G.R. No.

184823

October 6, 2010

COMMISSIONER
OF
INTERNAL
vs.
AICHI FORGING COMPANY OF ASIA, INC., Respondent.

REVENUE, Petitioner,

DECISION
DEL CASTILLO, J.:
A taxpayer is entitled to a refund either by authority of a statute expressly granting such right, privilege, or
incentive in his favor, or under the principle of solutio indebiti requiring the return of taxes erroneously or illegally
collected. In both cases, a taxpayer must prove not only his entitlement to a refund but also his compliance with the
procedural due process as non-observance of the prescriptive periods within which to file the administrative and
the judicial claims would result in the denial of his claim.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside the July 30, 2008
Decision1 and the October 6, 2008 Resolution2 of the Court of Tax Appeals (CTA) En Banc.
Factual Antecedents
Respondent Aichi Forging Company of Asia, Inc., a corporation duly organized and existing under the laws of the
Republic of the Philippines, is engaged in the manufacturing, producing, and processing of steel and its byproducts.3 It is registered with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT) entity4 and its
products, "close impression die steel forgings" and "tool and dies," are registered with the Board of Investments
(BOI) as a pioneer status.5
On September 30, 2004, respondent filed a claim for refund/credit of input VAT for the period July 1, 2002 to
September 30, 2002 in the total amount of P3,891,123.82 with the petitioner Commissioner of Internal Revenue

(CIR), through the Department of Finance (DOF) One-Stop Shop Inter-Agency Tax Credit and Duty Drawback
Center.6
Proceedings before the Second Division of the CTA
On even date, respondent filed a Petition for Review7 with the CTA for the refund/credit of the same input VAT.
The case was docketed as CTA Case No. 7065 and was raffled to the Second Division of the CTA.
In the Petition for Review, respondent alleged that for the period July 1, 2002 to September 30, 2002, it generated
and recorded zero-rated sales in the amount of P131,791,399.00,8 which was paid pursuant to Section 106(A) (2)
(a) (1), (2) and (3) of the National Internal Revenue Code of 1997 (NIRC); 9 that for the said period, it incurred and
paid input VAT amounting to P3,912,088.14 from purchases and importation attributable to its zero-rated
sales;10and that in its application for refund/credit filed with the DOF One-Stop Shop Inter-Agency Tax Credit and
Duty Drawback Center, it only claimed the amount of P3,891,123.82.11
In response, petitioner filed his Answer12 raising the following special and affirmative defenses, to wit:
4. Petitioners alleged claim for refund is subject to administrative investigation by the Bureau;
5. Petitioner must prove that it paid VAT input taxes for the period in question;
6. Petitioner must prove that its sales are export sales contemplated under Sections 106(A) (2) (a), and
108(B) (1) of the Tax Code of 1997;
7. Petitioner must prove that the claim was filed within the two (2) year period prescribed in Section 229 of
the Tax Code;
8. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to
sustain the burden is fatal to the claim for refund; and

9. Claims for refund are construed strictly against the claimant for the same partake of the nature of
exemption from taxation.13
Trial ensued, after which, on January 4, 2008, the Second Division of the CTA rendered a Decision partially
granting respondents claim for refund/credit. Pertinent portions of the Decision read:
For a VAT registered entity whose sales are zero-rated, to validly claim a refund, Section 112 (A) of the NIRC of
1997, as amended, provides:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such
sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: x x x
Pursuant to the above provision, petitioner must comply with the following requisites: (1) the taxpayer is engaged
in sales which are zero-rated or effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the claim must be
filed within two years after the close of the taxable quarter when such sales were made; and (4) the creditable input
tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax
has not been applied against the output tax.
The Court finds that the first three requirements have been complied [with] by petitioner.
With regard to the first requisite, the evidence presented by petitioner, such as the Sales Invoices (Exhibits "II" to
"II-262," "JJ" to "JJ-431," "KK" to "KK-394" and "LL") shows that it is engaged in sales which are zero-rated.
The second requisite has likewise been complied with. The Certificate of Registration with OCN 1RC0000148499
(Exhibit "C") with the BIR proves that petitioner is a registered VAT taxpayer.

In compliance with the third requisite, petitioner filed its administrative claim for refund on September 30, 2004
(Exhibit "N") and the present Petition for Review on September 30, 2004, both within the two (2) year prescriptive
period from the close of the taxable quarter when the sales were made, which is from September 30, 2002.
As regards, the fourth requirement, the Court finds that there are some documents and claims of petitioner that are
baseless and have not been satisfactorily substantiated.
xxxx
In sum, petitioner has sufficiently proved that it is entitled to a refund or issuance of a tax credit certificate
representing unutilized excess input VAT payments for the period July 1, 2002 to September 30, 2002, which are
attributable to its zero-rated sales for the same period, but in the reduced amount of P3,239,119.25, computed as
follows:
Amount of Claimed Input VAT
Less:
Exceptions as found by the ICPA

P 3,891,123.82

Net Creditable Input VAT

Less:
Output VAT Due
Excess Creditable Input VAT

P 3,850,103.45

41,020.37

610,984.20
P 3,239,119.25

WHEREFORE, premises considered, the present Petition for Review is PARTIALLY GRANTED. Accordingly,
respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner
[in] the reduced amount of THREE MILLION TWO HUNDRED THIRTY NINE THOUSAND ONE HUNDRED
NINETEEN AND 25/100 PESOS (P3,239,119.25), representing the unutilized input VAT incurred for the months
of July to September 2002.

SO ORDERED.14
Dissatisfied with the above-quoted Decision, petitioner filed a Motion for Partial Reconsideration,15 insisting that
the administrative and the judicial claims were filed beyond the two-year period to claim a tax refund/credit
provided for under Sections 112(A) and 229 of the NIRC. He reasoned that since the year 2004 was a leap year, the
filing of the claim for tax refund/credit on September 30, 2004 was beyond the two-year period, which expired on
September 29, 2004.16 He cited as basis Article 13 of the Civil Code,17 which provides that when the law speaks of
a year, it is equivalent to 365 days. In addition, petitioner argued that the simultaneous filing of the administrative
and the judicial claims contravenes Sections 112 and 229 of the NIRC.18 According to the petitioner, a prior filing
of an administrative claim is a "condition precedent" 19 before a judicial claim can be filed. He explained that the
rationale of such requirement rests not only on the doctrine of exhaustion of administrative remedies but also on
the fact that the CTA is an appellate body which exercises the power of judicial review over administrative actions
of the BIR. 20
The Second Division of the CTA, however, denied petitioners Motion for Partial Reconsideration for lack of
merit. Petitioner thus elevated the matter to the CTA En Banc via a Petition for Review.21
Ruling of the CTA En Banc
On July 30, 2008, the CTA En Banc affirmed the Second Divisions Decision allowing the partial tax refund/credit
in favor of respondent. However, as to the reckoning point for counting the two-year period, the CTA En Banc
ruled:
Petitioner argues that the administrative and judicial claims were filed beyond the period allowed by law and
hence, the honorable Court has no jurisdiction over the same. In addition, petitioner further contends that
respondent's filing of the administrative and judicial [claims] effectively eliminates the authority of the honorable
Court to exercise jurisdiction over the judicial claim.
We are not persuaded.

Section 114 of the 1997 NIRC, and We quote, to wit:

SEC. 114. Return and Payment of Value-added Tax.
(A) In General. Every person liable to pay the value-added tax imposed under this Title shall file a quarterly
return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable
quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-added
tax on a monthly basis.
[x x x x ]
Based on the above-stated provision, a taxpayer has twenty five (25) days from the close of each taxable quarter
within which to file a quarterly return of the amount of his gross sales or receipts. In the case at bar, the taxable
quarter involved was for the period of July 1, 2002 to September 30, 2002. Applying Section 114 of the 1997
NIRC, respondent has until October 25, 2002 within which to file its quarterly return for its gross sales or receipts
[with] which it complied when it filed its VAT Quarterly Return on October 20, 2002.
In relation to this, the reckoning of the two-year period provided under Section 229 of the 1997 NIRC should start
from the payment of tax subject claim for refund. As stated above, respondent filed its VAT Return for the taxable
third quarter of 2002 on October 20, 2002. Thus, respondent's administrative and judicial claims for refund filed on
September 30, 2004 were filed on time because AICHI has until October 20, 2004 within which to file its claim for
refund.
In addition, We do not agree with the petitioner's contention that the 1997 NIRC requires the previous filing of an
administrative claim for refund prior to the judicial claim. This should not be the case as the law does not prohibit
the simultaneous filing of the administrative and judicial claims for refund. What is controlling is that both claims
for refund must be filed within the two-year prescriptive period.

In sum, the Court En Banc finds no cogent justification to disturb the findings and conclusion spelled out in the
assailed January 4, 2008 Decision and March 13, 2008 Resolution of the CTA Second Division. What the instant
petition seeks is for the Court En Banc to view and appreciate the evidence in their own perspective of things,
which unfortunately had already been considered and passed upon.
WHEREFORE, the instant Petition for Review is hereby DENIED DUE COURSE and DISMISSED for lack of
merit. Accordingly, the January 4, 2008 Decision and March 13, 2008 Resolution of the CTA Second Division in
CTA Case No. 7065 entitled, "AICHI Forging Company of Asia, Inc. petitioner vs. Commissioner of Internal
Revenue, respondent" are hereby AFFIRMED in toto.
SO ORDERED.22
Petitioner sought reconsideration but the CTA En Banc denied23 his Motion for Reconsideration.
Issue
Hence, the present recourse where petitioner interposes the issue of whether respondents judicial and
administrative claims for tax refund/credit were filed within the two-year prescriptive period provided in Sections
112(A) and 229 of
the NIRC.24
Petitioners Arguments
Petitioner maintains that respondents administrative and judicial claims for tax refund/credit were filed in
violation of Sections 112(A) and 229 of the NIRC.25 He posits that pursuant to Article 13 of the Civil Code,26 since
the year 2004 was a leap year, the filing of the claim for tax refund/credit on September 30, 2004 was beyond the
two-year period, which expired on September 29, 2004.27

Petitioner further argues that the CTA En Banc erred in applying Section 114(A) of the NIRC in determining the
start of the two-year period as the said provision pertains to the compliance requirements in the payment of
VAT.28 He asserts that it is Section 112, paragraph (A), of the same Code that should apply because it specifically
provides for the period within which a claim for tax refund/ credit should be made.29
Petitioner likewise puts in issue the fact that the administrative claim with the BIR and the judicial claim with the
CTA were filed on the same day.30 He opines that the simultaneous filing of the administrative and the judicial
claims contravenes Section 229 of the NIRC, which requires the prior filing of an administrative claim. 31 He insists
that such procedural requirement is based on the doctrine of exhaustion of administrative remedies and the fact that
the CTA is an appellate body exercising judicial review over administrative actions of the CIR.32
Respondents Arguments
For its part, respondent claims that it is entitled to a refund/credit of its unutilized input VAT for the period July 1,
2002 to September 30, 2002 as a matter of right because it has substantially complied with all the requirements
provided by law.33 Respondent likewise defends the CTA En Banc in applying Section 114(A) of the NIRC in
computing the prescriptive period for the claim for tax refund/credit. Respondent believes that Section 112(A) of
the NIRC must be read together with Section 114(A) of the same Code.34
As to the alleged simultaneous filing of its administrative and judicial claims, respondent contends that it first filed
an administrative claim with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the DOF
before it filed a judicial claim with the CTA.35 To prove this, respondent points out that its Claimant Information
Sheet No. 4970236 and BIR Form No. 1914 for the third quarter of 2002,37 which were filed with the DOF, were
attached as Annexes "M" and "N," respectively, to the Petition for Review filed with the CTA. 38 Respondent
further contends that the non-observance of the 120-day period given to the CIR to act on the claim for tax
refund/credit in Section 112(D) is not fatal because what is important is that both claims are filed within the twoyear prescriptive period.39 In support thereof, respondent cites Commissioner of Internal Revenue v. Victorias
Milling Co., Inc.40 where it was ruled that "[i]f, however, the [CIR] takes time in deciding the claim, and the period
of two years is about to end, the suit or proceeding must be started in the [CTA] before the end of the two-year

period without awaiting the decision of the [CIR]."41 Lastly, respondent argues that even if the period had already
lapsed, it may be suspended for reasons of equity considering that it is not a jurisdictional requirement. 42
Our Ruling
The petition has merit.
Unutilized input VAT must be claimed within two years after the close of the taxable quarter when the sales were
made
In computing the two-year prescriptive period for claiming a refund/credit of unutilized input VAT, the Second
Division of the CTA applied Section 112(A) of the NIRC, which states:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales Any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such
sales, except transitional input tax, to the extent that such input tax has not been applied against output tax:
Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108
(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where
the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or
properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed
to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. (Emphasis
supplied.)
The CTA En Banc, on the other hand, took into consideration Sections 114 and 229 of the NIRC, which read:
SEC. 114. Return and Payment of Value-Added Tax.

(A) In General. Every person liable to pay the value-added tax imposed under this Title shall file a quarterly
return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable
quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-added
tax on a monthly basis.
Any person, whose registration has been cancelled in accordance with Section 236, shall file a return and pay the
tax due thereon within twenty-five (25) days from the date of cancellation of registration: Provided, That only one
consolidated return shall be filed by the taxpayer for his principal place of business or head office and all branches.
xxxx
SEC. 229. Recovery of tax erroneously or illegally collected.
No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax
hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been
collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected,
until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment
of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the
Commissioner may, even without written claim therefor, refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears clearly to have been erroneously paid. (Emphasis supplied.)
Hence, the CTA En Banc ruled that the reckoning of the two-year period for filing a claim for refund/credit of
unutilized input VAT should start from the date of payment of tax and not from the close of the taxable quarter
when the sales were made.43

The pivotal question of when to reckon the running of the two-year prescriptive period, however, has already been
resolved in Commissioner of Internal Revenue v. Mirant Pagbilao Corporation,44 where we ruled that Section
112(A) of the NIRC is the applicable provision in determining the start of the two-year period for claiming a
refund/credit of unutilized input VAT, and that Sections 204(C) and 229 of the NIRC are inapplicable as "both
provisions apply only to instances of erroneous payment or illegal collection of internal revenue taxes." 45 We
explained that:
The above proviso [Section 112 (A) of the NIRC] clearly provides in no uncertain terms that unutilized input
VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed within two
years reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the
input VAT regardless of whether said tax was paid or not. As the CA aptly puts it, albeit it erroneously applied
the aforequoted Sec. 112 (A), "[P]rescriptive period commences from the close of the taxable quarter when the
sales were made and not from the time the input VAT was paid nor from the time the official receipt was issued."
Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said taxpayer only
has a year to file a claim for refund or tax credit of the unutilized creditable input VAT. The reckoning frame
would always be the end of the quarter when the pertinent sales or transaction was made, regardless when the input
VAT was paid. Be that as it may, and given that the last creditable input VAT due for the period covering the
progress billing of September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for
unutilized creditable input VAT refund or tax credit for said quarter prescribed two years after September 30, 1996
or, to be precise, on September 30, 1998. Consequently, MPCs claim for refund or tax credit filed on December
10, 1999 had already prescribed.
Reckoning
for
Secs. 204(C) and 229 of the NIRC inapplicable

prescriptive

period

under

To be sure, MPC cannot avail itself of the provisions of either Sec. 204(C) or 229 of the NIRC which, for the
purpose of refund, prescribes a different starting point for the two-year prescriptive limit for the filing of a claim
therefor. Secs. 204(C) and 229 respectively provide:

Sec. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. The Commissioner
may
xxxx
(c) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value
of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion,
redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of
destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the
Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided,
however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund.
xxxx
Sec. 229. Recovery of Tax Erroneously or Illegally Collected. No suit or proceeding shall be maintained in any
court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally
assessed or collected, or of any penalty claimed to have been collected without authority, of any sum alleged to
have been excessively or in any manner wrongfully collected without authority, or of any sum alleged to have been
excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been
paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment
of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the
Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears clearly to have been erroneously paid.

Notably, the above provisions also set a two-year prescriptive period, reckoned from date of payment of the tax or
penalty, for the filing of a claim of refund or tax credit. Notably too, both provisions apply only to instances of
erroneous payment or illegal collection of internal revenue taxes.
MPCs creditable input VAT not erroneously paid
For perspective, under Sec. 105 of the NIRC, creditable input VAT is an indirect tax which can be shifted or
passed on to the buyer, transferee, or lessee of the goods, properties, or services of the taxpayer. The fact that the
subsequent sale or transaction involves a wholly-tax exempt client, resulting in a zero-rated or effectively zerorated transaction, does not, standing alone, deprive the taxpayer of its right to a refund for any unutilized creditable
input VAT, albeit the erroneous, illegal, or wrongful payment angle does not enter the equation.
xxxx
Considering the foregoing discussion, it is clear that Sec. 112 (A) of the NIRC, providing a two-year
prescriptive period reckoned from the close of the taxable quarter when the relevant sales or transactions
were made pertaining to the creditable input VAT, applies to the instant case, and not to the other actions
which refer to erroneous payment of taxes.46 (Emphasis supplied.)
In view of the foregoing, we find that the CTA En Banc erroneously applied Sections 114(A) and 229 of the NIRC
in computing the two-year prescriptive period for claiming refund/credit of unutilized input VAT. To be clear,
Section 112 of the NIRC is the pertinent provision for the refund/credit of input VAT. Thus, the two-year period
should be reckoned from the close of the taxable quarter when the sales were made.
The administrative claim was timely filed
Bearing this in mind, we shall now proceed to determine whether the administrative claim was timely filed.

Relying on Article 13 of the Civil Code,47 which provides that a year is equivalent to 365 days, and taking into
account the fact that the year 2004 was a leap year, petitioner submits that the two-year period to file a claim for
tax refund/ credit for the period July 1, 2002 to September 30, 2002 expired on September 29, 2004.48
We do not agree.
In Commissioner of Internal Revenue v. Primetown Property Group, Inc., 49 we said that as between the Civil Code,
which provides that a year is equivalent to 365 days, and the Administrative Code of 1987, which states that a year
is composed of 12 calendar months, it is the latter that must prevail following the legal maxim, Lex posteriori
derogat priori.50 Thus:
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal
with the same subject matter the computation of legal periods. Under the Civil Code, a year is equivalent to 365
days whether it be a regular year or a leap year. Under the Administrative Code of 1987, however, a year is
composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days is
irrelevant.
There obviously exists a manifest incompatibility in the manner of
computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that
Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the
computation of legal periods. Lex posteriori derogat priori.
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two-year
prescriptive period (reckoned from the time respondent filed its final adjusted return on April 14, 1998) consisted
of 24 calendar months, computed as follows:
Year 1 1st calendar April 15, 1998 to May 14, 1998
month

2nd calendar month

May 15, 1998 to June 14, 1998

3rd calendar month

June 15, 1998 to July 14, 1998

4th calendar month

July 15, 1998 to August 14, 1998

5th calendar month

August 15, 1998 to September 14,

1998

6th calendar month

September 15, 1998 to October 14,

1998

7th calendar month

October 15, 1998 to November 14,

1998

8th calendar month

November 15, 1998 to December 14,

1998

9th calendar month

December 15, 1998 to January 14,

1999

10th calendar month

January 15, 1999 to February 14, 1999

11th calendar month

February 15, 1999 to March 14, 1999

12th calendar month

March 15, 1999 to April 14, 1999

Year 2 13th calendar April 15, 1999 to May 14, 1999

month
14th calendar month

May 15, 1999 to June 14, 1999

15th calendar month

June 15, 1999 to July 14, 1999

16th calendar month

July 15, 1999 to August 14, 1999

17th calendar month

August 15, 1999 to September 14,

1999

18th calendar month

September 15, 1999 to October 14,

1999

19th calendar month

October 15, 1999 to November 14,

1999

20th calendar month

November 15, 1999 to December 14,

1999

21st calendar month

December 15, 1999 to January 14,

2000

22nd calendar month

January 15, 2000 to February 14, 2000

23rd calendar month

February 15, 2000 to March 14, 2000

24th calendar month

March 15, 2000 to April 14, 2000

We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar
month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period. 51
Applying this to the present case, the two-year period to file a claim for tax refund/credit for the period July 1,
2002 to September 30, 2002 expired on September 30, 2004. Hence, respondents administrative claim was timely
filed.
The filing of the judicial claim was premature
However, notwithstanding the timely filing of the administrative claim, we

are constrained to deny respondents claim for tax refund/credit for having been filed in violation of Section
112(D) of the NIRC, which provides that:
SEC. 112. Refunds or Tax Credits of Input Tax.
xxxx
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases, the Commissioner
shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents in support of the application filed in accordance with
Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty
(30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty dayperiod, appeal the decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied.)
Section 112(D) of the NIRC clearly provides that the CIR has "120 days, from the date of the submission of the
complete documents in support of the application [for tax refund/credit]," within which to grant or deny the claim.
In case of full or partial denial by the CIR, the taxpayers recourse is to file an appeal before the CTA within 30
days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the
application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30
days.
In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this reason,
we find the filing of the judicial claim with the CTA premature.

Respondents assertion that the non-observance of the 120-day period is not fatal to the filing of a judicial claim as
long as both the administrative and the judicial claims are filed within the two-year prescriptive period52 has no
legal basis.
There is nothing in Section 112 of the NIRC to support respondents view. Subsection (A) of the said provision
states that "any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two years
after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or
refund of creditable input tax due or paid attributable to such sales." The phrase "within two (2) years x x x apply
for the issuance of a tax credit certificate or refund" refers to applications for refund/credit filed with the CIR and
not to appeals made to the CTA. This is apparent in the first paragraph of subsection (D) of the same provision,
which states that the CIR has "120 days from the submission of complete documents in support of the application
filed in accordance with Subsections (A) and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC, which
already provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR.
The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is issued by the
CIR before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In both
instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then, the 120-day
period is crucial in filing an appeal with the CTA.
With regard to Commissioner of Internal Revenue v. Victorias Milling, Co., Inc.53 relied upon by respondent, we
find the same inapplicable as the tax provision involved in that case is Section 306, now Section 229 of the NIRC.
And as already discussed, Section 229 does not apply to refunds/credits of input VAT, such as the instant case.
In fine, the premature filing of respondents claim for refund/credit of input VAT before the CTA warrants a
dismissal inasmuch as no jurisdiction was acquired by the CTA.

WHEREFORE, the Petition is hereby GRANTED. The assailed July 30, 2008 Decision and the October 6, 2008
Resolution of the Court of Tax Appeals are hereby REVERSED and SET ASIDE. The Court of Tax Appeals
Second Division is DIRECTED to dismiss CTA Case No. 7065 for having been prematurely filed.
SO ORDERED.
G.R. No. 183994

June 30, 2014

WILLIAM
CO
a.k.a.
XU
QUING
HE, Petitioner,
vs.
NEW PROSPERITY PLASTIC PRODUCTS, represented by ELIZABETH UY,1 Respondent.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari under Rule 45 of the 1997 Revised Rules on Civil Procedure
(Rules) are the April 30, 20082 and August 1, 20083 Resolutions of the Court of Appeals (CA) in CA-G.R. SP No.
102975, which dismissed the petition and denied the motion for reconsideration, respectively. In effect, the CA
affirmed the January 28, 2008 Decision4 of the Regional Trial Court (RTC) Branch 121 of Caloocan City, which
annulled and set aside the Orders dated September 4, 2006 5 and November 16, 20066 of the Metropolitan Trial
Court (MeTC), Branch 50 of Caloocan City, permanently dismissing Criminal Case Nos. 206655-59, 206661-77
and 209634.
The facts are simple and undisputed:
Respondent New Prosperity Plastic Products, represented by Elizabeth Uy (Uy), is the private complainant in
Criminal Case Nos. 206655-59, 206661-77 and 209634 for Violation of Batas Pambansa (B.P.) Bilang 22 filed
against petitioner William Co (Co), which were raffled to the MeTC Branch. 49 of Caloocan City. In the absence
of Uy and the private counsel, the cases were provisionally dismissed on June 9, 2003 in open court pursuant to

Section 8, Rule 117 of the Revised Rules of Criminal Procedure (Rules).7 Uy received a copy of the June9, 2003
Order on July 2, 2003, while her counsel-of-record received a copy a day after.8 On July 2, 2004, Uy, through
counsel, filed a Motion to Revive the Criminal Cases.9 Hon. Belen B. Ortiz, then Presiding Judge of the MeTC
Branch 49, granted the motion on October 14, 2004 and denied Cos motion for reconsideration. 10 When Co moved
for recusation, Judge Ortiz inhibited herself from handling the criminal cases per Order dated January 10,
2005.11 The cases were, thereafter, raffled to the MeTC Branch 50 of Caloocan City. On March 17, 2005, Co filed
a petition for certiorari and prohibition with prayer for the issuance of a temporary restraining order (TRO)/writ of
preliminary injunction (WPI) before the RTC of Caloocan City challenging the revival of the criminal cases. 12 It
was, however, dismissed for lack of merit on May 23, 2005. 13 Cos motion for reconsideration was, subsequently,
denied on December 16, 2005.14 Co then filed a petition for review on certiorari under Rule 45 before the Supreme
Court, which was docketed as G.R. No. 171096.15 We dismissed the petition per Resolution dated February 13,
2006.16 There being no motion for reconsideration filed, the dismissal became final and executory on March 20,
2006.17
Before the MeTC Branch 50 where Criminal Case Nos. 206655-59, 206661-77 and 209634 were re-raffled after
the inhibition of Judge Ortiz, Co filed a "Motion for Permanent Dismissal" on July 13, 2006.18 Uy opposed the
motion, contending that the motion raised the same issues already resolved with finality by this Court in G.R. No.
171096.19 In spite of this, Judge Esteban V. Gonzaga issued an Order dated September 4, 2006 granting Cos
motion.20 When the court subsequently denied Uys motion for reconsideration on November 16, 2006, 21 Uy filed a
petition for certiorari before the RTC of Caloocan City. On January 28, 2008, Hon. Judge Adoracion G. Angeles of
the RTC Branch 121 acted favorably on the petition, annulling and setting aside the Orders dated September 4,
2006 and November 16, 2006 and directing the MeTC Branch 50 to proceed with the trial of the criminal
cases.22Co then filed a petition for certiorari before the CA, which, as aforesaid, dismissed the petition and denied
his motion for reconsideration. Hence, this present petition with prayer for TRO/WPI.
According to Co, the following issues need to be resolved in this petition:

1. WHETHER OR NOT THE DISMISSAL OF THE CRIMINAL CASES AGAINST PETITIONER

ONTHE GROUND OF DENIAL OF HIS RIGHT TO SPEEDY TRIAL CONSTITUTES FINAL
DISMISSAL OF THESE CASES;
2. WHETHER OR NOT THE METC ACTED WITH JURISDICTION IN REVIVING THE CRIMINAL
CASES AGAINST PETITIONER WHICH WERE DISMISSED ON THE GROUND OF DENIAL OF HIS
RIGHT TO SPEEDY TRIAL; and
3. ASSUMING POR GRATIA ARGUMENTITHE CASES WERE ONLY PROVISIONALLY
DISMISSED:
a. WHETHER THE ONE-YEAR TIMEBAR OF THEIR REVIVAL IS COMPUTED FROM
ISSUANCE OF THE ORDER OF PROVISIONAL DISMISSAL;
b. WHETHER THE ACTUAL NUMBER OF DAYS IN A YEAR IS THE BASIS FOR
COMPUTING THE ONE-YEAR TIME BAR;
c. WHETHER THE PROVISIONALLY DISMISSED CASES AGAINST PETITIONER ARE
REVIVED IPSO FACTO BY THE FILING OF MOTION TO REVIVE THESE CASES.23
Co argues that the June 9, 2003 Order provisionally dismissing Criminal Case Nos. 206655-59, 206661-77 and
209634 should be considered as a final dismissal on the ground that his right to speedy trial was denied. He reasons
out that from his arraignment on March 4, 2002 until the initial trial on June 9, 2003, there was already a
"vexatious, capricious and oppressive" delay, which is in violation of Section 6 of Republic Act 8493 (Speedy Trial
Act of 1998)24 and Section 2, Paragraph 2, Rule 119 of the Revised Rules of Criminal Procedure 25 mandating that
the entire trial period should not exceed 180 days from the first day of trial. As the dismissal is deemed final, Co
contends that the MeTC lost its jurisdiction over the cases and cannot reacquire jurisdiction over the same based on
a mere motion because its revival would already put him in double jeopardy.

Assuming that the criminal cases were only provisionally dismissed, Co further posits that such dismissal became
permanent one year after the issuance of the June 9, 2003 Order, not after notice to the offended party. He also
insists that both the filing of the motion to revive and the trial courts issuance of the order granting the revival
must be within the one-year period. Lastly, even assuming that the one-year period to revive the criminal cases
started on July 2, 2003 when Uy received the June 9, 2003 Order, Co asserts that the motion was filed one day late
since year 2004 was a leap year.
The petition is unmeritorious.
At the outset, it must be noted that the issues raised in this petition were also the meat of the controversy in Cos
previous petition in G.R. No. 171096, which We dismissed per Resolution dated February 13, 2006. Such dismissal
became final and executory on March 20, 2006. While the first petition was dismissed mainly due to procedural
infirmities, this Court nonetheless stated therein that "[i]n any event, the petition lacks sufficient showing that
respondent court had committed any reversible error in the questioned judgment to warrant the exercise by this
Court of its discretionary appellate jurisdiction in this case." Hence, upon the finality of Our February 13, 2006
Resolution in G.R. No. 171096, the same already constitutes as res judicata between the parties. On this ground
alone, this petition should have been dismissed outright.
Even if We are to squarely resolve the issues repeatedly raised in the present petition, Cos arguments are
nonetheless untenable on the grounds as follows:
First, Cos charge that his right to a speedy trial was violated is baseless. Obviously, he failed to show any
evidence that the alleged "vexatious, capricious and oppressive" delay in the trial was attended with malice or that
the same was made without good cause or justifiable motive on the part of the prosecution. This Court has
emphasized that "speedy trial is a relative term and necessarily a flexible concept." 26 In determining whether the
accused's right to speedy trial was violated, the delay should be considered in view of the entirety of the
proceedings.27 The factors to balance are the following: (a) duration of the delay; (b) reason therefor; (c) assertion
of the right or failure to assert it; and (d) prejudice caused by such delay. 28 Surely, mere mathematical reckoning of
the time involved would not suffice as the realities of everyday life must be regarded in judicial proceedings which,

after all, do not exist in a vacuum, and that particular regard must be given to the facts and circumstances peculiar
to each case.29 "While the Court recognizes the accused's right to speedy trial and adheres to a policy of speedy
administration of justice, we cannot deprive the State of a reasonable opportunity to fairly prosecute criminals.
Unjustified postponements which prolong the trial for an unreasonable length of time are what offend the right of
the accused to speedy trial."30
Second, Co is burdened to establish the essential requisites of the first paragraph of Section 8, Rule 117 of the
Rules, which are conditions sine qua non to the application of the time-bar in the second paragraph thereof, to wit:
(1) the prosecution with the express conformity of the accused or the accused moves for a provisional (sin
perjuicio) dismissal of the case; or both the prosecution and the accused move for a provisional dismissal of the
case; (2) the offended party is notified of the motion for a provisional dismissal of the case; (3) the court issues an
order granting the motion and dismissing the case provisionally; and (4) the public prosecutor is served with a copy
of the order of provisional dismissal of the case.31 In this case, it is apparent from the records that there is no notice
of any motion for the provisional dismissal of Criminal Cases Nos. 206655-59, 206661-77 and 209634 or of the
hearing thereon which was served on the private complainant at least three days before said hearing as mandated
by Section 4, Rule 15 of the Rules.32 The fact is that it was only in open court that Co moved for provisional
dismissal "considering that, as per records, complainant had not shown any interest to pursue her complaint."33 The
importance of a prior notice to the offended party of a motion for provisional dismissal is aptly explained in People
v. Lacson:34
x x x It must be borne in mind that in crimes involving private interests, the new rule requires that the offended
party or parties or the heirs of the victims must be given adequate a priori notice of any motion for the provisional
dismissal of the criminal case. Such notice may be served on the offended party or the heirs of the victim through
the private prosecutor, if there is one, or through the public prosecutor who in turn must relay the notice to the
offended party or the heirs of the victim to enable them to confer with him before the hearing or appear in court
during the hearing. The proof of such service must be shown during the hearing on the motion, otherwise, the
requirement of the new rule will become illusory. Such notice will enable the offended party or the heirs of the
victim the opportunity to seasonably and effectively comment on or object to the motion on valid grounds,
including: (a) the collusion between the prosecution and the accused for the provisional dismissal of a criminal

case thereby depriving the State of its right to due process; (b) attempts to make witnesses unavailable; or (c) the
provisional dismissal of the case with the consequent release of the accused from detention would enable him to
threaten and kill the offended party or the other prosecution witnesses or flee from Philippine jurisdiction, provide
opportunity for the destruction or loss of the prosecutions physical and other evidence and prejudice the rights of
the offended party to recover on the civil liability of the accused by his concealment or furtive disposition of his
property or the consequent lifting of the writ of preliminary attachment against his property. 35
Third, there is evident want of jurisprudential support on Cos supposition that the dismissal of the cases became
permanent one year after the issuance of the June 9, 2003 Order and not after notice to the offended party. When
the Rules states that the provisional dismissal shall become permanent one year after the issuance of the order
temporarily dismissing the case, it should not be literally interpreted as such. Of course, there is a vital need to
satisfy the basic requirements of due process; thus, said in one case:
Although the second paragraph of the new rule states that the order of dismissal shall become permanent one year
after the issuance thereof without the case having been revived, the provision should be construed to mean that the
order of dismissal shall become permanent one year after service of the order of dismissal on the public prosecutor
who has control of the prosecution without the criminal case having been revived. The public prosecutor cannot be
expected to comply with the timeline unless he is served with a copy of the order of dismissal.36
We hasten to add though that if the offended party is represented by a private counsel the better rule is that the
reckoning period should commence to run from the time such private counsel was actually notified of the order of
provisional dismissal. When a party is represented by a counsel, notices of all kinds emanating from the court
should be sent to the latter at his/her given address.37 Section 2, Rule 13 of the Rules analogously provides that if
any party has appeared by counsel, service upon the former shall be made upon the latter.38
Fourth, the contention that both the filing of the motion to revive the case and the court order reviving it must be
made prior to the expiration of the one-year period is unsustainable. Such interpretation is not found in the Rules.
Moreover, to permit otherwise would definitely put the offended party at the mercy of the trial court, which may
wittingly or unwittingly not comply. Judicial notice must be taken of the fact that most, if not all, of our trial court

judges have to deal with clogged dockets in addition to their administrative duties and functions. Hence, they could
not be expected to act at all times on all pending decisions, incidents, and related matters within the prescribed
period of time. It is likewise possible that some of them, motivated by ill-will or malice, may simply exercise their
whims and caprices in not issuing the order of revival on time.
Fifth, the fact that year 2004 was a leap year is inconsequential to determine the timeliness of Uys motion to
revive the criminal cases. What is material instead is Cos categorical admission that Uy is represented by a private
counsel who only received a copy of the June 9, 2003 Order on July 3, 2003. Therefore, the motion was not
belatedly filed on July 2, 2004. Since the period for filing a motion to revive is reckoned from the private counsel's
receipt of the order of provisional dismissal, it necessarily follows that the reckoning period for the permanent
dismissal is likewise the private counsel's date of receipt of the order of provisional dismissal.
And Sixth, granting for the sake of argument that this Court should take into account 2004 as a leap year and that
the one-year period to revive the case should be reckoned from the date of receipt of the order of provisional
dismissal by Uy, We still hold that the motion to revive the criminal cases against Co was timely filed. A year is
equivalent to 365 days regardless of whether it is a regular year or a leap year.39 Equally so, under the
Administrative Code of 1987, a yearis composed of 12 calendar months. The number of days is irrelevant. This
was our ruling in Commissioner of Internal Revenue v. Primetown Property Group, Inc., 40 which was subsequently
reiterated in Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.,41 thus:
x x x [In] 1987, EO 292 or the Administrative Code of 1987 was enacted. Section 31, Chapter VIII, Book I thereof
provides:
Sec. 31.Legal Periods.- "Year" shall be understood to be twelve calendar months; "month" of thirty days, unless it
refers to a specific calendar month in which case it shall be computed according to the number of days the specific
month contains; "day", to a day of twenty-four hours and; "night" from sunrise to sunset. (emphasis supplied)
A calendar month is "a month designated in the calendar without regard to the number of days it may contain." It is
the "period of time running from the beginning of a certain numbered day up to, but not including, the

corresponding numbered day of the next month, and if there is not a sufficient number of days in the next month,
then up to and including the last day of that month." To illustrate, one calendar month from December 31, 2007
will be from January 1, 2008 to January 31, 2008; one calendar month from January 31, 2008 will be from
February 1, 2008 until February 29, 2008.42
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the one-year period
reckoned from the time Uy received the order of dismissal on July2, 2003 consisted of 24 calendar months,
computed as follows:
1st calendar month July 3, 2003 to August 2, 2003
2nd calendar month August 3, 2003 to September 2, 2003
3rd calendar month September 3, 2003 to October 2, 2003
4th calendar month October 3, 2003 to November 2, 2003
5th calendar month November 3, 2003 to December 2, 2003
6th calendar month December 3, 2003 to January 2, 2004
7th calendar month January 3, 2004 to February 2, 2004
8th calendar month February 3, 2004 to March 2, 2004
9th calendar month March 3, 2004 to April 2, 2004
10th calendar month April 3, 2004 to May 2, 2004
11th calendar month May 3, 2004 to June 2, 2004

12th calendar month June 3, 2004 to July 2, 2004

In the end, We find it hard to disregard the thought that the instant petition was filed as a dilatory tactic to
prosecute Criminal Case Nos. 206655-59, 206661-77 and 209634. As correctly pointed out by Uy since the time
when the "Motion for Permanent Dismissal" was filed, the issues raised herein were already resolved with finality
by this Court in G.R. No. 171096. Verily, Co, acting through the guidance and advice of his counsel, Atty. Oscar
C. Maglaque, adopted a worthless and vexatious legal maneuver for no purpose other than to delay the trial court
proceedings. It appears that Atty. Maglaques conduct contravened the Code of Professional Responsibility which
enjoins lawyers to observe the rules of procedure and not to misuse them to defeat the ends of justice (Rule 10.03,
Canon 10) as well as not to unduly delay a case or misuse court processes (Rule 12.04, Canon 12). The Lawyers
Oath also upholds in particular:
x x x I will not wittingly or willingly promote or sue any groundless, false or unlawful suit, nor give aid nor
consent to the same; I will delay no man for money or malice, and will conduct myself as a lawyer according to the
best of my knowledge and discretion with all good fidelity as well to the courts as to my clients x x x.1wphi1
This Court has repeatedly impressed upon counsels that the need for the prompt termination of litigation is
essential to an effective and efficient administration of justice. In Spouses Aguilar v. Manila Banking
Corporation,43We said:
The Court reminds petitioners' counsel of the duty of lawyers who, as officers of the court, must see to it that the
orderly administration of justice must not be unduly impeded. It is the duty of a counsel to advise his client,
ordinarily a layman on the intricacies and vagaries of the law, on the merit or lack of merit of his case. If he finds
that his client's cause is defenseless, then it is his bounden duty to advise the latter to acquiesce and submit, rather
than traverse the incontrovertible. A lawyer must resist the whims and caprices of his client, and temper his client's
propensity to litigate. A lawyers oath to uphold the cause of justice is superior to his duty to his client; its primacy
is indisputable.44

WHEREFORE, premises considered, the Petition is DENIED. The April 30, 2008 and August 1, 2008 Resolutions
of the Court of Appeals, respectively, in CA-G.R. SP No. 102975, which affirmed the January 28, 2008 Decision
of the Regional Trial Court, Branch 121 of Caloocan City, annulling and setting aside the Orders dated September
4, 2006 and November 16, 2006 of the Metropolitan Trial Court, Branch 50 of Caloocan City that permanently
dismissed Criminal Case Nos. 206655-59, 206661-77 and 209634, are hereby AFFIRMED. Costs of suit to be paid
by the petitioner.
The Commission on Bar Discipline-Integrated Bar of the Philippines is DIRECTED to investigate Atty. Oscar C.
Maglaque for his acts that appear to have violated the Lawyer's Oath, the Code of Professional Responsibility, and
the Rule on Forum Shopping.
SO ORDERED.
G.R. No. 171914

July 23, 2014

SOLEDAD
L.
LAVADIA, Petitioner,
vs.
HEIRS OF JUAN LUCES LUNA, represented by GREGORIO Z. LUNA and EUGENIA ZABALLEROLUNA, Respondents.
DECISION
BERSAMIN, J.:
Divorce between Filipinos is void and ineffectual under the nationality rule adopted by Philippine law. Hence, any
settlement of property between the parties of the first marriage involving Filipinos submitted as an incident of a
divorce obtained in a foreign country lacks competent judicial approval, and cannot be enforceable against the
assets of the husband who contracts a subsequent marriage.
The Case

The petitioner, the second wife of the late Atty. Juan Luces Luna, appeals the adverse decision promulgated on
November 11, 2005,1 whereby the Court of Appeals (CA) affirmed with modification the decision rendered on
August 27, 2001 by the Regional Trial Court (RTC), Branch 138, in Makati City.2 The CA thereby denied her right
in the 25/100 pro indiviso share of the husband in a condominium unit, and in the law books of the husband
acquired during the second marriage.
Antecedents
The antecedent facts were summarized by the CA as follows:
ATTY. LUNA, a practicing lawyer, was at first a name partner in the prestigious law firm Sycip, Salazar, Luna,
Manalo, Hernandez & Feliciano Law Offices at that time when he was living with his first wife, herein intervenorappellant Eugenia Zaballero-Luna (EUGENIA), whom he initially married ina civil ceremony conducted by the
Justice of the Peace of Paraaque, Rizal on September 10, 1947 and later solemnized in a church ceremony at the
Pro-Cathedral in San Miguel, Bulacan on September 12, 1948. In ATTY. LUNAs marriage to EUGENIA, they
begot seven (7) children, namely: Regina Maria L. Nadal, Juan Luis Luna, Araceli Victoria L. Arellano, Ana Maria
L. Tabunda, Gregorio Macario Luna, Carolina Linda L. Tapia, and Cesar Antonio Luna. After almost two (2)
decades of marriage, ATTY. LUNA and EUGENIA eventually agreed to live apart from each other in February
1966 and agreed to separation of property, to which end, they entered into a written agreement entitled
"AGREEMENT FOR SEPARATION AND PROPERTY SETTLEMENT" dated November 12, 1975, whereby
they agreed to live separately and to dissolve and liquidate their conjugal partnership of property.
On January 12, 1976, ATTY. LUNA obtained a divorce decree of his marriage with EUGENIA from the Civil and
Commercial Chamber of the First Circumscription of the Court of First Instance of Sto. Domingo, Dominican
Republic. Also in Sto.Domingo, Dominican Republic, on the same date, ATTY. LUNA contracted another
marriage, this time with SOLEDAD. Thereafter, ATTY. LUNA and SOLEDAD returned to the Philippines and
lived together as husband and wife until 1987.

Sometime in 1977, ATTY. LUNA organized a new law firm named: Luna, Puruganan, Sison and Ongkiko
(LUPSICON) where ATTY. LUNA was the managing partner.
On February 14, 1978, LUPSICON through ATTY. LUNA purchased from Tandang Sora Development
Corporation the 6th Floor of Kalaw-Ledesma Condominium Project(condominium unit) at Gamboa St., Makati
City, consisting of 517.52 square meters, for P1,449,056.00, to be paid on installment basis for 36months starting
on April 15, 1978. Said condominium unit was to be usedas law office of LUPSICON. After full payment, the
Deed of Absolute Sale over the condominium unit was executed on July 15, 1983, and CCT No. 4779 was issued
on August 10, 1983, which was registered bearing the following names:
"JUAN LUCES LUNA, married to Soledad L. Luna (46/100); MARIO E. ONGKIKO, married to Sonia P.G.
Ongkiko (25/100); GREGORIO R. PURUGANAN, married to Paz A. Puruganan (17/100); and TERESITA CRUZ
SISON, married to Antonio J.M. Sison (12/100) x x x" Subsequently, 8/100 share of ATTY. LUNA and 17/100
share of Atty. Gregorio R. Puruganan in the condominium unit was sold to Atty. Mario E. Ongkiko, for which a
new CCT No. 21761 was issued on February 7, 1992 in the following names:
"JUAN LUCES LUNA, married to Soledad L. Luna (38/100); MARIO E. ONGKIKO, married to Sonia P.G.
Ongkiko (50/100); TERESITA CRUZ SISON, married to Antonio J.M. Sison (12/100) x x x"
Sometime in 1992, LUPSICON was dissolved and the condominium unit was partitioned by the partners but the
same was still registered in common under CCT No. 21716. The parties stipulated that the interest of ATTY.
LUNA over the condominium unit would be 25/100 share. ATTY. LUNA thereafter established and headed
another law firm with Atty. Renato G. Dela Cruzand used a portion of the office condominium unit as their office.
The said law firm lasted until the death of ATTY. JUAN on July 12, 1997.
After the death of ATTY. JUAN, his share in the condominium unit including the lawbooks, office furniture and
equipment found therein were taken over by Gregorio Z. Luna, ATTY. LUNAs son of the first marriage. Gregorio
Z. Luna thenleased out the 25/100 portion of the condominium unit belonging to his father to Atty. Renato G. De la
Cruz who established his own law firm named Renato G. De la Cruz & Associates.

The 25/100 pro-indiviso share of ATTY. Luna in the condominium unit as well as the law books, office furniture
and equipment became the subject of the complaint filed by SOLEDAD against the heirs of ATTY. JUAN with the
RTC of Makati City, Branch 138, on September 10, 1999, docketed as Civil Case No. 99-1644. The complaint
alleged that the subject properties were acquired during the existence of the marriage between ATTY. LUNA and
SOLEDAD through their joint efforts that since they had no children, SOLEDAD became co-owner of the said
properties upon the death of ATTY. LUNA to the extent of pro-indiviso share consisting of her share in the
said properties plus her share in the net estate of ATTY. LUNA which was bequeathed to her in the latters last
will and testament; and thatthe heirs of ATTY. LUNA through Gregorio Z. Luna excluded SOLEDAD from her
share in the subject properties. The complaint prayed that SOLEDAD be declared the owner of the portion of the
subject properties;that the same be partitioned; that an accounting of the rentals on the condominium unit
pertaining to the share of SOLEDAD be conducted; that a receiver be appointed to preserve ad administer the
subject properties;and that the heirs of ATTY. LUNA be ordered to pay attorneys feesand costs of the suit to
SOLEDAD.3
Ruling of the RTC
On August 27, 2001, the RTC rendered its decision after trial upon the aforementioned facts,4 disposing thusly:
WHEREFORE, judgment is rendered as follows:
(a) The 24/100 pro-indiviso share in the condominium unit located at the SIXTH FLOOR of the KALAW
LEDESMA CONDOMINIUM PROJECT covered by Condominium Certificate of Title No. 21761
consisting of FIVE HUNDRED SEVENTEEN (517/100) SQUARE METERS is adjudged to have been
acquired by Juan Lucas Luna through his sole industry;
(b) Plaintiff has no right as owner or under any other concept over the condominium unit, hence the entry in
Condominium Certificate of Title No. 21761 of the Registry of Deeds of Makati with respect to the civil
status of Juan Luces Luna should be changed from "JUAN LUCES LUNA married to Soledad L. Luna" to
"JUAN LUCES LUNA married to Eugenia Zaballero Luna";

(c) Plaintiff is declared to be the owner of the books Corpus Juris, Fletcher on Corporation, American
Jurisprudence and Federal Supreme Court Reports found in the condominium unit and defendants are
ordered to deliver them to the plaintiff as soon as appropriate arrangements have been madefor transport and
storage.
No pronouncement as to costs.
SO ORDERED.5
Decision of the CA
Both parties appealed to the CA.6
On her part, the petitioner assigned the following errors to the RTC, namely:
I. THE LOWER COURT ERRED IN RULING THAT THE CONDOMINIUM UNIT WAS ACQUIRED
THRU THE SOLE INDUSTRY OF ATTY. JUAN LUCES LUNA;
II. THE LOWER COURT ERRED IN RULING THAT PLAINTIFFAPPELLANT DID NOT
CONTRIBUTE MONEY FOR THE ACQUISITION OF THE CONDOMINIUM UNIT;
III. THE LOWER COURT ERRED IN GIVING CREDENCE TO PORTIONS OF THE TESTIMONY OF
GREGORIO LUNA, WHO HAS NO ACTUAL KNOWLEDGE OF THE ACQUISITION OF THE UNIT,
BUT IGNORED OTHER PORTIONS OF HIS TESTIMONY FAVORABLE TO THE PLAINTIFFAPPELLANT;
IV. THE LOWER COURT ERRED IN NOT GIVING SIGNIFICANCE TO THE FACT THAT THE
CONJUGAL PARTNERSHIP BETWEEN LUNA AND INTERVENOR-APPELLANT WAS ALREADY
DISSOLVED AND LIQUIDATED PRIOR TO THE UNION OF PLAINTIFF-APPELLANT AND LUNA;

V. THE LOWER COURT ERRED IN GIVING UNDUE SIGNIFICANCE TO THE ABSENCE OF THE
DISPOSITION OF THE CONDOMINIUM UNIT IN THE HOLOGRAPHIC WILL OF THE PLAINTIFFAPPELLANT;
VI. THE LOWER COURT ERRED IN GIVING UNDUE SIGNIFICANCE TO THE FACTTHAT THE
NAME OF PLAINTIFF-APPELLANT DID NOT APPEAR IN THE DEED OF ABSOLUTE SALE
EXECUTED BY TANDANG SORA DEVELOPMENT CORPORATION OVER THE CONDOMINIUM
UNIT;
VII. THE LOWER COURT ERRED IN RULING THAT NEITHER ARTICLE 148 OF THE
FAMILYCODE NOR ARTICLE 144 OF THE CIVIL CODE OF THE PHILIPPINES ARE APPLICABLE;
VIII. THE LOWER COURT ERRED IN NOT RULING THAT THE CAUSE OF ACTION OF THE
INTERVENOR-APPELLANT HAS BEEN BARRED BY PESCRIPTION AND LACHES; and
IX. THE LOWER COURT ERRED IN NOT EXPUNGING/DISMISSING THE INTERVENTION FOR
FAILURE OF INTERVENOR-APPELLANT TO PAY FILING FEE.7
In contrast, the respondents attributedthe following errors to the trial court, to wit:
I. THE LOWER COURT ERRED IN HOLDING THAT CERTAIN FOREIGN LAW BOOKS IN THE
LAW OFFICE OF ATTY. LUNA WERE BOUGHT WITH THE USE OF PLAINTIFFS MONEY;
II. THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF PROVED BY PREPONDERANCE
OF EVIDENCE (HER CLAIM OVER) THE SPECIFIED FOREIGN LAW BOOKS FOUND IN ATTY.
LUNAS LAW OFFICE; and
III. THE LOWER COURT ERRED IN NOT HOLDING THAT, ASSUMING PLAINTIFF PAID FOR THE
SAID FOREIGN LAW BOOKS, THE RIGHT TO RECOVER THEM HAD PRESCRIBED AND
BARRED BY LACHES AND ESTOPPEL.8

On November 11, 2005, the CA promulgated its assailed modified decision,9 holding and ruling:
EUGENIA, the first wife, was the legitimate wife of ATTY. LUNA until the latters death on July 12, 1997. The
absolute divorce decree obtained by ATTY. LUNA inthe Dominican Republic did not terminate his prior marriage
with EUGENIA because foreign divorce between Filipino citizens is not recognized in our jurisdiction. x x x10
xxxx
WHEREFORE, premises considered, the assailed August 27, 2001 Decision of the RTC of MakatiCity, Branch
138, is hereby MODIFIEDas follows:
(a) The 25/100 pro-indiviso share in the condominium unit at the SIXTH FLOOR of the KALAW
LEDESMA CONDOMINIUM PROJECT covered by Condominium Certificate of Title No. 21761
consisting of FIVE HUNDRED SEVENTEEN (517/100) (sic) SQUARE METERS is hereby adjudged to
defendants-appellants, the heirs of Juan Luces Luna and Eugenia Zaballero-Luna (first marriage), having
been acquired from the sole funds and sole industry of Juan Luces Luna while marriage of Juan Luces Luna
and Eugenia Zaballero-Luna (first marriage) was still subsisting and valid;
(b) Plaintiff-appellant Soledad Lavadia has no right as owner or under any other concept over the
condominium unit, hence the entry in Condominium Certificate of Title No. 21761 of the Registry of Deeds
ofMakati with respect to the civil status of Juan Luces Luna should be changed from "JUAN LUCES LUNA
married to Soledad L. Luna" to "JUAN LUCES LUNA married to Eugenia Zaballero Luna";
(c) Defendants-appellants, the heirs of Juan Luces Luna and Eugenia Zaballero-Luna(first marriage) are
hereby declared to be the owner of the books Corpus Juris, Fletcher on Corporation, American Jurisprudence
and Federal Supreme Court Reports found in the condominium unit.
No pronouncement as to costs.
SO ORDERED.11

On March 13, 2006,12 the CA denied the petitioners motion for reconsideration.13
Issues
In this appeal, the petitioner avers in her petition for review on certiorarithat:
A. The Honorable Court of Appeals erred in ruling that the Agreement for Separation and Property
Settlement executed by Luna and Respondent Eugenia was unenforceable; hence, their conjugal partnership
was not dissolved and liquidated;
B. The Honorable Court of Appeals erred in not recognizing the Dominican Republic courts approval of the
Agreement;
C. The Honorable Court of Appeals erred in ruling that Petitioner failed to adduce sufficient proof of actual
contribution to the acquisition of purchase of the subjectcondominium unit; and
D. The Honorable Court of Appeals erred in ruling that Petitioner was not entitled to the subject law books.14
The decisive question to be resolved is who among the contending parties should be entitled to the 25/100 pro
indivisoshare in the condominium unit; and to the law books (i.e., Corpus Juris, Fletcher on Corporation, American
Jurisprudence and Federal Supreme Court Reports).
The resolution of the decisive question requires the Court to ascertain the law that should determine, firstly,
whether the divorce between Atty. Luna and Eugenia Zaballero-Luna (Eugenia) had validly dissolved the first
marriage; and, secondly, whether the second marriage entered into by the late Atty. Luna and the petitioner entitled
the latter to any rights in property. Ruling of the Court
We affirm the modified decision of the CA.

1.
Atty.
Lunas
subsisted up to the time of his death

first

marriage

with

Eugenia

The first marriage between Atty. Luna and Eugenia, both Filipinos, was solemnized in the Philippines on
September 10, 1947. The law in force at the time of the solemnization was the Spanish Civil Code, which adopted
the nationality rule. The Civil Codecontinued to follow the nationality rule, to the effect that Philippine laws
relating to family rights and duties, or to the status, condition and legal capacity of persons were binding upon
citizens of the Philippines, although living abroad.15 Pursuant to the nationality rule, Philippine laws governed
thiscase by virtue of bothAtty. Luna and Eugenio having remained Filipinos until the death of Atty. Luna on July
12, 1997 terminated their marriage.
From the time of the celebration ofthe first marriage on September 10, 1947 until the present, absolute divorce
between Filipino spouses has not been recognized in the Philippines. The non-recognition of absolute divorce
between Filipinos has remained even under the Family Code,16 even if either or both of the spouses are residing
abroad.17 Indeed, the only two types of defective marital unions under our laws have beenthe void and the voidable
marriages. As such, the remedies against such defective marriages have been limited to the declaration of nullity
ofthe marriage and the annulment of the marriage.
It is true that on January 12, 1976, the Court of First Instance (CFI) of Sto. Domingo in the Dominican Republic
issued the Divorce Decree dissolving the first marriage of Atty. Luna and Eugenia.18 Conformably with the
nationality rule, however, the divorce, even if voluntarily obtained abroad, did not dissolve the marriage between
Atty. Luna and Eugenia, which subsisted up to the time of his death on July 12, 1997. This finding conforms to the
Constitution, which characterizes marriage as an inviolable social institution,19 and regards it as a special contract
of permanent union between a man and a woman for the establishment of a conjugal and family life.20 The nonrecognition of absolute divorce in the Philippines is a manifestation of the respect for the sanctity of the marital
union especially among Filipino citizens. It affirms that the extinguishment of a valid marriage must be grounded
only upon the death of either spouse, or upon a ground expressly provided bylaw. For as long as this public policy
on marriage between Filipinos exists, no divorce decree dissolving the marriage between them can ever be given
legal or judicial recognition and enforcement in this jurisdiction.

2.
The
Agreement
was void for lack of court approval

for

Separation

and

Property

Settlement

The petitioner insists that the Agreement for Separation and Property Settlement (Agreement) that the late Atty.
Luna and Eugenia had entered into and executed in connection with the divorce proceedings before the CFI of Sto.
Domingo in the Dominican Republic to dissolve and liquidate their conjugal partnership was enforceable against
Eugenia. Hence, the CA committed reversible error in decreeing otherwise.
The insistence of the petitioner was unwarranted.
Considering that Atty. Luna and Eugenia had not entered into any marriage settlement prior to their marriage on
September 10, 1947, the system of relative community or conjugal partnership of gains governed their property
relations. This is because the Spanish Civil Code, the law then in force at the time of their marriage, did not specify
the property regime of the spouses in the event that they had not entered into any marriage settlement before or at
the time of the marriage. Article 119 of the Civil Codeclearly so provides, to wit:
Article 119. The future spouses may in the marriage settlements agree upon absolute or relative community of
property, or upon complete separation of property, or upon any other regime. In the absence of marriage
settlements, or when the same are void, the system of relative community or conjugal partnership of gains as
established in this Code, shall govern the property relations between husband and wife.
Article 142 of the Civil Codehas defined a conjugal partnership of gains thusly:
Article 142. By means of the conjugal partnership of gains the husband and wife place in a common fund the fruits
of their separate property and the income from their work or industry, and divide equally, upon the dissolution of
the marriage or of the partnership, the net gains or benefits obtained indiscriminately by either spouse during the
marriage.

The conjugal partnership of gains subsists until terminated for any of various causes of termination enumerated in
Article 175 of the Civil Code, viz:
Article 175. The conjugal partnership of gains terminates:
(1) Upon the death of either spouse;
(2) When there is a decree of legal separation;
(3) When the marriage is annulled;
(4) In case of judicial separation of property under Article 191.
The mere execution of the Agreement by Atty. Luna and Eugenia did not per sedissolve and liquidate their
conjugal partnership of gains. The approval of the Agreement by a competent court was still required under Article
190 and Article 191 of the Civil Code, as follows:
Article 190. In the absence of an express declaration in the marriage settlements, the separation of property
between spouses during the marriage shall not take place save in virtue of a judicial order. (1432a)
Article 191. The husband or the wife may ask for the separation of property, and it shall be decreed when the
spouse of the petitioner has been sentenced to a penalty which carries with it civil interdiction, or has been declared
absent, or when legal separation has been granted.
xxxx
The husband and the wife may agree upon the dissolution of the conjugal partnership during the marriage, subject
to judicial approval. All the creditors of the husband and of the wife, as well as of the conjugal partnership shall be
notified of any petition for judicialapproval or the voluntary dissolution of the conjugal partnership, so that any

such creditors may appear atthe hearing to safeguard his interests. Upon approval of the petition for dissolution of
the conjugal partnership, the court shall take such measures as may protect the creditors and other third persons.
After dissolution of the conjugal partnership, the provisions of articles 214 and 215 shall apply. The provisions of
this Code concerning the effect of partition stated in articles 498 to 501 shall be applicable. (1433a)
But was not the approval of the Agreement by the CFI of Sto. Domingo in the Dominican Republic sufficient in
dissolving and liquidating the conjugal partnership of gains between the late Atty. Luna and Eugenia?
The query is answered in the negative. There is no question that the approval took place only as an incident ofthe
action for divorce instituted by Atty. Luna and Eugenia, for, indeed, the justifications for their execution of the
Agreement were identical to the grounds raised in the action for divorce.21 With the divorce not being itself valid
and enforceable under Philippine law for being contrary to Philippine public policy and public law, the approval of
the Agreement was not also legally valid and enforceable under Philippine law. Consequently, the conjugal
partnership of gains of Atty. Luna and Eugenia subsisted in the lifetime of their marriage.
3.
Atty.
Lunas
marriage
was
void;
properties
were governed by the rules on co-ownership

with
acquired

Soledad,
during

being
their

bigamous,
marriage

What law governed the property relations of the second marriage between Atty. Luna and Soledad?
The CA expressly declared that Atty. Lunas subsequent marriage to Soledad on January 12, 1976 was void for
being bigamous,22 on the ground that the marriage between Atty. Luna and Eugenia had not been dissolved by the
Divorce Decree rendered by the CFI of Sto. Domingo in the Dominican Republic but had subsisted until the death
of Atty. Luna on July 12, 1997.
The Court concurs with the CA.

In the Philippines, marriages that are bigamous, polygamous, or incestuous are void. Article 71 of the Civil
Codeclearly states:
Article 71. All marriages performed outside the Philippines in accordance with the laws in force in the country
where they were performed, and valid there as such, shall also be valid in this country, except bigamous,
polygamous, or incestuous marriages as determined by Philippine law.
Bigamy is an illegal marriage committed by contracting a second or subsequent marriage before the first marriage
has been legally dissolved, or before the absent spouse has been declared presumptively dead by means of a
judgment rendered in the proper proceedings.23 A bigamous marriage is considered void ab initio.24
Due to the second marriage between Atty. Luna and the petitioner being void ab initioby virtue of its being
bigamous, the properties acquired during the bigamous marriage were governed by the rules on co-ownership,
conformably with Article 144 of the Civil Code, viz:
Article 144. When a man and a woman live together as husband and wife, but they are not married, ortheir
marriage is void from the beginning, the property acquired by eitheror both of them through their work or industry
or their wages and salaries shall be governed by the rules on co-ownership.(n)
In such a situation, whoever alleges co-ownership carried the burden of proof to confirm such fact.1wphi1 To
establish co-ownership, therefore, it became imperative for the petitioner to offer proof of her actual contributions
in the acquisition of property. Her mere allegation of co-ownership, without sufficient and competent evidence,
would warrant no relief in her favor. As the Court explained in Saguid v. Court of Appeals:25
In the cases of Agapay v. Palang, and Tumlos v. Fernandez, which involved the issue of co-ownership ofproperties
acquired by the parties to a bigamous marriage and an adulterous relationship, respectively, we ruled that proof of
actual contribution in the acquisition of the property is essential. The claim of co-ownership of the petitioners
therein who were parties to the bigamous and adulterousunion is without basis because they failed to substantiate
their allegation that they contributed money in the purchase of the disputed properties. Also in Adriano v. Court of

Appeals, we ruled that the fact that the controverted property was titled in the name of the parties to an adulterous
relationship is not sufficient proof of coownership absent evidence of actual contribution in the acquisition of the
property.
As in other civil cases, the burden of proof rests upon the party who, as determined by the pleadings or the nature
of the case, asserts an affirmative issue. Contentions must be proved by competent evidence and reliance must be
had on the strength of the partys own evidence and not upon the weakness of the opponents defense. This applies
with more vigor where, as in the instant case, the plaintiff was allowed to present evidence ex parte.1wphi1 The
plaintiff is not automatically entitled to the relief prayed for. The law gives the defendantsome measure of
protection as the plaintiff must still prove the allegations in the complaint. Favorable relief can be granted only
after the court isconvinced that the facts proven by the plaintiff warrant such relief. Indeed, the party alleging a fact
has the burden of proving it and a mereallegation is not evidence.26
The petitioner asserts herein that she sufficiently proved her actual contributions in the purchase of the
condominium unit in the aggregate amount of at least P306,572.00, consisting in direct contributions
of P159,072.00, and in repaying the loans Atty. Luna had obtained from Premex Financing and Banco Filipino
totaling P146,825.30;27 and that such aggregate contributions of P306,572.00 corresponded to almost the entire
share of Atty. Luna in the purchase of the condominium unit amounting to P362,264.00 of the units purchase price
of P1,449,056.00.28 The petitioner further asserts that the lawbooks were paid for solely out of her personal funds,
proof of which Atty. Luna had even sent her a "thank you" note; 29 that she had the financial capacity to make the
contributions and purchases; and that Atty. Luna could not acquire the properties on his own due to the meagerness
of the income derived from his law practice.
Did the petitioner discharge her burden of proof on the co-ownership?
In resolving the question, the CA entirely debunked the petitioners assertions on her actual contributions through
the following findings and conclusions, namely:

SOLEDAD was not able to prove by preponderance of evidence that her own independent funds were used to buy
the law office condominium and the law books subject matter in contentionin this case proof that was required
for Article 144 of the New Civil Code and Article 148 of the Family Code to apply as to cases where properties
were acquired by a man and a woman living together as husband and wife but not married, or under a marriage
which was void ab initio. Under Article 144 of the New Civil Code, the rules on co-ownership would govern. But
this was not readily applicable to many situations and thus it created a void at first because it applied only if the
parties were not in any way incapacitated or were without impediment to marry each other (for it would be absurd
to create a co-ownership where there still exists a prior conjugal partnership or absolute community between the
man and his lawful wife). This void was filled upon adoption of the Family Code. Article 148 provided that: only
the property acquired by both of the parties through their actual joint contribution of money, property or industry
shall be owned in common and in proportion to their respective contributions. Such contributions and
corresponding shares were prima faciepresumed to be equal. However, for this presumption to arise, proof of
actual contribution was required. The same rule and presumption was to apply to joint deposits of money and
evidence of credit. If one of the parties was validly married to another, his or her share in the co-ownership accrued
to the absolute community or conjugal partnership existing in such valid marriage. If the party who acted in bad
faith was not validly married to another, his or her share shall be forfeited in the manner provided in the last
paragraph of the Article 147. The rules on forfeiture applied even if both parties were in bad faith. Co-ownership
was the exception while conjugal partnership of gains was the strict rule whereby marriage was an inviolable social
institution and divorce decrees are not recognized in the Philippines, as was held by the Supreme Court in the case
of Tenchavez vs. Escao, G.R. No. L-19671, November 29, 1965, 15 SCRA 355, thus:
xxxx
As to the 25/100pro-indivisoshare of ATTY. LUNA in the condominium unit, SOLEDAD failed to prove that she
made an actual contribution to purchase the said property. She failed to establish that the four (4) checks that she
presented were indeed used for the acquisition of the share of ATTY. LUNA in the condominium unit. This was
aptly explained in the Decision of the trial court, viz.:

"x x x The first check, Exhibit "M" for P55,000.00 payable to Atty. Teresita Cruz Sison was issued on January 27,
1977, which was thirteen (13) months before the Memorandum of Agreement, Exhibit "7" was signed. Another
check issued on April 29, 1978 in the amount of P97,588.89, Exhibit "P" was payable to Banco Filipino. According
to the plaintiff, thiswas in payment of the loan of Atty. Luna. The third check which was for P49,236.00 payable to
PREMEX was dated May 19, 1979, also for payment of the loan of Atty. Luna. The fourth check, Exhibit "M",
for P4,072.00 was dated December 17, 1980. None of the foregoing prove that the amounts delivered by plaintiff to
the payees were for the acquisition of the subject condominium unit. The connection was simply not established. x
x x"
SOLEDADs claim that she made a cash contribution of P100,000.00 is unsubstantiated. Clearly, there is no basis
for SOLEDADs claim of co-ownership over the 25/100 portion of the condominium unit and the trial court
correctly found that the same was acquired through the sole industry of ATTY. LUNA, thus:
"The Deed of Absolute Sale, Exhibit "9", covering the condominium unit was in the name of Atty. Luna, together
with his partners in the law firm. The name of the plaintiff does not appear as vendee or as the spouse of Atty.
Luna. The same was acquired for the use of the Law firm of Atty. Luna. The loans from Allied Banking
Corporation and Far East Bank and Trust Company were loans of Atty. Luna and his partners and plaintiff does not
have evidence to show that she paid for them fully or partially. x x x"
The fact that CCT No. 4779 and subsequently, CCT No. 21761 were in the name of "JUAN LUCES LUNA,
married to Soledad L. Luna" was no proof that SOLEDAD was a co-owner of the condominium unit. Acquisition
of title and registration thereof are two different acts. It is well settled that registration does not confer title but
merely confirms one already existing. The phrase "married to" preceding "Soledad L. Luna" is merely descriptive
of the civil status of ATTY. LUNA.
SOLEDAD, the second wife, was not even a lawyer. So it is but logical that SOLEDAD had no participation in the
law firm or in the purchase of books for the law firm. SOLEDAD failed to prove that she had anything to
contribute and that she actually purchased or paid for the law office amortization and for the law books. It is more
logical to presume that it was ATTY. LUNA who bought the law office space and the law books from his earnings

from his practice of law rather than embarrassingly beg or ask from SOLEDAD money for use of the law firm that
he headed.30
The Court upholds the foregoing findings and conclusions by the CA both because they were substantiated by the
records and because we have not been shown any reason to revisit and undo them. Indeed, the petitioner, as the
party claiming the co-ownership, did not discharge her burden of proof. Her mere allegations on her contributions,
not being evidence,31 did not serve the purpose. In contrast, given the subsistence of the first marriage between
Atty. Luna and Eugenia, the presumption that Atty. Luna acquired the properties out of his own personal funds and
effort remained. It should then be justly concluded that the properties in litislegally pertained to their conjugal
partnership of gains as of the time of his death. Consequently, the sole ownership of the 25/100 pro indivisoshare
of Atty. Luna in the condominium unit, and of the lawbooks pertained to the respondents as the lawful heirs of
Atty. Luna.
WHEREFORE, the Court AFFIRMS the decision promulgated on November 11, 2005; and ORDERS the
petitioner to pay the costs of suit.
SO ORDERED.
MARIA
REBECCA
MAKAPUGAY BAYOT,
Petitioner,
- versus THE HONORABLE COURT OF
APPEALS
and
VICENTE
MADRIGAL BAYOT,
Respondents.
x-------------------------------------------x

G.R. No. 155635

Present:
QUISUMBING, J., Chairperson,
CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.

MARIA
REBECCA
MAKAPUGAY BAYOT,
Petitioner,

G.R. No. 163979

- versus -

Promulgated:
November 7, 2008

VICENTE MADRIGAL BAYOT,

Respondent.
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
The Case
Before us are these two petitions interposed by petitioner Maria Rebecca Makapugay Bayot impugning
certain issuances handed out by the Court of Appeals (CA) in CA-G.R. SP No. 68187.
In the first, a petition for certiorari[1] under Rule 65 and docketed as G.R. No. 155635, Rebecca assails and
seeks to nullify the April 30, 2002 Resolution[2] of the CA, as reiterated in another Resolution of September 2,
2002,[3] granting a writ of preliminary injunction in favor of private respondent Vicente Madrigal Bayot staving off
the trial courts grant of support pendente lite to Rebecca.
The second, a petition for review under Rule 45,[4] docketed G.R. No. 163979, assails the March 25, 2004
Decision[5] of the CA, (1) dismissing Civil Case No. 01-094, a suit for declaration of absolute nullity of marriage
with application for support commenced by Rebecca against Vicente before the Regional Trial Court (RTC) in
Muntinlupa City; and (2) setting aside certain orders and a resolution issued by the RTC in the said case.

Per its Resolution of August 11, 2004, the Court ordered the consolidation of both cases.
The Facts
Vicente and Rebecca were married on April 20, 1979 in Sanctuario de San Jose,
Greenhills, Mandaluyong City. On its face, the Marriage Certificate[6] identified Rebecca, then 26 years old, to be
an American citizen[7] born in Agaa, Guam, USA to Cesar Tanchiong Makapugay, American, and Helen Corn
Makapugay, American.
On November 27, 1982 in San Francisco, California, Rebecca gave birth to Marie Josephine Alexandra or
Alix. From then on, Vicente and Rebeccas marital relationship seemed to have soured as the latter, sometime in
1996, initiated divorce proceedings in the Dominican Republic. Before the Court of the First Instance of the
Judicial District of Santo Domingo, Rebecca personally appeared, while Vicente was duly represented by
counsel. On February 22, 1996, the Dominican court issued Civil Decree No. 362/96,[8] ordering the dissolution of
the couples marriage and leaving them to remarry after completing the legal requirements, but giving them joint
custody and guardianship over Alix. Over a year later, the same court would issue Civil Decree No.
406/97,[9] settling the couples property relations pursuant to an Agreement [10] they executed on December 14,
1996. Said agreement specifically stated that the conjugal property which they acquired during their marriage
consist[s] only of the real property and all the improvements and personal properties therein contained at 502
Acacia Avenue, Alabang, Muntinlupa.[11]
Meanwhile, on March 14, 1996, or less than a month from the issuance of Civil Decree No. 362/96, Rebecca
filed with the Makati City RTC a petition[12] dated January 26, 1996, with attachments, for declaration of nullity of

marriage, docketed as Civil Case No. 96-378. Rebecca, however, later moved[13] and secured approval[14] of the
motion to withdraw the petition.
On May 29, 1996, Rebecca executed an Affidavit of Acknowledgment[15] stating under oath that she is an
American citizen; that, since 1993, she and Vicente have been living separately; and that she is carrying a child not
of Vicente.
On March 21, 2001, Rebecca filed another petition, this time before the Muntinlupa City RTC, for
declaration of absolute nullity of marriage[16] on the ground of Vicentes alleged psychological incapacity. Docketed
as Civil Case No. 01-094 and entitled as Maria Rebecca Makapugay Bayot v. Vicente Madrigal Bayot, the petition
was eventually raffled to Branch 256 of the court. In it, Rebecca also sought thedissolution of the conjugal
partnership of gains with application for support pendente lite for her and Alix. Rebecca also prayed that Vicente
be ordered to pay a permanent monthly support for their daughter Alix in the amount of PhP 220,000.
On June 8, 2001, Vicente filed a Motion to Dismiss[17] on, inter alia, the grounds of lack of cause of action
and that the petition is barred by the prior judgment of divorce. Earlier, on June 5, 2001, Rebecca filed and moved
for the allowance of her application for support pendente lite.
To the motion to dismiss, Rebecca interposed an opposition, insisting on her Filipino citizenship, as affirmed
by the Department of Justice (DOJ), and that, therefore, there is no valid divorce to speak of.

Meanwhile, Vicente, who had in the interim contracted another marriage, and Rebecca commenced several
criminal complaints against each other. Specifically, Vicente filed adultery and perjury complaints against
Rebecca. Rebecca, on the other hand, charged Vicente with bigamy and concubinage.
Ruling of the RTC on the Motion to Dismiss
and Motion for Support Pendente Lite
On August 8, 2001, the RTC issued an Order[18] denying Vicentes motion to dismiss Civil Case No. 01-094
and granting Rebeccas application for support pendente lite, disposing as follows:
Wherefore, premises considered, the Motion to Dismiss filed by the respondent is
DENIED. Petitioners Application in Support of the Motion for Support Pendente Lite is hereby
GRANTED. Respondent is hereby ordered to remit the amount of TWO HUNDRED AND TWENTY
THOUSAND PESOS (Php 220,000.00) a month to Petitioner as support for the duration of the
proceedings relative to the instant Petition.
SO ORDERED.[19]

The RTC declared, among other things, that the divorce judgment invoked by Vicente as bar to the petition
for declaration of absolute nullity of marriage is a matter of defense best taken up during actual trial. As to the
grant of support pendente lite, the trial court held that a mere allegation of adultery against Rebecca does not
operate to preclude her from receiving legal support.

Following the denial[20] of his motion for reconsideration of the above August 8, 2001 RTC order, Vicente
went to the CA on a petition for certiorari, with a prayer for the issuance of a temporary restraining order (TRO)
and/or writ of preliminary injunction.[21] His petition was docketed as CA-G.R. SP No. 68187.
Grant of Writ of Preliminary Injunction by the CA
On January 9, 2002, the CA issued the desired TRO.[22] On April 30, 2002, the appellate court granted, via a
Resolution, the issuance of a writ of preliminary injunction, the decretal portion of which reads:
IN VIEW OF ALL THE FOREGOING, pending final resolution of the petition at bar, let the
Writ of Preliminary Injunction be ISSUED in this case, enjoining the respondent court from
implementing the assailed Omnibus Order dated August 8, 2001 and the Order dated November 20,
2001, and from conducting further proceedings in Civil Case No. 01-094, upon the posting of an
injunction bond in the amount of P250,000.00.
SO ORDERED.[23]

Rebecca moved[24] but was denied reconsideration of the aforementioned April 30, 2002 resolution. In the
meantime, on May 20, 2002, the preliminary injunctive writ[25] was issued. Rebecca also moved for reconsideration
of this issuance, but the CA, by Resolution dated September 2, 2002, denied her motion.
The adverted CA resolutions of April 30, 2002 and September 2, 2002 are presently being assailed in
Rebeccas petition for certiorari, docketed under G.R. No. 155635.

Ruling of the CA
Pending resolution of G.R. No. 155635, the CA, by a Decision dated March 25, 2004, effectively dismissed
Civil Case No. 01-094, and set aside incidental orders the RTC issued in relation to the case. The fallo of the
presently assailed CA Decision reads:
IN VIEW OF THE FOREGOING, the petition is GRANTED. The Omnibus Order dated
August 8, 2001 and the Order dated November 20, 2001 are REVERSED and SET ASIDE and a new
one entered DISMISSING Civil Case No. 01-094, for failure to state a cause of action. No
pronouncement as to costs.
SO ORDERED.[26]

To the CA, the RTC ought to have granted Vicentes motion to dismiss on the basis of the following
premises:
(1) As held in China Road and Bridge Corporation v. Court of Appeals, the hypothetical-admission rule
applies in determining whether a complaint or petition states a cause of action. [27] Applying said rule in the light of
the essential elements of a cause of action,[28] Rebecca had no cause of action against Vicente for declaration of
nullity of marriage.

(2) Rebecca no longer had a legal right in this jurisdiction to have her marriage with Vicente declared void,
the union having previously been dissolved on February 22, 1996 by the foreign divorce decree she personally
secured as an American citizen. Pursuant to the second paragraph of Article 26 of the Family Code, such divorce
restored Vicentes capacity to contract another marriage.
(3) Rebeccas contention about the nullity of a divorce, she being a Filipino citizen at the time the foreign
divorce decree was rendered, was dubious. Her allegation as to her alleged Filipino citizenship was also doubtful as
it was not shown that her father, at the time of her birth, was still a Filipino citizen. The Certification of Birth of
Rebecca issued by the Government of Guam also did not indicate the nationality of her father.
(4) Rebecca was estopped from denying her American citizenship, having professed to have that nationality
status and having made representations to that effect during momentous events of her life, such as: (a) during her
marriage; (b) when she applied for divorce; and (c) when she applied for and eventually secured an American
passport on January 18, 1995, or a little over a year before she initiated the first but later withdrawn petition for
nullity of her marriage (Civil Case No. 96-378) on March 14, 1996.
(5) Assuming that she had dual citizenship, being born of a purportedly Filipino father in Guam, USA which
follows the jus soliprinciple, Rebeccas representation and assertion about being an American citizen when she
secured her foreign divorce precluded her from denying her citizenship and impugning the validity of the divorce.
Rebecca seasonably filed a motion for reconsideration of the above Decision, but this recourse was denied in
the equally assailed June 4, 2004 Resolution.[29] Hence, Rebeccas Petition for Review on Certiorari under Rule 45,
docketed under G.R. No. 163979.

The Issues
In G.R. No. 155635, Rebecca raises four (4) assignments of errors as grounds for the allowance of her
petition, all of which converged on the proposition that the CA erred in enjoining the implementation of the RTCs
orders which would have entitled her to support pending final resolution of Civil Case No. 01-094.
In G.R. No. 163979, Rebecca urges the reversal of the assailed CA decision submitting as follows:
I
THE COURT OF APPEALS GRAVELY ERRED IN NOT MENTIONING AND NOT TAKING
INTO CONSIDERATION IN ITS APPRECIATION OF THE FACTS THE FACT OF
PETITIONERS FILIPINO CITIZENSHIP AS CATEGORICALLY STATED AND ALLEGED IN
HER PETITION BEFORE THE COURT A QUO.
II
THE COURT OF APPEALS GRAVELY ERRED IN RELYING ONLY ON ANNEXES TO THE
PETITION IN RESOLVING THE MATTERS BROUGHT BEFORE IT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FAILING TO CONSIDER THAT
RESPONDENT IS ESTOPPED FROM CLAIMING THAT HIS MARRIAGE TO PETITIONER
HAD ALREADY BEEN DISSOLVED BY VIRTUE OF HIS SUBSEQUENT AND CONCURRENT
ACTS.
IV

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THERE WAS ABUSE OF
DISCRETION ON THE PART OF THE TRIAL COURT, MUCH LESS A GRAVE ABUSE.[30]
We shall first address the petition in G.R. No. 163979, its outcome being determinative of the success or
failure of the petition in G.R. No. 155635.
Three legal premises need to be underscored at the outset. First, a divorce obtained abroad by an alien
married to a Philippine national may be recognized in the Philippines, provided the decree of divorce is valid
according to the national law of the foreigner.[31] Second, the reckoning point is not the citizenship of the divorcing
parties at birth or at the time of marriage, but their citizenship at the time a valid divorce is obtained abroad.
And third, an absolute divorce secured by a Filipino married to another Filipino is contrary to our concept of public
policy and morality and shall not be recognized in this jurisdiction.[32]
Given the foregoing perspective, the determinative issue tendered in G.R. No. 155635, i.e., the propriety of
the granting of the motion to dismiss by the appellate court, resolves itself into the questions of: first, whether
petitioner Rebecca was a Filipino citizen at the time the divorce judgment was rendered in the Dominican Republic
on February 22, 1996; and second, whether the judgment of divorce is valid and, if so, what are its consequent
legal effects?
The Courts Ruling
The petition is bereft of merit.

Rebecca an American Citizen in the Purview of This Case

There can be no serious dispute that Rebecca, at the time she applied for and obtained her divorce from
Vicente, was an American citizen and remains to be one, absent proof of an effective repudiation of such
citizenship. The following are compelling circumstances indicative of her American citizenship: (1) she was born
in Agaa, Guam, USA; (2) the principle of jus soli is followed in this American territory granting American
citizenship to those who are born there; and (3) she was, and may still be, a holder of an American passport.[33]
And as aptly found by the CA, Rebecca had consistently professed, asserted, and represented herself as an
American citizen, particularly: (1) during her marriage as shown in the marriage certificate; (2) in the birth
certificate of Alix; and (3) when she secured the divorce from the Dominican Republic. Mention may be made of
the Affidavit of Acknowledgment[34] in which she stated being an American citizen.
It is true that Rebecca had been issued by the Bureau of Immigration (Bureau) of Identification (ID)
Certificate No. RC 9778 and a Philippine Passport. On its face, ID Certificate No. RC 9778 would tend to show
that she has indeed been recognized as a Filipino citizen. It cannot be over-emphasized, however, that such
recognition was given only on June 8, 2000 upon the affirmation by the Secretary of Justice of Rebeccas
recognition pursuant to the Order of Recognition issued by Bureau Associate Commissioner Edgar L. Mendoza.
For clarity, we reproduce in full the contents of ID Certificate No. RC 9778:
To Whom It May Concern:

This is to certify that *MARIA REBECCA MAKAPUGAY BAYOT* whose photograph and
thumbprints are affixed hereto and partially covered by the seal of this Office, and whose other
particulars are as follows:
Place of Birth: Guam, USA Date of Birth: March 5, 1953
Sex: female Civil Status: married Color of Hair: brown
Color of Eyes: brown Distinguishing marks on face: none
was r e c o g n i z e d as a citizen of the Philippines as per pursuant to Article IV, Section 1, Paragraph
3 of the 1935 Constitution per order of Recognition JBL 95-213 signed by Associate Commissioner
Jose B. Lopez dated October 6, 1995, and duly affirmed by Secretary of Justice Artemio G. Tuquero
in his 1st Indorsement dated June 8, 2000.
Issued for identification purposes only. NOT VALID for travel purposes.
Given under my hand and seal this 11th day of October, 1995
(SGD) EDGAR L. MENDOZA
ASSO. COMMISSIONER
Official Receipt No. 5939988
issued at Manila
dated Oct. 10, 1995 for P 2,000
From the text of ID Certificate No. RC 9778, the following material facts and dates may be deduced: (1)
Bureau Associate Commissioner Jose B. Lopez issued the Order of Recognition on October 6, 1995; (2) the
1st Indorsement of Secretary of Justice Artemio G. Tuquero affirming Rebeccas recognition as a Filipino citizen
was issued on June 8, 2000 or almost five years from the date of the order of recognition; and (3) ID Certificate

No. RC 9778 was purportedly issued on October 11, 1995 after the payment of the PhP 2,000 fee on October 10,
1995 per OR No. 5939988.
What begs the question is, however, how the above certificate could have been issued by the Bureau
on October 11, 1995 when the Secretary of Justice issued the required affirmation only on June 8, 2000. No
explanation was given for this patent aberration. There seems to be no error with the date of the issuance of the
1st Indorsement by Secretary of Justice Tuquero as this Court takes judicial notice that he was the Secretary of
Justice from February 16, 2000 to January 22, 2001. There is, thus, a strong valid reason to conclude that the
certificate in question must be spurious.
Under extant immigration rules, applications for recognition of Filipino citizenship require the affirmation
by the DOJ of the Order of Recognition issued by the Bureau. Under Executive Order No. 292, also known as
the 1987 Administrative Code, specifically in its Title III, Chapter 1, Sec. 3(6), it is the DOJ which is tasked to
provide immigration and naturalization regulatory services and implement the laws governing citizenship and the
admission and stay of aliens. Thus, the confirmation by the DOJ of any Order of Recognition for Filipino
citizenship issued by the Bureau is required.
Pertinently, Bureau Law Instruction No. RBR-99-002[35] on Recognition as a Filipino Citizen clearly
provides:
The Bureau [of Immigration] through its Records Section shall automatically furnish the
Department of Justice an official copy of its Order of Recognition within 72 days from its date of
approval by the way of indorsement for confirmation of the Order by the Secretary of Justice pursuant
to Executive Order No. 292. No Identification Certificate shall be issued before the date of

confirmation by the Secretary of Justice and any Identification Certificate issued by the Bureau
pursuant to an Order of Recognition shall prominently indicate thereon the date of confirmation by the
Secretary of Justice. (Emphasis ours.)

Not lost on the Court is the acquisition by Rebecca of her Philippine passport only on June 13, 2000, or five
days after then Secretary of Justice Tuquero issued the 1 st Indorsement confirming the order of recognition. It may
be too much to attribute to coincidence this unusual sequence of close events which, to us, clearly suggests that
prior to said affirmation or confirmation, Rebecca was not yet recognized as a Filipino citizen. The same sequence
would also imply that ID Certificate No. RC 9778 could not have been issued in 1995, as Bureau Law Instruction
No. RBR-99-002 mandates that no identification certificate shall be issued before the date of confirmation by the
Secretary of Justice. Logically, therefore, the affirmation or confirmation of Rebeccas recognition as a Filipino
citizen through the 1st Indorsement issued only on June 8, 2000 by Secretary of Justice Tuquero corresponds to the
eventual issuance of Rebeccas passport a few days later, or on June 13, 2000 to be exact.

When Divorce Was Granted Rebecca, She Was not a

Filipino Citizen and Was not Yet Recognized as One
The Court can assume hypothetically that Rebecca is now a Filipino citizen. But from the foregoing
disquisition, it is indubitable that Rebecca did not have that status of, or at least was not yet recognized as, a
Filipino citizen when she secured the February 22, 1996 judgment of divorce from the Dominican Republic.

The Court notes and at this juncture wishes to point out that Rebecca voluntarily withdrew her original
petition for declaration of nullity (Civil Case No. 96-378 of the Makati City RTC) obviously because she could not
show proof of her alleged Filipino citizenship then. In fact, a perusal of that petition shows that, while bearing the
date January 26, 1996, it was only filed with the RTC on March 14, 1996 or less than a month after Rebecca
secured, on February 22, 1996, the foreign divorce decree in question. Consequently, there was no mention about
said divorce in the petition. Significantly, the only documents appended as annexes to said original petition
were: the Vicente-Rebecca Marriage Contract (Annex A) and Birth Certificate of Alix (Annex B). If indeed ID
Certificate No. RC 9778 from the Bureau was truly issued on October 11, 1995, is it not but logical to expect that
this piece of document be appended to form part of the petition, the question of her citizenship being crucial to her
case?
As may be noted, the petition for declaration of absolute nullity of marriage under Civil Case No. 01-094,
like the withdrawn first petition, also did not have the ID Certificate from the Bureau as attachment. What were
attached consisted of the following material documents: Marriage Contract (Annex A) and Divorce Decree. It was
only through her Opposition (To Respondents Motion to Dismiss dated 31 May 2001)[36] did Rebecca attach as
Annex C ID Certificate No. RC 9778.
At any rate, the CA was correct in holding that the RTC had sufficient basis to dismiss the petition for
declaration of absolute nullity of marriage as said petition, taken together with Vicentes motion to dismiss and
Rebeccas opposition to motion, with their respective attachments, clearly made out a case of lack of cause of
action, which we will expound later.
Validity of Divorce Decree

Going to the second core issue, we find Civil Decree Nos. 362/96 and 406/97 valid.
First, at the time of the divorce, as above elucidated, Rebecca was still to be recognized, assuming for
argument that she was in fact later recognized, as a Filipino citizen, but represented herself in public documents as
an American citizen. At the very least, she chose, before, during, and shortly after her divorce, her American
citizenship to govern her marital relationship. Second, she secured personally said divorce as an American citizen,
as is evident in the text of the Civil Decrees, which pertinently declared:
IN THIS ACTION FOR DIVORCE in which the parties expressly submit to the jurisdiction of this
court, by reason of the existing incompatibility of temperaments x x x. The parties MARIA
REBECCA M. BAYOT, of United States nationality, 42 years of age, married, domiciled and
residing at 502 Acacia Ave., Ayala Alabang, Muntin Lupa, Philippines, x x x, who personally
appeared before this court, accompanied by DR. JUAN ESTEBAN OLIVERO, attorney, x x x and
VICENTE MADRIGAL BAYOT, of Philippine nationality, of 43 years of age, married and domiciled
and residing at 502 Acacia Ave., Ayala Alabang, Muntin Lupa, Filipino, appeared before this court
represented by DR. ALEJANDRO TORRENS, attorney, x x x, revalidated by special power of
attorney given the 19th of February of 1996, signed before the Notary Public Enrico L. Espanol of the
City of Manila, duly legalized and authorizing him to subscribe all the acts concerning this
case.[37] (Emphasis ours.)

Third, being an American citizen, Rebecca was bound by the national laws of the United States of America,
a country which allows divorce. Fourth, the property relations of Vicente and Rebecca were properly adjudicated

through their Agreement[38] executed on December 14, 1996 after Civil Decree No. 362/96 was rendered
on February 22, 1996, and duly affirmed by Civil Decree No. 406/97 issued on March 4, 1997. Veritably, the
foreign divorce secured by Rebecca was valid.
To be sure, the Court has taken stock of the holding in Garcia v. Recio that a foreign divorce can be
recognized here, provided the divorce decree is proven as a fact and as valid under the national law of the alien
spouse.[39] Be this as it may, the fact that Rebecca was clearly an American citizen when she secured the divorce
and that divorce is recognized and allowed in any of the States of the Union, [40]the presentation of a copy of foreign
divorce decree duly authenticated by the foreign court issuing said decree is, as here, sufficient.
It bears to stress that the existence of the divorce decree has not been denied, but in fact admitted by both
parties. And neither did they impeach the jurisdiction of the divorce court nor challenge the validity of its
proceedings on the ground of collusion, fraud, or clear mistake of fact or law, albeit both appeared to have the
opportunity to do so. The same holds true with respect to the decree of partition of their conjugal property. As this
Court explained in Roehr v. Rodriguez:
Before our courts can give the effect of res judicata to a foreign judgment [of divorce] x x x, it must
be shown that the parties opposed to the judgment had been given ample opportunity to do so on
grounds allowed under Rule 39, Section 50 of the Rules of Court (now Rule 39, Section 48, 1997
Rules of Civil Procedure), to wit:
SEC. 50. Effect of foreign judgments.The effect of a judgment of a tribunal of a foreign
country, having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to
the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a right
as between the parties and their successors in interest by a subsequent title; but the judgment
may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact.
It is essential that there should be an opportunity to challenge the foreign judgment, in order for
the court in this jurisdiction to properly determine its efficacy. In this jurisdiction, our Rules of Court
clearly provide that with respect to actions in personam, as distinguished from actions in rem, a
foreign judgment merely constitutes prima facie evidence of the justness of the claim of a party and,
as such, is subject to proof to the contrary.[41]
As the records show, Rebecca, assisted by counsel, personally secured the foreign divorce while Vicente was
duly represented by his counsel, a certain Dr. Alejandro Torrens, in said proceedings. As things stand, the foreign
divorce decrees rendered and issued by the Dominican Republic court are valid and, consequently, bind both
Rebecca and Vicente.
Finally, the fact that Rebecca may have been duly recognized as a Filipino citizen by force of the June 8,
2000 affirmation by Secretary of Justice Tuquero of the October 6, 1995 Bureau Order of Recognition will not,
standing alone, work to nullify or invalidate the foreign divorce secured by Rebecca as an American citizen on
February 22, 1996. For as we stressed at the outset, in determining whether or not a divorce secured abroad
would come within the pale of the countrys policy against absolute divorce, the reckoning point is the citizenship
of the parties at the time a valid divorce is obtained.[42]

Legal Effects of the Valid Divorce

Given the validity and efficacy of divorce secured by Rebecca, the same shall be given a res judicata effect
in this jurisdiction. As an obvious result of the divorce decree obtained, the marital vinculum between Rebecca and
Vicente is considered severed; they are both freed from the bond of matrimony. In plain language, Vicente and
Rebecca are no longer husband and wife to each other. As the divorce court formally pronounced: [T]hat the
marriage between MARIA REBECCA M. BAYOT and VICENTE MADRIGAL BAYOT is hereby dissolved x x
x leaving them free to remarry after completing the legal requirements.[43]
Consequent to the dissolution of the marriage, Vicente could no longer be subject to a husbands obligation
under the Civil Code. He cannot, for instance, be obliged to live with, observe respect and fidelity, and render
support to Rebecca.[44]
The divorce decree in question also brings into play the second paragraph of Art. 26 of the Family Code,
providing as follows:
Art. 26. x x x x
Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce
is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the
Filipino spouse shall likewise have capacity to remarry under Philippine law. (As amended by E.O.
227)

In Republic v. Orbecido III, we spelled out the twin elements for the applicability of the second paragraph of
Art. 26, thus:
x x x [W]e state the twin elements for the application of Paragraph 2 of Article 26 as follows:
1. There is a valid marriage that has been celebrated between a Filipino citizen and a
foreigner; and
2.

A valid divorce is obtained abroad by the alien spouse capacitating him or her to remarry.

The reckoning point is not the citizenship of the parties at the time of the celebration of the
marriage, but their citizenship at the time a valid divorce is obtained abroad by the alien spouse
capacitating the latter to remarry.[45]
Both elements obtain in the instant case. We need not belabor further the fact of marriage of Vicente and
Rebecca, their citizenship when they wed, and their professed citizenship during the valid divorce proceedings.
Not to be overlooked of course is the fact that Civil Decree No. 406/97 and the Agreement executed
on December 14, 1996 bind both Rebecca and Vicente as regards their property relations. The Agreement provided
that the ex-couples conjugal property consisted only their family home, thus:
9. That the parties stipulate that the conjugal property which they acquired during their
marriage consists only of the real property and all the improvements and personal properties
therein contained at 502 Acacia Avenue, Ayala Alabang, Muntinlupa, covered by TCT No. 168301
dated Feb. 7, 1990 issued by the Register of Deeds of Makati, Metro Manila registered in the name of
Vicente M. Bayot, married to Rebecca M. Bayot, x x x.[46] (Emphasis ours.)

This property settlement embodied in the Agreement was affirmed by the divorce court which, per its second
divorce decree, Civil Decree No. 406/97 dated March 4, 1997, ordered that, THIRD: That the agreement entered
into between the parties dated 14th day of December 1996 in Makati City, Philippines shall survive in this
Judgment of divorce by reference but not merged and that the parties are hereby ordered and directed to comply
with each and every provision of said agreement.[47]
Rebecca has not repudiated the property settlement contained in the Agreement. She is thus estopped by her
representation before the divorce court from asserting that her and Vicentes conjugal property was not limited to
their family home in Ayala Alabang.[48]
No Cause of Action in the Petition for Nullity of Marriage
Upon the foregoing disquisitions, it is abundantly clear to the Court that Rebecca lacks, under the premises,
cause of action. Philippine Bank of Communications v. Trazo explains the concept and elements of a cause of
action, thus:
A cause of action is an act or omission of one party in violation of the legal right of the other. A
motion to dismiss based on lack of cause of action hypothetically admits the truth of the allegations in
the complaint. The allegations in a complaint are sufficient to constitute a cause of action against the
defendants if, hypothetically admitting the facts alleged, the court can render a valid judgment upon
the same in accordance with the prayer therein. A cause of action exists if the following elements are
present, namely: (1) a right in favor of the plaintiff by whatever means and under whatever law it
arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant violative of the right of the

plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the latter
may maintain an action for recovery of damages.[49]

One thing is clear from a perusal of Rebeccas underlying petition before the RTC, Vicentes motion to
dismiss and Rebeccas opposition thereof, with the documentary evidence attached therein: The petitioner lacks a
cause of action for declaration of nullity of marriage, a suit which presupposes the existence of a marriage.
To sustain a motion to dismiss for lack of cause of action, the movant must show that the claim for relief
does not exist rather than that a claim has been defectively stated or is ambiguous, indefinite, or uncertain.[50] With
the valid foreign divorce secured by Rebecca, there is no more marital tie binding her to Vicente. There is in fine
no more marriage to be dissolved or nullified.

The Court to be sure does not lose sight of the legal obligation of Vicente and Rebecca to support the needs
of their daughter, Alix. The records do not clearly show how he had discharged his duty, albeit Rebecca alleged
that the support given had been insufficient. At any rate, we do note that Alix, having been born on November 27,
1982, reached the majority age on November 27, 2000, or four months before her mother initiated her petition for
declaration of nullity. She would now be 26 years old. Hence, the issue of back support, which allegedly had been
partly shouldered by Rebecca, is best litigated in a separate civil action for reimbursement. In this way, the actual
figure for the support of Alix can be proved as well as the earning capacity of both Vicente and Rebecca. The trial
court can thus determine what Vicente owes, if any, considering that support includes provisions until the child
concerned shall have finished her education.

Upon the foregoing considerations, the Court no longer need to delve into the issue tendered in G.R. No.
155635, that is, Rebeccas right to support pendente lite. As it were, her entitlement to that kind of support hinges
on the tenability of her petition under Civil Case No. 01-094 for declaration of nullity of marriage. The dismissal of
Civil Case No. 01-094 by the CA veritably removed any legal anchorage for, and effectively mooted, the claim for
support pendente lite.
WHEREFORE, the petition for certiorari in G.R. No. 155635 is hereby DISMISSED on the ground of
mootness, while the petition for review in G.R. No. 163979 is hereby DENIED for lack of merit. Accordingly,
the March 25, 2004 Decision and June 4, 2004 Resolution of the CA in CA-G.R. SP No. 68187 are
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
LAND
BANK
OF
PHILIPPINES,
Petitioner,

- versus -

ALFREDO ONG,
Respondent.

THE

G.R. No. 190755

Present:
CORONA, C.J., Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
PERALTA,* and
PEREZ, JJ.
Promulgated:
November 24, 2010

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

DECISION

VELASCO, JR., J.:

This is an appeal from the October 20, 2009 Decision of the Court of Appeals (CA) in CA-G.R. CR-CV No. 84445
entitled Alfredo Ong v. Land Bank of the Philippines, which affirmed the Decision of the Regional Trial Court
(RTC), Branch 17 in Tabaco City.
The Facts
On March 18, 1996, spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City in
the amount of PhP 16 million. The loan was secured by three (3) residential lots, five (5) cargo trucks, and a
warehouse. Under the loan agreement, PhP 6 million of the loan would be short-term and would mature on
February 28, 1997, while the balance of PhP 10 million would be payable in seven (7) years. The Notice of Loan
Approval dated February 22, 1996 contained an acceleration clause wherein any default in payment of
amortizations or other charges would accelerate the maturity of the loan.[1]
Subsequently, however, the Spouses Sy found they could no longer pay their loan. On December 9, 1996,
they sold three (3) of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria Ong, Evangelines
mother, under a Deed of Sale with Assumption of Mortgage. The relevant portion of the document [2] is quoted as
follows:

WHEREAS, we are no longer in a position to settle our obligation with the bank;
NOW THEREFORE, for and in consideration of the sum of ONE HUNDRED FIFTY
THOUSAND PESOS (P150,000.00) Philippine Currency, we hereby these presents SELL, CEDE,
TRANSFER and CONVEY, by way of sale unto ANGELINA GLORIA ONG, also of legal age,
Filipino citizen, married to Alfredo Ong, and also a resident of Tabaco, Albay, Philippines, their heirs
and assigns, the above-mentioned debt with the said LAND BANK OF THE PHILIPPINES, and by
reason hereof they can make the necessary representation with the bank for the proper restructuring of
the loan with the said bank in their favor;
That as soon as our obligation has been duly settled, the bank is authorized to release the
mortgage in favor of the vendees and for this purpose VENDEES can register this instrument with the
Register of Deeds for the issuance of the titles already in their names.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this 9 th day of December
1996 at Tabaco, Albay, Philippines.
(signed) (signed)
EVANGELINE O. SY JOHNSON B. SY
Vendor Vendor

Evangelines father, petitioner Alfredo Ong, later went to Land Bank to inform it about the sale and
assumption of mortgage.[3] Atty. Edna Hingco, the Legazpi City Land Bank Branch Head, told Alfredo and his
counsel Atty. Ireneo de Lumen that there was nothing wrong with the agreement with the Spouses Sy but
provided them with requirements for the assumption of mortgage. They were also told that Alfredo should pay
part of the principal which was computed at PhP 750,000 and to update due or accrued interests on the

promissory notes so that Atty. Hingco could easily approve the assumption of mortgage. Two weeks later,
Alfredo issued a check for PhP 750,000 and personally gave it to Atty. Hingco. A receipt was issued for his
payment. He also submitted the other documents required by Land Bank, such as financial statements for 1994
and 1995. Atty. Hingco then informed Alfredo that the certificate of title of the Spouses Sy would be transferred
in his name but this never materialized. No notice of transfer was sent to him.[4]
Alfredo later found out that his application for assumption of mortgage was not approved by Land Bank.
The bank learned from its credit investigation report that the Ongs had a real estate mortgage in the amount of
PhP 18,300,000 with another bank that was past due. Alfredo claimed that this was fully paid later on.
Nonetheless, Land Bank foreclosed the mortgage of the Spouses Sy after several months. Alfredo only learned of
the foreclosure when he saw the subject mortgage properties included in a Notice of Foreclosure of Mortgage and
Auction Sale at the RTC in Tabaco, Albay. Alfredos other counsel, Atty. Madrilejos, subsequently talked to Land
Banks lawyer and was told that the PhP 750,000 he paid would be returned to him. [5]
On December 12, 1997, Alfredo initiated an action for recovery of sum of money with damages against
Land Bank in Civil Case No. T-1941, as Alfredos payment was not returned by Land Bank. Alfredo maintained
that Land Banks foreclosure without informing him of the denial of his assumption of the mortgage was done in
bad faith. He argued that he was lured into believing that his payment of PhP 750,000 would cause Land Bank to
approve his assumption of the loan of the Spouses Sy and the transfer of the mortgaged properties in his and his
wifes name.[6] He also claimed incurring expenses for attorneys fees of PhP 150,000, filing fee of PhP 15,000,
and PhP 250,000 in moral damages.[7]

Testifying for Land Bank, Atty. Hingco claimed during trial that as branch manager she had no authority to
approve loans and could not assure anybody that their assumption of mortgage would be approved. She testified
that the breakdown of Alfredos payment was as follows:
PhP 101,409.59 applied to principal
216,246.56 accrued interests receivable
396,571.77 interests
18,766.10 penalties
16,805.98 accounts receivable
---------------Total: 750,000.00
According to Atty. Hingco, the bank processes an assumption of mortgage as a new loan, since the new borrower is
considered a new client. They used character, capacity, capital, collateral, and conditions in determining who can
qualify to assume a loan. Alfredos proposal to assume the loan, she explained, was referred to a separate office, the
Lending Center. [8]
During cross-examination, Atty. Hingco testified that several months after Alfredo made the tender of payment,
she received word that the Lending Center rejected Alfredos loan application. She stated that it was the Lending
Center and not her that should have informed Alfredo about the denial of his and his wifes assumption of
mortgage. She added that although she told Alfredo that the agreement between the spouses Sy and Alfredo was
valid between them and that the bank would accept payments from him, Alfredo did not pay any further amount so
the foreclosure of the loan collaterals ensued. She admitted that Alfredo demanded the return of the PhP 750,000
but said that there was no written demand before the case against the bank was filed in court. She said that Alfredo
had made the payment of PhP 750,000 even before he applied for the assumption of mortgage and that the bank

received the said amount because the subject account was past due and demandable; and the Deed of Assumption
of Mortgage was not used as the basis for the payment. [9]
The Ruling of the Trial Court
The RTC held that the contract approving the assumption of mortgage was not perfected as a result of the credit
investigation conducted on Alfredo. It noted that Alfredo was not even informed of the disapproval of the
assumption of mortgage but was just told that the accounts of the spouses Sy had matured and gone unpaid. It ruled
that under the principle of equity and justice, the bank should return the amount Alfredo had paid with interest at
12% per annum computed from the filing of the complaint. The RTC further held that Alfredo was entitled to
attorneys fees and litigation expenses for being compelled to litigate.[10]
The dispositive portion of the RTC Decision reads:
WHEREFORE, premises considered, a decision is rendered, ordering defendant bank to pay
plaintiff, Alfredo Ong the amount of P750,000.00 with interest at 12% per annum computed from
Dec. 12, 1997 and attorneys fees and litigation expenses of P50,000.00.
Costs against defendant bank.
SO ORDERED.[11]

The Ruling of the Appellate Court

On appeal, Land Bank faulted the trial court for (1) holding that the payment of PhP 750,000 made by Ong was
one of the requirements for the approval of his proposal to assume the mortgage of the Sy spouses; (2) erroneously
ordering Land Bank to return the amount of PhP 750,000 to Ong on the ground of its failure to effect novation;
and (3) erroneously affirming the award of PhP 50,000 to Ong as attorneys fees and litigation expenses.
The CA affirmed the RTC Decision.[12] It held that Alfredos recourse is not against the Sy spouses. According to
the appellate court, the payment of PhP 750,000 was for the approval of his assumption of mortgage and not for
payment of arrears incurred by the Sy spouses. As such, it ruled that it would be incorrect to consider Alfredo a
third person with no interest in the fulfillment of the obligation under Article 1236 of the Civil Code. Although
Land Bank was not bound by the Deed between Alfredo and the Spouses Sy, the appellate court found that Alfredo
and Land Banks active preparations for Alfredos assumption of mortgage essentially novated the agreement.
On January 5, 2010, the CA denied Land Banks motion for reconsideration for lack of merit. Hence, Land Bank
appealed to us.
The Issues
I
Whether the Court of Appeals erred in holding that Art. 1236 of the Civil Code does not apply and in
finding that there is no novation.
II

Whether the Court of Appeals misconstrued the evidence and the law when it affirmed the trial court
decisions ordering Land Bank to pay Ong the amount of Php750,000.00 with interest at 12% annum.
III
Whether the Court of Appeals committed reversible error when it affirmed the award of Php50,000.00
to Ong as attorneys fees and expenses of litigation.
The Ruling of this Court
We affirm with modification the appealed decision.
Recourse is against Land Bank
Land Bank contends that Art. 1236 of the Civil Code backs their claim that Alfredo should have sought recourse
against the Spouses Sy instead of Land Bank. Art. 1236 provides:
The creditor is not bound to accept payment or performance by a third person who has no interest in
the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he paid
without the knowledge or against the will of the debtor, he can recover only insofar as the payment
has been beneficial to the debtor.

We agree with Land Bank on this point as to the first part of paragraph 1 of Art. 1236. Land Bank was not
bound to accept Alfredos payment, since as far as the former was concerned, he did not have an interest in the
payment of the loan of the Spouses Sy. However, in the context of the second part of said paragraph, Alfredo was
not making payment to fulfill the obligation of the Spouses Sy. Alfredo made a conditional payment so that the
properties subject of the Deed of Sale with Assumption of Mortgage would be titled in his name. It is clear from
the records that Land Bank required Alfredo to make payment before his assumption of mortgage would be
approved. He was informed that the certificate of title would be transferred accordingly. He, thus, made payment
not as a debtor but as a prospective mortgagor. But the trial court stated:

[T]he contract was not perfected or consummated because of the adverse finding in the credit
investigation which led to the disapproval of the proposed assumption. There was no evidence
presented that plaintiff was informed of the disapproval. What he received was a letter dated May 22,
1997 informing him that the account of spouses Sy had matured but there [were] no payments. This
was sent even before the conduct of the credit investigation on June 20, 1997 which led to the
disapproval of the proposed assumption of the loans of spouses Sy.[13]

Alfredo, as a third person, did not, therefore, have an interest in the fulfillment of the obligation of the Spouses Sy,
since his interest hinged on Land Banks approval of his application, which was denied. The circumstances of the
instant case show that the second paragraph of Art. 1236 does not apply. As Alfredo made the payment for his own
interest and not on behalf of the Spouses Sy, recourse is not against the latter.And as Alfredo was not paying for
another, he cannot demand from the debtors, the Spouses Sy, what he has paid.
Novation of the loan agreement

Land Bank also faults the CA for finding that novation applies to the instant case. It reasons that a
substitution of debtors was made without its consent; thus, it was not bound to recognize the substitution under the
rules on novation.
On the matter of novation, Spouses Benjamin and Agrifina Lim v. M.B. Finance Corporation[14] provides the
following discussion:
Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an
old obligation is terminated by the creation of a new obligation that takes the place of the former; it is
merely modificatory when the old obligation subsists to the extent it remains compatible with the
amendatory agreement. An extinctive novation results either by changing the object or principal
conditions (objective or real), or by substituting the person of the debtor or subrogating a third person
in the rights of the creditor (subjective or personal). Under this mode, novation would have dual
functions one to extinguish an existing obligation, the other to substitute a new one in its place
requiring a conflux of four essential requisites: (1) a previous valid obligation; (2) an agreement of
all parties concerned to a new contract; (3) the extinguishment of the old obligation; and (4) the
birth of a valid new obligation. x x x
In order that an obligation may be extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on
every point incompatible with each other. The test of incompatibility is whether or not the two
obligations can stand together, each one having its independent existence. x x x (Emphasis supplied.)

Furthermore, Art. 1293 of the Civil Code states:

Novation which consists in substituting a new debtor in the place of the original one, may be made
even without the knowledge or against the will of the latter, but not without the consent of the
creditor. Payment by the new debtor gives him rights mentioned in articles 1236 and 1237.

We do not agree, then, with the CA in holding that there was a novation in the contract between the parties. Not all
the elements of novation were present. Novation must be expressly consented to. Moreover, the conflicting
intention and acts of the parties underscore the absence of any express disclosure or circumstances with which to
deduce a clear and unequivocal intent by the parties to novate the old agreement. [15]Land Bank is thus correct when
it argues that there was no novation in the following:
[W]hether or not Alfredo Ong has an interest in the obligation and payment was made with the
knowledge or consent of Spouses Sy, he may still pay the obligation for the reason that even before he
paid the amount of P750,000.00 on January 31, 1997, the substitution of debtors was already perfected
by and between Spouses Sy and Spouses Ong as evidenced by a Deed of Sale with Assumption of
Mortgage executed by them on December 9, 1996. And since the substitution of debtors was made
without the consent of Land Bank a requirement which is indispensable in order to effect a novation of
the obligation, it is therefore not bound to recognize the substitution of debtors. Land Bank did not
intervene in the contract between Spouses Sy and Spouses Ong and did not expressly give its consent
to this substitution.[16]

Unjust enrichment
Land Bank maintains that the trial court erroneously applied the principle of equity and justice in ordering it
to return the PhP 750,000 paid by Alfredo. Alfredo was allegedly in bad faith and in estoppel. Land Bank contends

that it enjoyed the presumption of regularity and was in good faith when it accepted Alfredos tender of PhP
750,000. It reasons that it did not unduly enrich itself at Alfredos expense during the foreclosure of the mortgaged
properties, since it tendered its bid by subtracting PhP 750,000 from the Spouses Sys outstanding loan obligation.
Alfredos recourse then, according to Land Bank, is to have his payment reimbursed by the Spouses Sy.
We rule that Land Bank is still liable for the return of the PhP 750,000 based on the principle of unjust
enrichment. Land Bank is correct in arguing that it has no obligation as creditor to recognize Alfredo as a person
with interest in the fulfillment of the obligation. But while Land Bank is not bound to accept the substitution of
debtors in the subject real estate mortgage, it is estopped by its action of accepting Alfredos payment from arguing
that it does not have to recognize Alfredo as the new debtor. The elements of estoppel are:
First, the actor who usually must have knowledge, notice or suspicion of the true facts,
communicates something to another in a misleading way, either by words, conduct or silence; second,
the other in fact relies, and relies reasonably or justifiably, upon that communication; third, the other
would be harmed materially if the actor is later permitted to assert any claim inconsistent with his
earlier conduct; and fourth, the actor knows, expects or foresees that the other would act upon the
information given or that a reasonable person in the actors position would expect or foresee such
action.[17]
By accepting Alfredos payment and keeping silent on the status of Alfredos application, Land Bank misled
Alfredo to believe that he had for all intents and purposes stepped into the shoes of the Spouses Sy.
The defense of Land Bank Legazpi City Branch Manager Atty. Hingco that it was the banks Lending Center
that should have notified Alfredo of his assumption of mortgage disapproval is unavailing. The Lending Centers

lack of notice of disapproval, the Tabaco Branchs silence on the disapproval, and the banks subsequent actions
show a failure of the bank as a whole, first, to notify Alfredo that he is not a recognized debtor in the eyes of the
bank; and second, to apprise him of how and when he could collect on the payment that the bank no longer had a
right to keep.
We turn then on the principle upon which Land Bank must return Alfredos payment. Unjust enrichment
exists when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity and good conscience.[18] There is unjust enrichment
under Art. 22 of the Civil Code when (1) a person is unjustly benefited, and (2) such benefit is derived at the
expense of or with damages to another.[19]
Additionally, unjust enrichment has been applied to actions called accion in rem verso. In order that
the accion in rem verso may prosper, the following conditions must concur: (1) that the defendant has been
enriched; (2) that the plaintiff has suffered a loss; (3) that the enrichment of the defendant is without just or legal
ground; and (4) that the plaintiff has no other action based on contract, quasi-contract, crime, or quasidelict.[20] The principle of unjust enrichment essentially contemplates payment when there is no duty to pay, and
the person who receives the payment has no right to receive it.[21]
The principle applies to the parties in the instant case, as, Alfredo, having been deemed disqualified from
assuming the loan, had no duty to pay petitioner bank and the latter had no right to receive it.

Moreover, the Civil Code likewise requires under Art. 19 that [e]very person must, in the exercise of his rights and
in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Land

Bank, however, did not even bother to inform Alfredo that it was no longer approving his assumption of the
Spouses Sys mortgage. Yet it acknowledged his interest in the loan when the branch head of the bank wrote to tell
him that his daughters loan had not been paid.[22] Land Bank made Alfredo believe that with the payment of PhP
750,000, he would be able to assume the mortgage of the Spouses Sy. The act of receiving payment without
returning it when demanded is contrary to the adage of giving someone what is due to him. The outcome of the
application would have been different had Land Bank first conducted the credit investigation before accepting
Alfredos payment. He would have been notified that his assumption of mortgage had been disapproved; and he
would not have taken the futile action of paying PhP 750,000. The procedure Land Bank took in acting on Alfredos
application cannot be said to have been fair and proper.
As to the claim that the trial court erred in applying equity to Alfredos case, we hold that Alfredo had no other
remedy to recover from Land Bank and the lower court properly exercised its equity jurisdiction in resolving the
collection suit. As we have held in one case:
Equity, as the complement of legal jurisdiction, seeks to reach and complete justice where courts of
law, through the inflexibility of their rules and want of power to adapt their judgments to the special
circumstances of cases, are incompetent to do so. Equity regards the spirit and not the letter, the intent
and not the form, the substance rather than the circumstance, as it is variously expressed by different
courts.[23]

Another claim made by Land Bank is the presumption of regularity it enjoys and that it was in good faith
when it accepted Alfredos tender of PhP 750,000.

The defense of good faith fails to convince given Land Banks actions. Alfredo was not treated as a mere
prospective borrower. After he had paid PhP 750,000, he was made to sign bank documents including a promissory
note and real estate mortgage. He was assured by Atty. Hingco that the titles to the properties covered by the
Spouses Sys real estate mortgage would be transferred in his name, and upon payment of the PhP 750,000, the
account would be considered current and renewed in his name.[24]
Land Bank posits as a defense that it did not unduly enrich itself at Alfredos expense during the foreclosure
of the mortgaged properties, since it tendered its bid by subtracting PhP 750,000 from the Spouses Sys outstanding
loan obligation. It is observed that this is the first time Land Bank is revealing this defense. However, issues,
arguments, theories, and causes not raised below may no longer be posed on appeal.[25] Land Banks contention,
thus, cannot be entertained at this point.
Land Bank further questions the lower courts decision on the basis of the inconsistencies made by Alfredo
on the witness stand. It argues that Alfredo was not a credible witness and his testimony failed to overcome the
presumption of regularity in the performance of regular duties on the part of Land Bank.
This claim, however, touches on factual findings by the trial court, and we defer to these findings of the trial court
as sustained by the appellate court. These are generally binding on us. While there are exceptions to this rule, Land
Bank has not satisfactorily shown that any of them is applicable to this issue.[26] Hence, the rule that the trial court
is in a unique position to observe the demeanor of witnesses should be applied and respected[27] in the instant case.
In sum, we hold that Land Bank may not keep the PhP 750,000 paid by Alfredo as it had already foreclosed on the
mortgaged lands.

Interest and attorneys fees

As to the applicable interest rate, we reiterate the guidelines found in Eastern Shipping Lines, Inc. v. Court of
Appeals:[28]

II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed
from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article
1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.

No evidence was presented by Alfredo that he had sent a written demand to Land Bank before he filed the
collection suit. Only the verbal agreement between the lawyers of the parties on the return of the payment was
mentioned.[29] Consequently, the obligation of Land Bank to return the payment made by Alfredo upon the formers
denial of the latters application for assumption of mortgage must be reckoned from the date of judicial demand on
December 12, 1997, as correctly determined by the trial court and affirmed by the appellate court.
The next question is the propriety of the imposition of interest and the proper imposable rate of applicable
interest. The RTC granted the rate of 12% per annum which was affirmed by the CA. From the above-quoted
guidelines, however, the proper imposable interest rate is 6% per annum pursuant to Art. 2209 of the Civil
Code. Sunga-Chan v. Court of Appeals is illuminating in this regard:
In Reformina v. Tomol, Jr., the Court held that the legal interest at 12% per annum under Central
Bank (CB) Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of
money. And for transactions involving payment of indemnities in the concept of damages arising
from default in the performance of obligations in general and/or for money judgment not involving
a loan or forbearance of money, goods, or credit, the governing provision is Art. 2209 of the Civil Code
prescribing a yearly 6% interest. Art. 2209 pertinently provides:

Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor
incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be
the payment of the interest agreed upon, and in the absence of stipulation, the legal interest,
which is six per cent per annum.
The term forbearance, within the context of usury law, has been described as a contractual
obligation of a lender or creditor to refrain, during a given period of time, from requiring the borrower
or debtor to repay the loan or debt then due and payable.
Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the
applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only to
loans or forbearance of money, goods, or credits, as well as to judgments involving such loan or
forbearance of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code
applies when the transaction involves the payment of indemnities in the concept of damage
arising from the breach or a delay in the performance of obligations in general, with the
application of both rates reckoned from the time the complaint was filed until the [adjudged] amount is
fully paid. In either instance, the reckoning period for the commencement of the running of the legal
interest shall be subject to the condition that the courts are vested with discretion, depending on the
equities of each case, on the award of interest.[30] (Emphasis supplied.)

Based on our ruling above, forbearance of money refers to the contractual obligation of the lender or creditor to
desist for a fixed period from requiring the borrower or debtor to repay the loan or debt then due and for which
12% per annum is imposed as interest in the absence of a stipulated rate. In the instant case, Alfredos conditional
payment to Land Bank does not constitute forbearance of money, since there was no agreement or obligation for
Alfredo to pay Land Bank the amount of PhP 750,000, and the obligation of Land Bank to return what Alfredo has

conditionally paid is still in dispute and has not yet been determined. Thus, it cannot be said that Land Banks
alleged obligation has become a forbearance of money.
On the award of attorneys fees, attorneys fees and expenses of litigation were awarded because Alfredo was
compelled to litigate due to the unjust refusal of Land Bank to refund the amount he paid. There are instances when
it is just and equitable to award attorneys fees and expenses of litigation.[31] Art. 2208 of the Civil Code pertinently
states:
In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:
xxxx
(2) When the defendants act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest.

Given that Alfredo was indeed compelled to litigate against Land Bank and incur expenses to protect his
interest, we find that the award falls under the exception above and is, thus, proper given the circumstances.
On a final note. The instant case would not have been litigated had Land Bank been more circumspect in dealing
with Alfredo. The bank chose to accept payment from Alfredo even before a credit investigation was underway, a
procedure worsened by the failure to even inform him of his credit standings impact on his assumption of
mortgage. It was, therefore, negligent to a certain degree in handling the transaction with Alfredo. It should be

remembered that the business of a bank is affected with public interest and it should observe a higher standard of
diligence when dealing with the public.[32]
WHEREFORE, the appeal is DENIED. The CA Decision in CA-G.R. CR-CV No. 84445
is AFFIRMED with MODIFICATION in that the amount of PhP 750,000 will earn interest at 6% per annum
reckoned from December 12, 1997, and the total aggregate monetary awards will in turn earn 12% per annum from
the finality of this Decision until fully paid.
SO ORDERED.

[G.R. No. 152411. September 29, 2004]

UNIVERSITY OF THE PHILIPPINES, petitioner, vs. PHILAB INDUSTRIES, INC., respondent.

DECISION
CALLEJO, SR., J.:
Before the Court is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G.R. CV
No. 44209, as well as its Resolution[2]denying the petitioners motion for the reconsideration thereof. The Court of
Appeals set aside the Decision[3] of Branch 150 of the Regional Trial Court (RTC) of Makati City, which dismissed
the complaint of the respondent against the petitioner for sum of money and damages.
The Facts of the Case

Sometime in 1979, the University of the Philippines (UP) decided to construct an integrated system of research
organization known as the Research Complex. As part of the project, laboratory equipment and furniture were
purchased for the National Institute of Biotechnology and Applied Microbiology (BIOTECH) at the UP Los Baos.
Providentially, the Ferdinand E. Marcos Foundation (FEMF) came forward and agreed to fund the acquisition of
the laboratory furniture, including the fabrication thereof.
Renato E. Lirio, the Executive Assistant of the FEMF, gave the go-signal to BIOTECH to contact a corporation
to accomplish the project. On July 23, 1982, Dr. William Padolina, the Executive Deputy Director of BIOTECH,
arranged for Philippine Laboratory Industries, Inc. (PHILAB), to fabricate the laboratory furniture and deliver the
same to BIOTECH for the BIOTECH Building Project, for the account of the FEMF. Lirio directed Padolina to
give the go-signal to PHILAB to proceed with the fabrication of the laboratory furniture, and requested Padolina to
forward the contract of the project to FEMF for its approval.
On July 13, 1982, Padolina wrote Lirio and requested for the issuance of the purchase order and downpayment
for the office and laboratory furniture for the project, thus:
1. Supply and Installation of Laboratory furniture for the BIOTECH Building Project
Amount : P2,934,068.90
Supplier : Philippine Laboratory Furniture Co.,
College, Laguna
Attention: Mr. Hector C. Navasero
President
Downpayment : 40% or P1,173,627.56
2. Fabrication and Supply of office furniture for the BIOTECH Building Project
Amount : P573,375.00
Supplier : Trans-Oriental Woodworks, Inc.

1st Avenue, Bagumbayan

Tanyag, Taguig, Metro Manila
Downpayment : 50% or P286,687.50[4]
Padolina assured Lirio that the contract would be prepared as soon as possible before the issuance of the
purchase orders and the downpayment for the goods, and would be transmitted to the FEMF as soon as possible.
In a Letter dated July 23, 1982, Padolina informed Hector Navasero, the President of PHILAB, to proceed with
the fabrication of the laboratory furniture, per the directive of FEMF Executive Assistant Lirio. Padolina also
requested for copies of the shop drawings and a sample contract [5] for the project, and that such contract and
drawings had to be finalized before the down payment could be remitted to the PHILAB the following week.
However, PHILAB failed to forward any sample contract.
Subsequently, PHILAB made partial deliveries of office and laboratory furniture to BIOTECH after having
been duly inspected by their representatives and FEMF Executive Assistant Lirio.
On August 24, 1982, FEMF remitted P600,000 to PHILAB as downpayment for the laboratory furniture for the
BIOTECH project, for which PHILAB issued Official Receipt No. 253 to FEMF. On October 22, 1982, FEMF
made another partial payment of P800,000 to PHILAB, for which the latter issued Official Receipt No. 256 to
FEMF. The remittances were in the form of checks drawn by FEMF and delivered to PHILAB, through Padolina.
On October 16, 1982, UP, through Emil Q. Javier, the Chancellor of UP Los Baos and FEMF, represented by
its Executive Officer, Rolando Gapud, executed a Memorandum of Agreement (MOA) in which FEMF agreed to
grant financial support and donate sums of money to UP for the construction of buildings, installation of laboratory
and other capitalization for the project, not to exceed P29,000,000.00. The obligations of FEMF under the MOA
are the following:
ARTICLE II
OBLIGATIONS OF THE FOUNDATION

2.1. The FOUNDATION, in carrying out its principal objectives of promoting philantrophic and scientific projects
through financial support to such projects that will contribute to the countrys economic development, shall grant
such financial support and donate such sums of money to the RESEARCH COMPLEX as may be necessary for the
construction of buildings, installation of laboratories, setting up of offices and physical plants and facilities and
other capital investment of the RESEARCH COMPLEX and/or any of its component Research Institutes not to
exceed P29 Million. For this purpose, the FOUNDATION shall:
(a) Acquire and donate to the UNIVERSITY the site for the RESEARCH COMPLEX; and
(b) Donate or cause to be donated to the UNIVERSITY the sum of TWENTY-NINE MILLION PESOS
(P29,000,000.00) for the construction of the buildings of the National Institutes of Biotechnology and Applied
Microbiology (BIOTECH) and the installation of their laboratories and their physical plants and other facilities to
enable them to commence operations.
2.2. In addition, the FOUNDATION shall, subject to the approval of the Board of Trustees of the FOUNDATION,
continue to support the activities of the RESEARCH COMPLEX by way of recurrent additional grants and
donations for specific research and development projects which may be mutually agreed upon and, from time to
time, additional grants and donations of such amounts as may be necessary to provide the RESEARCH
COMPLEX and/or any of its Research Institutes with operational flexibility especially with regard to incentives to
staff purchase of equipment/facilities, travel abroad, recruitment of local and expatriate staff and such other
activities and inputs which are difficult to obtain under usual government rules and regulations.[6]
The Board of Regents of the UP approved the MOA on November 25, 1982.[7]
In the meantime, Navasero promised to submit the contract for the installation of laboratory furniture to
BIOTECH, by January 12, 1983. However, Navasero failed to do so. In a Letter dated February 1, 1983,
BIOTECH reminded Navasero of the need to submit the contract so that it could be submitted to FEMF for its
evaluation and approval.[8] Instead of submitting the said contract, PHILAB submitted to BIOTECH an
accomplishment report on the project as of February 28, 1983, and requested payment thereon. [9] By May 1983,
PHILAB had completed 78% of the project, amounting to P2,288,573.74 out of the total cost of P2,934,068.90.

The FEMF had already paid forty percent (40%) of the total cost of the project. On May 12, 1983, Padolina wrote
Lirio and furnished him the progress billing from PHILAB.[10] On August 11, 1983, the FEMF made another
partial payment of P836,119.52 representing the already delivered laboratory and office furniture after the requisite
inspection and verification thereof by representatives from the BIOTECH, FEMF, and PHILAB. The payment was
made in the form of a check, for which PHILAB issued Official Receipt No. 202 to FEMF through Padolina.[11]
On July 1, 1984, PHILAB submitted to BIOTECH Invoice No. 01643 in the amount of P702,939.40 for the
final payment of laboratory furniture. Representatives from BIOTECH, PHILAB, and Lirio for the FEMF,
conducted a verification of the accomplishment of the work and confirmed the same. BIOTECH forwarded the
invoice to Lirio on December 18, 1984 for its payment.[12] Lirio, in turn, forwarded the invoice to Gapud,
presumably sometime in the early part of 1985. However, the FEMF failed to pay the bill. PHILAB reiterated its
request for payment through a letter on May 9, 1985.[13] BIOTECH again wrote Lirio on March 21, 1985,
requesting the payment of PHILABs bill.[14] It sent another letter to Gapud, on November 22, 1985, again
appealing for the payment of PHILABs bill.[15] In a Letter to BIOTECH dated December 5, 1985, PHILAB
requested payment of P702,939.40 plus interest thereon of P224,940.61.[16] There was, however, no response from
the FEMF. On February 24, 1986, PHILAB wrote BIOTECH, appealing for the payment of its bill even on
installment basis.[17]
President Marcos was ousted from office during the February 1986 EDSA Revolution. On March 26, 1986,
Navasero wrote BIOTECH requesting for its much-needed assistance for the payment of the balance already due
plus interest of P295,234.55 for its fabrication and supply of laboratory furniture.[18]
On April 22, 1986, PHILAB wrote President Corazon C. Aquino asking her help to secure the payment of the
amount due from the FEMF.[19] The letter was referred to then Budget Minister Alberto Romulo, who referred the
letter to then UP President Edgardo Angara on June 9, 1986. On September 30, 1986, Raul P. de Guzman, the
Chancellor of UP Los Baos, wrote then Chairman of the Presidential Commission on Good Government (PCGG)
Jovito Salonga, submitting PHILABs claim to be officially entered as accounts payable as soon as the assets of
FEMF were liquidated by the PCGG.[20]
In the meantime, the PCGG wrote UP requesting for a copy of the relevant contract and the MOA for its
perusal.[21]

Chancellor De Guzman wrote Navasero requesting for a copy of the contract executed between PHILAB and
FEMF. In a Letter dated October 20, 1987, Navasero informed De Guzman that PHILAB and FEMF did not
execute any contract regarding the fabrication and delivery of laboratory furniture to BIOTECH.
Exasperated, PHILAB filed a complaint for sum of money and damages against UP. In the complaint, PHILAB
prayed that it be paid the following:
(1) PESOS: SEVEN HUNDRED TWO THOUSAND NINE HUNDRED THIRTY NINE & 40/100
(P702,939.40) plus an additional amount (as shall be determined during the hearing) to cover the
actual cost of money which at the time of transaction the value of the peso was eleven to a dollar
(P11.00:$1) and twenty seven (27%) percent interest on the total amount from August 1982 until fully
paid;
(2) PESOS: ONE HUNDRED THOUSAND (P100,000.00) exemplary damages;
(3) FIFTY THOUSAND [PESOS] (P50,000.00) as and for attorneys fees; and
(4) Cost of suit.[22]
PHILAB alleged, inter alia, that:
3. Sometime in August 1982, defendant, through its officials, particularly MR. WILLIAM PADOLINA,
Director, asked plaintiff to supply and install several laboratory furnitures and equipment at BIOTECH, a
research laboratory of herein defendant located at its campus in College, Laguna, for a total contract
price of PESOS: TWO MILLION NINE HUNDRED THIRTY-NINE THOUSAND FIFTY-EIGHT &
90/100 (P2,939,058.90);
4. After the completion of the delivery and installation of said laboratory furnitures and equipment at
defendants BIOTECH Laboratory, defendant paid three (3) times on installment basis:
a) P600,000.00 as per Official Receipt No. 253 dated August 24, 1982;
b) P800,000.00 as per Official Receipt No. 256 dated October 22, 1982;
c) P836,119.52 as per Official Receipt No. 202 dated August 11, 1983;

thus leaving a balance of PESOS: SEVEN HUNDRED TWO THOUSAND NINE HUNDRED THIRTYNINE & 40/100 (P702,939.40).
5. That notwithstanding repeated demands for the past eight years, defendant arrogantly and maliciously
made plaintiff believe that it was going to pay the balance aforestated, that was why plaintiffs President
and General Manager himself, HECTOR C. NAVASERO, personally went to and from UP Los Baos to
talk with defendants responsible officers in the hope of expecting payment, when, in truth and in fact,
defendant had no intention to pay whatsoever right from the start on a misplaced ground of
technicalities. Some of plaintiffs demand letters since year 1983 up to the present are hereto attached as
Annexes A, B, C, D, E, F, G, and H hereof;
6. That by reason of defendants malicious, evil and unnecessary misrepresentations that it was going to pay
its obligation and asking plaintiff so many red tapes and requirements to submit, compliance of all of
which took plaintiff almost eight (8) years to finish, when, in truth and in fact, defendant had no
intention to pay, defendant should be ordered to pay plaintiff no less than PESOS: ONE HUNDRED
THOUSAND (P100,000.00) exemplary damages, so that other government institutions may be warned
that they must not unjustly enrich themselves at the expense of the people they serve.[23]
In its answer, UP denied liability and alleged that PHILAB had no cause of action against it because it was
merely the donee/beneficiary of the laboratory furniture in the BIOTECH; and that the FEMF, which funded the
project, was liable to the PHILAB for the purchase price of the laboratory furniture. UP specifically denied
obliging itself to pay for the laboratory furniture supplied by PHILAB.
After due proceedings, the trial court rendered judgment dismissing the complaint without prejudice to
PHILABs recourse against the FEMF. The fallo of the decision reads:
WHEREFORE, this case is hereby DISMISSED for lack of merit without prejudice to plaintiff's recourse to the
assets of the Marcos Foundation for the unpaid balance of P792,939.49.
SO ORDERED.[24]

Undaunted, PHILAB appealed to the Court of Appeals (CA) alleging that the trial court erred in finding that:
1. the contract for the supply and installation of subject laboratory furniture and equipment was between
PHILAB and the Marcos Foundation; and,
2. the Marcos Foundation, not the University of the Philippines, is liable to pay the respondent the balance
of the purchase price.[25]
The CA reversed and set aside the decision of the RTC and held that there was never a contract between FEMF
and PHILAB. Consequently, PHILAB could not be bound by the MOA between the FEMF and UP since it was
never a party thereto. The appellate court ruled that, although UP did not bind itself to pay for the laboratory
furniture; nevertheless, it is liable to PHILAB under the maxim: No one should unjustly enrich himself at the
expense of another.
The Present Petition
Upon the denial of its motion for reconsideration of the appellate courts decision, UP, now the petitioner, filed
its petition for review contending that:
I. THE COURT OF APPEALS ERRED WHEN IT FAILED TO APPLY THE LAW ON CONTRACTS
BETWEEN PHILAB AND THE MARCOS FOUNDATION.
II. THE COURT OF APPEALS ERRED IN APPLYING THE LEGAL PRINCIPLE OF UNJUST
ENRICHMENT WHEN IT HELD THAT THE UNIVERSITY, AND NOT THE MARCOS
FOUNDATION, IS LIABLE TO PHILAB.[26]
Prefatorily, the doctrinal rule is that pure questions of facts may not be the subject of appeal by certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, as this mode of appeal is generally restricted to questions of
law.[27] However, this rule is not absolute. The Court may review the factual findings of the CA should they be
contrary to those of the trial court.[28] Correspondingly, this Court may review findings of facts when the judgment
of the CA is premised on a misapprehension of facts.[29]

On the first assigned error, the petitioner argues that the CA overlooked the evidentiary effect and substance of
the corresponding letters and communications which support the statements of the witnesses showing affirmatively
that an implied contract of sale existed between PHILAB and the FEMF. The petitioner furthermore asserts that no
contract existed between it and the respondent as it could not have entered into any agreement without the requisite
public bidding and a formal written contract.
The respondent, on the other hand, submits that the CA did not err in not applying the law on contracts between
the respondent and the FEMF. It, likewise, attests that it was never privy to the MOA entered into between the
petitioner and the FEMF. The respondent adds that what the FEMF donated was a sum of money equivalent
to P29,000,000, and not the laboratory equipment supplied by it to the petitioner. The respondent submits that the
petitioner, being the recipient of the laboratory furniture, should not enrich itself at the expense of the respondent.
The petition is meritorious.
It bears stressing that the respondents cause of action is one for sum of money predicated on the alleged
promise of the petitioner to pay for the purchase price of the furniture, which, despite demands, the petitioner failed
to do. However, the respondent failed to prove that the petitioner ever obliged itself to pay for the laboratory
furniture supplied by it. Hence, the respondent is not entitled to its claim against the petitioner.
There is no dispute that the respondent is not privy to the MOA executed by the petitioner and FEMF; hence, it
is not bound by the said agreement. Contracts take effect only between the parties and their assigns. [30] A contract
cannot be binding upon and cannot be enforced against one who is not a party to it, even if he is aware of such
contract and has acted with knowledge thereof.[31] Likewise admitted by the parties, is the fact that there was no
written contract executed by the petitioner, the respondent and FEMF relating to the fabrication and delivery of
office and laboratory furniture to the BIOTECH. Even the CA failed to specifically declare that the petitioner and
the respondent entered into a contract of sale over the said laboratory furniture. The parties are in accord that the
FEMF had remitted to the respondent partial payments via checks drawn and issued by the FEMF to the
respondent, through Padolina, in the total amount of P2,288,573.74 out of the total cost of the project
of P2,934,068.90 and that the respondent received the said checks and issued receipts therefor to the FEMF. There
is also no controversy that the petitioner did not pay a single centavo for the said furniture delivered by the
respondent that the petitioner had been using ever since.

We agree with the petitioner that, based on the records, an implied-in-fact contract of sale was entered into
between the respondent and FEMF. A contract implied in fact is one implied from facts and circumstances showing
a mutual intention to contract. It arises where the intention of the parties is not expressed, but an agreement in fact
creating an obligation. It is a contract, the existence and terms of which are manifested by conduct and not by
direct or explicit words between parties but is to be deduced from conduct of the parties, language used, or things
done by them, or other pertinent circumstances attending the transaction. To create contracts implied in fact,
circumstances must warrant inference that one expected compensation and the other to pay. [32] An implied-in-fact
contract requires the parties intent to enter into a contract; it is a true contract. [33] The conduct of the parties is to be
viewed as a reasonable man would view it, to determine the existence or not of an implied-in-fact contract.[34] The
totality of the acts/conducts of the parties must be considered to determine their intention. An implied-in-fact
contract will not arise unless the meeting of minds is indicated by some intelligent conduct, act or sign. [35]
In this case, the respondent was aware, from the time Padolina contacted it for the fabrication and supply of the
laboratory furniture until the go-signal was given to it to fabricate and deliver the furniture to BIOTECH as
beneficiary, that the FEMF was to pay for the same. Indeed, Padolina asked the respondent to prepare the draft of
the contract to be received by the FEMF prior to the execution of the parties (the respondent and FEMF), but
somehow, the respondent failed to prepare one. The respondent knew that the petitioner was merely the doneebeneficiary of the laboratory furniture and not the buyer; nor was it liable for the payment of the purchase price
thereof. From the inception, the FEMF paid for the bills and statement of accounts of the respondent, for which the
latter unconditionally issued receipts to and under the name of the FEMF. Indeed, witness Lirio testified:
Q: Now, did you know, Mr. Witness, if PHILAB Industries was aware that it was the Marcos Foundation
who would be paying for this particular transaction for the completion of this particular transaction?
A: I think they are fully aware.
Q: What is your basis for saying so?
A: First, I think they were appraised by Dr. Padolina. Secondly, there were occasions during our inspection
in Los Baos, at the installation site, there were occasions, two or three occasions, when we met with
Mr. Navasero who is the President, I think, or manager of PHILAB, and we appraised him that it was

really between the foundation and him to which includes (sic) the construction company constructing
the building. He is fully aware that it is the foundation who (sic) engaged them and issued the
payments.[36]
The respondent, in its Letter dated March 26, 1986, informed the petitioner and sought its assistance for the
collection of the amount due from the FEMF:
Dear Dr. Padolina:
May we request for your much-needed assistance in the payment of the balance still due us on the laboratory
furniture we supplied and installed two years ago?
Business is still slow and we will appreciate having these funds as soon as possible to keep up our operations.
We look forward to hearing from you regarding this matter.
Very truly yours,
PHILAB INDUSTRIES, INC.[37]
The respondent even wrote former President Aquino seeking her assistance for the payment of the amount due,
in which the respondent admitted it tried to collect from her predecessor, namely, the former President Ferdinand
E. Marcos:
YOUR EXCELLENCY:
At the instance of the national government, subject laboratory furnitures were supplied by our company to the
National Institute of Biotechnology & Applied Microbiology (BIOTECH), University of the Philippines, Los Baos,
Laguna, in 1984.

Out of the total contract price of PESOS: TWO MILLION NINE HUNDRED THIRTY-NINE THOUSAND
FIFTY-EIGHT & 90/100 (P2,939,058.90), the previous administration had so far paid us the sum of P2,236,119.52
thus leaving a balance of PESOS: ONE MILLION FOUR HUNDRED TWELVE THOUSAND SEVEN
HUNDRED FORTY-EIGHT & 61/100 (P1,412.748.61) inclusive of interest of 24% per annum and 30% exchange
rate adjustment.
On several occasions, we have tried to collect this amount from your predecessor, the latest of which was subject
invoice (01643) we submitted to DR. W. PADOLINA, deputy director of BIOTECH. But this, notwithstanding,
our claim has remained unacted upon up to now. Copy of said invoice is hereto attached for easy reference.
Now that your excellency is the head of our government, we sincerely hope that payment of this obligation will
soon be made as this is one project the Republic of the Philippines has use of and derives benefit from.[38]
Admittedly, the respondent sent to the petitioner its bills and statements of accounts for the payments of the
laboratory furniture it delivered to the petitioner which the petitioner, through Padolina, transmitted to the FEMF
for its payment. However, the FEMF failed to pay the last statement of account of the respondent because of the
onset of the EDSA upheaval. It was only when the respondent lost all hope of collecting its claim from the
government and/or the PCGG did it file the complaint against the petitioner for the collection of the payment of its
last delivery of laboratory furniture.
We reject the ruling of the CA holding the petitioner liable for the claim of the respondent based on the maxim
that no one should enrich itself at the expense of another.
Unjust enrichment claims do not lie simply because one party benefits from the efforts or obligations of others,
but instead it must be shown that a party was unjustly enriched in the sense that the term unjustly could mean
illegally or unlawfully.[39]
Moreover, to substantiate a claim for unjust enrichment, the claimant must unequivocally prove that another
party knowingly received something of value to which he was not entitled and that the state of affairs are such that
it would be unjust for the person to keep the benefit. [40] Unjust enrichment is a term used to depict result or effect
of failure to make remuneration of or for property or benefits received under circumstances that give rise to legal or

equitable obligation to account for them; to be entitled to remuneration, one must confer benefit by mistake, fraud,
coercion, or request.[41]Unjust enrichment is not itself a theory of reconvey. Rather, it is a prerequisite for the
enforcement of the doctrine of restitution.[42]
Article 22 of the New Civil Code reads:
Every person who, through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him.
(Boldface supplied)
In order that accion in rem verso may prosper, the essential elements must be present: (1) that the defendant
has been enriched, (2) that the plaintiff has suffered a loss, (3) that the enrichment of the defendant is without just
or legal ground, and (4) that the plaintiff has no other action based on contract, quasi-contract, crime or
quasi-delict.[43]
An accion in rem verso is considered merely an auxiliary action, available only when there is no other remedy
on contract, quasi-contract, crime, and quasi-delict. If there is an obtainable action under any other institution of
positive law, that action must be resorted to, and the principle of accion in rem verso will not lie.[44]
The essential requisites for the application of Article 22 of the New Civil Code do not obtain in this case. The
respondent had a remedy against the FEMF via an action based on an implied-in-fact contract with the FEMF for
the payment of its claim. The petitioner legally acquired the laboratory furniture under the MOA with FEMF;
hence, it is entitled to keep the laboratory furniture.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision of the Court of
Appeals is REVERSED AND SET ASIDE. The Decision of the Regional Trial Court, Makati City, Branch 150, is
REINSTATED. No costs.
SO ORDERED.
G.R. No. 195549

September 3, 2014

WILLAWARE
PRODUCTS
vs.
JESICHRIS MANUFACTURING CORPORATION, Respondent.

CORPORATION, Petitioner,

DECISION
PERALTA, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the
Decision1 dated November 24, 2010 and Resolution2 dated February 10, 2011 of the Court of Appeals (CA) in CAG.R. CV No. 86744.
The facts, as found by the Regional Trial Court (RTC), are as follows:
[Respondent] Jesichris Manufacturing Company ([respondent] for short) filed this present complaint for damages
for unfair competition with prayer for permanent injunction to enjoin [petitioner] Willaware Products Corporation
([petitioner] for short) from manufacturing and distributing plastic-made automotive parts similar to those of
[respondent].
[Respondent] alleged that it is a duly registeredpartnership engaged in the manufacture and distribution of plastic
and metal products, with principal office at No. 100 Mithi Street, Sampalukan, Caloocan City. Since its registration
in 1992, [respondent] has been manufacturing in its Caloocan plant and distributing throughout the Philippines
plastic-made automotive parts. [Petitioner], on the other hand, which is engaged in the manufacture and
distribution of kitchenware items made of plastic and metal has its office near that of [respondent]. [Respondent]
further alleged that in view of the physical proximity of [petitioners] office to [respondents] office, and in view of
the fact that some of the [respondents] employeeshad transferred to [petitioner], [petitioner] had developed
familiarity with [respondents] products, especially its plastic-made automotive parts.

That sometime in November 2000, [respondent] discovered that [petitioner] had been manufacturing and
distributing the same automotive parts with exactly similar design, same material and colors but was selling these
products at a lower price as [respondents] plastic-made automotive parts and to the same customers.
[Respondent] alleged that it had originated the use of plastic in place of rubber in the manufacture ofautomotive
underchassis parts such as spring eye bushing, stabilizer bushing, shock absorberbushing, center bearing cushions,
among others. [Petitioners] manufacture of the same automotive parts with plastic materialwas taken from
[respondents] idea of using plastic for automotive parts. Also, [petitioner] deliberately copied [respondents]
products all of which acts constitute unfair competition, is and are contrary to law, morals, good customs and
public policy and have caused [respondent] damages in terms oflost and unrealizedprofits in the amount of TWO
MILLION PESOS as of the date of [respondents] complaint.
Furthermore, [petitioners] tortuous conduct compelled [respondent] to institute this action and thereby to incur
expenses in the way of attorneys fees and other litigation expenses in the amount of FIVE HUNDRED
THOUSAND PESOS (P500,000.00).
In its Answer, [petitioner] denies all the allegations of the [respondent] except for the following facts: that it is
engaged in the manufacture and distribution of kitchenware items made of plastic and metal and that theres
physical proximity of [petitioners] office to [respondent]s office, and that someof [respondents] employees had
transferred to [petitioner] and that over the years [petitioner] had developed familiarity with [respondents]
products, especially its plastic made automotive parts.
As its Affirmative Defenses, [petitioner] claims that there can be no unfair competition as the plastic-made
automotive parts are mere reproductions of original parts and their construction and composition merely conforms
to the specificationsof the original parts of motor vehicles they intend to replace. Thus, [respondent] cannot claim
that it "originated" the use of plastic for these automotive parts. Even assuming for the sake of argument that
[respondent] indeed originated the use of these plastic automotive parts, it still has no exclusive right to use,
manufacture and sell these as it has no patent over these products. Furthermore, [respondent] is not the only

exclusive manufacturer of these plastic-made automotive parts as there are other establishments which were
already openly selling them to the public.3
After trial on the merits, the RTC ruled in favor of respondent. It ruled that petitioner clearly invaded the rights or
interest of respondent by deliberately copying and performing acts amounting to unfair competition. The RTC
further opined that under the circumstances, in order for respondents property rights to be preserved, petitioners
acts of manufacturing similar plastic-made automotive parts such as those of respondents and the selling of the
sameproducts to respondents customers, which it cultivated over the years, will have to be enjoined. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, the court finds the defendant liable to plaintiff Two Million (P2,000,000.00)
Pesos, as actual damages, One Hundred Thousand (P100,000.00) Pesos as attorneys fees and One Hundred
Thousand (P100,000.00) Pesos for exemplary damages. The court hereby permanently [enjoins] defendant from
manufacturing the plastic-made automotive parts as those manufactured by plaintiffs.
SO ORDERED.4
Thus, petitioner appealed to the CA.
On appeal, petitioner asserts that ifthere is no intellectual property protecting a good belonging to another,the
copying thereof for production and selling does not add up to unfair competition as competition is promoted by law
to benefit consumers. Petitioner further contends that it did not lure away respondents employees to get trade
secrets. It points out that the plastic spare parts sold by respondent are traded in the market and the copying of these
can be done by simplybuying a sample for a mold to be made.
Conversely, respondent averred that copyright and patent registrations are immaterial for an unfair competition
case to prosper under Article 28 of the Civil Code. It stresses that the characteristics of unfair competition are
present in the instant case as the parties are trade rivals and petitioners acts are contrary to good conscience for
deliberately copying its products and employing its former employees.

In a Decision dated November 24,2010, the CA affirmed with modification the ruling of the RTC. Relevant
portions of said decision read:
Despite the evidence showing thatWillaware took dishonest steps in advancing its business interest against
Jesichris, however, the Court finds no basis for the award by the RTC of actual damages. One is entitled to actual
damages as one has duly proven. The testimony of Quejada, who was engaged by Jesichris in 2001 to audit its
business, only revealed that there was a discrepancy between the sales of Jesichris from 2001 to 2002. No amount
was mentioned. As for Exhibit "Q," which is a copy of the comparative income statement of Jesichris for 19992002, it shows the decline of the sales in 2002 in comparison with those made in 2001 but it does not disclose if
this pertains to the subject automotive parts or to the other products of Jesichris like plates.
In any event, it was clearly shown that there was unfair competition on the part of Willaware that prejudiced
Jesichris. It is only proper that nominal damages be awarded in the amount of Two Hundred Thousand Pesos
(P200,000.00) in order to recognize and vindicate Jesichris rights. The RTCs award of attorneys fees and
exemplary damages is also maintained.
xxxx
WHEREFORE, premises considered, the Decision dated April 15, 2003 of the Regional Trial Court of Caloocan
City, Branch 131, in Civil Case No. C-19771 is hereby MODIFIED. The award of Two Million Pesos
(P2,000,000.00) actual damages is deleted and in its place, Two Hundred Thousand Pesos nominal damages is
awarded.
SO ORDERED.5
Dissatisfied, petitioner moved for reconsideration. However, the same was denied for lack of merit by the CA in a
Resolution dated February 10, 2011.
Hence, the present Petition for Review wherein petitioner raises the following issues for our resolution:

(1) Whether or not there is unfair competition under human relations when the parties are not competitors
and there is actually no damage on the part of Jesichris?
(2) Consequently, if there is no unfair competition, should there be moral damages and attorneys fees?
(3) Whether or not the addition of nominal damages is proper although no rights have been established?
(4) If ever the right of Jesichris refersto its copyright on automotive parts, should it be considered in the light
of the said copyrights were considered to be void by no less than this Honorable Court in SC GR No.
161295?
(5) If the right involved is "goodwill" then the issue is: whether or not Jesichris has established "goodwill?"6
In essence, the issue for our resolution is: whether or not petitioner committed acts amounting to unfair competition
under Article 28 of the Civil Code.
Prefatorily, we would like to stress that the instant case falls under Article 28 of the Civil Code on humanrelations,
and not unfair competition under Republic Act No. 8293,7 as the present suit is a damage suit and the products are
not covered by patent registration. A fortiori, the existence of patent registration is immaterial in the present case.
The concept of "unfair competition"under Article 28 is very much broader than that covered by intellectual
property laws. Under the present article, which follows the extended concept of "unfair competition" in American
jurisdictions, the term coverseven cases of discovery of trade secrets of a competitor, bribery of his employees,
misrepresentation of all kinds, interference with the fulfillment of a competitors contracts, or any malicious
interference with the latters business.8
With that settled, we now come to the issue of whether or not petitioner committed acts amounting tounfair
competition under Article 28 of the Civil Code.
We find the petition bereft of merit.

Article 28 of the Civil Code provides that "unfair competition in agricultural, commercial or industrial enterprises
or in labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action by the person who thereby suffers damage."
From the foregoing, it is clear thatwhat is being sought to be prevented is not competitionper sebut the use of
unjust, oppressive or high- handed methods which may deprive others of a fair chance to engage in business or to
earn a living. Plainly,what the law prohibits is unfair competition and not competition where the means usedare fair
and legitimate.
In order to qualify the competition as "unfair," it must have two characteristics: (1) it must involve an injury to a
competitor or trade rival, and (2) it must involve acts which are characterized as "contrary to good conscience," or
"shocking to judicial sensibilities," or otherwise unlawful; in the language of our law, these include force,
intimidation, deceit, machination or any other unjust, oppressive or high-handed method. The public injury or
interest is a minor factor; the essence of the matter appears to be a private wrong perpetrated by unconscionable
means.9
Here, both characteristics are present.
First, both parties are competitors or trade rivals, both being engaged in the manufacture of plastic-made
automotive parts. Second, the acts of the petitioner were clearly "contrary to good conscience" as petitioner
admitted having employed respondents formeremployees, deliberately copied respondents products and even
went to the extent of selling these products to respondents customers.10
To bolster this point, the CA correctly pointed out that petitioners hiring of the former employees of respondent
and petitioners act of copying the subject plastic parts of respondent were tantamount to unfair competition, viz.:
The testimonies of the witnesses indicate that [petitioner] was in bad faith in competing with the business of
[respondent].1wphi1 [Petitioners] acts can be characterized as executed with mischievous subtle calculation. To
illustrate, in addition to the findings of the RTC, the Court observes that [petitioner] is engaged in the production of

plastic kitchenware previous to its manufacturing of plasticautomotive spare parts, it engaged the services of the
then mold setter and maintenance operator of [respondent], De Guzman, while he was employed by the latter. De
Guzman was hired by [petitioner] in order to adjust its machinery since quality plastic automotive spare parts were
not being made. It baffles the Court why [petitioner] cannot rely onits own mold setter and maintenance operator to
remedy its problem. [Petitioners] engagement of De Guzman indicates that it is banking on his experience gained
from working for [respondent].
Another point we observe is that Yabut, who used to be a warehouse and delivery man of [respondent], was fired
because he was blamed of spying in favor of [petitioner]. Despite this accusation, he did not get angry. Later on, he
applied for and was hired by [petitioner] for the same position he occupied with [respondent]. These sequence of
events relating to his employment by [petitioner] is suspect too like the situation with De Guzman.11
Thus, it is evident that petitioner isengaged in unfair competition as shown by his act of suddenly shifting his
business from manufacturing kitchenware to plastic-made automotive parts; his luring the employees of the
respondent to transfer to his employ and trying to discover the trade secrets of the respondent. 12
Moreover, when a person starts an opposing place of business, not for the sake of profit to himself, but regardless
of loss and for the sole purpose of driving his competitor out of business so that later on he can take advantage of
the effects of his malevolent purpose, he is guilty of wanton wrong. 13 As aptly observed by the courta quo, the
testimony of petitioners witnesses indicate that it acted in bad faith in competing with the business of respondent,
to wit: [Petitioner], thru its General Manager, William Salinas, Jr., admitted that it was never engaged in the
business of plastic-made automotive parts until recently, year 2000:
Atty. Bautista: The business name of Willaware Product Corporation is kitchenware, it is (sic) not? Manufacturer
of kitchenware and distributor ofkitchenware, is it not? Mr. Salinas: Yes, sir. Atty. Bautista: And you said you have
known the [respondent] Jesichris Manufacturing Co., you have known it to be manufacturing plastic automotive
products, is it not? Mr. Salinas: Yes, sir. Atty. Bautista: In fact, you have been (sic) physically become familiar
with these products, plastic automotive products of Jesichris? Mr. Salinas: Yes, sir.

How [petitioner] was able to manufacture the same products, in terms of color, size, shape and composition as
those sold by Jesichris was due largely to the sudden transfer ofJesichris employees to Willaware.
Atty. Bautista: Since when have you been familiar with Jesichris Manufacturing Company?
Mr. Salinas: Since they transferred there (sic) our place.
Atty. Bautista: And that was in what year? Mr. Salinas: Maybe four (4) years. I dont know the exact date.
Atty. Bautista: And some of the employees of Jesichris Manufacturing Co. have transferred to your company, is it
not?
Mr. Salinas: Yes, sir.
Atty. Bautista: How many, more or less?
Mr. Salinas: More or less, three (3).
Atty. Bautista: And when, in what year or month did they transfer to you?
Mr. Salinas: First, November 1.
Atty. Bautista: Year 2000?
Mr. Salinas: Yes sir. And then the other maybe February, this year. And the other one, just one month ago.
That [petitioner] was clearly outto take [respondent] out of business was buttressed by the testimony of
[petitioners] witness, Joel Torres:
Q: Are you familiar with the [petitioner], Willaware Product Corporation?

A: Yes, sir.
Q: Will you kindly inform this court where is the office of this Willaware Product Corporation (sic)?
A: At Mithi Street, Caloocan City, sir.
Q: And Mr. Witness, sometime second Saturday of January 2001, will you kindly inform this court what unusual
even (sic) transpired between you and Mr. Salinas on said date?
A: There was, sir.
Q: What is that?
A: Sir, I was walking at that time together with my wife going to the market and then I passed by the place where
they were having a drinking spree, sir.
Q: You mentioned they, who were they who were drinking at that time?
A: I know one Jun Molina, sir.
Q: And who else was there?
A: William Salinas, sir.
Q: And will you kindly inform us what happened when you spotted upon them drinking?
A: Jun Molina called me, sir.
Q: And what happened after that?

A: At that time, he offered mea glass of wine and before I was able to drink the wine, Mr. Salinas uttered
something, sir.
Q: And what were those words uttered by Mr. Salinas to you?
A: "O, ano naapektuhan na kayo sa ginaya (sic) ko sa inyo?"
Q: And what did you do after that, after hearing those words?
A: And he added these words, sir. "sabihin mo sa amo mo, dalawang taon na lang pababagsakin ko na siya."
Q: Alright, hearing those words, will you kindly tell this court whom did you gather to be referred to as your
"amo"?
A: Mr. Jessie Ching, sir.14
In sum, petitioner is guilty of unfair competition under Article 28 of the Civil Code.
However, since the award of Two Million Pesos (P2,000,000.00) in actual damages had been deleted and in its
place Two Hundred Thousand Pesos (P200,000.00) in nominal damages is awarded, the attorney's fees should
concomitantly be modified and lowered to Fifty Thousand Pesos (P50,000.00).
WHEREFORE, the instant petition is DENIED. The Decision dated November 24, 2010 and Resolution dated
February 10, 2011 of the Court of Appeals in CA-G.R. CV No. 86744 are hereby AFFIRMED with
MODIFICATION that the award of attorney's fees be lowered to Fifty Thousand Pesos (P50,000.00).
SO ORDERED.
CONTINENTAL
MANUFACTURING

STEEL

G.R. No. 182836

CORPORATION,
Petitioner,

- versus -

Present:
CARPIO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,

HON.
ACCREDITED
VOLUNTARY ARBITRATOR
ALLAN S. MONTAO and
NAGKAKAISANG
MANGGAGAWA NG CENTRO
STEEL
CORPORATIONSOLIDARITY OF UNIONS IN
THE
PHILIPPINES
FOR
EMPOWERMENT
AND
REFORMS (NMCSC-SUPER),

NACHURA, and
PERALTA, JJ.

Promulgated:

Respondents.
October 13, 2009
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DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the
Decision[1] dated 27 February 2008 and the Resolution[2] dated 9 May 2008 of the Court of Appeals in CA-G.R. SP
No. 101697, affirming the Resolution[3] dated 20 November 2007 of respondent Accredited Voluntary Arbitrator
Atty. Allan S. Montao (Montao) granting bereavement leave and other death benefits to Rolando P. Hortillano
(Hortillano), grounded on the death of his unborn child.

The antecedent facts of the case are as follows:

Hortillano, an employee of petitioner Continental Steel Manufacturing Corporation (Continental Steel) and a
member of respondent Nagkakaisang Manggagawa ng Centro Steel Corporation-Solidarity of Trade Unions in the

Philippines for Empowerment and Reforms (Union) filed on 9 January 2006, a claim for Paternity Leave,
Bereavement Leave and Death and Accident Insurance for dependent, pursuant to the Collective Bargaining
Agreement (CBA) concluded between Continental and the Union, which reads:

ARTICLE X: LEAVE OF ABSENCE

xxxx

Section 2. BEREAVEMENT LEAVEThe Company agrees to grant a bereavement leave with

pay to any employee in case of death of the employees legitimate dependent (parents, spouse,
children, brothers and sisters) based on the following:

2.1 Within Metro Manila up to Marilao, Bulacan - 7 days

2.2 Provincial/Outside Metro Manila - 11 days

xxxx

ARTICLE XVIII: OTHER BENEFITS

xxxx

Section 4. DEATH AND ACCIDENT INSURANCEThe Company shall grant death and
accidental insurance to the employee or his family in the following manner:

xxxx

4.3 DEPENDENTSEleven Thousand Five Hundred Fifty Pesos (Php11,550.00) in case of death
of the employees legitimate dependents (parents, spouse, and children). In case the employee is single,
this benefit covers the legitimate parents, brothers and sisters only with proper legal document to be
presented (e.g. death certificate).[4]

The claim was based on the death of Hortillanos unborn child. Hortillanos wife, Marife V. Hortillano, had a
premature delivery on 5 January 2006 while she was in the 38th week of pregnancy.[5] According to the Certificate
of Fetal Death dated 7 January 2006, the female fetus died during labor due to fetal Anoxia secondary to
uteroplacental insufficiency.[6]

Continental Steel immediately granted Hortillanos claim for paternity leave but denied his claims for
bereavement leave and other death benefits, consisting of the death and accident insurance.[7]

Seeking the reversal of the denial by Continental Steel of Hortillanos claims for bereavement and other death
benefits, the Unionresorted to the grievance machinery provided in the CBA. Despite the series of conferences
held, the parties still failed to settle their dispute,[8] prompting the Union to file a Notice to Arbitrate before the
National Conciliation and Mediation Board (NCMB) of the Department of Labor and Employment (DOLE),
National Capital Region (NCR).[9] In a Submission Agreement dated 9 October 2006, the Union and Continental
Steel submitted for voluntary arbitration the sole issue of whether Hortillano was entitled to bereavement leave and
other death benefits pursuant to Article X, Section 2

and Article XVIII, Section 4.3 of the CBA.[10] The parties mutually chose Atty. Montao, an Accredited Voluntary
Arbitrator, to resolve said issue.[11]

When the preliminary conferences again proved futile in amicably settling the dispute, the parties proceeded
to submit their respective Position Papers, [12] Replies,[13] and Rejoinders[14] to Atty. Montao.

The Union argued that Hortillano was entitled to bereavement leave and other death benefits pursuant to the
CBA. The Union maintained that Article X, Section 2 and Article XVIII, Section 4.3 of the CBA did not

specifically state that the dependent should have first been born alive or must have acquired juridical personality
so that his/her subsequent death could be covered by the CBA death benefits. The Union cited cases wherein
employees of MKK Steel Corporation (MKK Steel) and Mayer Steel Pipe Corporation (Mayer Steel), sister
companies of Continental Steel, in similar situations as Hortillano were able to receive death benefits under similar
provisions of their CBAs.

The Union mentioned in particular the case of Steve L. Dugan (Dugan), an employee of Mayer Steel, whose
wife also prematurely delivered a fetus, which had already died prior to the delivery. Dugan was able to receive
paternity leave, bereavement leave, and voluntary contribution under the CBA between his union and Mayer
Steel.[15] Dugans child was only 24 weeks in the womb and died before labor, as opposed to Hortillanos child who
was already 37-38 weeks in the womb and only died during labor.

The Union called attention to the fact that MKK Steel and Mayer Steel are located in the same compound as
Continental Steel; and the representatives of MKK Steel and Mayer Steel who signed the CBA with their
respective employees unions were the same as the representatives of Continental Steel who signed the existing
CBA with the Union.

Finally, the Union invoked Article 1702 of the Civil Code, which provides that all doubts in labor
legislations and labor contracts shall be construed in favor of the safety of and decent living for the laborer.

On the other hand, Continental Steel posited that the express provision of the CBA did not contemplate the
death of an unborn child, a fetus, without legal personality. It claimed that there are two elements for the
entitlement to the benefits, namely: (1) death and (2) status as legitimate dependent, none of which existed in

Hortillanos case. Continental Steel, relying on Articles 40, 41 and 42[16] of the Civil Code, contended that only one
with civil personality could die. Hence, the unborn child never died because it never acquired juridical
personality.Proceeding from the same line of thought, Continental Steel reasoned that a fetus that was dead from
the moment of delivery was not a person at all. Hence, the term dependent could not be applied to a fetus that never
acquired juridical personality. A fetus that was delivered dead could not be considered a dependent, since it never
needed any support, nor did it ever acquire the right to be supported.

Continental Steel maintained that the wording of the CBA was clear and unambiguous. Since neither of the
parties qualified the terms used in the CBA, the legally accepted definitions thereof were deemed automatically
accepted by both parties. The failure of the Union to have unborn child included in the definition of dependent, as
used in the CBA the death of whom would have qualified the parent-employee for bereavement leave and other
death benefits bound the Union to the legally accepted definition of the latter term.

Continental Steel, lastly, averred that similar cases involving the employees of its sister companies, MKK
Steel and Mayer Steel, referred to by the Union, were irrelevant and incompetent evidence, given the separate and
distinct personalities of the companies. Neither could the Union sustain its claim that the grant of bereavement
leave and other death benefits to the parent-employee for the loss of an unborn child constituted company practice.

On 20 November 2007, Atty. Montao, the appointed Accredited Voluntary Arbitrator, issued a
Resolution[17] ruling that Hortillano was entitled to bereavement leave with pay and death benefits.

Atty. Montao identified the elements for entitlement to said benefits, thus:

This Office declares that for the entitlement of the benefit of bereavement leave with pay by the
covered employees as provided under Article X, Section 2 of the parties CBA, three (3) indispensable
elements must be present: (1) there is death; (2) such death must be of employees dependent; and (3)
such dependent must be legitimate.

On the otherhand, for the entitlement to benefit for death and accident insurance as provided
under Article XVIII, Section 4, paragraph (4.3) of the parties CBA, four (4) indispensable elements
must be present: (a) there is death; (b) such death must be of employees dependent; (c) such dependent
must be legitimate; and (d) proper legal document to be presented.[18]

Atty. Montao found that there was no dispute that the death of an employees legitimate dependent
occurred. The fetus had the right to be supported by the parents from the very moment he/she was conceived. The
fetus had to rely on another for support; he/she could not have existed or sustained himself/herself without the
power or aid of someone else, specifically, his/her mother. Therefore, the fetus was already a dependent, although
he/she died during the labor or delivery. There was also no question that Hortillano and his wife were lawfully
married, making their dependent, unborn child, legitimate.

In the end, Atty. Montao decreed:

WHEREFORE, premises considered, a resolution is hereby rendered ORDERING [herein

petitioner Continental Steel] to pay Rolando P. Hortillano the amount of Four Thousand Nine
Hundred Thirty-Nine Pesos (P4,939.00), representing his bereavement leave pay and the amount of
Eleven Thousand Five Hundred Fifty Pesos (P11,550.00) representing death benefits, or a total
amount of P16,489.00

The complaint against Manuel Sy, however, is ORDERED DISMISSED for lack of merit.

All other claims are DISMISSED for lack of merit.

Further, parties are hereby ORDERED to faithfully abide with the herein dispositions.

Aggrieved, Continental Steel filed with the Court of Appeals a Petition for Review on Certiorari,[19] under
Section 1, Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 101697.

Continental Steel claimed that Atty. Montao erred in granting Hortillanos claims for bereavement leave with
pay and other death benefits because no death of an employees dependent had occurred. The death of a fetus, at

whatever stage of pregnancy, was excluded from the coverage of the CBA since what was contemplated by the
CBA was the death of a legal person, and not that of a fetus, which did not acquire any juridical
personality. Continental Steel pointed out that its contention was bolstered by the fact that the term death was
qualified by the phrase legitimate dependent. It asserted that the status of a child could only be determined upon
said childs birth, otherwise, no such appellation can be had. Hence, the conditions sine qua non for Hortillanos
entitlement to bereavement leave and other death benefits under the CBA were lacking.

The Court of Appeals, in its Decision dated 27 February 2008, affirmed Atty. Montaos Resolution dated 20
November 2007. The appellate court interpreted death to mean as follows:

[Herein petitioner Continental Steels] exposition on the legal sense in which the term death is
used in the CBA fails to impress the Court, and the same is irrelevant for ascertaining the purpose,
which the grant of bereavement leave and death benefits thereunder, is intended to serve. While there
is no arguing with [Continental Steel] that the acquisition of civil personality of a child or fetus is
conditioned on being born alive upon delivery, it does not follow that such event of premature
delivery of a fetus could never be contemplated as a death as to be covered by the CBA provision,
undoubtedly an event causing loss and grief to the affected employee, with whom the dead fetus
stands in a legitimate relation. [Continental Steel] has proposed a narrow and technical significance to
the term death of a legitimate dependent as condition for granting bereavement leave and death
benefits under the CBA. Following [Continental Steels] theory, there can be no experience of death to
speak of. The Court, however, does not share this view. A dead fetus simply cannot be equated with
anything less than loss of human life, especially for the expectant parents. In this light, bereavement

leave and death benefits are meant to assuage the employee and the latters immediate family, extend
to them solace and support, rather than an act conferring legal status or personality upon the unborn
child. [Continental Steels] insistence that the certificate of fetal death is for statistical purposes only
sadly misses this crucial point.[20]

Accordingly, the fallo of the 27 February 2008 Decision of the Court of Appeals reads:

WHEREFORE, premises considered, the present petition is hereby DENIED for lack of merit.
The assailed Resolution dated November 20, 2007 of Accredited Voluntary Arbitrator Atty. Allan S.
Montao is hereby AFFIRMED and UPHELD.

With costs against [herein petitioner Continental Steel].[21]

In a Resolution[22] dated 9 May 2008, the Court of Appeals denied the Motion for Reconsideration[23] of
Continental Steel.

Hence, this Petition, in which Continental Steel persistently argues that the CBA is clear and unambiguous, so that
the literal and legal meaning of death should be applied. Only one with juridical personality can die and a dead
fetus never acquired a juridical personality.

We are not persuaded.

As Atty. Montao identified, the elements for bereavement leave under Article X, Section 2 of the CBA are: (1)
death; (2) the death must be of a dependent, i.e., parent, spouse, child, brother, or sister, of an employee; and (3)
legitimate relations of the dependent to the employee. The requisites for death and accident insurance under
Article XVIII, Section 4(3) of the CBA are: (1) death; (2) the death must be of a dependent, who could be a parent,
spouse, or child of a married employee; or a parent, brother, or sister of a single employee; and (4) presentation of
the proper legal document to prove such death, e.g., death certificate.

It is worthy to note that despite the repeated assertion of Continental Steel that the provisions of the CBA are
clear and unambiguous, its fundamental argument for denying Hortillanos claim for bereavement leave and other
death benefits rests on the purportedly proper interpretation of the terms death and dependent as used in the
CBA. If the provisions of the CBA are indeed clear and unambiguous, then there is no need to resort to the
interpretation or construction of the same. Moreover, Continental Steel itself admitted that neither management nor
the Union sought to define the pertinent terms for bereavement leave and other death benefits during the
negotiation of the CBA.
The reliance of Continental Steel on Articles 40, 41 and 42 of the Civil Code for the legal definition
of death is misplaced. Article 40 provides that a conceived child acquires personality only when it is born, and

Article 41 defines when a child is considered born. Article 42 plainly states that civil personality is extinguished by
death.

First, the issue of civil personality is not relevant herein. Articles 40, 41 and 42 of the Civil Code on natural
persons, must be applied in relation to Article 37 of the same Code, the very first of the general provisions on civil
personality, which reads:

Art. 37. Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in
every natural person and is lost only through death. Capacity to act, which is the power to do acts with
legal effect, is acquired and may be lost.

We need not establish civil personality of the unborn child herein since his/her juridical capacity and capacity to
act as a person are not in issue. It is not a question before us whether the unborn child acquired any rights or
incurred any obligations prior to his/her death that were passed on to or assumed by the childs parents. The rights
to bereavement leave and other death benefits in the instant case pertain directly to the parents of the unborn child
upon the latters death.

Second, Sections 40, 41 and 42 of the Civil Code do not provide at all a definition of death. Moreover, while
the Civil Code expressly provides that civil personality may be extinguished by death, it does not explicitly state
that only those who have acquired juridical personality could die.

And third, death has been defined as the cessation of life.[24] Life is not synonymous with civil personality. One
need not acquire civil personality first before he/she could die. Even a child inside the womb already has life. No
less than the Constitution recognizes the life of the unborn from conception,[25] that the State must protect equally
with the life of the mother. If the unborn already has life, then the cessation thereof even prior to the child being
delivered, qualifies as death.

Likewise, the unborn child can be considered a dependent under the CBA. As Continental Steel itself defines,
a dependent is one who relies on another for support; one not able to exist or sustain oneself without the power or
aid of someone else. Under said general definition,[26]even an unborn child is a dependent of its parents. Hortillanos
child could not have reached 38-39 weeks of its gestational life without depending upon its mother, Hortillanos
wife, for sustenance. Additionally, it is explicit in the CBA provisions in question that the dependentmay be the
parent, spouse, or child of a married employee; or the parent, brother, or sister of a single employee. The CBA did
not provide a qualification for the child dependent, such that the child must have been born or must have acquired
civil personality, as Continental Steel avers. Without such qualification, then child shall be understood in its more
general sense, which includes the unborn fetus in the mothers womb.

The term legitimate merely addresses the dependent childs status in relation to his/her parents. In Angeles v.
Maglaya,[27] we have expounded on who is a legitimate child, viz:
A legitimate child is a product of, and, therefore, implies a valid and lawful marriage. Remove the
element of lawful union and there is strictly no legitimate filiation between parents and child. Article
164 of the Family Code cannot be more emphatic on the matter: Children conceived or born during
the marriage of the parents are legitimate. (Emphasis ours.)

Conversely, in Briones v. Miguel,[28] we identified an illegitimate child to be as follows:

The fine distinctions among the various types of illegitimate children have been eliminated in
the Family Code. Now, there are only two classes of children -- legitimate (and those who, like the
legally adopted, have the rights of legitimate children) and illegitimate. All childrenconceived and
born outside a valid marriage are illegitimate, unless the law itself gives them legitimate status.
(Emphasis ours.)

It is apparent that according to the Family Code and the afore-cited jurisprudence, the legitimacy or
illegitimacy of a child attaches upon his/her conception. In the present case, it was not disputed that Hortillano and
his wife were validly married and that their child was conceived during said marriage, hence, making said
child legitimate upon her conception.

Also incontestable is the fact that Hortillano was able to comply with the fourth element entitling him to death and
accident insurance under the CBA, i.e., presentation of the death certificate of his unborn child.

Given the existence of all the requisites for bereavement leave and other death benefits under the CBA, Hortillanos
claims for the same should have been granted by Continental Steel.

We emphasize that bereavement leave and other death benefits are granted to an employee to give aid to, and if
possible, lessen the grief of, the said employee and his family who suffered the loss of a loved one. It cannot be
said that the parents grief and sense of loss arising from the death of their unborn child, who, in this case, had a
gestational life of 38-39 weeks but died during delivery, is any less than that of parents whose child was born alive
but died subsequently.

Being for the benefit of the employee, CBA provisions on bereavement leave and other death benefits should be
interpreted liberally to give life to the intentions thereof. Time and again, the Labor Code is specific in enunciating
that in case of doubt in the interpretation of any law or provision affecting labor, such should be interpreted in
favor of labor.[29] In the same way, the CBA and CBA provisions should be interpreted in favor of
labor. In Marcopper Mining v. National Labor Relations Commission,[30] we pronounced:

Finally, petitioner misinterprets the declaration of the Labor Arbiter in the assailed decision that
"when the pendulum of judgment swings to and fro and the forces are equal on both sides, the same
must be stilled in favor of labor." While petitioner acknowledges that all doubts in the interpretation of
the Labor Code shall be resolved in favor of labor, it insists that what is involved-here is the amended
CBA which is essentially a contract between private persons. What petitioner has lost sight of is the
avowed policy of the State, enshrined in our Constitution, to accord utmost protection and justice to
labor, a policy, we are, likewise, sworn to uphold.
In Philippine Telegraph & Telephone Corporation v. NLRC [183 SCRA 451 (1990)], we
categorically stated that:

When conflicting interests of labor and capital are to be weighed on the scales of
social justice, the heavier influence of the latter should be counter-balanced by sympathy
and compassion the law must accord the underprivileged worker.

Likewise, in Terminal Facilities and Services Corporation v. NLRC [199 SCRA 265 (1991)],
we declared:

Any doubt concerning the rights of labor should be resolved in its favor pursuant to
the social justice policy.

IN VIEW WHEREOF, the Petition is DENIED. The Decision dated 27 February 2008 and Resolution
dated 9 May 2008 of the Court of Appeals in CA-G.R. SP No. 101697, affirming the Resolution dated 20
November 2007 of Accredited Voluntary Arbitrator Atty. Allan S. Montao, which granted to Rolando P. Hortillano
bereavement leave pay and other death benefits in the amounts of Four Thousand Nine Hundred Thirty-Nine Pesos
(P4,939.00) and Eleven Thousand Five Hundred Fifty Pesos (P11,550.00), respectively, grounded on the death of
his unborn child, are AFFIRMED. Costs against Continental Steel Manufacturing Corporation.

SO ORDERED.