G.R. No.
100290 June 4, 1993 the trial court on the ground that payment in cashier's check is not payment in legal tender
NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and EDEN TAN, respondents.
PADILLA, J.:
Petitioners, spouses Norberto Tibajia, Jr. and Carmen Tibajia, are before this Court assailing
the decision * of respondent appellate court dated 24 April 1991 in CA-G.R. SP No. 24164
denying their petition for certiorari prohibition, and injunction which sought to annul the
order of Judge Eutropio Migriño of the Regional Trial Court, Branch 151, Pasig, Metro Manila
in Civil Case No. 54863 entitled "Eden Tan vs. Sps. Norberto and Carmen Tibajia."
Stated briefly, the relevant facts are as follows:
Case No. 54863 was a suit for collection of a sum of money filed by Eden Tan against the
Tibajia spouses. A writ of attachment was issued by the trial court on 17 August 1987 and on
17 September 1987, the Deputy Sheriff filed a return stating that a deposit made by the Tibajia
spouses in the Regional Trial Court of Kalookan City in the amount of Four Hundred Forty
Two Thousand Seven Hundred and Fifty Pesos (P442,750.00) in another case, had been
garnished by him. On 10 March 1988, the Regional Trial Court, Branch 151 of Pasig, Metro
Manila rendered its decision in Civil Case No. 54863 in favor of the plaintiff Eden Tan,
ordering the Tibajia spouses to pay her an amount in excess of Three Hundred Thousand
Pesos (P300,000.00). On appeal, the Court of Appeals modified the decision by reducing the
award of moral and exemplary damages. The decision having become final, Eden Tan filed the
corresponding motion for execution and thereafter, the garnished funds which by then were
on deposit with the cashier of the Regional Trial Court of Pasig, Metro Manila, were levied
upon.
On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the
total money judgment in the following form:
Cashier's Check P262,750.00
Cash 135,733.70
————
Total P398,483.70
Private respondent, Eden Tan, refused to accept the payment made by the Tibajia spouses
and instead insisted that the garnished funds deposited with the cashier of the Regional Trial
Court of Pasig, Metro Manila be withdrawn to satisfy the judgment obligation. On 15 January
1991, defendant spouses (petitioners) filed a motion to lift the writ of execution on the ground
that the judgment debt had already been paid. On 29 January 1991, the motion was denied by
and that payment was made by a third party other than the defendant. A motion for
reconsideration was denied on 8 February 1991. Thereafter, the spouses Tibajia filed a
petition for certiorari, prohibition and injunction in the Court of Appeals. The appellate court
dismissed the petition on 24 April 1991 holding that payment by cashier's check is not
payment in legal tender as required by Republic Act No. 529. The motion for reconsideration
was denied on 27 May 1991.
In this petition for review, the Tibajia spouses raise the following issues:
I WHETHER OR NOT THE BPI CASHIER'S CHECK NO. 014021 IN THE
AMOUNT OF P262,750.00 TENDERED BY PETITIONERS FOR PAYMENT
OF THE JUDGMENT DEBT, IS "LEGAL TENDER".
II WHETHER OR NOT THE PRIVATE RESPONDENT MAY VALIDLY
REFUSE THE TENDER OF PAYMENT PARTLY IN CHECK AND PARTLY
IN CASH MADE BY PETITIONERS, THRU AURORA VITO AND COUNSEL,
FOR THE SATISFACTION OF THE MONETARY OBLIGATION OF
PETITIONERS-SPOUSES.1
The only issue to be resolved in this case is whether or not payment by means of check (even
by cashier's check) is considered payment in legal tender as required by the Civil Code,
Republic Act No. 529, and the Central Bank Act.
It is contended by the petitioners that the check, which was a cashier's check of the Bank of
the Philippine Islands, undoubtedly a bank of good standing and reputation, and which was a
crossed check marked "For Payee's Account Only" and payable to private respondent Eden
Tan, is considered legal tender, payment with which operates to discharge their monetary
obligation.2 Petitioners, to support their contention, cite the case of New Pacific Timber and
Supply Co., Inc. v. Señeris3 where this Court held through Mr. Justice Hermogenes
Concepcion, Jr. that "It is a well-known and accepted practice in the business sector that a
cashier's check is deemed as cash".
The provisions of law applicable to the case at bar are the following:
a. Article 1249 of the Civil Code which provides:
Art. 1249. The payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then in the
currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or
other mercantile documents shall produce the effect of payment only when
they have been cashed, or when through the fault of the creditor they have
been impaired.
 In the meantime, the action derived from the original obligation shall be held bar for in that case the checks issued by the judgment debtor were made payable to the
in abeyance.; sheriff, Emilio Z. Reyes, who encashed the checks but failed to deliver the proceeds of said
encashment to the judgment creditor.
b. Section 1 of Republic Act No. 529, as amended, which provides:
In the more recent case of Fortunado vs. Court of Appeals,8 this Court stressed that, "We are
Sec. 1. Every provision contained in, or made with respect to, any obligation not, by this decision, sanctioning the use of a check for the payment of obligations over the
which purports to give the obligee the right to require payment in gold or in objection of the creditor."
any particular kind of coin or currency other than Philippine currency or in
an amount of money of the Philippines measured thereby, shall be as it is WHEREFORE, the petition is DENIED. The appealed decision is hereby AFFIRMED, with
hereby declared against public policy null and void, and of no effect, and no costs against the petitioners.
such provision shall be contained in, or made with respect to, any obligation
thereafter incurred. Every obligation heretofore and hereafter incurred, SO ORDERED.
whether or not any such provision as to payment is contained therein or
made with respect thereto, shall be discharged upon payment in any coin or
currency which at the time of payment is legal tender for public and private
debts.

c. Section 63 of Republic Act No. 265, as amended (Central Bank Act) which provides:

Sec. 63. Legal character — Checks representing deposit money do not have
legal tender power and their acceptance in the payment of debts, both public
and private, is at the option of the creditor: Provided, however, that a check
which has been cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor of cash in an amount equal to the
amount credited to his account.

From the aforequoted provisions of law, it is clear that this petition must fail.

In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals4 and Roman Catholic
Bishop of Malolos, Inc. vs. Intermediate Appellate Court,5 this Court held that —

A check, whether a manager's check or ordinary check, is not legal tender,

and an offer of a check in payment of a debt is not a valid tender of payment
and may be refused receipt by the obligee or creditor.

The ruling in these two (2) cases merely applies the statutory provisions which lay down the
rule that a check is not legal tender and that a creditor may validly refuse payment by check,
whether it be a manager's, cashier's or personal check.

Petitioners erroneously rely on one of the dissenting opinions in the Philippine

Airlines case6 to support their cause. The dissenting opinion however does not in any way
support the contention that a check is legal tender but, on the contrary, states that "If the PAL
checks in question had not been encashed by Sheriff Reyes, there would be no payment by
PAL and, consequently, no discharge or satisfaction of its judgment obligation." 7 Moreover,
the circumstances in the Philippine Airlines case are quite different from those in the case at
 [G.R. No. 106648. June 17, 1999]
AUDION ELECTRIC CO., INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and NICOLAS MADOLID, respondents.
DECISION
GONZAGA_REYES, J.:
In this special civil action for certiorari, petitioner seeks the annulment of the
resolution[1] dated March 24, 1992, of the National Labor Relations Commission in NLRC NCR-
CA No. 001034-90 and the Order[2] dated July 31, 1992, denying petitioners motion for
reconsideration dated April 22, 1992.
The facts of the case as summarized by Labor Arbiter Cresencio R. Iniego in his decision
rendered on November 15, 1990 in NLRC-NCR Case No. -00-08-03906-89, and which are
quoted in the questioned Resolution dated March 24, 1992 of the public respondent are as
follows:
From the position paper and affidavit corroborated by oral testimony, it appears that
complainant was employed by respondent Audion Electric Company on June 30, 1976 as
fabricator and continuously rendered service assigned in different offices or projects as helper
electrician, stockman and timekeeper. He has rendered thirteen (13) years of continuous,
loyal and dedicated service with a clean record. On August 3, complainant was surprised to
receive a letter informing him that he will be considered terminated after the turnover of
materials, including respondents tools and equipments not later than August 15, 1989.
Complainant claims that he was dismissed without justifiable cause and due process and that
his dismissal was done in bad faith which renders the dismissal illegal. For this reason, he
claims that he is entitled to reinstatement with full backwages. He also claims that he is
entitled to moral and exemplary damages. He includes payment of his overtime pay, project
allowance, minimum wage increase adjustment, proportionate 13th month pay and attorneys
fees.
On its part, respondent merely relied on its unverified letter-communication signed by its
project manager, dated September 25, 1989, the contents of which are as follows:
Your Honor:
Apropos to the complaints filed by NICOLAS MADOLID with your honorable office are as
stated and corresponding allegations as our defense to said complaints.
A. ILLEGAL DISMISSAL- There is no course (sic) to complain since employment
contract signed by complainant with respondent is co-terminus with the
project. xxx
B. UNPAID WAGES- Admitting that salary payment was delayed due to late
remittance of collection from respondents Japanese prime contractor but
nonetheless settled with complainant as evidenced by signed Payroll Slips by
complainant. xxx
C. NON-PAYMENT OF 13th MONTH PAY- As earlier admitted, there was a relative
delay in the remittance of collection payment from our Japanese prime contractor
but respondent knowing the economic predecament (sic) of complainant has seen
to it that respondent be satisfied without awaiting for remittance of 13th month
from its Japanese contractor. attached is a xxx
In full satisfaction of the enumerated complaints made by complainant NICOLAS MADOLID
against respondent THE AUDION ELECTRIC CO., INC., we pray that charges against
respondent be withdrawn and dropped.[3]
On November 15, 1990, Labor Arbiter Cresencio R. Iniego rendered a decision, the
dispositive portion states:
WHEREFORE, judgment is hereby rendered ordering respondent Audion Electric Co., Inc.
and/or Robert S. Coran, Manager:
1. to reinstate complainant Nicolas Madolid to his former position with full
backwages from the date of his dismissal on August 15, 1989 up to the signing of
this decision without loss of seniority rights in the amount of P34,710.00;
2. to pay complainant his overtime pay for the period March 16 to April 3, 1989 in the
amount of P 765.63;
3. to pay complainant his project allowances as follows:
April 16, 1989 to April 30, 1989 P30.00
May 1 to May 15, 1989 P45.00
May 16 to May 31, 1989 P30.00
June 1 to June 15, 1989 P45.00
June 16 to June 30, 1989 P30.00
July 1 to July 15, 1989 P30.00
July 16 to July 31, 1989 P45.00
4. to pay complainant the minimum wage increase adjustment from August 1 to 14,
1989 in the amount of P256.50;
5. to pay complainant his proportionate 13th month pay from January to May 1988 in
the amount of P700.00;
6. to pay complainant moral and exemplary damages in the amount of P20,000.00;
and
7. to pay attorneys fees equivalent to 10% of the total award of complainant. [4]
Petitioner appealed to the National Labor Relations Commission which rendered the
questioned Resolution dated March 24, 1992 dismissing the appeal.
The motion for reconsideration filed by petitioner was denied by the NLRC in its Order
dated July 31, 1992.
Petitioner is now before us raising the following issues:
I as well as attorneys fees, were granted.
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN
AFFIRMING THE DECISION OF THE LABOR ARBITER DIRECTING THE
REINSTATEMENT OF THE PRIVATE RESPONDENT TO HIS FORMER POSITION
WITHOUT LOSS OF SENIORITY RIGHTS AND WITH BACKWAGES AMOUNTING
TO P34,710.00 NOTWITHSTANDING THE FACT THAT THE PRIVATE RESPONDENT
WAS MERELY A PROJECT EMPLOYEE.
II
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION WHEN
IT AWARDED THE CLAIM FOR OVERTIME PAY TO PRIVATE RESPONDENT WHEN NO
OVERTIME WORK WAS RENDERED.
III
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION WHEN
IT AWARDED THE CLAIMS OF PRIVATE RESPONDENT FOR PROJECT ALLOWANCES,
MINIMUM WAGE INCREASE ADJUSTMENT AND PROPORTIONATE 13TH MONTH PAY
WITHOUT ANY EVIDENCE TO PROVE THE SAME.
IV
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION WHEN
IT DENIED PETITIONERS CLAIM THAT IT WAS DENIED DUE PROCESS.
V
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION WHEN
IT DID NOT TOUCH UPON MUCH LESS DISCUSS THE PETITIONERS ASSIGNMENTS OF
ERRORS IN ITS APPEAL.
VI
THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION IN
AWARDING MORAL AND EXEMPLARY DAMAGES IN THE AMOUNT OF P20,000 AS
WELL AS ATTORNEYS FEES CONSIDERING THAT THE SAME ARE WITHOUT FACTUAL
AND LEGAL BASIS.[5]
The core issues presented before us are (a) whether the respondent NLRC committed
grave abuse of discretion amounting to lack or excess of jurisdiction when it ruled that private
respondent was a regular employee and not a project employee, (b) whether petitioner was
denied due process when all the money claims of private respondent, i.e. overtime pay, project
allowances, salary differential, proportionate 13th month pay, moral and exemplary damages
Petitioner contends that as an electrical contractor, its business depends on contracts it
may obtain from private and government establishments, hence the duration of the
employment of its work force is not permanent but co-terminous with the project to which they
are assigned; that the conclusion reached by the Labor Arbiter and affirmed by the respondent
court that private respondent was a regular employee of petitioner was merely based on mere
allegations of private respondent since the Labor Arbiter did not consider the letter-
communication filed by petitioner through its project manager for the reason that it was not
under oath; that although private respondents employment records showed that he was hired
by petitioner as fabricator, helper/electrician, stockman and timekeeper in its various projects
from 1976 to August 14, 1989, the same employment record showed a gap in his employment
service by reason of completion of a particular project, hence, private respondent would be re-
assigned to other on-going projects of the petitioner or be laid off if there is no available project;
that private respondent is a project worker whose employment is co-terminous with the
completion of project, regardless of the number of projects in which he had worked as provided
under Policy Instruction No. 20 of the Labor Department defining project employees as those
employed in connection with a particular construction project.Petitioner relies on the rulings
laid down in Sandoval Shipyard Inc. vs. NLRC[6] and Cartagenas vs. Romago Electric Co.,
Inc[7] where this court declared the employment of project employees as co-terminous with the
completion of the project for which they were hired.
Well-settled is the rule that the findings of the NLRC, except when there is grave abuse of
discretion, are practically conclusive on this Court. It is only when the NLRCs findings are
bereft of any substantial support from the records that the Court may step in and proceed to
make its own independent evaluation of the facts.[8] We see no reason to deviate from the rule.
In finding that private respondent was a regular employee of petitioner and not a mere
project employee, the respondent Commission held:
"Firstly, respondents assigning complainant to its various projects did not make complainant
a project worker. As found by the Labor Arbiter, it appears that complainant was employed by
respondent xxx as fabricator and or projects as helper electrician, stockman and timekeeper.
Simply put, complainant was a regular non-project worker."[9]
Private respondents employment status was established by the Certification of
Employment dated April 10, 1989 issued by petitioner which certified that private respondent
is a bonafide employee of the petitioner from June 30, 1976 up to the time the certification was
issued on April 10, 1989. The same certificate of employment showed that private respondents
exposure to their field of operation was as fabricator, helper/electrician,
stockman/timekeeper. This proves that private respondent was regularly and continuously
employed by petitioner in various job assignments from 1976 to 1989, for a total of 13 years. The
alleged gap in employment service cited by petitioner does not defeat private respondents
regular status as he was rehired for many more projects without interruption and performed
functions which are vital, necessary and indispensable to the usual business of petitioner.
We have held that where the employment of project employees is extended long after the
supposed project has been finished, the employees are removed from the scope of project
employees and considered regular employees.[10] Private respondent had presented substantial
evidence to support his position, while petitioner merely presented an unverified position
paper merely stating therein that private respondent has no cause to complain since the
employment contract signed by private respondent with petitioner was co-terminous with the
project. Notably, petitioner failed to present such employment contract for a specific project
signed by private respondent that would show that his employment with the petitioner was for
the duration of a particular project. Moreover, notwithstanding petitioners claim in its reply
that in taking interest in the welfare of its workers, petitioner would strive to provide them with
more continuous work by successively employing its workers, in this case, private respondent,
petitioner failed to present any report of termination. Petitioner should have submitted or filed
as many reports of termination as there were construction projects actually finished,
considering that private respondent had been hired since 1976. The failure of petitioner to
submit reports of termination supports the claim of private respondent that he was indeed a
regular employee.
Policy Instruction No. 20 of the Department of Labor is explicit that employers of project
employees are exempted from the clearance requirement but not from the submission of
termination report. This court has consistently held that failure of the employer to file
termination reports after every project completion with the nearest public employment office
is an indication that private respondent was not and is not a project employee. [11] Department
Order No. 19 superseding Policy Instruction No. 20 expressly provides that the report of
termination is one of the indications of project employment.[12]
As stated earlier, the rule in our jurisdiction is that findings of facts of the NLRC affirming
those of the Labor Arbiter are entitled to great weight and will not be disturbed if they are
supported by substantial evidence.[13] Substantial evidence is an amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion. [14] We find no grave
abuse of discretion committed by NLRC in finding that private respondent was not a project
employee.
Our ruling in the case of Sandoval Shipyard vs. NLRC, supra, is not in point. In the said
case, the hiring of construction workers was not continuous for the reason that the shipyard
merely accepts contracts for shipbuilding or for repair of vessels from third parties and, it is
only on occasions when it has work contracts of this nature that it hires workers for the job
which lasts only for less than a year or longer. With respect to Cartagenas vs. Romago Electric
Co. also relied upon by the petitioner, the complainants were considered project employees
because they were issued appointments from project to project, which were co-terminous with
the phase or item of work assigned to them in said project, a situation which is not obtaining in
the instant case.
Petitioner further claims that respondent Commission erred in sustaining the awards for
overtime pay, project allowances, minimum wage increase adjustment and proportionate 13th
month pay to private respondent in the absence of any substantial evidence supporting the
same; that private respondent failed to present any documentary evidence other than his self-
serving allegation that he actually rendered overtime work and that he failed to specify in his
position paper the actual number of overtime work alleged to have been rendered; that in
petitioners letter-communication filed with the labor arbiter, it showed that claims for
allowances and salary differential and 13th month pay were already satisfied although petitioner
admitted that there was a delay in the payment which was not rebutted by private respondent.
We find no merit in petitioners contention.
Private respondent clearly specified in his affidavit the specific dates in which he was not
paid overtime pay, that is, from the period March 16, 1989 to April 3, 1989 amounting
to P765.63, project allowance from April 16, 1989 to July 31, 1989 in the total amount
of P255.00, wage adjustment for the period from August 1, 1989 to August 14, 1989 in the
amount of P256.50 and the proportionate 13th month pay for the period covering January to
May 1988, November-December 1988, and from January to August 1989. This same affidavit
was confirmed by private respondent in one of the scheduled hearings where he moved that he
be allowed to present his evidence ex-parte for failure of petitioner or any of his representative
to appear thereat. On the other hand, petitioner submitted its unverified Comment to private
respondents complaint stating that he had already satisfied the unpaid wages and 13th month
pay claimed by private respondent, but this was not considered by the Labor Arbiter for being
unverified. As a rule, one who pleads payment has the burden of proving it. Even where the
plaintiff must allege non-payment, the general rule is that the burden rests on the defendant to
prove payment, rather than on the plaintiff to prove non-payment.[15] The debtor has the
burden of showing with legal certainty that the obligation has been discharged by
payment.[16] Petitioner failed to rebut the claims of private respondent. It failed to show proof
by means of payroll or other evidence to disprove the claim of private respondent. Petitioner
was given the opportunity to cross-examine private respondent yet petitioner forfeited such
chance when it did not attend the hearing, and failed to rebut the claims of private respondent.
Petitioners contention that it was denied due process when it was not given the chance to
cross-examine the adverse party and his witnesses, is devoid of merit. The essence of due
process is simply an opportunity to be heard[17] or as applied to administrative proceedings, an
opportunity to explain ones side or an opportunity to seek a reconsideration of the action or
ruling complained of.[18] What the law prohibits is absolute absence of the opportunity to be
heard; hence, a party cannot feign denial of due process where he had been afforded the
opportunity to present his side.[19] Petitioner was not denied due process. As the
respondent commission observed:
The case was initially set for hearing on September 12, 1989 wherein complainant himself
appeared. Respondents representative appeared late. For this reason, the case was reset to
September 26, 1989 at 9:30 a.m. wherein both parties appeared.Complainant filed his
position paper and respondents through its project manager filed a one-page unverified
communication stating therein its defense. The case was then reset to October 9 and 10, 1990
both at 3:00 p.m. warning the parties that no further postponement will be allowed. On
October 9, 1989 complainant and his counsel appeared but respondents and representative
failed to appear despite due notice and warning. A reply to respondents position paper was
filed by complainant through counsel during the hearing. To give a chance to respondents to
appear, hearing was reset the next day, October 10, 1989. However, respondents or
representative again failed to appear which constrained counsel for complainant to move that
he be allowed to present evidence ex-parte which motion was granted. Complainant was
presented as witness, confirmed his affidavit, testified on additional direct examination and
identified the annexes attached to his position paper.
such action must be shown to have been willfully done in bad faith or with ill motive, and bad
faith or ill motive under the law cannot be presumed but must be established with clear and
convincing evidence.[25] Private respondent predicated his claim for such damages on his own
allegations of sleepless nights and mental anguish, without establishing bad faith, fraud or ill
motive as legal basis therefor.
Private respondent not being entitled to award of moral damages, an award of exemplary
damages is likewise baseless.[26] Where the award of moral and exemplary damages is
eliminated, so must the award for attorneys fees be deleted.[27]Private respondent has not
shown that he is entitled thereto pursuant to Art. 2208 of the Civil Code.
WHEREFORE, the challenged resolutions of the respondent NLRC are hereby
AFFIRMED with the MODIFICATION that the awards of moral and exemplary damages and
attorneys fees are DELETED.
SO ORDERED.

To allow the respondents to cross examine the complainant, hearing was again reset to
October 31, 1989 at 9:30 a.m. with the warning that if respondents again fail to appear,
presentation of evidence will be deemed waived and the case will be considered submitted for
decision. On October 31, 1989, despite due notice and warning, counsel for respondents failed
to appear although a representative appeared requesting for a resetting alleging that counsel
for respondents is busy with the Office of the Commission of Immigration. Said motion was
denied and the motion of counsel for complainant to submit the case for decision was
granted.[20]

Clearly, petitioner had ample opportunity to present its side of the controversy not only before
the Labor Arbiter but also with the NLRC on appeal, where petitioner submitted a
memorandum as well as a motion for reconsideration, which were all considered by the NLRC
in the course of resolving the case.[21] It cannot thereafter interpose lack of due process since it
was given the chance to be heard and present his case.[22] Consequently, the alleged defect in
the proceedings before the Labor Arbiter, if there be any, should be deemed cured.
Petitioners contention that the respondent Commission did not touch upon each one of
the errors enumerated in petitioners appeal in its resolution of March 24, 1992 is untenable. In
affirming the decision of the Labor Arbiter, the respondent NLRC found the evidence
supporting the labor arbiters factual findings to be substantial, and for this reason found it
unnecessary to make a separate discussion.
However, the award of moral and exemplary damages must be deleted for being devoid of
legal basis. Moral and exemplary damages are recoverable only where the dismissal of an
employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was
done in a manner contrary to morals, good customs or public policy. [23] The person claiming
moral damages must prove the existence of bad faith by clear and convincing evidence for the
law always presumes good faith.[24] It is not enough that one merely suffered sleepless nights,
mental anguish, serious anxiety as the result of the actuations of the other party. Invariably,
G.R. No. 172259 December 5, 2006
SPS. JAIME BENOS and MARINA BENOS, petitioners,
vs.
SPS. GREGORIO LAWILAO and JANICE GAIL LAWILAO, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review under Rule 45 of the Rules of Court assails the December 5, 2005
Decision1 of the Court of Appeals in CA-G.R. SP No. 78845, affirming the Judgment2 dated
July 1, 2003 of the Regional Trial Court of Bontoc, Mountain Province, Branch 35, in Civil
Case No. 1091. The Regional Trial Court reversed the Decision3dated November 14, 2002 of
the Municipal Circuit Trial Court of Bauko, Mountain Province in Civil Case No. 314, and
ordered the consolidation of ownership of subject property in the name of respondent-
spouses Gregorio and Janice Gail Lawilao. Also assailed is the March 17, 2006
Resolution4 denying petitioners’ motion for reconsideration.
The antecedent facts are as follows:
On February 11, 1999, petitioner-spouses Jaime and Marina Benos ("the Benos spouses") and
respondent-spouses Gregorio and Janice Gail Lawilao ("the Lawilao spouses") executed a
Pacto de Retro Sale5 where the Benos spouses sold their lot covered by Tax Declaration No.
25300 and the building erected thereon for P300,000.00, one half of which was to be paid in
cash to the Benos spouses and the other half to be paid to the bank to pay off the loan of the
Benos spouses which was secured by the same lot and building. Under the contract, the Benos
spouses could redeem the property within 18 months from date of execution by returning the
contract price, otherwise, the sale would become irrevocable without necessity of a final deed
to consolidate ownership over the property in the name of the Lawilao spouses.
After paying the P150,000.00, the Lawilao spouses immediately took possession of the
property and leased out the building thereon. However, instead of paying the loan to the
bank, Janice Lawilao restructured it twice. Eventually, the loan became due and demandable.
On August 14, 2000, a son of the Benos spouses paid the bank P159,000.00 representing the
principal and interest. On the same day, the Lawilao spouses also went to the bank and
offered to pay the loan, but the bank refused to accept the payment. The Lawilao spouses then
filed with the Municipal Circuit Trial Court a petition6 docketed as Civil Case No. 310 for
consignation against the bank and simultaneously deposited the amount of P159,000.00.
Upon the bank’s motion, the court dismissed the petition for lack of cause of action.
Subsequently, the Lawilao spouses filed with the Municipal Circuit Trial Court a complaint
docketed as Civil Case No. 314, for consolidation of ownership. This complaint is the
precursor of the instant petition. The Benos spouses moved to dismiss on grounds of lack of
jurisdiction and lack of cause of action but it was denied and the parties went to trial.
On November 14, 2002, the Municipal Circuit Trial Court rendered judgment in favor of the
Benos spouses, the dispositive portion of which states:
IN THE LIGHT of all the foregoing considerations, for lack of legal and factual basis
to demand consolidation of ownership over the subject property, the above-entitled
case is hereby ordered dismissed.
No pronouncement as to damages on the ground that no premium should be assessed
on the right to litigate.
No costs.
SO ORDERED.7
The Lawilao spouses appealed before the Regional Trial Court which reversed the Municipal
Circuit Trial Court and declared the ownership of the subject property consolidated in favor of
the Lawilao spouses.8
The Benos spouses appealed to the Court of Appeals which affirmed the Regional Trial Court
on December 5, 2005. The dispositive portion of the Decision reads:
WHEREFORE, the petition for review is DISMISSED for lack of sufficient merit. The
decision rendered by the Regional Trial Court, Branch 35, Bontoc, Mountain Province
in Civil Case No. 1091 on 1 July 2003, reversing the decision of the Municipal Circuit
Trial Court of Bauko-Sabangan, Mountain Province in (Civil Case No.) 314, is
AFFIRMED.
SO ORDERED.9
The appellate court denied petitioners’ motion for reconsideration, hence, the instant petition
on the following assignment of errors:
4.0. It was error for the Regional Trial Court and, subsequently, the Court of Appeals
to rule that respondents can consolidate ownership over the subject property.
 4.1. It was likewise error for said lower courts not to have ruled that the contract
between the parties is actually an equitable mortgage.10
The Benos spouses argue that consolidation is not proper because the Lawilao spouses
violated the terms of the contract by not paying the bank loan; that having breached the terms
of the contract, the Lawilao spouses cannot insist on the performance thereof by the Benos
spouses; that the contract was actually an equitable mortgage as shown by the inadequacy of
the consideration for the subject property; and that respondent-spouses’ remedy should have
been for recovery of the loan or foreclosure of mortgage.
The Lawilao spouses, on the other hand, assert that the Pacto de Retro Sale reflected the
parties’ true agreement; that the Benos spouses cannot vary its terms and conditions because
they did not put in issue in their pleadings its ambiguity, mistake or imperfection as well as its
failure to express the parties’ true intention; that the Benos spouses admitted its genuineness
and due execution; and that the delivery of the property to the Lawilao spouses after the
execution of the contract shows that the agreement was a sale with a right of repurchase and
not an equitable mortgage.
The Lawilao spouses also claim that they complied with their obligation when they offered to
pay the loan to the bank and filed a petition for consignation; and that because of the failure
of the Benos spouses to redeem the property, the title and ownership thereof immediately
vested in them (Lawilao spouses).
The issue for resolution is whether the Lawilao spouses can consolidate ownership over the
subject property.
The petition is impressed with merit.
In ruling for respondents, the Court of Appeals held that: (1) the pacto de retro sale was
perfected because the parties voluntarily agreed upon the object thereof and the price; (2) the
Lawilao spouses acquired possession over the property immediately after execution of the
pacto de retro sale; (3) the pacto de retro sale does not provide for automatic rescission in
case the Lawilao spouses fail to pay the full price; (4) the Benos spouses did not rescind the
contract after the Lawilao spouses failed to pay the P150,000.00 loan; (5) Janice Lawilao
offered to pay the loan and deposited P150,000.00 to the bank although the period for
payment had expired thus, complying with Article 1592 of the Civil Code allowing payment
even after expiration of the period as long as no demand for rescission of the contract had
been made either judicially or by a notarial act; (6) the title and ownership of the Lawilao
spouses became absolute when the Benos spouses failed to repurchase the lot within the
redemption period; and (7) the payment by the Benos spouses’ son of P159,000.00 to the
bank does not amount to a repurchase as it violates Article 1616 of the Civil Code requiring
the vendor to return to the vendee the price of the sale, the expenses of the contract and other
necessary and useful expenses.11
Contrary to the aforesaid findings, the evidence shows that the Lawilao spouses did not make
a valid tender of payment and consignation of the balance of the contract price. As correctly
found by the Regional Trial Court:
As matters stand, no valid tender of payment and/or consignation of the
P150,000.00 which the Appellant (Lawilaos) still owes the Appellee (Benos) has been
effected by the former. The amount of P159,000.00 deposited with the MCTC is in
relation to Civil Case No. 310 earlier dismissed by said court, and not to the instant
action. Hence, this Court cannot automatically apply such sum in satisfaction of the
aforesaid debt of the Appellant and order the Appellee creditor to accept the
same.12 (Emphasis supplied)
The Lawilao spouses did not appeal said finding, and it has become final and binding on
them. Although they had repeatedly alleged in their pleadings that the amount of
P159,000.00 was still with the trial court which the Benos spouses could withdraw anytime,
they never made any step to withdraw the amount and thereafter consign it. Compliance with
the requirements of tender and consignation to have the effect of payment are mandatory.
Thus –
Tender of payment is the manifestation by debtors of their desire to comply with or to
pay their obligation. If the creditor refuses the tender of payment without just cause,
the debtors are discharged from the obligation by the consignation of the sum due.
Consignation is made by depositing the proper amount to the judicial authority,
before whom the tender of payment and the announcement of the consignation shall
be proved. All interested parties are to be notified of the consignation. Compliance
with these requisites is mandatory.13(Emphasis supplied)
In the instant case, records show that the Lawilao spouses filed the petition for consignation
against the bank in Civil Case No. 310 without notifying the Benos spouses. The petition was
dismissed for lack of cause of action against the bank. Hence, the Lawilao spouses failed to
prove their offer to pay the balance of the purchase price and consignation. In fact, even
before the filing of the consignation case, the Lawilao spouses never notified the Benos
spouses of their offer to pay.
Thus, as far as the Benos are concerned, there was no full and complete payment of the
contract price, which gives them the right to rescind the contract pursuant to Articles 1191 in
relation to Article 1592 of the Civil Code, which provide:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.
 The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 of the Mortgage Law.
Art. 1592. In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of the
contract shall of right take place, the vendee may pay, even after the expiration of the
period, as long as no demand for rescission of the contract has been made upon him
either judicially or by a notarial act. After the demand, the court may not grant him a
new term.
In the instant case, while the Benos spouses did not rescind the Pacto de Retro Sale through a
notarial act, they nevertheless rescinded the same in their Answer with Counterclaim where
they stated that:
14. Plaintiffs did not perform their obligation as spelled out in the Pacto de Retro Sale
(ANNEX "A"), particularly the assumption of the obligation of defendants to the
Rural Bank of Bontoc. Defendants were the ones who paid their loan through their
son, ZALDY BENOS. As a result, ANNEX "A" is rendered null and of no effect.
Therefore, the VENDEE a retro who is one of plaintiffs herein cannot consolidate her
ownership over the property subject of the null and ineffective instrument.
15. Since plaintiffs did not perform their corresponding obligation under ANNEX "A",
defendants have been all too willing to return the amount of ON[E] HUNDRED
FIFTY THOUSAND PESOS (P150,000.00) and reasonable interest thereon to
plaintiffs. But plaintiffs refused to accept the same.
With the filing of this answer, defendants pray that this serves as a notice of tender of
payment, and they shall consign the amount with the proper court as soon as it is
legally feasible.14
They also prayed that the Municipal Circuit Trial Court render judgment "[d]eclaring the
Pacto de Retro Sale rescinded or ineffective or void for lack of, or insufficient consideration." 15
In Iringan v. Court of Appeals,16 we ruled that "even a crossclaim found in the Answer could
constitute a judicial demand for rescission that satisfies the requirement of the law."
Similarly, the counterclaim of the Benos spouses in their answer satisfied the requisites for
the judicial rescission of the subject Pacto de Retro Sale.
The Municipal Circuit Trial Court thus correctly dismissed the complaint for consolidation of
ownership filed by the Lawilao spouses for their failure to comply with the conditions of the
Pacto de Retro Sale. Nevertheless, it refused to declare the rescission of the Pacto de Retro
Sale as prayed for in the counterclaim of the Benos spouses, stating that:
How about the other obligations and/or rights owing to either party by virtue of the
Pacto de Retro Sale? This, the court opines that it can not delve into without
overstepping the limits of his functions there being appropriate remedies. It is
hornbook in our jurisprudence that a right in law may be enforced and a wrong way
be remedied but always through the appropriate action.17
The issue of rescission having been put in issue in the answer and the same having been
litigated upon without objections by the Lawilao spouses on grounds of jurisdiction, the
Municipal Circuit Trial Court should have ruled on the same and wrote finis to the
controversy.
Thus, as a necessary consequence of its ruling that the Lawilao spouses breached the terms of
the Pacto de Retro Sale, the Municipal Circuit Trial Court should have rescinded the Pacto de
Retro Sale and directed the Benos spouses to return P150,000.00 to the Lawilao spouses,
pursuant to our ruling in Cannu v. Galang,18 to wit:
Petitioners maintain that inasmuch as respondents-spouses Galang were not granted
the right to unilaterally rescind the sale under the Deed of Sale with Assumption of
Mortgage, they should have first asked the court for the rescission thereof before they
fully paid the outstanding balance of the mortgage loan with the NHMFC. They claim
that such payment is a unilateral act of rescission which violates existing
jurisprudence.
In Tan v. Court of Appeals, this court said:
. . . [T]he power to rescind obligations is implied in reciprocal ones in case
one of the obligors should not comply with what is incumbent upon him is
clear from a reading of the Civil Code provisions. However, it is equally
settled that, in the absence of a stipulation to the contrary, this power must
be invoked judicially; it cannot be exercised solely on a party’s own judgment
that the other has committed a breach of the obligation. Where there is
nothing in the contract empowering the petitioner to rescind it without resort
to the courts, the petitioner’s action in unilaterally terminating the contract
in this case is unjustified.
It is evident that the contract under consideration does not contain a provision
authorizing its extrajudicial rescission in case one of the parties fails to comply with
what is incumbent upon him. This being the case, respondents-spouses should have
asked for judicial intervention to obtain a judicial declaration of rescission. Be that as
it may, and considering that respondents-spouses’ Answer (with affirmative defenses)
with Counterclaim seeks for the rescission of the Deed of Sale with Assumption of
Mortgage, it behooves the court to settle the matter once and for all than to have the
case re-litigated again on an issue already heard on the merits and which this court
has already taken cognizance of. Having found that petitioners seriously breached the
contract, we, therefore, declare the same is rescinded in favor of respondents-
spouses.
 As a consequence of the rescission or, more accurately, resolution of the Deed of Sale
with Assumption of Mortgage, it is the duty of the court to require the parties to
surrender whatever they may have received from the other. The parties should be
restored to their original situation.

The record shows petitioners paid respondents-spouses the amount of P75,000.00

out of the P120,000.00 agreed upon. They also made payments to NHMFC
amounting to P55,312.47. As to the petitioners’ alleged payment to CERF Realty of
P46,616.70, except for petitioner Leticia Cannu’s bare allegation, we find the same
not to be supported by competent evidence. As a general rule, one who pleads
payment has the burden of proving it. However, since it has been admitted in
respondents-spouses’ Answer that petitioners shall assume the second mortgage with
CERF Realty in the amount of P35,000.00, and that Adelina Timbang, respondents-
spouses’ very own witness, testified that same has been paid, it is but proper to return
this amount to petitioners. The three amounts total P165,312.47 -- the sum to be
returned to petitioners.

WHEREFORE, the petition is GRANTED. The Decision dated December 5, 2005 and
Resolution dated March 17, 2006 of the Court of Appeals in CA-G.R. SP No. 78845, affirming
the Judgment dated July 1, 2003 of the Regional Trial Court of Bontoc, Mountain Province,
Branch 35, in Civil Case No. 1091, are REVERSED and SET ASIDE. The Decision dated
November 14, 2002 of the Municipal Circuit Trial Court of Bauko, Mountain Province in Civil
Case No. No. 314 dismissing respondents’ complaint for consolidation of ownership and
damages is REINSTATED WITH THE MODIFICATION that the Pacto de Retro Sale dated
February 11, 1999 is declared rescinded and petitioners are ordered to return the amount of
P150,000.00 to respondents. No costs.

SO ORDERED.