitting that Victorino, Luis,
and Jovito, all surnamed Reyes, indeed executed the Deed of Quitclaim coupled with the absence of evidence substantiating fraud and mistake
in its execution, we are constrained to uphold the appellate court’s conclusion that the execution of the Deed of Quitclaim was valid.

This finding is consonant with the findings of the trial court in the prior Civil Case No. 6238,[22] as affirmed in CA-G.R. CV No. 14527,[23] that while
respondents Agalas and Manabans (the heirs of Victoriana and Telesfora Reyes) had lost their equitable remedy in law on the ground of laches,
yet the Deed of Quitclaim is deemed valid and binding.

Equitable Rights Subsist Despite Laches

On the issue of the rights of the heirs of Victoriana and Telesfora Reyes being barred by the indefeasibility of petitioners’ Torrens Title over
subject lot, we qualify. White it is true that the indefeasibility of petitioners’ title on the ground of laches bars the rights or interests of the
heirs of Victoriana and Telesfora Reyes over the disputed lot, still, the indefeasible rights of a holder of a Torrens Title may be waived in favor of
another whose equitable rights may have been barred by laches.

In Soliva v. The Intestate Estate of Villalba, ‘laches’ is defined as:

the failure or neglect, for an unreasonable and unexplained length of time, to do that which — by the exercise of due diligence — could or
should have been done earlier. It is the negligence or omission to assert a right within a reasonable period, warranting the presumption that
the party entitled to assert it has either abandoned or declined to assert it.

Under this time-honored doctrine, relief has been denied to litigants who, by sleeping on their rights for an unreasonable length of
time — either by negligence, folly or inattention — have allowed their claims to become stale. Vigilantibus, sed non dormientibus, jura
subveniunt. The laws aid the vigilant, not those who slumber on their rights.[24](Emphasis supplied and citations omitted.)

Verily, laches serves to deprive a party guilty of it to any judicial remedies.

However, the equitable rights barred by laches still subsist and are not otherwise extinguished. Thus, parties guilty of laches retains equitable
rights albeit in an empty manner as they cannot assert their rights judicially. However, such equitable rights may be revived or activated by the
waiver of those whose right has ripened due to laches, and can be exercised to the extent of the right waived.
Equitable Rights Revived through Waiver

In the case at bar, petitioners’ title over Lot No. 3880 had become indefeasible due to the laches of the heirs of Victoriana and Telesfora
Reyes. However, like any rights over immovable property, titleholders may convey, dispose, or encumber their right or interest. Thus, through
the waiver and quitclaim, the rights of the heirs of Victoriana and Telesfora Reyes were acknowledged, revived, and activated to the extent of
the rights waived by titleholders Victorino, Luis, and Jovito Reyes. Clearly, the quitclaim executed by titleholders Victorino, Luis, and Jovito
Reyes waived and conveyed their rights over the said lot in favor of the heirs of Victoriana and Telesfora Reyes, whose equitable rights were
barred by laches.

In this light, we note that both trial and appellate courts in Civil Case No. 6238 did not categorically pronounce that the heirs of Victoriana and
Telesfora Reyes had no rights over the disputed lot. Their pronouncements were to the effect that whatever equitable rights the heirs of
Victoriana and Telesfora Reyes may have had over the subject lot had been barred by laches. Thus, the voluntary waiver of Victorino, Luis, and
Jovito Reyes revived and activated the equitable rights of the heirs of Victoriana and Telesfora Reyes over Lot No. 3880. But such revived and
activated rights over Lot No. 3880 correspond only to the extent of the rights of Victorino, Luis, and Jovito Reyes waived in their favor.

The Quitclaim (Waiver) is Valid

The waiver is clear. The recent case of Valderama v. Macalde reiterated the three (3) essential elements of a valid waiver, thus: “(a) existence
of a right; (b) athe knowledge of the existence thereof; and, (c) an intention to relinquish such right.” [25] These elements are all present in the
case at bar. The three (3) executors, who were co-owners and titleholders of the said lot since 1954, were aware of their rights, and executed
the Deed of Quitclaim in clear and unambiguous language to waive and relinquish their rights over Lot No. 3880 in favor of the heirs of
Victoriana and Telesfora Reyes. Thus, the existence of a valid waiver has been positively demonstrated. Moreover, in People v. Bodoso, cited
in Valderama, it was held that the standard of a valid waiver requires that it “not only must be voluntary, but must be knowing, intelligent, and
done with sufficient awareness of the relevant circumstances and likely consequences.”[26] In the instant case, petitioners utterly failed to
adduce any evidence showing that the assailed quitclaim was done absent such standard. Indeed, we note with approval the CA’s apt
application of the presumption “that a person takes ordinary care of his concerns and that private transactions have been fair and regular.”[27]

Waiver Complies with the Requisites of a Valid Contract

and the Formal Requisites to Convey Real Property

Petitioners argue that even if the conveyance or waiver was duly executed, such is ineffective on the grounds of non-compliance with the
requirements of Article 1318 of the new Civil Code on the requisites of a contract, and that it cannot be considered a donation for non-
compliance with the formalities required by the law on donation, for example, acceptance.

The argument is bereft of merit.

The Deed of Quitclaim complies with the essential requisites of a contract provided in Article 1318 of the Civil Code, viz: (a) consent of the
parties; (b) object certain that is the subject matter of the waiver and quitclaim; and, (c) the cause of the waiver and quitclaim that is
established. First, there is no doubt as to the consent of the executing parties and the heirs of Victoriana and Telesfora Reyes. Second, the
object is the executors’ right over the subject land. And third, the cause is certain, that is, the recognition by the executors of the rights of the
heirs of Victoriana and Telesfora Reyes over the disputed lot.

It likewise complies with Article 1358 (1) of the Civil Code which requires that “acts and contracts which have for their object the creation,
transmission, modification or extinguishments of real rights over immovable property” must appear in a public document. This is complied
with, as the Deed of Quitclaim is a public document having been acknowledged before a notary public.[28] Moreover, the Deed of Quitclaim has
been duly annotated in the original certificate of title covering the subject lot.

Deed of Quitclaim not a donation

Petitioners contended that the Deed of Quitclaim is really a donation and thus necessitates acceptance by respondents Agalas and
Manabans. A purview of the factual antecedents of the execution of the Deed of Quitclaim shows otherwise. Victorino, Luis, and Jovito Reyes
signed the Deed of Quitclaim to relinquish their rights in recognition of respondents’ right over the said land and thus conveyed their rights and
interest in the quitclaim to respondents Agalas and Manabans (the heirs of Victoriana and Telesfora Reyes).

It should be remembered that respondents Agalas and Manabans are the heirs of Victoriana and Telesfora Reyes. Originally the rights and
interests of respondents over Lot No. 3880 were formally filed in 1924 in the cadastral proceedings in the Cadastral Court. Leonardo Reyes
instructed his representative to file an answer asserting the ownership of said lot by the eight (8) children of Isidro Reyes which includes
Victoriana and Telesfora. However on July 10, 1949, another claim was filed by Dominador Agir only in behalf of the children of Higino and
Policarpio Reyes, and excluded Victoriana and Telesfora Reyes. Thus, when OCT No. OV-227 was issued, the respondents Agalas and
Manabans, as heirs of Victoriana and Telesfora, were excluded.

In this factual setting, respondents could have filed an action for reconveyance to recover their shares in Lot No. 3880. However, instead of
instituting such a suit, respondents were able to convince Victorino, Luis, and Jovito, all surnamed Reyes, to execute a Deed of Quitclaim
restoring to them their shares. Therefore, it is clear that the quitclaim is not a donation for the three (3) Reyeses––Victorino, Luis, and Jovito––
who merely acknowledged the ownership of and the better right over the said lot by the heirs of Victoriana and Telesfora Reyes. Having
acquired title over the property in 1954 to the exclusion of respondents Agalas and Manabans, through the Deed of Quitclaim executed in
1972, the three (3) Reyeses merely acknowledged the legal rights of respondents over their shares in the said lot. In fine, the Deed of Quitclaim,
not being a donation, no formal acceptance is needed from the Agalas and Manabans.

After resolving the validity of the Deed of Quitclaim and elucidating on why the deed is not tantamount to a donation, we will now resolve
what the heirs of Victoriana and Telesfora Reyes are entitled to own and why they can legally possess the disputed lot:

Heirs of Victoriana and Telesfora Reyes entitled to 1/3 of disputed lot

Through the Deed of Quitclaim, the heirs of Victoriana and Telesfora Reyes––respondents Agalas and Manabans and their co-heirs––are
entitled to the aggregate shares of Victorino, Luis, and Jovito Reyes over Lot No. 3880.
OCT No. OV-227 shows that the said lot has a total area of around 25,277 square meters, more or less. The shares of the registered co-owners
in the OCT are given as follows:

[I]t is hereby decreed that [1] Victorino Reyes, single; [2] Cipriano Reyes, single; [3] Luis Reyes, 19 years of age, single; [4] Ricardo Reyes, 17
years of age, single; [5] Jesus Reyes, 11 years of age; [6] Daylinda Reyes, 8 years of age; [7] Jovito Reyes, single; [8] Guillermo Reyes, 19 years of
age, single; and [9] Beatriz Reyes, 17 years of age, single; in the proportion of undivided 1/2 in equal shares to the first six (6) named and the
remaining 1/2 in undivided equal shares, to the last three (3) named x x x

From the foregoing division of pro-indiviso shares, Victorino’s share is 1/6 of 1/2 undivided share or 1/12 of the total area. Luis has the same
share as Victorino’s; while Jovito’s share is 1/3 of 1/2 undivided share or 2/12 [1/6] of the total area. Thus, Victorino and Luis have equal shares
of 2,106.417 square meters while Jovito has a share of 4,212.833 square meters. Thus, the aggregate area of the shares of Victorino, Luis, and
Jovito is 8,425.667 square meters or 1/3 of the total land area of subject lot, which will be passed on to the heirs of Victoriana and Telesfora
Reyes––respondents Agalas and Manabans, and their co-heirs, the Balsamos, Aguilars, and Mayormitas.

Second and Fourth Issues:

Respondent Calumpangs barred by Civil Case No. 6238

We will now tackle both alleged assignments of errors as regards respondents Calumpangs because both issues are closely related. In the
second assignment of error, petitioners, as registered owners, contend that they are in constructive possession of the disputed land and have
the right to demand that respondent Calumpangs, who are occupying the land, to vacate it. And, in the last assignment of error, petitioners
contend that the appellate court erred in dismissing the complaint, including the claim against respondents Jose and Geoffrey Calumpang, who
did not contest the case in the trial court, aside from their joint answer and whose appeal before the appellate court was dismissed with
finality.

We agree with petitioners.

As mentioned above, petitioners’ title over Lot No. 3880, Tanjay Cadastre, Original Certificate of Title No. OV-227 issued in their names
sometime in 1954, had become indefeasible pursuant to the trial court’s Decision duly affirmed by the appellate court in Civil Case No.
6238. Respondent Calumpangs apparently did not adduce evidence to assert their rights over subject lot both in the prior Civil Case No. 6238
and in the instant one. Be that as it may, the claim of respondent Calumpangs over Lot No. 3880 had been conclusively denied in Civil Case No.
6238. Thus, whatever rights and interests respondents Jose and Geoffrey Calumpang have had over Lot No. 3880 are barred by the Decision in
Civil Case No. 6238. Moreover, the December 19, 1997 Resolution of the CA had become final and executory. Consequently, having no rights
over Lot No. 3880, there is no reason for respondents Jose and Geoffrey Calumpang to continue occupying a portion of Lot No. 3880.

WHEREFORE, the petition is partly GRANTED. The January 26, 1999 Decision and the March 25, 1999 Resolution of the Court of Appeals in CA-
G.R. CV No. 54795 are hereby SET ASIDE. Respondents Jose and Geoffrey Calumpang are ORDERED to VACATE Lot No. 3880, REMOVE their
houses from the said lot, if any, and PAYpetitioners, jointly and severally, PhP 10,000.00 as attorney’s fees. The heirs of Victoriana and
Telesfora Reyes––among whom are respondents Agalas and Manabans––are entitled to 8,425.667 square meters of Lot No. 3880. The parties
are ORDERED to have Lot No. 3880 surveyed, and a subdivision plan prepared showing the respective shares of the parties as basis for the
issuance of separate titles. The Register of Deeds of Tanjay, Negros Oriental is hereby ORDERED to issue separate Transfer Certificates of Title
based on the said survey plan; one title in the name of the heirs of Victoriana and Telesfora Reyes over 8,425.667 square meters, who will
retain possession of such area only, and another title over the remaining area of 16,851.333 square meters of Lot No. 3880 which shall be
issued in the names of Cipriano, Ricardo, Jesus, Daylinda, Guillermo, and Beatriz, all surnamed Reyes, excluding Victorino, Luis, and Jovito
Reyes, whose shares were conveyed to the heirs of Victoriana and Telesfora Reyes.

No costs.

SO ORDERED.
[G.R. No. 138018. July 26, 2002]

RIDO MONTECILLO, petitioner, vs. IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA ABUCAY, respondents.

DECISION

CARPIO, J.:

The Case

On March 24, 1993, the Regional Trial Court of Cebu City, Branch 18, rendered a Decision[1] declaring the deed of sale of a parcel of land in favor
of petitioner null and void ab initio. The Court of Appeals,[2] in its July 16, 1998 Decision[3] as well as its February 11, 1999 Order[4] denying
petitioner’s Motion for Reconsideration, affirmed the trial court’s decision in toto. Before this Court now is a Petition for Review on
Certiorari[5] assailing the Court of Appeals’ decision and order.

The Facts

Respondents Ignacia Reynes (“Reynes” for brevity) and Spouses Abucay (“Abucay Spouses” for brevity) filed on June 20, 1984 a complaint for
Declaration of Nullity and Quieting of Title against petitioner Rido Montecillo (“Montecillo” for brevity). Reynes asserted that she is the owner
of a lot situated in Mabolo, Cebu City, covered by Transfer Certificate of Title No. 74196 and containing an area of 448 square meters (“Mabolo
Lot” for brevity). In 1981, Reynes sold 185 square meters of the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they
bought.

Reynes alleged further that on March 1, 1984 she signed a Deed of Sale of the Mabolo Lot in favor of Montecillo (“Montecillo’s Deed of Sale”
for brevity). Reynes, being illiterate,[6]signed by affixing her thumb-mark[7] on the document. Montecillo promised to pay the
agreed P47,000.00 purchase price within one month from the signing of the Deed of Sale. Montecillo’s Deed of Sale states as follows:

“That I, IGNACIA T. REYNES, of legal age, Filipino, widow, with residence and postal address at Mabolo, Cebu City, Philippines, for and in
consideration of FORTY SEVEN THOUSAND (P47,000.00) PESOS, Philippine Currency, to me in hand paid by RIDO MONTECILLO, of legal age,
Filipino, married, with residence and postal address at Mabolo, Cebu City, Philippines, the receipt hereof is hereby acknowledged, have sold,
transferred, and conveyed, unto RIDO MONTECILLO, his heirs, executors, administrators, and assigns, forever, a parcel of land together with the
improvements thereon, situated at Mabolo, Cebu City, Philippines, free from all liens and encumbrances, and more particularly described as
follows:

A parcel of land (Lot 203-B-2-B of the subdivision plan Psd-07-01-00 2370, being a portion of Lot 203-B-2, described on plan (LRC) Psd-76821,
L.R.C. (GLRO) Record No. 5988), situated in the Barrio of Mabolo, City of Cebu. Bounded on the SE., along line 1-2 by Lot 206; on the SW., along
line 2-3, by Lot 202, both of Banilad Estate; on the NW., along line 4-5, by Lot 203-B-2-A of the subdivision of Four Hundred Forty Eight (448)
square meters, more or less.

of which I am the absolute owner in accordance with the provisions of the Land Registration Act, my title being evidenced by Transfer
Certificate of Title No. 74196 of the Registry of Deeds of the City of Cebu, Philippines. That This Land Is Not Tenanted and Does Not Fall Under
the Purview of P.D. 27.”[8] (Emphasis supplied)

Reynes further alleged that Montecillo failed to pay the purchase price after the lapse of the one-month period, prompting Reynes to demand
from Montecillo the return of the Deed of Sale. Since Montecillo refused to return the Deed of Sale,[9] Reynes executed a document unilaterally
revoking the sale and gave a copy of the document to Montecillo.

Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the Abucay Spouses the entire Mabolo Lot, at the same time
confirming the previous sale in 1981 of a 185-square meter portion of the lot. This Deed of Sale states:

“I, IGNACIA T. REYNES, of legal age, Filipino, widow and resident of Mabolo, Cebu City, do hereby confirm the sale of a portion of Lot No. 74196
to an extent of 185 square meters to Spouses Redemptor Abucay and Elisa Abucay covered by Deed per Doc. No. 47, Page No. 9, Book No. V,
Series of 1981 of notarial register of Benedicto Alo, of which spouses is now in occupation;

That for and in consideration of the total sum of FIFTY THOUSAND (P50,000) PESOS, Philippine Currency, received in full and receipt whereof is
herein acknowledged from SPOUSES REDEMPTOR ABUCAY and ELISA ABUCAY, do hereby in these presents, SELL, TRANSFER and CONVEY
absolutely unto said Spouses Redemptor Abucay and Elisa Abucay, their heirs, assigns and successors-in-interest the whole parcel of land
together with improvements thereon and more particularly described as follows:
TCT No. 74196

A parcel of land (Lot 203-B-2-B of the subdivision plan psd-07-01-002370, being a portion of Lot 203-B-2, described on plan (LRC) Psd 76821,
LRC (GLRO) Record No. 5988) situated in Mabolo, Cebu City, along Arcilla Street, containing an area of total FOUR HUNDRED FORTY EIGHT (448)
Square meters.

of which I am the absolute owner thereof free from all liens and encumbrances and warrant the same against claim of third persons and other
deeds affecting said parcel of land other than that to the said spouses and inconsistent hereto is declared without any effect.

In witness whereof, I hereunto signed this 23rd day of May, 1984 in Cebu City, Philippines.” [10]

Reynes and the Abucay Spouses alleged that on June 18, 1984 they received information that the Register of Deeds of Cebu City issued
Certificate of Title No. 90805 in the name of Montecillo for the Mabolo Lot.

Reynes and the Abucay Spouses argued that “for lack of consideration there (was) no meeting of the minds”[11] between Reynes and
Montecillo. Thus, the trial court should declare null and void ab initio Montecillo’s Deed of Sale, and order the cancellation of Certificate of
Title No. 90805 in the name of Montecillo.

In his Answer, Montecillo, a bank executive with a B.S. Commerce degree,[12] claimed he was a buyer in good faith and had actually paid
the P47,000.00 consideration stated in his Deed of Sale. Montecillo, however, admitted he still owed Reynes a balance of P10,000.00. He also
alleged that he paid P50,000.00 for the release of the chattel mortgage which he argued constituted a lien on the Mabolo Lot. He further
alleged that he paid for the real property tax as well as the capital gains tax on the sale of the Mabolo Lot.

In their Reply, Reynes and the Abucay Spouses contended that Montecillo did not have authority to discharge the chattel mortgage, especially
after Reynes revoked Montecillo’s Deed of Sale and gave the mortgagee a copy of the document of revocation. Reynes and the Abucay
Spouses claimed that Montecillo secured the release of the chattel mortgage through machination. They further asserted that Montecillo took
advantage of the real property taxes paid by the Abucay Spouses and surreptitiously caused the transfer of the title to the Mabolo Lot in his
name.

During pre-trial, Montecillo claimed that the consideration for the sale of the Mabolo Lot was the amount he paid to Cebu Ice and Cold Storage
Corporation (“Cebu Ice Storage” for brevity) for the mortgage debt of Bienvenido Jayag (“Jayag” for brevity). Montecillo argued that the
release of the mortgage was necessary since the mortgage constituted a lien on the Mabolo Lot.

Reynes, however, stated that she had nothing to do with Jayag’s mortgage debt except that the house mortgaged by Jayag stood on a portion
of the Mabolo Lot. Reynes further stated that the payment by Montecillo to release the mortgage on Jayag’s house is a matter between
Montecillo and Jayag. The mortgage on the house, being a chattel mortgage, could not be interpreted in any way as an encumbrance on the
Mabolo Lot. Reynes further claimed that the mortgage debt had long prescribed since the P47,000.00 mortgage debt was due for payment on
January 30, 1967.

The trial court rendered a decision on March 24, 1993 declaring the Deed of Sale to Montecillo null and void. The trial court ordered the
cancellation of Montecillo’s Transfer Certificate of Title No. 90805 and the issuance of a new certificate of title in favor of the Abucay Spouses.
The trial court found that Montecillo’s Deed of Sale had no cause or consideration because Montecillo never paid Reynes the P47,000.00
purchase price, contrary to what is stated in the Deed of Sale that Reynes received the purchase price. The trial court ruled that Montecillo’s
Deed of Sale produced no effect whatsoever for want of consideration. The dispositive portion of the trial court’s decision reads as follows:

“WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered declaring the deed of sale in favor of defendant null and
void and of no force and effect thereby ordering the cancellation of Transfer Certificate of Title No. 90805 of the Register of Deeds of Cebu City
and to declare plaintiff Spouses Redemptor and Elisa Abucay as rightful vendees and Transfer Certificate of Title to the property subject matter
of the suit issued in their names. The defendants are further directed to pay moral damages in the sum of P20,000.00 and attorney’s fees in the
sum of P2,000.00 plus cost of the suit.

xxx”

Not satisfied with the trial court’s Decision, Montecillo appealed the same to the Court of Appeals.

Ruling of the Court of Appeals

The appellate court affirmed the Decision of the trial court in toto and dismissed the appeal[13] on the ground that Montecillo’s Deed of Sale is
void for lack of consideration. The appellate court also denied Montecillo’s Motion for Reconsideration[14] on the ground that it raised no new
arguments.

Still dissatisfied, Montecillo filed the present petition for review on certiorari.

The Issues

Montecillo raises the following issues:

1. “Was there an agreement between Reynes and Montecillo that the stated consideration of P47,000.00 in the Deed of Sale be paid to Cebu
Ice and Cold Storage to secure the release of the Transfer Certificate of Title?”

2. “If there was none, is the Deed of Sale void from the beginning or simply rescissible?”[15]

The Ruling of the Court

The petition is devoid of merit.

First issue: manner of payment of the P47,000.00 purchase price.

Montecillo’s Deed of Sale does not state that the P47,000.00 purchase price should be paid by Montecillo to Cebu Ice Storage. Montecillo
failed to adduce any evidence before the trial court showing that Reynes had agreed, verbally or in writing, that the P47,000.00 purchase price
should be paid to Cebu Ice Storage. Absent any evidence showing that Reynes had agreed to the payment of the purchase price to any other
party, the payment to be effective must be made to Reynes, the vendor in the sale. Article 1240 of the Civil Code provides as follows:

“Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized
to receive it.”

Thus, Montecillo’s payment to Cebu Ice Storage is not the payment that would extinguish[16] Montecillo’s obligation to Reynes under the Deed
of Sale.

It militates against common sense for Reynes to sell her Mabolo Lot for P47,000.00 if this entire amount would only go to Cebu Ice Storage,
leaving not a single centavo to her for giving up ownership of a valuable property. This incredible allegation of Montecillo becomes even more
absurd when one considers that Reynes did not benefit, directly or indirectly, from the payment of the P47,000.00 to Cebu Ice Storage.

The trial court found that Reynes had nothing to do with Jayag’s mortgage debt with Cebu Ice Storage. The trial court made the following
findings of fact:

“x x x. Plaintiff Ignacia Reynes was not a party to nor privy of the obligation in favor of the Cebu Ice and Cold Storage Corporation, the obligation
being exclusively of Bienvenido Jayag and wife who mortgaged their residential house constructed on the land subject matter of the complaint.
The payment by the defendant to release the residential house from the mortgage is a matter between him and Jayag and cannot by
implication or deception be made to appear as an encumbrance upon the land.”[17]

Thus, Montecillo’s payment to Jayag’s creditor could not possibly redound to the benefit[18] of Reynes. We find no reason to disturb the factual
findings of the trial court. In petitions for review on certiorari as a mode of appeal under Rule 45, as in the instant case, a petitioner can raise
only questions of law.[19] This Court is not the proper venue to consider a factual issue as it is not a trier of facts.

Second issue: whether the Deed of Sale is void ab initio or only rescissible.

Under Article 1318 of the Civil Code, “[T]here is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2)
Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established.” Article 1352 of the Civil Code also
provides that “[C]ontracts without cause x x x produce no effect whatsoever.”

Montecillo argues that his Deed of Sale has all the requisites of a valid contract. Montecillo points out that he agreed to purchase, and Reynes
agreed to sell, the Mabolo Lot at the price of P47,000.00. Thus, the three requisites for a valid contract concur: consent, object certain and
consideration. Montecillo asserts there is no lack of consideration that would prevent the existence of a valid contract. Rather, there is only
non-payment of the consideration within the period agreed upon for payment.
Montecillo argues there is only a breach of his obligation to pay the full purchase price on time. Such breach merely gives Reynes a right to ask
for specific performance, or for annulment of the obligation to sell the Mabolo Lot. Montecillo maintains that in reciprocal obligations, the
injured party can choose between fulfillment and rescission,[20] or more properly cancellation, of the obligation under Article 1191[21] of the Civil
Code. This Article also provides that the “court shall decree the rescission claimed, unless there be just cause authorizing the fixing of the
period.” Montecillo claims that because Reynes failed to make a demand for payment, and instead unilaterally revoked Montecillo’s Deed of
Sale, the court has a just cause to fix the period for payment of the balance of the purchase price.

These arguments are not persuasive.

Montecillo’s Deed of Sale states that Montecillo paid, and Reynes received, the P47,000.00 purchase price on March 1, 1984, the date of
signing of the Deed of Sale. This is clear from the following provision of the Deed of Sale:

“That I, IGNACIA T. REYNES, x x x for and in consideration of FORTY SEVEN THOUSAND (P47,000.00) PESOS, Philippine Currency, to me in hand
paid by RIDO MONTECILLO xxx, receipt of which is hereby acknowledged, have sold, transferred, and conveyed, unto RIDO MONTECILLO, x x x
a parcel of land x x x.”

On its face, Montecillo’s Deed of Absolute Sale[22] appears supported by a valuable consideration. However, based on the evidence presented
by both Reynes and Montecillo, the trial court found that Montecillo never paid to Reynes, and Reynes never received from Montecillo,
the P47,000.00 purchase price. There was indisputably a total absence of consideration contrary to what is stated in Montecillo’s Deed of
Sale. As pointed out by the trial court –

“From the allegations in the pleadings of both parties and the oral and documentary evidence adduced during the trial, the court is convinced
that the Deed of Sale (Exhibits “1” and “1-A”) executed by plaintiff Ignacia Reynes acknowledged before Notary Public Ponciano Alvinio is
devoid of any consideration. Plaintiff Ignacia Reynes through the representation of Baudillo Baladjay had executed a Deed of Sale in favor of
defendant on the promise that the consideration should be paid within one (1) month from the execution of the Deed of Sale. However, after
the lapse of said period, defendant failed to pay even a single centavo of the consideration. The answer of the defendant did not allege clearly
why no consideration was paid by him except for the allegation that he had a balance of only P10,000.00. It turned out during the pre-trial that
what the defendant considered as the consideration was the amount which he paid for the obligation of Bienvenido Jayag with the Cebu Ice
and Cold Storage Corporation over which plaintiff Ignacia Reynes did not have a part except that the subject of the mortgage was constructed
on the parcel of land in question. Plaintiff Ignacia Reynes was not a party to nor privy of the obligation in favor of the Cebu Ice and Cold Storage
Corporation, the obligation being exclusively of Bienvenido Jayag and wife who mortgaged their residential house constructed on the land
subject matter of the complaint. The payment by the defendant to release the residential house from the mortgage is a matter between him
and Jayag and cannot by implication or deception be made to appear as an encumbrance upon the land. “[23]

Factual findings of the trial court are binding on us, especially if the Court of Appeals affirms such findings.[24] We do not disturb such findings
unless the evidence on record clearly does not support such findings or such findings are based on a patent misunderstanding of facts,[25] which
is not the case here. Thus, we find no reason to deviate from the findings of both the trial and appellate courts that no valid consideration
supported Montecillo’s Deed of Sale.

This is not merely a case of failure to pay the purchase price, as Montecillo claims, which can only amount to a breach of obligation with
rescission as the proper remedy. What we have here is a purported contract that lacks a cause - one of the three essential requisites of a valid
contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or
cancellation of the obligation under an existing valid contract[26] while the latter prevents the existence of a valid contract

Where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void ab
initio for lack of consideration. This has been the well-settled rule as early as Ocejo Perez & Co. v. Flores,[27] a 1920 case. As subsequently
explained in Mapalo v. Mapalo[28]–

“In our view, therefore, the ruling of this Court in Ocejo Perez & Co. vs. Flores, 40 Phil. 921, is squarely applicable herein. In that case we ruled
that a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in
that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor.”

The Court reiterated this rule in Vda. De Catindig v. Heirs of Catalina Roque,[29] to wit –

“The Appellate Court’s finding that the price was not paid or that the statement in the supposed contracts of sale (Exh. 6 to 26) as to the
payment of the price was simulated fortifies the view that the alleged sales were void. “If the price is simulated, the sale is void . . .” (Art. 1471,
Civil Code)
A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as paid, has in fact never been paid by the
purchaser to the vendor (Ocejo, Perez & Co. vs. Flores and Bas, 40 Phil. 921; Mapalo vs. Mapalo, L-21489, May 19, 1966, 64 O.G. 331, 17 SCRA
114, 122). Such a sale is non-existent (Borromeo vs. Borromeo, 98 Phil. 432) or cannot be considered consummated (Cruzado vs. Bustos and
Escaler, 34 Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28 SCRA 229).”

Applying this well-entrenched doctrine to the instant case, we rule that Montecillo’s Deed of Sale is null and void ab initio for lack of
consideration.

Montecillo asserts that the only issue in controversy is “the mode and/or manner of payment and/or whether or not payment has been
made.”[30] Montecillo implies that the mode or manner of payment is separate from the consideration and does not affect the validity of the
contract. In the recent case of San Miguel Properties Philippines, Inc. v. Huang,[31] we ruled that –

“In Navarro v. Sugar Producers Cooperative Marketing Association, Inc. (1 SCRA 1181 [1961]), we laid down the rule that the manner of
payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not
expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise
there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals (244 SCRA 320 [1995]), agreement on the manner of payment goes into the
price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.” (Emphasis supplied)

One of the three essential requisites of a valid contract is consent of the parties on the object and cause of the contract. In a contract of sale,
the parties must agree not only on the price, but also on the manner of payment of the price. An agreement on the price but a disagreement
on the manner of its payment will not result in consent, thus preventing the existence of a valid contract for lack of consent. This lack of
consent is separate and distinct from lack of consideration where the contract states that the price has been paid when in fact it has never
been paid.

Reynes expected Montecillo to pay him directly the P47,000.00 purchase price within one month after the signing of the Deed of Sale. On the
other hand, Montecillo thought that his agreement with Reynes required him to pay the P47,000.00 purchase price to Cebu Ice Storage to
settle Jayag’s mortgage debt. Montecillo also acknowledged a balance of P10,000.00 in favor of Reynes although this amount is not stated in
Montecillo’s Deed of Sale. Thus, there was no consent, or meeting of the minds, between Reynes and Montecillo on the manner of
payment. This prevented the existence of a valid contract because of lack of consent.

In summary, Montecillo’s Deed of Sale is null and void ab initio not only for lack of consideration, but also for lack of consent. The cancellation
of TCT No. 90805 in the name of Montecillo is in order as there was no valid contract transferring ownership of the Mabolo Lot from Reynes to
Montecillo.

WHEREFORE, the petition is DENIED and the assailed Decision dated July 16, 1998 of the Court of Appeals in CA-G.R. CV No. 41349 is
AFFIRMED. Costs against petitioner.

SO ORDERED.
[G.R. No. 139982. November 21, 2002]

JULIAN FRANCISCO (Substituted by his Heirs, namely: CARLOS ALTEA FRANCISCO; the heirs of late ARCADIO FRANCISCO, namely: CONCHITA
SALANGSANG-FRANCISCO (surviving spouse), and his children namely: TEODULO S. FRANCISCO, EMILIANO S. FRANCISCO, MARIA THERESA S.
FRANCISCO, PAULINA S. FRANCISCO, THOMAS S. FRANCISCO; PEDRO ALTEA FRANCISCO; CARINA FRANCISCO-ALCANTARA; EFREN ALTEA
FRANCISCO; DOMINGA LEA FRANCISCO-REGONDON; BENEDICTO ALTEA FRANCISCO and ANTONIO ALTEA FRANCISCO), petitioner, vs.
PASTOR HERRERA, respondent.

DECISION

QUISUMBING, J.:

This is a petition for review on certiorari of the decision[1] of the Court of Appeals, dated August 30, 1999, in CA-G.R. CV No. 47869, which
affirmed in toto the judgment[2] of the Regional Trial Court (RTC) of Antipolo City, Branch 73, in Civil Case No. 92-2267. The appellate court
sustained the trial court’s ruling which: (a) declared null and void the deeds of sale of the properties covered by Tax Declaration Nos. 01-00495
and 01-00497; and (b) directed petitioner to return the subject properties to respondent who, in turn, must refund to petitioner the purchase
price of P1,750,000.

The facts, as found by the trial court and affirmed by the Court of Appeals, are as follows:

Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land, one consisting of 500 sq. m. and another consisting of 451
sq. m., covered by Tax Declaration (TD) Nos. 01-00495 and 01-00497, respectively. Both were located at Barangay San Andres, Cainta, Rizal.[3]

On January 3, 1991, petitioner bought from said landowner the first parcel, covered by TD No. 01-00495, for the price of P1,000,000, paid in
installments from November 30, 1990 to August 10, 1991.

On March 12, 1991, petitioner bought the second parcel covered by TD No. 01-00497, for P750,000.

Contending that the contract price for the two parcels of land was grossly inadequate, the children of Eligio, Sr., namely, Josefina Cavestany,
Eligio Herrera, Jr., and respondent Pastor Herrera, tried to negotiate with petitioner to increase the purchase price. When petitioner refused,
herein respondent then filed a complaint for annulment of sale, with the RTC of Antipolo City, docketed as Civil Case No. 92-2267. In his
complaint, respondent claimed ownership over the second parcel, which is the lot covered by TD No. 01-00497, allegedly by virtue of a sale in
his favor since 1973. He likewise claimed that the first parcel, the lot covered by TD No. 01-00495, was subject to the co-ownership of the
surviving heirs of Francisca A. Herrera, the wife of Eligio, Sr., considering that she died intestate on April 2, 1990, before the alleged sale to
petitioner. Finally, respondent also alleged that the sale of the two lots was null and void on the ground that at the time of sale, Eligio, Sr. was
already incapacitated to give consent to a contract because he was already afflicted with senile dementia, characterized by deteriorating mental
and physical condition including loss of memory.

In his answer, petitioner as defendant below alleged that respondent was estopped from assailing the sale of the lots. Petitioner contended
that respondent had effectively ratified both contracts of sales, by receiving the consideration offered in each transaction.

On November 14, 1994, the Regional Trial Court handed down its decision, the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, this court hereby orders that:

1. The deeds of sale of the properties covered by Tax Dec. Nos. 01-00495 and 01-00497 are declared null and void;

2. The defendant is to return the lots in question including all improvements thereon to the plaintiff and the plaintiff is ordered to
simultaneously return to the defendant the purchase price of the lots sold totalling to P750,000.00 for lot covered by TD 01-00497
and P1,000,000.00 covered by TD 01-00495;

3. The court also orders the defendant to pay the cost of the suit.

4. The counter-claim of the defendant is denied for lack of merit.

SO ORDERED.[4]

Petitioner then elevated the matter to the Court of Appeals in CA-G.R. CV No. 47869. On August 30, 1999, however, the appellate court
affirmed the decision of the Regional Trial Court, thus:
WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED in toto. Costs against defendant-appellant.

SO ORDERED.[5]

Hence, this petition for review anchored on the following grounds:

I. THE COURT OF APPEALS COMPLETELY IGNORED THE BASIC DIFFERENCE BETWEEN A VOID AND A MERELY VOIDABLE CONTRACT THUS
MISSING THE ESSENTIAL SIGNIFICANCE OF THE ESTABLISHED FACT OF RATIFICATION BY THE RESPONDENT WHICH EXTINGUISHED WHATEVER
BASIS RESPONDENT MAY HAVE HAD IN HAVING THE CONTRACT AT BENCH ANNULLED.

II. THE DECISION OF THE COURT OF APPEALS ON “SENILE DEMENTIA”:

A. DISREGARDED THE FACTUAL BACKGROUND OF THE CASE;

B. WAS CONTRARY TO ESTABLISHED JURISPRUDENCE; AND

C. WAS PURELY CONJECTURAL, THE CONJECTURE BEING ERRONEOUS.

III. THE COURT OF APPEALS WAS IN GROSS ERROR AND IN FACT VIOLATED PETITIONERS’ RIGHT TO DUE PROCESS WHEN IT RULED THAT THE
CONSIDERATION FOR THE QUESTIONED CONTRACTS WAS GROSSLY INADEQUATE.[6]

The resolution of this case hinges on one pivotal issue: Are the assailed contracts of sale void or merely voidable and hence capable of being
ratified?

Petitioner contends that the Court of Appeals erred when it ignored the basic distinction between void and voidable contracts. He argues that
the contracts of sale in the instant case, following Article 1390[7] of the Civil Code are merely voidable and not void ab initio. Hence, said
contracts can be ratified. Petitioner argues that while it is true that a demented person cannot give consent to a contract pursuant to Article
1327,[8] nonetheless the dementia affecting one of the parties will not make the contract void per se but merely voidable. Hence, when
respondent accepted the purchase price on behalf of his father who was allegedly suffering from senile dementia, respondent effectively
ratified the contracts. The ratified contracts then become valid and enforceable as between the parties.

Respondent counters that his act of receiving the purchase price does not imply ratification on his part. He only received the installment
payments on his senile father’s behalf, since the latter could no longer account for the previous payments. His act was thus meant merely as a
safety measure to prevent the money from going into the wrong hands. Respondent also maintains that the sales of the two properties were
null and void. First, with respect to the lot covered by TD No. 01-00497, Eligio, Sr. could no longer sell the same because it had been previously
sold to respondent in 1973. As to lot covered by TD No. 01-00495, respondent contends that it is co-owned by Eligio, Sr. and his children, as
heirs of Eligio’s wife. As such, Eligio, Sr. could not sell said lot without the consent of his co-owners.

We note that both the trial court and the Court of Appeals found that Eligio, Sr. was already suffering from senile dementia at the time he sold
the lots in question. In other words, he was already mentally incapacitated when he entered into the contracts of sale. Settled is the rule that
findings of fact of the trial court, when affirmed by the appellate court, are binding and conclusive upon the Supreme Court.[9]

Coming now to the pivotal issue in this controversy. A void or inexistent contract is one which has no force and effect from the very beginning.
Hence, it is as if it has never been entered into and cannot be validated either by the passage of time or by ratification. There are two types of
void contracts: (1) those where one of the essential requisites of a valid contract as provided for by Article 1318[10] of the Civil Code is
totally wanting; and (2) those declared to be so under Article 1409[11] of the Civil Code. By contrast, a voidable or annullable contract is one in
which the essential requisites for validity under Article 1318 are present, but vitiated by want of capacity, error, violence, intimidation, undue
influence, or deceit.

Article 1318 of the Civil Code states that no contract exists unless there is a concurrence of consent of the parties, object certain as subject
matter, and cause of the obligation established. Article 1327 provides that insane or demented persons cannot give consent to a contract. But,
if an insane or demented person does enter into a contract, the legal effect is that the contract is voidable or annullable as specifically provided
in Article 1390.[12]

In the present case, it was established that the vendor Eligio, Sr. entered into an agreement with petitioner, but that the former’s capacity to
consent was vitiated by senile dementia.Hence, we must rule that the assailed contracts are not void or inexistent per se; rather, these are
contracts that are valid and binding unless annulled through a proper action filed in court seasonably.
An annullable contract may be rendered perfectly valid by ratification, which can be express or implied. Implied ratification may take the form
of accepting and retaining the benefits of a contract.[13] This is what happened in this case. Respondent’s contention that he merely received
payments on behalf of his father merely to avoid their misuse and that he did not intend to concur with the contracts is unconvincing. If he was
not agreeable with the contracts, he could have prevented petitioner from delivering the payments, or if this was impossible, he could have
immediately instituted the action for reconveyance and have the payments consigned with the court. None of these happened. As found by the
trial court and the Court of Appeals, upon learning of the sale, respondent negotiated for the increase of the purchase price while receiving the
installment payments. It was only when respondent failed to convince petitioner to increase the price that the former instituted the complaint
for reconveyance of the properties. Clearly, respondent was agreeable to the contracts, only he wanted to get more. Further, there is no
showing that respondent returned the payments or made an offer to do so. This bolsters the view that indeed there was ratification. One
cannot negotiate for an increase in the price in one breath and in the same breath contend that the contract of sale is void.

Nor can we find for respondent’s argument that the contracts were void as Eligio, Sr., could not sell the lots in question as one of the properties
had already been sold to him, while the other was the subject of a co-ownership among the heirs of the deceased wife of Eligio, Sr. Note that it
was found by both the trial court and the Court of Appeals that Eligio, Sr., was the “declared owner” of said lots. This finding is conclusive on
us. As declared owner of said parcels of land, it follows that Eligio, Sr., had the right to transfer the ownership thereof under the principle of jus
disponendi.

In sum, the appellate court erred in sustaining the judgment of the trial court that the deeds of sale of the two lots in question were null and
void.

WHEREFORE, the instant petition is GRANTED. The decision dated August 30, 1999 of the Court of Appeals in CA-G.R. CV No. 47869, affirming
the decision of the Regional Trial Court in Civil Case No. 92-2267 is REVERSED. The two contracts of sale covering lots under TD No. 01-00495
and No. 01-00497 are hereby declared VALID. Costs against respondent.

SO ORDERED.
[G.R. No. 121069. February 7, 2003]

BENJAMIN CORONEL AND EMILIA MEKING VDA. DE CORONEL, petitioners, vs. FLORENTINO CONSTANTINO, AUREA BUENSUCESO, AND THE
HONORABLE COURT OF APPEALS, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

This refers to the petition for review on certiorari of the decision of the Court of Appeals, dated March 27, 1995, in CA-G.R. CV No.
44023[1] which affirmed the decision of the Regional Trial Court of Bulacan, Branch 8, dated April 12, 1993 in Civil Case No. 105-M-91[2]; and the
resolution of said appellate court, dated July 4, 1995, denying the motion for reconsideration of its decision.

The factual background of the case is as follows:

The subject property consists of two parcels of land situated in Sta. Monica, Hagonoy, Bulacan, designated as Cadastral Lots Nos. 5737 and
5738. The property is originally owned by Honoria Aguinaldo. One-half (1/2) of it was inherited by Emilia Meking Vda. de Coronel together
with her sons Benjamin, Catalino and Ceferino, all surnamed Coronel. The other half was inherited by Florentino Constantino and Aurea
Buensuceso.

On February 20, 1991, Constantino and Buensuceso filed a complaint for declaration of ownership, quieting of title and damages with prayer
for writ of mandatory and/or prohibitory injunction with the Regional Trial Court of Bulacan (Branch 8) against Benjamin, Emilia and John Does,
docketed as Civil Case No. 105-M-91. Plaintiffs allege that: on April 23, 1981, Jess C. Santos and Priscilla Bernardo purchased the property
belonging to Emilia and her sons by virtue of a deed of sale signed by Emilia; on June 21, 1990, Santos and Bernardo in turn sold the same to
Constantino and Buensuceso by virtue of a compromise agreement in Civil Case No. 8289-M; they are the owners of the subject property and
defendants have illegally started to introduce construction on the premises in question; and pray that “defendants respect, acknowledge and
confirm the right of ownership of the plaintiffs to the share, interest and participation of the one-third (1/3) portion of the above described
property”.

After defendants filed their Answer, pre-trial ensued wherein the parties stipulated that: (1) the property in question was previously owned by
Honoria Aguinaldo, one-half (1/2) of which was inherited by the defendants while the other half was inherited by the plaintiffs from the same
predecessor; (2) it was admitted by counsel for the defendants that there was a sale between Jess Santos and the plaintiffs covering the subject
property; and (3) that there was no evidence presented in Civil Case No. 8289-M by either of the parties and that the decision therein was
based on a compromise agreement.[3]

After trial on the merits, the trial court rendered a decision in favor of the plaintiffs, the decretal portion of which reads as follows:

“WHEREFORE, judgment is hereby made in favor of plaintiffs, the Court hereby declares plaintiffs as the sole and absolute owners of the
properties covered by Tax Declarations Nos. 28960 and 28961 of Hagonoy, Bulacan, and orders the defendants to respect, acknowledge and
confirm the right of ownership of plaintiffs over the whole property described above, to remove whatever improvements introduced by them
thereon, and to pay the plaintiffs, solidarily and severally P10,000.00 as attorney’s fees and costs of suit.

“SO ORDERED.”[4]

On appeal brought by defendants, the Court of Appeals affirmed the decision of the lower court and denied defendants’ motion for
reconsideration.

Hence, herein petition brought by defendants, raising the following issues:

“I.

WHETHER OR NOT THE CONTRACT [OF] SALE EXECUTED BY A PARENT-CO-OWNER, IN HER OWN BEHALF, IS UNENFORCEABLE WITH RESPECT TO
THE SHARES OF HER CO-HEIRS-CHILDREN;

“II.

WHETHER OR NOT THE MINOR CHILDREN CAN RATIFY UNAUTHORIZED ACTIONS OF THEIR PARENTS;

“III.
WHETHER OR NOT THE CO-HEIRS ARE INDISPENSABLE DEFENDANTS IN AN ACTION FOR DECLARATION OF OWNERSHIP AND QUIETING OF
TITLE;

“IV.

WHETHER OR NOT THE DEED OF SALE WHICH IS A PRIVATE DOCUMENT WAS SUFFICIENTLY ESTABLISHED WHEN THE COUNSEL FOR THE
DEFENDANTS-PETITIONERS ADMITTED ONLY ITS EXISTENCE BUT NOT ITS CONTENTS.”[5]

The third issue was raised by the petitioners for the first time with the Court of Appeals. They claim that the complaint should have been
dismissed because private respondents failed to implead the heirs of Ceferino and Catalino who died in 1983 and 1990,[6] respectively, in their
complaint as indispensable parties. We do not agree.

A careful reading of the “Kasulatan ng Bilihang Patuluyan” which is a private document, not having been duly notarized, shows that only the
share of Emilia in the subject property was sold because Benjamin did not sign the document and the shares of Ceferino and Catalino were not
subject of the sale. Pertinent portions of the document read as follows:

“KASULATAN NG BILIHANG PATULUYAN

“PANIWALAAN NG LAHAT:

“Kaming mag-iinang Emilia Micking Vda. Coronel at Benjamin M. Coronel kapwa may sapat na gulang, Pilipino, naninirahan sa nayon ng Sta.
Monica, Hagonoy, Bulacan, sa kasulatang ito ay malaya naming:

“P I N A T U T U N A Y A N

“Na, kami ay tunay na nagmamay-ari ng isang lagay na lupang Bakuran na minana namin sa aming Lolong yumaong Mauricio Coronel, na ang
ayos, takal at kalagayan ay ang sumusunod:

“ORIGINAL CERTIFICATE OF TITLE NO. 5737

“Bakuran sa nayon ng Sta. Monica, Hagonoy, Bulacan na may sukat na 416 Square Meters ang kabuuan 208 Square Meters Lot A-1 ang kalahati
nito na kanilang ipinagbibili.

“x x x xxx xxx

“Na, dahil at alang-alang sa halagang DALAWAMPU’T LIMANG LIBONG PISO (P25,000) salaping Pilipino, na aming tinanggap sa kasiyahang loob
namin, buhat sa mag-asawang Jess C. Santos at Prescy Bernardo, kapwa may sapat na gulang, Pilipino at naninirahan sa nayon ng Sta. Monica,
Hagonoy, Bulacan, sa bisa ng kasulatang ito, ay aming isinasalin, inililipat at ipinagbibili ng bilihang patuluyan ang lahat ng aming dapat na
makaparte sa lupang Bakuran Nakasaad sa dakong unahan nito, sa nabanggit na Jess C. Santos at Prescy Bernardo o sa kanilang tagapagmana
at kahalili.

“Na, ako namang Jess C. Santos, bilang nakabili, ay kusang loob ding nagsasaysay sa kasulatang ito na ako ay kasangayon sa lahat ng dito’y
nakatala, bagaman ang lupang naturan ay hindi pa nahahati sa dapat magmana sa yumaong Honoria Aguinaldo.

“Na, sa aming kagipitan inari naming ipagbili ang aming karapatan o kaparte na minana sa yumaong Guillermo Coronel ay napagkasunduan
namin mag-iina na ipagbili ang bakurang ito na siyang makalulunas sa aming pangangailangan x x x.”

“Na, kaming nagbili ang magtatanggol ng katibayan sa pagmamayari sa lupang naturan, sakaling may manghihimasok.

SA KATUNAYAN NITO, kami ay lumagda sa kasulatang ito sa bayan ng Malabon, Rizal ngayong ika-23 ng Abril, 1981.

(Signed) (Signed)

EMILIA MICKING Vda. CORONEL JESS C. SANTOS

Nagbili Nakabili

(Unsigned) (Signed)

BENJAMIN M. CORONEL PRISCILLA BERNARDO

Nagbili Nakabili”[7]

Thus, it is clear, as already stated, that petitioner Benjamin did not sign the document and that the shares of Catalino and Ceferino in the
subject property were not sold by them.

Since the shares of Catalino and Ceferino were not sold, plaintiffs Constantino and Buensuceso have no cause of action against them or against
any of their heirs. Under Rule 3, Section 7 of the 1997 Rules of Civil Procedure, indispensable parties are parties in interest without whom no
final determination can be had of an action. In the present case, the heirs of Catalino and Ceferino are not indispensable parties because a
complete determination of the rights of herein petitioners and respondents can be had even if the said heirs are not impleaded.

Besides, it is undisputed that petitioners never raised before the trial court the issue of the private respondents’ failure to implead said heirs in
their complaint. Instead, petitioners actively participated in the proceedings in the lower court and raised only the said issue on appeal with
the Court of Appeals. It is a settled rule that jurisdictional questions may be raised at any time unless an exception arises where estoppel has
supervened.[8] In the present case, petitioners’ participation in all stages of the case during trial, without raising the issue of the trial court’s
lack of jurisdiction over indispensable parties, estops them from challenging the validity of the proceedings therein.

Further, the deed of sale is not a competent proof that petitioner Benjamin had sold his own share of the subject property. It cannot be
disputed that Benjamin did not sign the document and therefore, it is unenforceable against him.

Emilia executed the instrument in her own behalf and not in representation of her three children.

Article 493 of the Civil Code states:

“Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign
or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation
or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the
termination of the co-ownership.”

Consequently, the sale of the subject property made by Emilia in favor of Santos and Bernardo is limited to the portion which may be allotted to
her upon the termination of her co-ownership over the subject property with her children.

As to the first, second and fourth issues – it has been established that at the time of execution of the “Kasulatan ng Bilihang Patuluyan” on April
23, 1981[9], the subject property was co-owned, pro-indiviso, by petitioner Emilia together with her petitioner son Benjamin, and her two other
sons, Catalino and Ceferino. No proof was presented to show that the co-ownership that existed among the heirs of Ceferino and Catalino and
herein petitioners has ever been terminated.

Applying Articles 1317 and 1403 of the Civil Code, the Court of Appeals ruled that through their inaction and silence, the three sons of Emilia
are considered to have ratified the aforesaid sale of the subject property by their mother.

Articles 1317 and 1403 (1) of the Civil Code provide:

“Art. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent
him.

“A contract entered into in the name of another by one who has no authority or legal representation or who has acted “beyond his powers shall
be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the
other contracting party.

“Art. 1403. The following contracts are unenforceable, unless they are ratified:

“(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.

xxx xxx x x x”

We do not agree with the appellate court. The three sons of Emilia did not ratify the sale. In Maglucot-Aw vs. Maglucot[10] we held that:
“Ratification means that one under no disability voluntarily adopts and gives sanction to some unauthorized act or defective proceeding, which
without his sanction would not be binding on him. It is this voluntary choice, knowingly made, which amounts to a ratification of what was
theretofore unauthorized, and becomes the authorized act of the party so making the ratification.

No evidence was presented to show that the three brothers were aware of the sale made by their mother. Unaware of such sale, Catalino,
Ceferino and Benjamin could not be considered as having voluntarily remained silent and knowingly chose not to file an action for the
annulment of the sale. Their alleged silence and inaction may not be interpreted as an act of ratification on their part.

We also find no concrete evidence to show that Ceferino, Catalino and Benjamin benefited from the sale. It is true that private respondent
Constantino testified that Benjamin took money from Jess Santos but this is mere allegation on the part of Constantino. No other evidence was
presented to support such allegation. Bare allegations, unsubstantiated by evidence, are not equivalent to proof under our Rules of
Court.[11] Neither do the records show that Benjamin admitted having received money from Jess Santos. Even granting that Benjamin indeed
received money from Santos, Constantino’s testimony does not show that the amount received was part of the consideration for the sale of the
subject property.

To repeat, the sale is valid insofar as the share of petitioner Emilia Meking Vda. de Coronel is concerned. The due execution of the “Kasulatan
ng Bilihang Patuluyan” was duly established when petitioners, through their counsel, admitted during the pre-trial conference that the said
document was signed by Emilia.[12] While petitioners claim that Emilia erroneously signed it under the impression that it was a contract of
mortgage and not of sale, no competent evidence was presented to prove such allegation.

Hence, Jess C. Santos and Priscilla Bernardo, who purchased the share of Emilia, became co-owners of the subject property together with
Benjamin and the heirs of Ceferino and Catalino. As such, Santos and Bernardo could validly dispose of that portion of the subject property
pertaining to Emilia in favor of herein private respondents Constantino and Buensuceso.

However, the particular portions properly pertaining to each of the co-owners are not yet defined and determined as no partition in the proper
forum or extrajudicial settlement among the parties has been effected among the parties. Consequently, the prayer of respondents for a
mandatory or prohibitory injunction lacks merit.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with the following MODIFICATIONS:

1. Plaintiffs-private respondents Florentino Constantino and Aurea Buensuceso are declared owners of one-half (1/2) undivided portion of the
subject property plus the one-fourth (¼) undivided share of defendant-petitioner Emilia Meking Vda. de Coronel; and, defendant-petitioner
Benjamin Coronel together with the heirs of Catalino Coronel and the heirs of Ceferino Coronel are declared owners of one-fourth (¼) share
each of the other one-half (1/2) portion of the subject property, without prejudice to the parties entering into partition of the subject property,
judicial or otherwise.

2. The order of removal of the improvements and the award of the amount of Ten Thousand Pesos (P10,000.00) as attorney’s fees and costs of
suit are DELETED.

No costs.

SO ORDERED.