G.R. No. L-8321 October 14, 1913 ALEJANDRA MINA, ET AL., plaintiffs-appellants, vs. RUPERTA PASCUAL, ET AL., defendants-appellees.

N. Segundo for appellants. Iigo Bitanga for appellees. ARELLANO, C.J.: Francisco Fontanilla and Andres Fontanilla were brothers. Francisco Fontanilla acquired during his lifetime, on March 12, 1874, a lot in the center of the town of Laoag, the capital of the Province of Ilocos Norte, the property having been awarded to him through its purchase at a public auction held by the alcalde mayor of that province. The lot has a frontage of 120 meters and a depth of 15. Andres Fontanilla, with the consent of his brother Francisco, erected a warehouse on a part of the said lot, embracing 14 meters of its frontage by 11 meters of its depth. Francisco Fontanilla, the former owner of the lot, being dead, the herein plaintiffs, Alejandro Mina, et al., were recognized without discussion as his heirs. Andres Fontanilla, the former owner of the warehouse, also having died, the children of Ruperta Pascual were recognized likes without discussion, though it is not said how, and consequently are entitled to the said building, or rather, as Ruperta Pascual herself stated, to only six-sevenths of one-half of it, the other half belonging, as it appears, to the plaintiffs themselves, and the remaining oneseventh of the first one-half to the children of one of the plaintiffs, Elena de Villanueva. The fact is that the plaintiffs and the defendants are virtually, to all appearance, the owners of the warehouse; while the plaintiffs are undoubtedly, the owners of the part of the lot occupied by that building, as well as of the remainder thereof. This was the state of affairs, when, on May 6, 1909, Ruperta Pascual, as the guardian of her minor children, the herein defendants, petitioned the Curt of First Instance of Ilocos Norte for authorization to sell "the six-sevenths of the one-half of the warehouse, of 14 by 11 meters, together with its lot." The plaintiffs that is Alejandra Mina, et al. opposed the petition of Ruperta Pascual for the reason that the latter had included therein the lot occupied by the warehouse, which they claimed was their exclusive property. All this action was taken in a special proceeding in re guardianship. The plaintiffs did more than oppose Pascual's petition; they requested the court, through motion, to decide the question of the ownership of the lot before it pass upon the petition for the sale of the warehouse. But the court before determining the matter of the ownership of the lot occupied by the warehouse, ordered the sale of this building, saying: While the trial continues with respect to the ownership of the lot, the court orders the sale at public auction of the said warehouse and of the lot on which it is built, with the present boundaries of the land and condition of the building, at a price of not less than P2,890 Philippine currency . . . . So, the warehouse, together with the lot on which it stands, was sold to Cu Joco, the other defendant in this case, for the price mentioned. The plaintiffs insisted upon a decision of the question of the ownership of the lot, and the court decided it by holding that this land belonged to the owner of the warehouse which had been built thereon thirty years before. The plaintiffs appealed and this court reversed the judgment of the lower court and held that the appellants were the owners of 1 the lot in question. When the judgment became final and executory, a writ of execution issued and the plaintiffs were given possession of the lot; but soon thereafter the trial court annulled this possession for the reason that it affected Cu Joco, who had not been a party to the suit in which that writ was served. It was then that the plaintiffs commenced the present action for the purpose of having the sale of the said lot declared null and void and of no force and effect. An agreement was had ad to the facts, the ninth paragraph of which is as follows: 9. That the herein plaintiffs excepted to the judgment and appealed therefrom to the Supreme Court which found for them by holding that they are the owners of the lot in question, although there existed and still exists a commodatum by virtue of which the guardianship (meaning the defendants) had and has the use, and the plaintiffs the ownership, of the property, with no finding concerning the decree of the lower court that ordered the sale. The obvious purport of the cause "although there existed and still exists a commodatum," etc., appears to be that it is a part of the decision of the Supreme Court and that, while finding the plaintiffs to be the owners of the lot, we recognized in principle the existence of a commodatum under which the defendants held the lot. Nothing could be more inexact. Possibly, also, the meaning of that clause is that, notwithstanding the finding made by the Supreme Court that the plaintiffs were the owners, these former and the defendants agree that there existed, and still exists, a commodatum, etc. But such an agreement would not affect the truth of the contents of the decision of this court, and the opinions held by the litigants in regard to this point could have no bearing whatever on the present decision. Nor did the decree of the lower court that ordered the sale have the least influence in our previous decision to require our making any finding in regard thereto, for, with or without that decree, the Supreme Court had to decide the ownership of the lot consistently with its titles and not in accordance with the judicial acts or proceedings had prior to the setting up of the issue in respect to the ownership of the property that was the subject of the judicial decree. What is essentially pertinent to the case is the fact that the defendant agree that the plaintiffs have the ownership, and they themselves only the use, of the said lot. On this premise, the nullity of the sale of the lot is in all respects quite evident, whatsoever be the manner in which the sale was effected, whether judicially or extrajudicially. He who has only the use of a thing cannot validly sell the thing itself. The effect of the sale being a transfer of the ownership of the thing, it is evident that he who has only the mere use of the thing cannot transfer its ownership. The sale of a thing effected by one who is not its owner is null and void. The defendants never were the owners of the lot sold. The sale of it by them is necessarily null and void. On cannot convey to another what he has never had himself. The returns of the auction contain the following statements: I, Ruperta Pascual, the guardian of the minors, etc., by virtue of the authorization conferred upon me on the 31st of July, 1909, by the Court of First Instance of Ilocos Norte, proceeded with the sale at public auction of the six-sevenths part of the one-half of the warehouse constructed of rubble stone, etc. Whereas I, Ruperta Pascual, the guardian of the minors, etc., sold at public auction all the land and all the rights title, interest, and ownership in the said property to Cu Joco, who was the highest bidder, etc. Therefore, . . . I cede and deliver forever to the said purchaser, Cu Joco, his heirs and assigns, all the interest, ownership and inheritance rights and others that, as the guardian of the said minors, I have and may have in the said property, etc. The purchaser could not acquire anything more than the interest that might be held by a person to whom realty in possession of the vendor might be sold, for at a judicial auction nothing else is disposed of. What the minor children of Ruperta Pascual had in their possession was the ownership of the six-sevenths part of one-half of the warehouse and the use of the lot occupied by his building.

This, and nothing more, could the Chinaman Cu Joco acquire at that sale: not the ownership of the lot; neither the other half, nor the remaining one-seventh of the said first half, of the warehouse. Consequently, the sale made to him of this one-seventh of one-half and the entire other half of the building was null and void, and likewise with still more reason the sale of the lot the building occupies. The purchaser could and should have known what it was that was offered for sale and what it was that he purchased. There is nothing that can justify the acquisition by the purchaser of the warehouse of the ownership of the lot that this building occupies, since the minors represented by Ruperta Pascual never were the owners of the said lot, nor were they ever considered to be such. The trial court, in the judgment rendered, held that there were no grounds for the requested annulment of the sale, and that the plaintiffs were entitled to the P600 deposited with the clerk of the court as the value of the lot in question. The defendants, Ruperta Pascual and the Chinaman Cu Joco, were absolved from the complaint, without express finding as to costs. The plaintiffs cannot be obliged to acquiesce in or allow the sale made and be compelled to accept the price set on the lot by expert appraisers, not even though the plaintiffs be considered as coowner of the warehouse. It would be much indeed that, on the ground of coownership, they should have to abide by and tolerate the sale of the said building, which point this court does not decide as it is not a question submitted to us for decision, but, as regards the sale of the lot, it is in all respects impossible to hold that the plaintiffs must abide by it and tolerate, it, and this conclusion is based on the fact that they did not give their consent (art. 1261, Civil Code), and only the contracting parties who have given it are obliged to comply (art. 1091, idem). The sole purpose of the action in the beginning was to obtain an annulment of the sale of the lot; but subsequently the plaintiffs, through motion, asked for an amendment by their complaint in the sense that the action should be deemed to be one for the recovery of possession of a lot and for the annulment of its sale. The plaintiff's petition was opposed by the defendant's attorney, but was allowed by the court; therefore the complaint seeks, after the judicial annulment of the sale of the lot, to have the defendants sentenced immediately to deliver the same to the plaintiffs. Such a finding appears to be in harmony with the decision rendered by the Supreme Court in previous suit, wherein it was held that the ownership of the lot lay in the plaintiffs, and for this reason steps were taken to give possession thereof to the defendants; but, as the purchaser Cu Joco was not a party to that suit, the present action is strictly one for recover against Cu Joco to compel him, once the sale has been annulled, to deliver the lot to its lawful owners, the plaintiffs. As respects this action for recovery, this Supreme Court finds: 1. That it is a fact admitted by the litigating parties, both in this and in the previous suit, that Andres Fontanilla, the defendants' predecessor in interest, erected the warehouse on the lot, some thirty years ago, with the explicit consent of his brother Francisco Fontanilla, the plaintiff's predecessor in interest. 2. That it also appears to be an admitted fact that the plaintiffs and the defendants are the coowners of the warehouse. 3. That it is a fact explicitly admitted in the agreement, that neither Andres Fontanilla nor his successors paid any consideration or price whatever for the use of the lot occupied by the said building; whence it is, perhaps, that both parties have denominated that use a commodatum. Upon the premise of these facts, or even merely upon that of the first of them, the sentencing of the defendants to deliver the lot to the plaintiffs does not follow as a necessary corollary of the judicial declaration of ownership made in the previous suit, nor of that of the nullity of the sale of the lot, made in the present case. The defendants do not hold lawful possession of the lot in question.1awphil.net But, although both litigating parties may have agreed in their idea of the commodatum, on account of its not being, as indeed it is not, a question of fact but of law, yet that denomination given by them to the use of the lot granted by Francisco Fontanilla to his brother, Andres Fontanilla, is not acceptable. Contracts are not to be interpreted in conformity with the name that the parties thereto agree to give them, but must be construed, duly considering their constitutive elements, as they are defined and denominated by law. By the contract of loan, one of the parties delivers to the other, either anything not perishable, in order that the latter may use it during the certain period and return it to the former, in which case it is calledcommodatum . . . (art. 1740, Civil Code). It is, therefore, an essential feature of the commodatum that the use of the thing belonging to another shall for a certain period. Francisco Fontanilla did not fix any definite period or time during which Andres Fontanilla could have the use of the lot whereon the latter was to erect a stone warehouse of considerable value, and so it is that for the past thirty years of the lot has been used by both Andres and his successors in interest. The present contention of the plaintiffs that Cu Joco, now in possession of the lot, should pay rent for it at the rate of P5 a month, would destroy the theory of the commodatum sustained by them, since, according to the second paragraph of the aforecited article 1740, "commodatum is essentially gratuitous," and, if what the plaintiffs themselves aver on page 7 of their brief is to be believed, it never entered Francisco's mind to limit the period during which his brother Andres was to have the use of the lot, because he expected that the warehouse would eventually fall into the hands of his son, Fructuoso Fontanilla, called the adopted son of Andres, which did not come to pass for the reason that Fructuoso died before his uncle Andres. With that expectation in view, it appears more likely that Francisco intended to allow his brother Andres a surface right; but this right supposes the payment of an annual rent, and Andres had the gratuitous use of the lot. Hence, as the facts aforestated only show that a building was erected on another's ground, the question should be decided in accordance with the statutes that, thirty years ago, governed accessions to real estate, and which were Laws 41 and 42, title 28, of the third Partida, nearly identical with the provisions of articles 361 and 362 of the Civil Code. So, then, pursuant to article 361, the owner of the land on which a building is erected in good faith has a right to appropriate such edifice to himself, after payment of the indemnity prescribed in articles 453 and 454, or to oblige the builder to pay him the value of the land. Such, and no other, is the right to which the plaintiff are entitled. For the foregoing reasons, it is only necessary to annul the sale of the said lot which was made by Ruperta Pascual, in representation of her minor children, to Cu Joco, and to maintain the latter in the use of the lot until the plaintiffs shall choose one or the other of the two rights granted them by article 361 of the Civil Code.1awphil.net The judgment appealed from is reversed and the sale of the lot in question is held to be null and void and of no force or effect. No special finding is made as to the costs of both instances. Torres, Johnson, Carson, Moreland and Trent, JJ., concur. G.R. No. 80294-95 September 21, 1988 CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner, vs. COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, respondents. Valdez, Ereso, Polido & Associates for petitioner. Claustro, Claustro, Claustro Law Office collaborating counsel for petitioner. Jaime G. de Leon for the Heirs of Egmidio Octaviano. Cotabato Law Office for the Heirs of Juan Valdez. GANCAYCO, J.: The principal issue in this case is whether or not a decision of the Court of Appeals promulgated a long time ago can properly be considered res judicata by respondent Court of Appeals in the present two cases between petitioner and two private respondents. Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of the Ninth Division of Respondent Court of 1 Appeals in CA-G.R. No. 05148 [Civil Case No. 3607 (419)] and CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for Recovery of

Possession, which affirmed the Decision of the Honorable Nicodemo T. Ferrer, Judge of the Regional Trial Court of Baguio and Benguet in Civil Case No. 3607 (419) and Civil Case No. 3655 (429), with the dispositive portion as follows: WHEREFORE, Judgment is hereby rendered ordering the defendant, Catholic Vicar Apostolic of the Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs. Heirs of Juan Valdez, and Lot 3 of the same Plan to the other set of plaintiffs, the Heirs of Egmidio Octaviano (Leonardo Valdez, et al.). For lack or insufficiency of evidence, the plaintiffs' claim or damages is hereby denied. Said defendant is ordered to pay costs. (p. 36, Rollo) Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial court's conclusions that the Decision of the Court of Appeals, dated May 4,1977 in CA-G.R. No. 38830-R, in the two cases affirmed by the Supreme Court, touched on the ownership of lots 2 and 3 in question; that the two lots were possessed by the predecessors-in-interest of private respondents under claim of ownership in good faith from 1906 to 1951; that petitioner had been in possession of the same lots as bailee in commodatum up to 1951, when petitioner repudiated the trust and when it applied for registration in 1962; that petitioner had just been in possession as owner for eleven years, hence there is no possibility of acquisitive prescription which requires 10 years possession with just title and 30 years of possession without; that the principle of res judicata on these findings by the Court of Appeals will bar a reopening of these questions of facts; and that those facts may no longer be altered. Petitioner's motion for reconsideation of the respondent appellate court's Decision in the two aforementioned cases (CA G.R. No. CV05418 and 05419) was denied. The facts and background of these cases as narrated by the trail court are as follows ... The documents and records presented reveal that the whole controversy started when the defendant Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed with the Court of First Instance of Baguio Benguet on September 5, 1962 an application for registration of title over Lots 1, 2, 3, and 4 in Psu-194357, situated at Poblacion Central, La Trinidad, Benguet, docketed as LRC N-91, said Lots being the sites of the Catholic Church building, convents, high school building, school gymnasium, school dormitories, social hall, stonewalls, etc. On March 22, 1963 the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto. After trial on the merits, the land registration court promulgated its Decision, dated November 17, 1965, confirming the registrable title of VICAR to Lots 1, 2, 3, and 4. The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. 3655) and the Heirs of Egmidio Octaviano (plaintiffs in the herein Civil Case No. 3607) appealed the decision of the land registration court to the then Court of Appeals, docketed as CA-G.R. No. 38830-R. The Court of Appeals rendered its decision, dated May 9, 1977, reversing the decision of the land registration court and dismissing the VICAR's application as to Lots 2 and 3, the lots claimed by the two sets of oppositors in the land registration case (and two sets of plaintiffs in the two cases now at bar), the first lot being presently occupied by the convent and the second by the women's dormitory and the sister's convent. On May 9, 1977, the Heirs of Octaviano filed a motion for reconsideration praying the Court of Appeals to order the registration of Lot 3 in the names of the Heirs of Egmidio Octaviano, and on May 17, 1977, the Heirs of Juan Valdez and Pacita Valdez filed their motion for reconsideration praying that both Lots 2 and 3 be ordered registered in the names of the Heirs of Juan Valdez and Pacita Valdez. On August 12,1977, the Court of Appeals denied the motion for reconsideration filed by the Heirs of Juan Valdez on the ground that there was "no sufficient merit to justify reconsideration one way or the other ...," and likewise denied that of the Heirs of Egmidio Octaviano. Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals dismissing his (its) application for registration of Lots 2 and 3, docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic of the Mountain Province vs. Court of Appeals and Heirs of Egmidio Octaviano.' From the denial by the Court of Appeals of their motion for reconsideration the Heirs of Juan Valdez and Pacita Valdez, on September 8, 1977, filed with the Supreme Court a petition for review, docketed as G.R. No. L-46872, entitled, Heirs of Juan Valdez and Pacita Valdez vs. Court of Appeals, Vicar, Heirs of Egmidio Octaviano and Annable O. Valdez. On January 13, 1978, the Supreme Court denied in a minute resolution both petitions (of VICAR on the one hand and the Heirs of Juan Valdez and Pacita Valdez on the other) for lack of merit. Upon the finality of both Supreme Court resolutions in G.R. No. L-46832 and G.R. No. L- 46872, the Heirs of Octaviano filed with the then Court of First Instance of Baguio, Branch II, a Motion For Execution of Judgment praying that the Heirs of Octaviano be placed in possession of Lot 3. The Court, presided over by Hon. Salvador J. Valdez, on December 7, 1978, denied the motion on the ground that the Court of Appeals decision in CA-G.R. No. 38870 did not grant the Heirs of Octaviano any affirmative relief. On February 7, 1979, the Heirs of Octaviano filed with the Court of Appeals a petitioner for certiorari and mandamus, docketed as CA-G.R. No. 08890-R, entitled Heirs of Egmidio Octaviano vs. Hon. Salvador J. Valdez, Jr. and Vicar. In its decision dated May 16, 1979, the Court of Appeals dismissed the petition. It was at that stage that the instant cases were filed. The Heirs of Egmidio Octaviano filed Civil Case No. 3607 (419) on July 24, 1979, for recovery of possession of Lot 3; and the Heirs of Juan Valdez filed Civil Case No. 3655 (429) on September 24, 1979, likewise for recovery of possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.). In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio Octaviano presented one (1) witness, Fructuoso Valdez, who testified on the alleged ownership of the land in question (Lot 3) by their predecessor-ininterest, Egmidio Octaviano (Exh. C ); his written demand (Exh. BB-4 ) to defendant Vicar for the return of the land to them; and the reasonable rentals for the use of the land at P10,000.00 per month. On the other hand, defendant Vicar presented the Register of Deeds for the Province of Benguet, Atty. Nicanor Sison, who testified that the land in question is not covered by any title in the name of Egmidio Octaviano or any of the plaintiffs (Exh. 8). The defendant dispensed with the testimony of Mons.William Brasseur when the plaintiffs admitted that the witness if called to the witness stand, would testify that defendant Vicar has been in possession of Lot 3, for seventy-five (75) years continuously and peacefully and has constructed permanent structures thereon. In Civil Case No. 3655, the parties admitting that the material facts are not in dispute, submitted the case on the sole issue of whether or not the decisions of the Court of Appeals and the Supreme Court touching on the ownership of Lot 2, which in effect declared the plaintiffs the owners of the land constitute res judicata.

In these two cases , the plaintiffs arque that the defendant Vicar is barred from setting up the defense of ownership and/or long and continuous possession of the two lots in question since this is barred by prior judgment of the Court of Appeals in CA-G.R. No. 038830-R under the principle of res judicata. Plaintiffs contend that the question of possession and ownership have already been determined by the Court of Appeals (Exh. C, Decision, CA-G.R. No. 038830-R) and affirmed by the Supreme Court (Exh. 1, Minute Resolution of the Supreme Court). On his part, defendant Vicar maintains that the principle of res judicata would not prevent them from litigating the issues of long possession and ownership because the dispositive portion of the prior judgment in CA-G.R. No. 038830-R merely dismissed their application for registration and titling of lots 2 and 3. Defendant Vicar contends that only the 2 dispositive portion of the decision, and not its body, is the controlling pronouncement of the Court of Appeals. The alleged errors committed by respondent Court of Appeals according to petitioner are as follows: 1. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA; 2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3 WERE ACQUIRED BY PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE PRESENTED; 3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND 3 FROM VALDEZ AND OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE FORMER OWNERS WERE VALDEZ AND OCTAVIANO; 4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE RESPONDENTS WHO WERE IN POSSESSION OF LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT PETITIONER; 5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT APPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTS ALREADY HAD FREE PATENT APPLICATIONS SINCE 1906; 6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN 1951 AND JUST TITLE IS A PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS; 7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA G.R. NO. 038830 WAS AFFIRMED BY THE SUPREME COURT; 8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ON OWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIR PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH FROM 1906 TO 1951; 9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2 AND 3 MERELY AS BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS LOAN FOR USE; 10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN GOOD FAITH WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND IS BARRED BY THE FINALITY AND CONCLUSIVENESS OF THE DECISION IN CA 3 G.R. NO. 038830. The petition is bereft of merit. Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148 and 05149, when it clearly held that it was in agreement with the findings of the trial court that the Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No. 38830-R, on the question of ownership of Lots 2 and 3, declared that the said Court of Appeals Decision CA-G.R. No. 38830-R) did not positively declare private respondents as owners of the land, neither was it declared that they were not owners of the land, but it held that the predecessors of private respondents were possessors of Lots 2 and 3, with claim of ownership in good faith from 1906 to 1951. Petitioner was in possession as borrower in commodatum up to 1951, when it repudiated the trust by declaring the properties in its name for taxation purposes. When petitioner applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept of owner only for eleven years. Ordinary acquisitive prescription requires possession for ten years, but always with just title. Extraordinary 4 acquisitive prescription requires 30 years. On the above findings of facts supported by evidence and evaluated by the Court of Appeals in CA-G.R. No. 38830-R, affirmed by this Court, We see no error in respondent appellate court's ruling that said findings are res judicata between the parties. They can no longer be altered by presentation of evidence because those issues were resolved with finality a long time ago. To ignore the principle of res judicata would be to open the door to endless litigations by continuous determination of issues without end. 5 An examination of the Court of Appeals Decision dated May 4, 1977, First Division in CA-G.R. No. 38830-R, shows that it reversed 6 the trial court's Decision finding petitioner to be entitled to register the lands in question under its ownership, on its evaluation of evidence and conclusion of facts. The Court of Appeals found that petitioner did not meet the requirement of 30 years possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement of 10 years possession for ordinary acquisitive prescription because of the absence of just title. The appellate court did not believe the findings of the trial court that Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio Octaviano by petitioner Vicar because there was absolutely no documentary evidence to support the same and the alleged purchases were never mentioned in the application for registration. By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and Octaviano. Both Valdez and Octaviano had Free Patent Application for those lots since 1906. The predecessors of private respondents, not petitioner Vicar, were in possession of the questioned lots since 1906. There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question, but not Lots 2 and 3, because the buildings standing thereon were only constructed after liberation in 1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes in 1951. The improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but said Bishop was appointed only in 1947, the church was constructed only in 1951 and the new convent only 2 years before the trial in 1963. When petitioner Vicar was notified of the oppositor's claims, the parish priest offered to buy the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitioner Vicar only in 1962. Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar after the church and the convent were destroyed. They never asked for the return of the house, but when they allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees' failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive prescription because of the absence of just title. The Court of Appeals found that the predecessors-in-interest and private respondents were possessors under claim of ownership in good faith from 1906; that petitioner Vicar was only a bailee in commodatum; and that the adverse claim and repudiation of trust came only in 1951. We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G.R. No. 38830-R. Its findings of fact have become incontestible. This Court declined to review said decision, thereby in effect, affirming it. It has become final and executory a long time ago. Respondent appellate court did not commit any reversible error, much less grave abuse of discretion, when it held that the Decision of the Court of Appeals in CA-G.R. No. 38830-R is governing, under the principle of res judicata, hence the rule, in the present cases CAG.R. No. 05148 and CA-G.R. No. 05149. The facts as supported by evidence established in that decision may no longer be altered. WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED for lack of merit, the Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, by respondent Court of Appeals is AFFIRMED, with costs against petitioner.

SO ORDERED. Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur. G.R. No. L-46240 November 3, 1939 MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants, vs. BECK, defendant-appellee. Mauricio Carlos for appellants. Felipe Buencamino, Jr. for appellee. IMPERIAL, J.: The plaintiff brought this action to compel the defendant to return her certain furniture which she lent him for his use. She appealed from the judgment of the Court of First Instance of Manila which ordered that the defendant return to her the three has heaters and the four electric lamps found in the possession of the Sheriff of said city, that she call for the other furniture from the said sheriff of Manila at her own expense, and that the fees which the Sheriff may charge for the deposit of the furniture be paid pro rata by both parties, without pronouncement as to the costs. The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. H. del Pilar street, No. 1175. On January 14, 1936, upon the novation of the contract of lease between the plaintiff and the defendant, the former gratuitously granted to the latter the use of the furniture described in the third paragraph of the stipulation of facts, subject to the condition that the defendant would return them to the plaintiff upon the latter's demand. The plaintiff sold the property to Maria Lopez and Rosario Lopez and on September 14, 1936, these three notified the defendant of the conveyance, giving him sixty days to vacate the premises under one of the clauses of the contract of lease. There after the plaintiff required the defendant to return all the furniture transferred to him for them in the house where they were found. On November 5, 1936, the defendant, through another person, wrote to the plaintiff reiterating that she may call for the furniture in the ground floor of the house. On the 7th of the same month, the defendant wrote another letter to the plaintiff informing her that he could not give up the three gas heaters and the four electric lamps because he would use them until the 15th of the same month when the lease in due to expire. The plaintiff refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. On November 15th, before vacating the house, the defendant deposited with the Sheriff all the furniture belonging to the plaintiff and they are now on deposit in the warehouse situated at No. 1521, Rizal Avenue, in the custody of the said sheriff. In their seven assigned errors the plaintiffs contend that the trial court incorrectly applied the law: in holding that they violated the contract by not calling for all the furniture on November 5, 1936, when the defendant placed them at their disposal; in not ordering the defendant to pay them the value of the furniture in case they are not delivered; in holding that they should get all the furniture from the Sheriff at their expenses; in ordering them to pay-half of the expenses claimed by the Sheriff for the deposit of the furniture; in ruling that both parties should pay their respective legal expenses or the costs; and in denying pay their respective legal expenses or the costs; and in denying the motions for reconsideration and new trial. To dispose of the case, it is only necessary to decide whether the defendant complied with his obligation to return the furniture upon the plaintiff's demand; whether the latter is bound to bear the deposit fees thereof, and whether she is entitled to the costs of litigation.lawphi1.net The contract entered into between the parties is one of commadatum, because under it the plaintiff gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof; by this contract the defendant bound himself to return the furniture to the plaintiff, upon the latters demand (clause 7 of the contract, Exhibit A; articles 1740, paragraph 1, and 1741 of the Civil Code). The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's demand, means that he should return all of them to the plaintiff at the latter's residence or house. The defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and the four eletric lamps. The provisions of article 1169 of the Civil Code cited by counsel for the parties are not squarely applicable. The trial court, therefore, erred when it came to the legal conclusion that the plaintiff failed to comply with her obligation to get the furniture when they were offered to her. As the defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's demand, the Court could not legally compel her to bear the expenses occasioned by the deposit of the furniture at the defendant's behest. The latter, as bailee, was not entitled to place the furniture on deposit; nor was the plaintiff under a duty to accept the offer to return the furniture, because the defendant wanted to retain the three gas heaters and the four electric lamps. As to the value of the furniture, we do not believe that the plaintiff is entitled to the payment thereof by the defendant in case of his inability to return some of the furniture because under paragraph 6 of the stipulation of facts, the defendant has neither agreed to nor admitted the correctness of the said value. Should the defendant fail to deliver some of the furniture, the value thereof should be latter determined by the trial Court through evidence which the parties may desire to present. The costs in both instances should be borne by the defendant because the plaintiff is the prevailing party (section 487 of the Code of Civil Procedure). The defendant was the one who breached the contract ofcommodatum, and without any reason he refused to return and deliver all the furniture upon the plaintiff's demand. In these circumstances, it is just and equitable that he pay the legal expenses and other judicial costs which the plaintiff would not have otherwise defrayed. The appealed judgment is modified and the defendant is ordered to return and deliver to the plaintiff, in the residence to return and deliver to the plaintiff, in the residence or house of the latter, all the furniture described in paragraph 3 of the stipulation of facts Exhibit A. The expenses which may be occasioned by the delivery to and deposit of the furniture with the Sheriff shall be for the account of the defendant. the defendant shall pay the costs in both instances. So ordered. G.R. No. L-20240 December 31, 1965 REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. JOSE GRIJALDO, defendant-appellant. Office of the Solicitor General for plaintiff-appellee. Isabelo P. Samson for defendant-appellant. ZALDIVAR, J.: In the year 1943 appellant Jose Grijaldo obtained five loans from the branch office of the Bank of Taiwan, Ltd. in Bacolod City, in the total sum of P1,281.97 with interest at the rate of 6% per annum, compounded quarterly. These loans are evidenced by five promissory notes executed by the appellant in favor of the Bank of Taiwan, Ltd., as follows: On June 1, 1943, P600.00; on June 3, 1943, P159.11; on June 18, 1943, P22.86; on August 9, 1943,P300.00; on August 13, 1943, P200.00, all notes without due dates, but because the loans were due one year after they were incurred. To secure the payment of the loans the appellant executed a chattel mortgage on the standing crops on his land, Lot No. 1494 known as Hacienda Campugas in Hinigiran, Negros Occidental. By virtue of Vesting Order No. P-4, dated January 21, 1946, and under the authority provided for in the Trading with the Enemy Act, as amended, the assets in the Philippines of the Bank of Taiwan, Ltd. were vested in the Government of the United States. Pursuant to the Philippine Property Act of 1946 of the United States, these assets, including the loans in question, were subsequently transferred to the Republic of the Philippines by the Government of the United States under Transfer Agreement dated July 20, 1954. These assets were among the properties that were placed under the administration of the Board of Liquidators created under Executive Order No. 372, dated November 24, 1950, and in accordance with Republic Acts Nos. 8 and 477 and other pertinent laws.

On September 29, 1954 the appellee, Republic of the Philippines, represented by the Chairman of the Board of Liquidators, made a written extrajudicial demand upon the appellant for the payment of the account in question. The record shows that the appellant had actually received the written demand for payment, but he failed to pay. The aggregate amount due as principal of the five loans in question, computed under the Ballantyne scale of values as of the time that the loans were incurred in 1943, was P889.64; and the interest due thereon at the rate of 6% per annum compounded quarterly, computed as of December 31, 1959 was P2,377.23. On January 17, 1961 the appellee filed a complaint in the Justice of the Peace Court of Hinigaran, Negros Occidental, to collect from the appellant the unpaid account in question. The Justice of the Peace Of Hinigaran, after hearing, dismissed the case on the ground that the action had prescribed. The appellee appealed to the Court of First Instance of Negros Occidental and on March 26, 1962 the court a quo rendered a decision ordering the appellant to pay the appellee the sum of P2,377.23 as of December 31, 1959, plus interest at the rate of 6% per annum compounded quarterly from the date of the filing of the complaint until full payment was made. The appellant was also ordered to pay the sum equivalent to 10% of the amount due as attorney's fees and costs. The appellant appealed directly to this Court. During the pendency of this appeal the appellant Jose Grijaldo died. Upon motion by the Solicitor General this Court, in a resolution of May 13, 1963, required Manuel Lagtapon, Jacinto Lagtapon, Ruben Lagtapon and Anita L. Aguilar, who are the legal heirs of Jose Grijaldo to appear and be substituted as appellants in accordance with Section 17 of Rule 3 of the Rules of Court. In the present appeal the appellant contends: (1) that the appellee has no cause of action against the appellant; (2) that if the appellee has a cause of action at all, that action had prescribed; and (3) that the lower court erred in ordering the appellant to pay the amount of P2,377.23. In discussing the first point of contention, the appellant maintains that the appellee has no privity of contract with the appellant. It is claimed that the transaction between the Taiwan Bank, Ltd. and the appellant, so that the appellee, Republic of the Philippines, could not legally bring action against the appellant for the enforcement of the obligation involved in said transaction. This contention has no merit. It is true that the Bank of Taiwan, Ltd. was the original creditor and the transaction between the appellant and the Bank of Taiwan was a private contract of loan. However, pursuant to the Trading with the Enemy Act, as amended, and Executive Order No. 9095 of the United States; and under Vesting Order No. P-4, dated January 21, 1946, the properties of the Bank of Taiwan, Ltd., an entity which was declared to be under the jurisdiction of the enemy country (Japan), were vested in the United States Government and the Republic of the Philippines, the assets of the Bank of Taiwan, Ltd. were transferred to and vested in the Republic of the Philippines. The successive transfer of the rights over the loans in question from the Bank of Taiwan, Ltd. to the United States Government, and from the United States Government to the government of the Republic of the Philippines, made the Republic of the Philippines the successor of the rights, title and interest in said loans, thereby creating a privity of contract between the appellee and the appellant. In defining the word "privy" this Court, in a case, said: The word "privy" denotes the idea of succession ... hence an assignee of a credit, and one subrogated to it, etc. will be privies; in short, he who by succession is placed in the position of one of those who contracted the judicial relation and executed the private document and appears to be substituting him in the personal rights and obligation is a privy (Alpurto vs. Perez, 38 Phil. 785, 790). The United States of America acting as a belligerent sovereign power seized the assets of the Bank of Taiwan, Ltd. which belonged to an enemy country. The confiscation of the assets of the Bank of Taiwan, Ltd. being an involuntary act of war, and sanctioned by international law, the United States succeeded to the rights and interests of said Bank of Taiwan, Ltd. over the assets of said bank. As successor in interest in, and transferee of, the property rights of the United States of America over the loans in question, the Republic of the Philippines had thereby become a privy to the original contracts of loan between the Bank of Taiwan, Ltd. and the appellant. It follows, therefore, that the Republic of the Philippines has a legal right to bring the present action against the appellant Jose Grijaldo. The appellant likewise maintains, in support of his contention that the appellee has no cause of action, that because the loans were secured by a chattel mortgage on the standing crops on a land owned by him and these crops were lost or destroyed through enemy action his obligation to pay the loans was thereby extinguished. This argument is untenable. The terms of the promissory notes and the chattel mortgage that the appellant executed in favor of the Bank of Taiwan, Ltd. do not support the claim of appellant. The obligation of the appellant under the five promissory notes was not to deliver a determinate thing namely, the crops to be harvested from his land, or the value of the crops that would be harvested from his land. Rather, his obligation was to pay a generic thing the amount of money representing the total sum of the five loans, with interest. The transaction between the appellant and the Bank of Taiwan, Ltd. was a series of five contracts of simple loan of sums of money. "By a contract of (simple) loan, one of the parties delivers to another ... money or other consumable thing upon the condition that the same amount of the same kind and quality shall be paid." (Article 1933, Civil Code) The obligation of the appellant under the five promissory notes evidencing the loans in questions is to pay the value thereof; that is, to deliver a sum of money a clear case of an obligation to deliver, a generic thing. Article 1263 of the Civil Code provides: In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation. The chattel mortgage on the crops growing on appellant's land simply stood as a security for the fulfillment of appellant's obligation covered by the five promissory notes, and the loss of the crops did not extinguish his obligation to pay, because the account could still be paid from other sources aside from the mortgaged crops. In his second point of contention, the appellant maintains that the action of the appellee had prescribed. The appellant points out that the loans became due on June 1, 1944; and when the complaint was filed on January 17,1961 a period of more than 16 years had already elapsed far beyond the period of ten years when an action based on a written contract should be brought to court. This contention of the appellant has no merit. Firstly, it should be considered that the complaint in the present case was brought by the Republic of the Philippines not as a nominal party but in the exercise of its sovereign functions, to protect the interests of the State over a public property. Under paragraph 4 of Article 1108 of the Civil Code prescription, both acquisitive and extinctive, does not run against the State. This Court has held that the statute of limitations does not run against the right of action of the Government of the Philippines (Government of the Philippine Islands vs. Monte de Piedad, etc., 35 Phil. 738-751).Secondly, the running of the period of prescription of the action to collect the loan from the appellant was interrupted by the moratorium laws (Executive Orders No. 25, dated November 18, 1944; Executive Order No. 32. dated March 10, 1945; and Republic Act No. 342, approved on July 26, 1948). The loan in question, as evidenced by the five promissory notes, were incurred in the year 1943, or during the period of Japanese occupation of the Philippines. This case is squarely covered by Executive Order No. 25, which became effective on November 18, 1944, providing for the suspension of payments of debts incurred after December 31, 1941. The period of prescription was, therefore, suspended beginning November 18, 1944. This Court, in the case of Rutter vs. Esteban (L-3708, May 18, 1953, 93 Phil. 68), declared on May 18, 1953 that the Moratorium Laws, R.A. No. 342 and Executive Orders Nos. 25 and 32, are unconstitutional; but in that case this Court ruled that the moratorium laws had suspended the prescriptive period until May 18, 1953. This ruling was categorically reiterated in the decision in the case of Manila Motors vs. Flores, L-9396, August 16, 1956. It follows, therefore, that the prescriptive period in the case now before US was suspended from November 18,1944, when Executive Orders Nos. 25 and 32 were declared unconstitutional by this Court. Computed accordingly, the prescriptive period was suspended for 8 years and 6 months. By the appellant's own admission, the cause of action on the five promissory notes in question arose on June 1, 1944. The complaint in the present case was filed on January 17, 1961, or after a period of 16 years, 6 months and 16 days when the cause of action arose. If the prescriptive period was not interrupted by the moratorium laws, the action would have prescribed already; but, as We have stated, the prescriptive period was suspended by the moratorium laws for a period of 8 years and 6 months. If we deduct the period of suspension (8 years and 6 months) from the period that elapsed from the time the cause of action arose to the time when the complaint was filed (16 years, 6 months and 16 days) there

remains a period of 8 years and 16 days. In other words, the prescriptive period ran for only 8 years and 16 days. There still remained a period of one year, 11 months and 14 days of the prescriptive period when the complaint was filed. In his third point of contention the appellant maintains that the lower court erred in ordering him to pay the amount of P2,377.23. It is claimed by the appellant that it was error on the part of the lower court to apply the Ballantyne Scale of values in evaluating the Japanese war notes as of June 1943 when the loans were incurred, because what should be done is to evaluate the loans on the basis of the Ballantyne Scale as of the time the loans became due, and that was in June 1944. This contention of the appellant is also without merit. The decision of the court a quo ordered the appellant to pay the sum of P2,377.23 as of December 31, 1959, plus interest rate of 6% per annum compounded quarterly from the date of the filing of the complaint. The sum total of the five loans obtained by the appellant from the Bank of Taiwan, Ltd. was P1,281.97 in Japanese war notes. Computed under the Ballantyne Scale of values as of June 1943, this sum of P1,281.97 in Japanese war notes in June 1943 is equivalent to P889.64 in genuine Philippine currency which was considered the aggregate amount due as principal of the five loans, and the amount of P2,377.23 as of December 31, 1959 was arrived at after computing the interest on the principal sum of P889.64 compounded quarterly from the time the obligations were incurred in 1943. It is the stand of the appellee that the Ballantyne scale of values should be applied as of the time the obligation was incurred, and that was in June 1943. This stand of the appellee was upheld by the lower court; and the decision of the lower court is supported by the ruling of this Court in the case of Hilado vs. De la Costa (G.R. No. L-150, April 30, 1949; 46 O.G. 5472), which states: ... Contracts stipulating for payments presumably in Japanese war notes may be enforced in our Courts after the liberation to the extent of the just obligation of the contracting parties and, as said notes have become worthless, in order that justice may be done and the party entitled to be paid can recover their actual value in Philippine Currency, what the debtor or defendant bank should return or pay is the value of the Japanese military notes in relation to the peso in Philippine Currency obtaining on the date when and at the place where the obligation was incurred unless the parties had agreed otherwise. ... . (italics supplied) IN VIEW OF THE FOREGOING, the decision appealed from is affirmed, with costs against the appellant. Inasmuch as the appellant Jose Grijaldo died during the pendency of this appeal, his estate must answer in the execution of the judgment in the present case. G.R. No. L-38745 August 6, 1975 LUCIA TAN, plaintiff-appellee, vs. ARADOR VALDEHUEZA and REDICULO VALDEHUEZA, defendants-appellants. Alaric P. Acosta for plaintiff-appellee. Lorenzo P. de Guzman for defendants-appellants. CASTRO, J.: This appeal was certified to this Court by the Court of Appeals as involving questions purely of law. The decision a quo was rendered by the Court of First Instance of Misamis Occidental (Branch I) in an action instituted by the plaintiffappellee Lucia Tan against the defendants-appellants Arador Valdehueza and Rediculo Valdehueza (docketed as civil case 2574) for (a) declaration of ownership and recovery of possession of the parcel of land described in the first cause of action of the complaint, and (b) consolidation of ownership of two portions of another parcel of (unregistered) land described in the second cause of action of the complaint, purportedly sold to the plaintiff in two separate deeds of pacto de retro. After the issues were joined, the parties submitted the following stipulation of facts: 1. That parties admit the legal capacity of plaintiff to sue; that defendants herein, Arador, Rediculo, Pacita, Concepcion and Rosario, all surnamed Valdehueza, are brothers and sisters; that the answer filed by Arador and Rediculo stand as the answer of Pacita, Concepcion and Rosario. 2. That the parties admit the identity of the land in the first cause of action. 3. That the parcel of land described in the first cause of action was the subject matter of the public auction sale held on May 6, 1955 at the Capitol Building in Oroquieta, Misamis Occidental, wherein the plaintiff was the highest bidder and as such a Certificate of Sale was executed by MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff in favor of LUCIA TAN the herein plaintiff. Due to the failure of defendant Arador Valdehueza to redeem the said land within the period of one year as being provided by law, MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff executed an ABSOLUTE DEED OF SALE in favor of the plaintiff LUCIA TAN. A copy of the NOTICE OF SHERIFFS SALE is hereby marked as 'Annex A', the CERTIFICATE OF SALE is marked as 'Annex B' and the ABSOLUTE DEED OF SALE is hereby marked as Annex C and all of which are made as integral parts of this stipulation of facts. 4. That the party-plaintiff is the same plaintiff in Civil Case No. 2002; that the parties defendants Arador, Rediculo and Pacita, all Valdehueza were the same parties-defendants in the same said Civil Case No. 2002; the complaint in Civil Case No. 2002 to be marked as Exhibit 1; the answer as Exhibit 2 and the order dated May 22, 1963 as Exhibit 3, and said exhibits are made integral part of this stipulation. 5. That defendants ARADOR VALDEHUEZA and REDICULO VALDEHUEZA have executed two documents of DEED OF PACTO DE RETRO SALE in favor of the plaintiff herein, LUCIA TAN of two portions of a parcel of land which is described in the second cause of action with the total amount of ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00), Philippine Currency, copies of said documents are marked as 'Annex D' and Annex E', respectively and made as integral parts of this stipulation of facts. 6. That from the execution of the Deed of Sale with right to repurchase mentioned in the second cause of action, defendants Arador Valdehueza and Rediculo Valdehueza remained in the possession of the land; that land taxes to the said land were paid by the same said defendants. Civil case 2002 referred to in stipulation of fact no. 4 was a complaint for injunction filed by Tan on July 24, 1957 against the Valdehuezas, to enjoin them "from entering the above-described parcel of land and gathering the nuts therein ...." This complaint and the counterclaim were subsequently dismissed for failure of the parties "to seek for the 1 immediate trial thereof, thus evincing lack of interest on their part to proceed with the case. The Deed of Pacto de Retro referred to in stipulation of fact no. 5 as "Annex D" (dated August 5, 1955) was not registered in the Registry of Deeds, while the Deed of Pacto de Retro referred to as "Annex E" (dated March 15, 1955) was registered. On the basis of the stipulation of facts and the annexes, the trial court rendered judgment, as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff: 1. Declaring Lucia Tan the absolute owner of the property described in the first cause of action of the amended complaint; and ordering the herein defendants not to encroach and molest her in the exercise of her proprietary rights; and, from which property they must be dispossessed; 2. Ordering the defendants, Arador Valdehueza and Rediculo Valdehueza jointly and severally to pay to the plaintiff, Lucia Tan, on Annex 'E' the amount of P1,200, with legal interest of 6% as of August 15, 1966, within 90 days to be

deposited with the Office of the Court within 90 days from the date of service of this decision, and that in default of such payment the property shall be sold in accordance with the Rules of Court for the release of the mortgage debt, plus costs; 3. And as regards the land covered by deed of pacto de retro annex 'D', the herein defendants Arador Valdehueza and Rediculo Valdehueza are hereby ordered to pay the plaintiff the amount of P300 with legal interest of 6% from August 15, 1966, the said land serving as guaranty of the said amount of payment; 4. Sentencing the defendants Arador Valdehueza and Rediculo Valdehueza to pay jointly and severally to the herein plaintiff Lucia Tan the amount of 1,000.00 as attorney's fees; and . 5. To pay the costs of the proceedings. The Valdehuezas appealed, assigning the following errors: That the lower court erred in failing to adjudge on the first cause of action that there exists res judicata; and That the lower court erred in making a finding on the second cause of action that the transactions between the parties were simple loan, instead, it should be declared as equitable mortgage. We affirm in part and modify in part. 1. Relying on Section 3 of Rule 17 of the Rules of Court which pertinently provides that a dismissal for failure to prosecute "shall have the effect of an adjudication upon the merits," the Valdehuezas submit that the dismissal of civil case 2002 operated, upon the principle of res judicata, as a bar to the first cause of action in civil case 2574. We rule that this contention is untenable as the causes of action in the two cases are not identical. Case 2002 was for injunction against the entry into and the gathering of nuts from the land, while case 2574 seeks to "remove any doubt or cloud of the plaintiff's ownership ..." (Amended complaint, Rec. on App., p. 27), with a prayer for declaration of ownership and recovery of possession. 2 Applying the test of absence of inconsistency between prior and subsequent judgments, we hold that the failure of Tan, in case 2002, to secure an injunction against the Valdehuezas to prevent them from entering the land and gathering nuts is not inconsistent with her being adjudged, in case 2574, as owner of the land with right to recover possession thereof. Case 2002 involved only the possession of the land and the fruits thereof, while case 2574 involves ownership of the land, with possession as a mere attribute of ownership. The judgment in the first case could not and did not encompass the judgment in the second, although the second judgment would encompass the first. Moreover, the new Civil Code provides that suitors in actions to quiet title "need not be in possession of said 3 property. 2. The trial court treated the registered deed of pacto de retro as an equitable mortgage but considered the unregistered deed of pacto de retro "as a mere case of simple loan, secured by the property thus sold underpacto de retro," on the ground that no suit lies to foreclose an unregistered mortgage. It would appear that the trial judge had not updated himself on law and jurisprudence; he cited, in support of his ruling, article 1875 of the old Civil Code and decisions of this Court circa 1910 and 1912. Under article 1875 of the Civil Code of 1889, registration was a necessary requisite for the validity of a mortgage even as between the 4 parties, but under article 2125 of the new Civil Code (in effect since August 30,1950), this is no longer so. If the instrument is not recorded, the mortgage is nonetheless binding between the parties. (Article 2125, 2nd sentence). The Valdehuezas having remained in possession of the land and the realty taxes having been paid by them, the contracts which 5 purported to be pacto de retro transactions are presumed to be equitable mortgages, whether registered or not, there being no third parties involved. 3. The Valdehuezas claim that their answer to the complaint of the plaintiff affirmed that they remained in possession of the land and gave the proceeds of the harvest to the plaintiff; it is thus argued that they would suffer double prejudice if they are to pay legal interest on the amounts stated in the pacto de retro contracts, as the lower court has directed, and that therefore the court should have ordered evidence to be adduced on the harvest. The record does not support this claim. Nowhere in the original and the amended complaints is an allegation of delivery to the plaintiff of the harvest from the land involved in the second cause of action. Hence, the defendants' answer had none to affirm. In submitting their stipulation of facts, the parties prayed "for its approval and maybe made the basis of the decision of this Honorable Court. " (emphasis supplied) This, the court did. It cannot therefore be faulted for not receiving evidence on who profited from the harvest. 4. The imposition of legal interest on the amounts subject of the equitable mortgages, P1,200 and P300, respectively, is without legal basis, for, "No interest shall be due unless it has been expressly stipulated in writing." (Article 1956, new Civil Code) Furthermore, the plaintiff did not pray for such interest; her thesis was a consolidation of ownership, which was properly rejected, the contracts being equitable mortgages. With the definitive resolution of the rights of the parties as discussed above, we find it needless to pass upon the plaintiffs petition for receivership. Should the circumstances so warrant, she may address the said petition to the court a quo. ACCORDINGLY, the judgment a quo is hereby modified, as follows: (a) the amounts of P1,200 and P300 mentioned in Annexes E and D shall bear interest at six percent per annum from the finality of this decision; and (b) the parcel of land covered by Annex D shall be treated in the same manner as that covered by Annex E, should the defendants fail to pay to the plaintiff the sum of P300 within 90 days from the finality of this decision. In all other respects the judgment is affirmed. No costs. G.R. No. L-26058 October 28, 1977 AMPARO JOVEN DE CORTES & NOEL J. CORTES (Jesus Noel plaintiff-appellees, vs. MARY E. VENTURANZA, ETC., JOSE OLEDAN & ERLINDA M. OLEDAN, defendants-appellants. Delia L. Hermoso for appellants the Venturanzas. Ang. Atienza, Tabora & Del Rosario for appellants the Oledans, Bernardo Guerrero & Associates for appellees. MAKASIAR, J.:t.hqw Direct appeal by the defendants-appellants from the decision of the Court of First Instance of Bulacan against them in its Civil Case No. 2693, entitled "Felix Cortes y Ochoa, and Noel J. Cortes (Jesus Noel plaintiffs, versus Gregorio Venturanza, Mary E. Venturanza, Jose Oledan and Erlinda M. Oledan, defendants." The original plaintiffs in this case were Felix Cortes y Ochoa and Noel J. Cortes, and the original defendants were Gregorio Venturanza, Mary E. Venturanza, Jose Oledan and Erlinda M. Oledan. On December 11, 1967, defendant Gregorio Venturanza died. Accordingly, as prayed for by appellees, Mary E. Venturanza, Edna Lucille, Greymar, Sylvia, Edward and Mary Grace, all surnamed Venturanza, surviving spouse and children of the deceased Gregorio Venturanza, were substituted as appellants, in place of the deceased, by resolution of this Court dated February 28, 1968. On September 12, 1968, Felix Cortes y Ochoa died. Appellees, through counsel, thereupon filed a petition praying that the title of this case be changed to read: "Amparo Joven de Cortes and Noel J. Cortes (Jesus Noel plaintiffs-appellant, versus Mary E. Venturanza, etc., Jose Oledan and Erlinda M. Oledan, defendants-appellants," which petition was granted by this Court in its resolution dated April 11, 1969. The background facts may be gleaned from the pertinent portions of the decision of the court a quo, as follows:

Plaintiff Felix Cortes y Ochoa and Noel J. Cortes filed the instant action for foreclosure of real estate against the defendants Gregorio Venturanza, Mary E. Venturanza, Jose Oledan and Erlinda M. Oledan. The complaint alleges that plaintiff Felix Cortez y Ochoa was the original owner of nine (9) parcels of land covered by Transfer Certificates of Title Nos. 21334 to 21342, inclusive, while plaintiff Noel J. Cortes was likewise the original owner of twenty-four (24) parcels of land covered by Transfer Certificates off Title Nos. 21343, 21345, 21347 to 21367, inclusive, all of the land records of Bulacan; that on October 24, 1958 said plaintiffs sold and delivered to the defendants all the abovementioned thirty-three (33) parcels of land with all the improvements thereon for the total sum of P716,573.90 of which defendants agreed to pay jointly and severally the plaintiffs the sum of P100,000.00 upon the signing and execution of a deed of sale and P40,000.00 on January 1, 1959 thereby leaving a balance of P576,573.90 which the defendants agreed and bound themselves to pay plaintiffs jointly and severally within three (3) years from January 1, 1959 with interest thereon at the rate of 6% per annum; that defendants further agreed and bound themselves to secure the payment of the said balance of P576,573.90 with a first mortgage upon the said 33 parcels of land with improvements; that the defendants have already paid the plaintiffs the total sum of P140,000.00; that of the unpaid balance owing to plaintiffs, P169,484.24 pertaining to plaintiff Felix Cortes and P407,089.66 pertains to plaintiff Noel J. Cortes; that upon the registration of the deed of sale and mortgage with the office of the register of deeds of Bulacan new certificates of title for the 33 parcels of land were issued in the names of the defendants and the mortgage obligation was noted thereon; that the mortgage obligation fell due on January 1, 1962, but despite repeated demands for payment, defendants failed and refused to pay the said balance of P576,573.90 to plaintiffs; that from the time the mortgage obligation fell due and demandable up to December 1, 1962 the total interest due from the defendants on the balance of their obligation is P103,783.32 computer led at the stipulated interest of 6% per annum; that it is stipulated in the deed of sale with purchase money mortgage that in the event or default by defendants to pay the obligation secured by the mortgage and a suit is brought for the foreclosure of the mortgage or any other legal proceedings is instituted for the enforcement of plaintiffs' right, defendants would be obligated and hound to pay the plaintiffs reasonable compensation for attorney's fees which plaintiffs fixed at P50,000.00. Defendants Spouses Venturanza admit the allegations of the complaint regarding plaintiffs's former ownership of the lands in question as well as their execution of the mortgage in favor of plaintiffs but allege that they are at present the registered owners of the same parcels of land by virtue of the sale thereof made to them; they likewise admit the allotment of payment to plaintiffs of the balance of their obligation but allege that the said balance has not yet become due and demandable so that they have not incurred in default. As special affirmative defense defendants Venturanza allege that the document designated as deed of sale with purchase money mortgage does not express the true intent and agreement of the parties with respect to the manner of payment of the balance of the purchase price, the truth being that defendants will pay the balance of the purchase price in,the amount of P576,573.90 to the plaintiffs, and the latter agreed, as soon as defendants will have received from the Land Tenure Administration the purchase price of their (defendants') hacienda in Bugo, Cagayan de Oro in the amount of P360,000.00 which hacienda is the object of exporpiration proceedings before the Court of First Instance of said City; that it was agreed moreover that defendants will complete payment of the balance of the purchase price upon the consummation of the sale of their other hacienda at Buhi, Camarines Sur to one Mr. De Castro for P837, 00.00 more or less; that this negotiation was known to plaintiffs who agreed to wait for the sale of the same properties by defendants; that the property in question was bought by defendant for speculative purposes. As second special and affirmative defenses defendants allege that the deed of sale with purchase money mortgage had been novated by a subsequent agreement regarding the manner and period of payment to be made by defendants and that, therefore, the cause of action has not yet accrued. Defendants Jose Oledan and Erlinda M. Oledan deny the material allegations of the complaint with respect to the mortgage obligation alleging that plaintiffs cause of action against them has been extinguished and, therefore did not become due against them on January 1, 1962; that even as regards their co-defendants Venturanzas the mortgage obligation did not become due on January 1, 1962 there hating been a novation of the original agreement which affected material changes in the manner and condition of time of payment of the balance of the mortgage obligation. By way of affirmative defenses defendants Oledans alleged that the deed of sale with purchase money mortgage fails to express the true intent and agreement of the parties thereto insofar as the nature of the liability of the defendants is concerned, the true intention being to hold them (defendants Oledan) obligated unto plaintiffs only to the extent of the proportion of their share, ownership and interests in the property conveyed; that their obligation to plaintiffs has been extinguished by novation; that their obligation to plaintiffs has been extinguished by the assumption of the obligation by defendants Venturanza as provided for in the agreement among defendants dated December 28, 1959, such assumption of the obligation being inside' with full knowledge (of) and consent of plaintiffs which partakes of the character of a novation of the original agreement and that by their failure to seasonably interrupt any opposition to the assumption of any obligation by defendants Venturanza and to take appropriate action thereon, plaintiffs have waived their right to proceed against them. By way of cross-claim against their co-defendants Venturanza, defendants Oledan allege that on December 28, 1958 they and their co-defendants executed and entered into an agreement whereby they sold, transferred unto their codefendants all their shares, ownership and interest in the property subject of a deed of sale with purchase money mortgage for and in consideration of the sum of P44,571.66 payable at the time and in the manner specified in the written agreement; that of the aforementioned consideration cross-defendants have paid to them the sum of P22,285.83 thereby leaving a balance still due and unpaid in the amount of P22,285.83 which cross-defendants have failed to pay within the period stipulated in their agreement; that it is further stipulated in their agreement with crossdefendants that in the event of failure by the latter to pay the said balance within the period agreed upon they (crossdefendants) shall pay to them the sum of P6,367.30 for the period August 8, 1960 to August 28, 1961; another amount of P6,367.30 for the period August 28,1961 to August 28, 1962 and still another amount of P6,367.30 for the period August 28, 1963 by way of penalty, which despite repeated demands cross-defendants have failed to pay; that it is further stipulated in their agreement that in the event of default on the part of cross-defendants, interest in the legal rate of 6% per annum shall be borne by the unpaid balance in the amount of P22,285.83 plus the penalties aforementioned. By way of counter-claim, defendants-cross-plaintiffs allege that at the time defendants executed the agreement dated December 28, 1958 plaintiffs had full knowledge of and gave their consent to the transfer of their shares, ownership and interest in favor of their co-defendants, as well as the assumption by the latter of the mortgage obligation; that despite such knowledge and consent, plaintiffs induced cross-defendants not to register the agreement and effect the issuance of new transfer certificate of title in the name solely of defendants Venturanza, evidently for the purpose of preversing cause of action against them under the deed of sale with purchase money mortgage; that as a consequence of plaintiffs' injurious and malicious suit against them they suffered mental anguish, serious anxiety, besmirched reputation and moral shock on the basis of which plaintiffs should he held answerable to them in moral damages in the amount of P100,000.00 aside from exemplary damages; and that a, a consequence of plaintiffs' having filed the instant action against them they were compelled to engage the services of counsel and incurred

expenses of litigation in the total amount of P20,000.00 for which plaintiffs should be held liable to them (pp. 93-100, Corrected Rec. on Appeal, pp. 320-323, rec ). After due trial, the court a quo rendered its judgment with the following rationale and dispositive portion: There is no question that defendants are indebted to plaintiffs on the mortgage executed by them contained in the document denominated as 'Deed of Sale with Purchase Money Mortgage' (Exhibit 'A') to the tune of P576,573.90 with interest thereon at the stipulate rate of 6% per annum. The pertinent portion of the document in question is quoted, as follows: '(c) The remaining balance of the purchase price, after deducting the sums of P100,000.00 and P40,000.00, mentioned in Paragraphs (a) and (b) of this Article II, aggregating the sum of Five Hundred Seventy Six Thousand Five Hundred Seventy Three Pesos and Ninety Centavos (P576,573.90) shall be paid jointly and severally, by the vendees to the vendors within three (3) Nears from January 1, 1959, with interest thereon at the rate of six per annum, until fully paid, of which the sum of P169,484.24, plus the corresponding interest thereon, shall be paid by the vendees to the vendor, Felix Cortes y Ochoa, and the balance of P407,089.66, plus the corresponding interest thereon, shall be paid by the Vendees to the Vendor, Noel J. Cortes.' Defendants do not deny their failure to make good their obligation to pay plaintiffs the balance of the purchase price within the three-year period agreed upon in their document. However, defendants Venturanzas explained their failure as being due to their inability to collect the payment of the sale of their own property located in Buhi, Camarines Sur, and Bugo, Cagayan de Oro. in this connection, we are again quoting a specific provision of the agreement between the parties as regards the payment of the obligation, thus: C. In the event that the vendees shall fail to pay to the vendors, in the form and manner provided in Paragraphs (b) and (c) of Article II hereof, the said sums of P40,000.00 and P576,573.90, and the interest thereon, or should the vendees make default in the performance of any one or more of the conditions stipulated herein, the Vendors shall have the right, at their election, to foreclos(ur)e this mortgage, and to that end the vendors are hereby appointed the attorneys-in-fact for the Vendees with full power of substitution, to enter upon and take possession of the mortgaged properties, without the order of any court or any other authority other than herein granted, and to sell and dispose of the same to the highest bidder at public auction, ... .' Defendants claim that there had been a novation of the contract between them and plaintiffs on account of the transfer made by defendants Oledans of their interest in the property in favor of their defendants Venturanzas, with the knowledge and consent of the plaintiffs As regards this claim of defendants, we have another pertinenent provision of their contract which reads as follows: 'B. The vendees may, during the existence of this mortgage, sell the property hereby mortgaged, or any part thereof, or encumber the same with a second mortgage, with the previous written consent of the vendors. ... .' In view of the foregoing stipulations in the contract between the parties, while plaintiffs may have knowledge of the transfer made by defendants Oledans of their interest in the property in question in favor of their co-defendants, yet insofar as the original contract between plaintiffs and defendants are concerned, 'the provisions thereof shall govern. For plaintiffs' written consent to any transfer is required by the provisions of their contract. Since defendants were of the said provision, they should have taken steps to obtain plaintiffs' written consent if only to effect a novation. To the mind of the court, it must have been due to a premonition on the part of plaintiffs that there might be a substitution of debtor that gave rise to the incIusion of the aforequoted provision in their original contract. It having been satisfactorily established that defendants are indeed indebted to plaintiffs on the mortgage constituted by them over the parcels of land in question, the period of payment of the obligations having become due, plaintiffs are, therefore, entitled to a foreclosure of the said mortgage. The next question that crops up for determination is whether or not defendants Oledans have a right against their codefendants Venturanzas in this case. Exhibit 1-Oledan which is an Agreement and Deed of Sale of Undivided Share in Real Estate entered into by and between the Venturanzas and the Oledans clearly shows that by virtue of said document, the Venturanzas assumed the whole obligation to plaintiffs for and in consideration of the sum of P44,571.66, one-half of which amount was paid to the Oledans upon the execution and signing thereof and the balance payable within 8 months therefrom. The Venturanzas do not assail the veracity of the document However, they seem to deny having agreed to the divisions of the penalty clause claiming that the Oledans assured them that the same was just incorporated therein as a matter of form but that it would not be enforced. The Venturanzas having agreed to time, as in fact, they have assumed the whole obligation to the plaintiffs, they should, therefore, be held liable to the Oledans for ,Alexander the latter shall be bound to pay to plaintiffs under the original contract known as Deed of Sale with Purchase Money Mortgage. WHEREFORE, judgment is hereby rendered in favor of pIaintiffs and against the defendants, ordering the latter jointly and severally to pay to the former or to deposit with the clerk of court the sum of P576,573.90 with interest thereon at the stipulated rate of 6% per annum until fully paid, within 90 days from notice hereof. In default of such payment the mortgaged property will be sold at public auction to realize the mortgage indebtedness and costs. in accordance with law. On the cross-claim filed by defendants-cross-claimants Oledans, cross-defendants Venturanzas are ordered to reimburse to the former the amount which cross-claimants are to pay to plaintiffs under the above judgment. The parties will bear their own costs and expensive of litigation" (pp. 107-113, Corrected Record on Appeal, pp. 327330, rec.). Not satisfied with the foregoing decision of the court a quo, particularly with respect to its dispositive portion, plaintiffs filed a motion for reconsideration and/or new trial, dated October 19, 1965, and an urgent supplemental ration for reconsideration, dated November 2, 1965. The defendants Oledans likewise filed their motion for reconsideration dated November 2, 1965, and the defendants Venturanzas also filed a motion for reconsideration dated November 10, 1965. Resolving the aforesaid motions of the parties litigants, the trial court amended the dispositive portion of its in question in its order dated November 22, 1965, which reads as follows: This case is again before the Court upon a motion for reconsideration and/or new trial filed by plaintiffs dated October 19, 1965, an urgent supplemental motion for reconsideration dated November 2, 1965 filed by the same plaintiffs, a motion for reconsideration dated November 2, 1965 filed by defendants Oledans, and a motion for reconsideration dated November 10, 1965 filed by defendants Venturanzas. After a careful deliberation of the different motions for filed by the parties, the Court believes a further modification of the decision of September 30, 1965, as amended by the order of October l, 1965, is in order. This, in accordance with the agreement entered into by the parties embodied in the document designated as Deed of Sale with Purchase Money Mortgage. WHEREFORE, the dispositive part of the decision of September 30, 1965 is hereby re-amended so as to read as follows:

'WHEREFORE, judgment is hereby rendered in favor of plaintiff.s, and against the defendants ordering the latter, jointly and severally, to pay the former or to deposit with the clerk of court the sum of P576,573.90 with interest thereon at the stipulated rate of 6% per annum from January 1, 1959 until fully paid, within 90 days from notice hereof. In default of such payment the mortgaged property will be sold at public auction to realize the mortgage indebtedness and costs, in accordance with law.' 'On the cross-claim by the defendants-cross-claimants Venturanzas are ordered to reimburse to the former the amount which cross-claimants are to pay to plaintiff under the judgment. 'The parties will bear their own costs and expenses of litigation.' With the foregoing resolution the motion for reconsideration filed by defendants Venturanzas and Oledans are, therefore, DENIED (pp. 151-152, Corrected Record on Appeal, pp. 349-350, rec.). From the foregoing judgment, as amended, the defendants Venturanzas and Oledans now appeal directly before this Court. The Venturanzas assigned four (4) errors while the Oledans assinged five (5) errors allegedly committed by the trial court. WE believe these errors taken together all boil down to the following issues: a. Whether, upon the filing by plaintiffs of their complaint against the defendants on December 12, 1962, the obligation of the defendants had not yet become due and demandable and, hence, the complaint was filed prematurely. b. Whether the payment of P576,573.90 with interest thereon at the stipulated rate of 6% per annum was to be made dependent upon the consummation of the sale of the two haciendas of defendants Venturanzas and, hence, there was a novation of the contract of sale with purchase money mortgage, Exhibit B, as a result of a change in the manner of payment. c. Whether the sale on December 28, 1959 by the defendants Oledans to their co-defendants Venturanzas, of all their rights and interests in the property, subject-matter of the deed of sale with purchase money mortgage, Exhibit B, likewise constituted a novation thereof and, therefore, had the effect of discharging the defendants Oledans from their original obligation to the plaintiffs. 1. The first and second issues involve an interpretation of paragraph II (c) of the Deed of Sale with Purchase Money Mortgage, Exhibit B, which provides as follows: (c) The remaining balance of the purchase price, after deducting the sums of P100,000.00 and P40,000.00, mentioned in Paragraphs (a) and (b) of this Article II, aggregating the sum of FIVE HUNDRED SEVENTY-SIX THOUSAND FIVE HUNDRED SEVENTY-THREE PESOS AND NINETY CENTAVOS (P576,573.90) shall be paid, jointly and severally, by the VENDEES to the VENDORS WITHIN THREE (3) years from January 1, 1959, with interest at the rate of Six Per Centrum (6%) per annum, until fully paid of which the sum of P169,484.24, plus the corresponding interest thereon, shall be paid by the VENDEES to the VENDOR, FELIX CORTES y OCHOA, and the balance of P407,089.66, plus the corresponding interest thereon, shall be paid by the VENDEES to the VENDOR, NOEL J. CORTES. ... With respect to the first issue whether the complaint was filed prematurely there is no dispute that plaintiffs filed their complaint on December 12, 1962; that under the term of the contract, the pertinent portion of which is quoted above, the defendants were given until January 1, 1962 within which to pay their obligation; and that January 1, 1962 had passed without the defendants having paid to the plaintiffs the sum of P576,573.90 and the corresponding interest thereon notwithstanding repeated demands for payment made upon and duly received by them (Exhs. D, D-3 E, E-3, pp. 72, 73, 73-A, 74- 75, Folder of Exhibits). Therefore, when plaintiffs filed the complaint on December 12, 1962, the effects of default as against the defendants had already arisen. Besides, no less than the defendants Venturanzas themselves admitted in their brief that they were delayed in the payment of the balance of their obligation to the plaintiffs. Let us turn to page 25 of their brief. The delay in the payment of the balance of the purchase price due to the plaintiffs-appellees was caused by the delay in the receipt of the payment of the purchase price of the two haciendas of the herein defendants-appellants Venturanza spouses. The non-compliance of herein defendants-appellants with their obligations to pIaintiffsappellees was due to circumstances not within their control ... . One cannot admit being delayed in the payment of his obligation unless he believes that his obligation is already due and demandable. Stated otherwise, there is no delay if the obligation is not yet due. The alleged cause of their default in paying the balance of the price, is not force majeure nor an act of God. Hence, their failure to pay is not justified. 2. With respect to the second issue, defendants Venturanzas contend that the three-year period provided for in the Deed of Sale with Purchase Money Mortgage, Exhibit B, was dependent on the date when they would be able to collect the purchase price of the two properties they were trying to sell. For this purpose, they claim that Dr. Cortes, one of the plaintiffs, granted them an extension of time within which to pay and this act of Dr. Cortes constituted a novation of the contract. This claim of defendants Venturanzas is equally devoid of merit. A careful reading of the Deed of Sale with Purchase Money Mortgage, Exhibit B, reveals the conspicuous absence of any provision making the consummation of the said contract dependent on the ability of defendants Venturanzas to collect the purchase price of their two haciendas. If this were the intention of the parties, they should have clearly stated it in the contract. It is true the defendants wrote two letters to Dr. Cortes and/or his lawyer (Exhibits H and I-Venturanza, p. 90, Folder of Exhibits), wherein the defendants Venturanzas requested an extension of time within which to pay and Dr. Cortes admitted having been informed of the alleged projected sale of defendants Venturanzas' properties. Dr. Cortes, however, vehemently denied having given said defendants any extension of time. The deed of sale with purchase money mortgage clearly indicates that the balance of P576,573.90 shall be paid by the defendants, jointly and severally, within three (3) years from January 1, 1959, with interest at the rate of 6%per annum, until fully paid. On January 1, 1962, the defendants failed and refused to pay their obligation. This is a clear case of an obligation with a definite period ex die, which period was incidentally established for the benefit of the defendants. The evidence presented by the plaintiffs to substantiate these facts approaches moral certainty, not merely preponderance of evidence. Hence, defendants' defense of novation as to the period for payment, fails. Furthermore, according to Article 1159 of the New Civil Code, obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. The deed, Exhibit B, does not show on its face that any of the limitation of the freedom of contract under Article 1306 of the same Code, such as law, morals, good customs, public order, or public policy, exists, On the contrary, the terms of said exhibit are so clear and leave no doubt with respect to the intention of the contracting parties. Hence, the literal meaning of its stipulations shall control (Art. 1370, New Civil Code). This is so because the intention of the parties is clearly manifested and they are presumed to intend the consequences of their voluntary acts ft. 5, par. [c], Rule 131, Revised Rules of Court). There being nothing in the deed, Exhibit B, which would argue against its enforcement, it follows that there is no ground or reason why it should not be given effect. WE therefore, see no reason to overturn the finding of the court a quo that the defendants are indebted to the plaintiffs on the mortgage constituted by them over the 33 parcels of land in question since the period for payment of the obligation had become due and, therefore, plaintiffs are entitled to a foreclosure of the said mortgage 3. The third and last issue pertains to the principal defense of the defendants Oledans. These defendants claim that because they transferred their interest and participation in the property subject of the Deed of Sale with Purchase Money Mortgage, Exhibit B, to the defendants Venturanzas allegedly with the knowledge of the plaintiffs, novation by substitution of the person of the debtor took place and, therefore, their obligation to the plaintiffs had been extinguished.

In resolving this issue, it is important to state some principles and jurisprudence underlying the concept and nature of novation as a mode of extinguishing obligations. According to Manresa, novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or Principal conditions, or by substituting the person of the debtor, or by subrogating a third person to the rights of the creditor (8 Manresa 428, cited in IV Civil Code of the Philippines by Tolentino 1962 ed., p. 352). Unlike other modes of extinction of obligations, novation is a juridical act with a dual function it extinguishes an obligation and creates a new one in lieu of the old. Article 1293 of the New Civil Code provides: Novation which consists in substituting a new debtor ,in the place of the original one, may be made even without the knowledge or -i , it the will of the latter, but not without the without of the creditor (Emphasis supplied). Under this provision, there are two forms of novation by substituting the person of the debtor, and they are: (1)expromision and (2) delegacion. In the former,the initiative for the change does not come from the debtor and may even be made without his knowledge, since it consists in a third person assuming the obligation. As such, it logically requires the consent of the third person and the creditor. In the latter, the debtor offers and the creditor accepts a third person who consents to the substitution and assumes the obligation, so that the intervention and the consent of these three persons are necessary (8 Manresa 436-437, cited in IV Civil Code of the Philippines by Tolentino, 1962 ed., p. 360). In these two modes of substitution, the consent of the creditor is an indispensable requirement (Garcia vs. Khu Yek Chiong, 65 Phil. 466, 468) Defendants Oledans' theory is that the Agreement and Deed of Sale of Undivided Share in Real Estate (Exhibit 1-Oledan, p. 91, Folder of Exhibits), executed and entered into by and between them and their co-defendants Venturanzas, and which in effect transferred all their interest and participation in the property subject of the deed of mortgage (Exhibit B) to their co-defendants Venturanzas, extinguished their obligation to the plaintiffs. In support of their theory, they cited Article 1293 of the New Civil Code, quoted above, and then concluded that the creditor's consent to the novation which consists one "is entirely unnecessary and senseless." They also cited the cases of Rio Grande Oil Co. vs. Coleman (39 O.G. No. 38, 986) and Santisimo Rosario de Molo vs. Gemperle (39 O.G. No. 59, 1410), both decided by the Court of Appeals, through the learned Mr. Justice Sabino Padilla, who later became an active and respected member of this Court. A perusal of the aforecited cases shows the following: From the Coleman case: ... A personal novation by substitution of another in place of the debtor may be effected with or without the knowledge of the debtor but not without the consent of the creditor (Art. 1205, Civil Code [now Art 1293, New Civil code]). this is the legal provision applicable to the case at bar. the reason for the requirement that the creditor give his consent to the substitution is obvious. the substitution of another in place of the debtor may prevent or delay the fulfillment or performance of the obligation by reason of the inability or insolvency of the new debtor; hence, the consent of the creditor is necessary. This kind of substitution may take place without the knowledge of the debtor when a third party assumes the obligation of the debtor with the consent of the creditor. The novation effected in this way is called delegacion. (Art. 1206, Civil Code [now Art. 1295, New Civil Code]). In these two modes of substitution, the consent of the creditor is always required.... (emphasis supplied). From the Gemperle case: A personal novation by substitution of another in place of the debtor may take place with or without the knowledge of the debtor but not without the consent of the creditor (Article 1205, Civil code the creditor's consent to such substitution is obvious. Substitution of one debtor, for another may delay or prevent the fulfillment or performance of the obligation by reason of the temporary inability or insolvency of the new debtor. In a novation that takes place when the debtor offers and the creditor accepts a third party in place of the former debtor, the consent of the creditor is also necessary (art. 1206, Civil Code [now Art. 1295, New civil Code]). ... After going over carefully the aforecited portions of the decisions of the Court of Appeal cited by the defendants Oledans, WE find that they do not help any the cause of said defendants; on the contrary, they both militate against their theory. Be that as it may, suffice it to state that while the Agreement and Deed of Sale of Undivided Share in Real Estate, Exhibit 1-Oledan, might have created a juridical relation as between defendants Venturanzas and Oledans, it cannot however affect the relation between them on one hand, and the plaintiffs, on the other, since the latter are not privies to the said agreement, and this kind of novation cannot be made without the consent of the plaintiffs (Garcia vs. Khu Yek Chiong, et al., supra). One reason for the requirement of the creditor's consent to such substitution is obvious. Substitution of one debtor for another may delay or prevent the fulfillment of the obligation by reason of the financial inability or insolvency of the new debtor; hence, the creditor should agree to accept the substitution in order that it may be binding on him. Incidentally, this case is, in practically all respects, similar to, if not Identical with, the case of McCullough & Co. vs. Veloso and Serna (46 Phil. 1). In that case, plaintiff sold to defendant Veloso its property known as "McCullough Building" consisting of a land with the building thereon, for the price of P700,000.00. Veloso paid a down payment of P50,000.00 cash on account at the execution of the contract, and the balance of P650,000.00 to be paid on installment basis. To secure the payment of the balance, Veloso mortgaged the property purchased in favor of McCullough. It was stipulated that in case of failure on the part of Veloso to comply with any of the stipulations contained in the mortgage deed, all the installments with the interest thereon at the rate of 7% per annum shall become due, and the creditor shall then have the right to bring the proper action in court. Subsequently, Veloso sold the property with the improvements thereon for P100,000.00 to Serna, who agreed to respect the mortgage on the property in favor of McCullough and to assume Veloso's obligation to pay the plaintiff the balance. Veloso paid P50,000.00 on account of the P650,000.00 and Serna made several payments up to the total sum of P250.000.00 Subsequently, however, neither Veloso nor Serna made any payment upon the last installments, by virtue of which delay, the whole obligation became due McCullough went to court. After due trial, the court sentenced defendant Veloso to pay the plaintiff the sum of P510,047.34, with interest thereon at 7% per annum, within three months; otherwise, the property mortgaged shall be sold at public auction to the highest bidder and in the manner provided by law, the proceeds of the sale to be applied to the payment of the judgment, after deducting the fees of the court's officer. On appeal, defendant Veloso contended that having sold the property to Serna and the otter having assumed the obligation to pay the plaintiff"the unpaid balance of the price secured by the he was relieved from the obligation to pay the plaintiff. This means contract between the appellant and Serna, contract between him and the plaintiff was novated by the substitution of Serna as a new debtor. The Supreme Court rule In order that this novation may take place, the law requires the consent of the creditor (Art. 1205 of the Old Civil code; now Art. 1293 of the New Civil Code). The plaintiff did not intervene in the contract between Veloso and Serna and did not expressly give his consent to this substitution. Novation must be express, and cannot be presumed. In the case at bar, the agreement, Exhibit 1-Oledan relied upon by the defendants Oledans, does not show on its face that the plaintiffs intervened in, much less gave their consent to, the substitution; as a matter of fact, plaintiff Cortes vehemently denied having consented to the transfer of rights from the Oledans to the Venturanzas alone. Res inter alios acta alteri nocere non debet , no less than defendant lose Oledan himself testified that he did not personally see Dr. Cortes about the transfer of rights in Exhibit 1-Oledan, despite his commitment with his co-defendants in said agreement 'to inform Messrs. Felix Cortes and Noel J. Cortes (Jesus Noel) of the execution of the said agreement" (p. 15, t.s.n. hearing of January 19, 1965). There is thus a complete absence of animus novandi, whether express or implied, on the part of the creditors the Corteses.

With respect to the claim of plaintiffs for reasonable attorney's fees, paragraph III (G) of the Deed of Sale with Purchase Money Mortgage, Exhibit B, provides: G In the event of default on the part of the VENDEES and by reason thereof a suit is brought for the foreclosure of this mortgage or any other legal proceedings is instituted for the enforcement of any of the rights of the VENDORS hereunder, a reasonable compensation shall be paid, jointly and severally, by the VENDEES to the VENDORS for attorney's fees, in addition to the fees and costs allowed by the Rules of Court. The validity of the above agreement for reasonable attorney's fees was questioned in the pleadings of the defendants before the trial court. Before this Court, the plaintiffs in their brief (pp. 121-123, 126), called OUR attention to the oversight in respect thereto committed by the court a quo. With respect, however, to the interest due to the plaintiffs on the indebtedness of the defendants, WE are reminded of the mandate of Article 2212 of the New Civil Code, which provides: Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. Per stipulation, plaintiffs are entitled to collect from defendants interest at the rate of six per centum (6%) per annum on the remaining balance of P576,573.90 from January 1, 1959. Hence, for the period from January 1, 1959 to December 12, 1962, the date of the riling of the complaint, plaintiffs are entitled to collect from the defendants, by way of interest at six percent per annum, the sum of P136,482.13. Applying the aforequoted legal provision, this amount of P136,482.13 should be added to the principal of P576,573.90, making a total of P713,056.03, which shall earn legal interest stipulated at six percent per annum from December 13, 1962 until fully paid. Such interest is not due to stipulation; rather it is due to the mandate of the law hereinbefore quoted. Now, considering that the total amount recoverable in this case approximates 1.4 million pesos as of October 31, 1977 (consisting of principal of P576,573.90, plus P136,482.13 interest from January 1, 1959 to December 12, 1962, plus P636,827.37 interest from December 13, 1962 to October 31, 1977), and that every step in the foreclosure proceedings had been tenaciously contested, not to mention the work it will still require counsel for the plaintiffs to collect the same by judicial proceedings, WE find that P50,000.00 is a reasonable amount to which the plaintiffs are entitled as and for attorney's fees. Anent the cross-claim of defendants Oledans against their co-defendants Venturanzas to the effect "that the defendants Venturanzas are liable to them for the balance of P22,285.83 in addition to the penalties stipulated in the agreement and deed of sale, Exhibit 1Oledan, and the interests provided therein, WE find the claim for the balance of P22,285.83 meritorious. On their claim for penalties and interests as provided for in the same agreement, cross-claimants and defendants Oledans rely on the pertinent portions of the agreement, which read: xxx xxx xxx 2. That upon the execution and signing of this Agreement, the PARTIES/OF THE FIRST PART (the Venturanzas will pay to the PARTIES OF THE SECOND PART (the Oledans and the latter hereby, acknowledge receipt thereof, of the sum of TWENTY TWO THOUSAND (TWO HUNDRED) AND EIGHTY FIVE PESOS AND EIGHTY THREE CENTAVOS (P22,285-83), Philippine Currency (Prudential Bank Check No. 965159) and the balance of Twenty Two Thousand Two Hundred and Eighty Five Pesos and Eighty Three centavos (P22,285.83), Philippine Currency, shall be paid by the PARTIES OF THE FIRST PART to the PARTIES OF THE SECOND PART within eight (8) months from the date and execution of this Agreement and Deed of Sale; xxx xxx xxx 4. That in the event of failure on the part of the PARTIES OF THE FIRST PART to pay the said balance of Twenty Two Thousand Two Hundred and Eighty Five Pesos and Eighty Centavos (P22,285.80) within the said period of eight (8) months stipulated above, the said PARTIES OF THE FIRST PART will pay to the PARTIES OF THE SECOND PART a penalty of Six Thousand Three Hundred Sixty Seven Pesos and Thirty Centavos (P6,367.30) for the period from August 28, 1960 to August 28, 1961; another penalty of P6,367.30 for the period from August 28, 1961 to August 28, 1962; and another penalty of P6,367.30 for the period from August 28, 1962 to August 28, 1963. It is agreed that any part payment on the said balance of P22,285.80 has no effect on the payment of the penalty provided for herein, and in case of non-payment of the full amount of the balance of P22,285.80 within the said period of three years aforementioned or up to August 28, 1963, then the said balance left unpaid plus the penalties due, as provided for herein, shall bear an interest at the legal rate. It is of course understood, that the penalties and interest provided for herein shall not apply if the PARTIES OF THE FIRST PART shall pay the said balance of Twenty Two Thousand Two Hundred and Eighty Five Pesos and Eighty Centavos (P22,285.80) within the eight (8) months stipulated in paragraph 2 above, or on or before August 28, 1960; xxx xxx xxx (Brief for defendants Oledans, pp. 32-34, Folder of Exhibits, pp. 92- 93). A meticulous analysis of the aforequoted portions of Exhibit 1-Oledan shows: 1. That the Venturanzas were given a period of eight (8) months from and after December 28, 1959 - the date of the execution of the agreement - within which to pay the balance of P22,285.80; 2. That in the event of failure on the part of the Venturanzas to pay the said balance of P22,285.80 within the said period of eight (8) months, the Venturanzas would pay to the Oledans a penalty of P6,367.30 annually, beginning August 28, 1960, for a period of three (3) years lip to August 28, 1963, regardless of any partial payment which the Venturanzas might make on the balance of P22,285.80; and 3. That in case of non-payment of the whole obligation of P22,285.80 within the stipulated period of three (3) years from August 28, 1960 to August 28, 1963, such obligation or any balance thereof remaining unpaid, plus the penalties due at the rate of P6,367.30 annually for three (3) years, shall earn interest at the legal rate. Going over the entire agreement, Exhibit 1-Oledan, WE have noted the following: 1. That in connection with the deed of sale with mortgage, Exhibit B, the Venturanzas were the ones who paid out of their own personal funds the One Hundred Thousand Pesos (P100,000.00) to the plaintiffs, representing the down payment on the purchase price of the property, with the understanding that the Oledans would reimburse the Venturanzas their one-half (1/2) share of P50,000.00; 2. That subsequently, the Oledans decided not to continue with the payment or reimbursement to the Venturanzas of their one-half (1/2) share of P50,000.00 as above indicated, but they agreed to share in the amount of their investment of only P20,000.00; 3. That the Venturanzas were again the ones who paid out of their own personal funds the succeeding P40,000.00, which fell due on January 1, 1959, to the plaintiffs; 4. That it was only on January 16, 1959 that the Oledans were able to reimburse to the Venturanzas their one-half (1/2) share of the P40,000.00; and 5. That the sum of P20,000.00 was the only amount paid by the Oledans to and/or invested with the Venturanzas in their joint venture envisioned in the deed of sale with mortgage, Exhibit B. In support of their claim for penalties and interests, the cross-claimants and defendants Oledans contend that "this is a normal stipulation in contracts of this character." WE do not agree and hereby reject such claim for penalties as well as for interests. Settled is the rule that 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 (Art. 1306, New Civil Code). The

onwards show that cross-claimants and defendants Oledans more than broke even on their investment of P20,000.00 when they received from their co-defendants Venturanzas the sum of P22,285.F3 on December 28, 1959. From all indications, it would seem that defendants Venturanzas threw caution to the four winds, so to say, and bound themselves to pay to their co-defendants Oledans the stipulated penalty of P6,367.30 annually for three (3) years, beginning August 28, 1960, in their belief that within the said period of time they would have more than enough money with which to pay their obligation to the plaintiffs. Unfortunately, however, to their great disappointment, the unexpected happened as they ended up with no money with which to pay not only the balance of their obligation to the plaintiffs in the sum of P576,573.90, but also the balance of their obligation to their co-defendants Oledans in the sum of P22,285.30. Be that as it may justice and morality cannot consent to and sanction a clearly iniquitous deprivation of property, repulsive to the common sense of man. This is what this Court said some sixty (60) years ago in the case of Ibarra vs. Aveyro and Pre (37 Phil 273, 282), which WE cannot help but quote hereunder: Notwithstanding the imprudence and temerity shown by the defendants by their execution of a ruinous engagement, assumed, as it appears, knowingly and voluntarily, morality and justice cannot consent to and sanction a repugnant spoliation and iniquitous deprivation of property, repulsive to the common sense of man; and therefore, as all acts performed against the provisions of law are null and void, and as the penal clause referred to, notwithstanding its being an ostensible violation of morals, was inserted in said promissory note, and as there is no law that expressly authorizes it, we must conclude that the contracting party favored by said penal clause totally lacks all right of action to enforce its fulfillment (emphasis supplied). WHEREFORE, THE APPEALED JUDGMENT IS MODIFIED AND ANOTHER ONE IS RENDERED, DIRECTING: I. ALL THE DEFENDANTS APPELLANTS VENTURANZAS AND OLEDANS TO PAY JOINTLY AND SEVERALLY THE PLAINTIFFSAPPELLEES: A. THE SUM OF FIVE HUNDRED SEVENTY SIX THOUSAND FIVE HUNDRED SEVENTY THREE PESOS AND NINETY CENTAVOS (P576,573.90), PLUS ONE HUNDRED THIRTY SIX THOUSAND FOUR HUNDRED EIGHTY TWO PESOS AND THIRTEEN CENTAVOS (P136,482.13) INTEREST AT THE RATE OF SIX PER CENTUM (6%) PER ANNUM FROM JANUARY 1, 1959 TO DECEMBER 12, 1962, PLUS INTEREST AT THE SAME RATE ON THE PRINCIPAL AMOUNT OF P576, 573.90 ADDED TO THE ACCRUED INTEREST FOR THE PERIOD FROM DECEMBER 13,1962 UNTIL THE WHOLE OBLIGATION IS FULLY PAID, WITHIN NINETY (90) DAYS FROM NOTICE HEREOF. IN DEFAULT OF SUCH PAYMENT, THE MORTGAGED PROPERTIES SHALL BE SOLD AT PUBLIC AUCTION TO REALIZE THE MORTGAGE INDEBTEDNESS AND COSTS IN ACCORDANCE WITH LAW; AND B. THE SUM OF FIFTY THOUSAND PESOS (P50,000.00) AS ATTORNEY'S FEES: II. THE CROSS-DEFENDANT'S VENTURANZAS TO PAY AND/OR REIMBURSE THE CROSS-CLAIMANTS OLEDANS: A. THE SUM OF TWENTY TWO THOUSAND TWO HUNDRED AND EIGHTY FIVE PESOS AND EIGHTY THREE CENTAVOS (P22,285.83), PLUS INTEREST AT THE RATE OF SIX PERCENT (6%) PER ANNUM COUNTED FROM THE FINALITY OF THIS DECISION, UNTIL THE SAW IS FULLY PAID; B. THE AMOUNT WHICH SAID CROSS-CLAIMANT'S MAY PAY TO PLAINTIFFS-APPELLEES UNDER THIS JUDGMENT;AND III. THE DEFENDANTS-APPELLANTS VENTURANZAS TO PAY TREBLE COSTS.