THIRD DIVISION enforcing the 3 June 1993 Resolution of the MKSE Board of

Directors.

MAKATI STOCK G.R. No. 138814 The SICD subsequently issued another Order on 10
EXCHANGE, INC., March 1994 granting respondents application for a Writ of
MA. VIVIAN Preliminary Injunction, to continuously enjoin, during the
YUCHENGCO, Present: pendency of SEC Case No. 02-94-4678, the implementation
ADOLFO M. DUARTE, or enforcement of the MKSE Board Resolution in
MYRON C. PAPA, question. Petitioners assailed this SICD Order dated 10
NORBERTO C. YNARES- March 1994 in a Petition for Certiorari filed with the SEC en
NAZARENO, SANTIAGO, J., banc, docketed as SEC-EB No. 393.
GEORGE UY-TIOCO, Chairperson,
ANTONIO A. LOPA, AUSTRIA- On 11 March 1994, petitioners filed a Motion to
RAMON B. ARNAIZ, MARTINEZ, Dismiss respondents Petition in SEC Case No. 02-94-4678,
LUIS J.L. VIRATA, and CHICO-NAZARIO, based on the following grounds: (1) the Petition became moot
ANTONIO GARCIA, NACHURA, and due to the cancellation of the license of MKSE; (2) the SICD
JR. PERALTA, JJ. had no jurisdiction over the Petition; and (3) the Petition
Petitioners, failed to state a cause of action.

The SICD denied petitioners Motion to Dismiss in

- versus - an Order dated 4 May 1994. Petitioners again challenged
Promulgated: the 4 May 1994 Order of SICD before the SEC en
banc through another Petition for Certiorari, docketed as
MIGUEL V. CAMPOS, April 16, 2009 SEC-EB No. 403.
substituted by JULIA
ORTIGAS VDA. In an Order dated 31 May 1995 in SEC-EB No. 393,
DE CAMPOS,[1] the SEC en banc nullified the 10 March 1994 Order of SICD
Respondent. in SEC Case No. 02-94-4678 granting a Writ of Preliminary
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Injunction in favor of respondent. Likewise, in an Order
- - - - - - - - - -x dated 14 August 1995 in SEC-EB No. 403, the SEC en
banc annulled the 4 May 1994 Order of SICD in SEC Case
No. 02-94-4678 denying petitioners Motion to Dismiss, and
DECISION accordingly ordered the dismissal of respondents Petition
before the SICD.

CHICO-NAZARIO, J.: Respondent filed a Petition for Certiorari with the

This is a Petition for Review on Certiorari under
Rule 45 seeking the reversal of the Decision[2] dated 11
February 1997 and Resolution dated 18 May 1999 of the
Court of Appeals in CA-G.R. SP No. 38455.
Court of Appeals assailing the Orders of the SEC en
banc dated 31 May 1995 and 14 August 1995 in SEC-EB No.
393 and SEC-EB No. 403, respectively. Respondents Petition
before the appellate court was docketed as CA-G.R. SP No.
38455.

The facts of the case are as follows: On 11 February 1997, the Court of Appeals
promulgated its Decision in CA-G.R. SP No. 38455, granting
SEC Case No. 02-94-4678 was instituted on 10 respondents Petition for Certiorari, thus:
February 1994 by respondent Miguel V. Campos, who filed
with the Securities, Investigation and Clearing Department WHEREFORE, the petition in so
(SICD) of the Securities and Exchange Commission (SEC), a far as it prays for annulment of the Orders
Petition against herein petitioners Makati Stock Exchange, dated May 31, 1995 and August 14,
Inc. (MKSE) and MKSE directors, Ma. Vivian Yuchengco, 1995 in SEC-EB Case Nos. 393 and 403 is
Adolfo M. Duarte, Myron C. Papa, Norberto C. Nazareno, GRANTED. The said orders are hereby
George Uy-Tioco, Antonio A, Lopa, Ramon B. Arnaiz, Luis rendered null and void and set aside.
J.L. Virata, and Antonio Garcia, Jr. Respondent, in said
Petition, sought: (1) the nullification of the Resolution dated
3 June 1993 of the MKSE Board of Directors, which Petitioners filed a Motion for Reconsideration of the
allegedly deprived him of his right to participate equally in foregoing Decision but it was denied by the Court of Appeals
the allocation of Initial Public Offerings (IPO) of corporations in a Resolution dated 18 May 1999.
registered with MKSE; (2) the delivery of the IPO shares he
was allegedly deprived of, for which he would pay IPO Hence, the present Petition for Review raising the
prices; and (3) the payment of P2 million as moral following arguments:
damages, P1 million as exemplary damages,
and P500,000.00 as attorneys fees and litigation expenses. I.

On 14 February 1994, the SICD issued an Order THE SEC EN BANC DID NOT COMMIT
granting respondents prayer for the issuance of a Temporary GRAVE ABUSE OF DISCRETION
Restraining Order to enjoin petitioners from implementing or AMOUNTING TO LACK OR EXCESS
 OF JURISDICTION WHEN IT
DISMISSED THE PETITION FILED BY If a defendant moves to dismiss the complaint on the
RESPONDENT BECAUSE ON ITS ground of lack of cause of action, he is regarded as having
FACE, IT FAILED TO STATE A CAUSE hypothetically admitted all the averments thereof. The test of
OF ACTION. sufficiency of the facts found in a complaint as constituting a
cause of action is whether or not admitting the facts alleged,
II. the court can render a valid judgment upon the same in
accordance with the prayer thereof. The hypothetical
THE GRANT OF THE IPO admission extends to the relevant and material facts well
ALLOCATIONS IN FAVOR OF pleaded in the complaint and inferences fairly deducible
RESPONDENT WAS A MERE therefrom. Hence, if the allegations in the complaint furnish
ACCOMMODATION GIVEN TO HIM sufficient basis by which the complaint can be maintained,
BY THE BOARD OF [DIRECTORS] OF the same should not be dismissed regardless of the defense
THE MAKATI STOCK EXCHANGE, that may be assessed by the defendant.[5]
INC. Given the foregoing, the issue of whether
respondents Petition in SEC Case No. 02-94-4678
III. sufficiently states a cause of action may be alternatively
stated as whether, hypothetically admitting to be true the
THE COURT OF APPEALS ERRED IN allegations in respondents Petition in SEC Case No. 02-94-
HOLDING THAT THE SEC EN BANC 4678, the SICD may render a valid judgment in accordance
COMMITTED GRAVE ABUSE OF with the prayer of said Petition.
DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION WHEN A reading of the exact text of respondents Petition in
IT MADE AN EXTENDED INQUIRY SEC Case No. 02-94-4678 is, therefore,
AND PROCEEDED TO MAKE A unavoidable. Pertinent portions of the said Petition reads:
DETERMINATION AS TO THE TRUTH
OF RESPONDENTS ALLEGATIONS IN 7. In recognition of petitioner’s
HIS PETITION AND USED AS BASIS invaluable services, the general membership
THE EVIDENCE ADDUCED DURING of respondent corporation [MKSE] passed a
THE HEARING ON THE APPLICATION resolution sometime in 1989 amending its
FOR THE WRIT OF PRELIMINARY Articles of Incorporation, to include the
INJUNCTION TO DETERMINE THE following provision therein:
EXISTENCE OR VALIDITY OF A
STATED CAUSE OF ACTION. ELEVENTH
WHEREAS, Mr. Miguel
IV. Campos is the only
surviving incorporator of
IPO ALLOCATIONS GRANTED TO the Makati Stock
BROKERS ARE NOT TO BE BOUGHT Exchange, Inc. who has
BY THE BROKERS FOR THEMSELVES maintained his
BUT ARE TO BE DISTRIBUTED TO membership;
THE INVESTING PUBLIC. HENCE,
RESPONDENTS CLAIM FOR WHEREAS, he
DAMAGES IS ILLUSORY AND HIS has unselfishly served
PETITION A NUISANCE SUIT.[3] the Exchange in various
capacities, as governor
On 18 September 2001, counsel for respondent from 1977 to the present
manifested to this Court that his client died on 7 May 2001. In and as President from
a Resolution dated 24 October 2001, the Court directed the 1972 to 1976 and again
substitution of respondent by his surviving spouse, Julia as President from 1988 to
Ortigas vda. deCampos. the present;

Petitioners want this Court to affirm the dismissal by WHEREAS,

the SEC en banc of respondents Petition in SEC Case No. 02- such dedicated service
94-4678 for failure to state a cause of action. On the other and leadership which has
hand, respondent insists on the sufficiency of his Petition and contributed to the
seeks the continuation of the proceedings before the SICD. advancement and well
being not only of the
A cause of action is the act or omission by which a Exchange and its
party violates a right of another.[4] A complaint states a cause members but also to the
of action where it contains three essential elements of a cause Securities industry,
of action, namely: (1) the legal right of the plaintiff, (2) the needs to be recognized
correlative obligation of the defendant, and (3) the act or and appreciated;
omission of the defendant in violation of said legal right. If
these elements are absent, the complaint becomes vulnerable WHEREAS, as
to dismissal on the ground of failure to state a cause of action. such, the Board of
 Governors in its meeting
held on February 09,
1989 has
correspondingly adopted
a resolution recognizing
his valuable service to
the Exchange, reward the
same, and preserve for
posterity such
recognition by proposing
a resolution to the
membership body which
would make him as
Chairman Emeritus for
life and install in the
Exchange premises a
commemorative bronze
plaque in his honor;
NOW,
THEREFORE, for and in
consideration of the
above premises, the
position of the Chairman
Emeritus to be occupied
by Mr. Miguel Campos
during his lifetime and
irregardless of his
continued membership in
the Exchange with the
Privilege to attend all
membership meetings as
well as the meetings of
the Board of Governors
of the Exchange, is
hereby created.
8. Hence, to this day, petitioner is
not only an active member of the respondent
corporation, but its Chairman Emeritus as
well.
9. Correspondingly, at all times
material to this petition, as an active member
and Chairman Emeritus of respondent
corporation, petitioner has always enjoyed
the right given to all the other members to
participate equally in the Initial Public
Offerings (IPOs for brevity) of corporations.
10. IPOs are shares of corporations
offered for sale to the public, prior to the
listing in the trading floor of the countrys
two stock exchanges. Normally, Twenty
Five Percent (25%) of these shares are
divided equally between the two stock
exchanges which in turn divide these
equally among their members, who pay
therefor at the offering price.
11. However, on June 3, 1993,
during a meeting of the Board of Directors
of respondent-corporation, individual
respondents passed a resolution to stop
giving petitioner the IPOs he is entitled to,
based on the ground that these shares were
allegedly benefiting Gerardo O. Lanuza, Jr.,
who these individual respondents wanted to
get even with, for having filed cases before
the Securities and Exchange (SEC) for their
disqualification as member of the Board of
Directors of respondent corporation.
12. Hence, from June 3, 1993 up to
the present time, petitioner has been
deprived of his right to subscribe to the IPOs
of corporations listing in the stock market at
their offering prices.
13. The collective act of the
individual respondents in depriving
petitioner of his right to a share in the IPOs
for the aforementioned reason, is unjust,
dishonest and done in bad faith, causing
petitioner substantial financial damage.[6]
There is no question that the Petition in SEC Case
No. 02-94-4678 asserts a right in favor of respondent,
particularly, respondents alleged right to subscribe to the
IPOs of corporations listed in the stock market at their
offering prices; and stipulates the correlative obligation of
petitioners to respect respondents right, specifically, by
continuing to allow respondent to subscribe to the IPOs of
corporations listed in the stock market at their offering prices.
However, the terms right and obligation in
respondents Petition are not magic words that would
automatically lead to the conclusion that such Petition
sufficiently states a cause of action. Right and obligation are
legal terms with specific legal meaning. A right is a claim or
title to an interest in anything whatsoever that is enforceable
by law.[7] An obligation is defined in the Civil Code as a
juridical necessity to give, to do or not to do.[8] For every right
enjoyed by any person, there is a corresponding obligation on
the part of another person to respect such right. Thus, Justice
J.B.L. Reyes offers[9] the definition given by Arias Ramos as
a more complete definition:
An obligation is a juridical
relation whereby a person (called the
creditor) may demand from another
(called the debtor) the observance of a
determinative conduct (the giving, doing
or not doing), and in case of breach, may
demand satisfaction from the assets of the
latter.
The Civil Code enumerates the sources of
obligations:
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.
Therefore, an obligation imposed on a person, and
the corresponding right granted to another, must be rooted in
at least one of these five sources. The mere assertion of a right
and claim of an obligation in an initiatory pleading, whether
a Complaint or Petition, without identifying the basis or
source thereof, is merely a conclusion of fact and law. A
pleading should state the ultimate facts essential to the rights
of action or defense asserted, as distinguished from
mere conclusions of fact or conclusions of law.[10] Thus, a
Complaint or Petition filed by a person claiming a right to the
Office of the President of this Republic, but without stating
the source of his purported right, cannot be said to have
sufficiently stated a cause of action. Also, a person claiming
to be the owner of a parcel of land cannot merely state that he
has a right to the ownership thereof, but must likewise assert
in the Complaint either a mode of acquisition of ownership or
at least a certificate of title in his name.
In the case at bar, although the Petition in SEC Case
No. 02-94-4678 does allege respondents right to subscribe to
the IPOs of corporations listed in the stock market at their
offering prices, and petitioners obligation to continue
respecting and observing such right, the Petition utterly failed
to lay down the source or basis of respondents right and/or
petitioners obligation.
Respondent merely quoted in his Petition the MKSE
Board Resolution, passed sometime in 1989, granting him the
position of Chairman Emeritus of MKSE for life. However,
there is nothing in the said Petition from which the Court can
deduce that respondent, by virtue of his position as Chairman
Emeritus of MKSE, was granted by law, contract, or any
other legal source, the right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices.
A meticulous review of the Petition reveals that the
allocation of IPO shares was merely alleged to have been
done in accord with a practice normally observed by the
members of the stock exchange, to wit:
IPOs are shares of corporations offered for
sale to the public, prior to their listing in the
trading floor of the countrys two stock
exchanges. Normally, Twenty-Five
Percent (25%) of these shares are
divided equally between the two stock
exchanges which in turn divide these
equally among their members, who pay
therefor at the offering
price.[11] (Emphasis supplied)
A practice or custom is, as a general rule, not a
source of a legally demandable or enforceable
right.[12] Indeed, in labor cases, benefits which were
voluntarily given by the employer, and which have ripened
into company practice, are considered as rights that cannot be
diminished by the employer.[13] Nevertheless, even in such
cases, the source of the employees right is not custom, but
ultimately, the law, since Article 100 of the Labor Code
explicitly prohibits elimination or diminution of benefits.
There is no such law in this case that converts the
practice of allocating IPO shares to MKSE members, for
subscription at their offering prices, into an enforceable or
demandable right. Thus, even if it is hypothetically admitted
that normally, twenty five percent (25%) of the IPOs are
divided equally between the two stock exchanges -- which, in
turn, divide their respective allocation equally among their
members, including the Chairman Emeritus, who pay for IPO
shares at the offering price -- the Court cannot grant
respondents prayer for damages which allegedly resulted
from the MKSE Board Resolution dated 3 June 1993
deviating from said practice by no longer allocating any
shares to respondent.
Accordingly, the instant Petition should be
granted. The Petition in SEC Case No. 02-94-4678 should be
dismissed for failure to state a cause of action. It does not
matter that the SEC en banc, in its Order dated 14 August
1995 in SEC-EB No. 403, overstepped its bounds by not
limiting itself to the issue of whether respondents Petition
before the SICD sufficiently stated a cause of action. The
SEC en banc may have been mistaken in considering
extraneous evidence in granting petitioners Motion to
Dismiss, but its discussion thereof are merely superfluous
and obiter dictum. In the main, the SEC en banc did correctly
dismiss the Petition in SEC Case No. 02-94-4678 for its
failure to state the basis for respondents alleged right, to wit:
Private respondent Campos has
failed to establish the basis or authority for
his alleged right to participate equally in
the IPO allocations of the Exchange. He
cited paragraph 11 of the amended articles
of incorporation of the Exchange in support
of his position but a careful reading of the
said provision shows nothing therein that
would bear out his claim. The provision
merely created the position of chairman
emeritus of the Exchange but it mentioned
nothing about conferring upon the
occupant thereof the right to receive IPO
allocations.[14]
With the dismissal of respondents Petition in SEC
Case No. 02-94-4678, there is no more need for this Court to
resolve the propriety of the issuance by SCID of a writ of
preliminary injunction in said case.
WHEREFORE, the Petition is GRANTED. The
Decision of the Court of Appeals dated 11 February 1997 and
its Resolution dated 18 May 1999 in CA-G.R. SP No. 38455
are REVERSED and SET ASIDE. The Orders dated 31
May 1995 and 14 August 1995 of the Securities and
Exchange Commission en banc in SEC-EB Case No. 393 and
No. 403, respectively, are hereby reinstated. No
pronouncement as to costs.
SO ORDERED.
MINITA V. CHICO-
NAZARIO
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
[1]
Per Resolution of 24 October 2001.
[2]
Penned by Associate Justice Eubulo G. Verzola with
Associate Justices Jesus M. Elbinias and Hilarion L.
Aquino, concurring; rollo, pp. 30-36.
[3]
Rollo, p. 144.
[4]
Revised Rules of Court, Rule 2, Section 2. of residential and commercial spaces
[5]
Fil-Estate Golf and Development, Inc. v. Court of Appeals, owned by defendants described as Nos.
333 Phil. 465, 490-491 (1996). 630-638 Ongpin Street, Binondo, Manila;
[6]
Rollo, pp. 50-52. that they have occupied said spaces since
[7]
Bailey v. Miller, 91 N.E. 24, 25, Ind. App. 475, cited in 37A 1935 and have been religiously paying the
Words and Phrases 363. rental and complying with all the
[8]
Civil Code, Article 1156. conditions of the lease contract; that on
[9]
Lawyers Journal, 31 January 1951, p. 47. several occasions before October 9, 1986,
[10]
Abad v. Court of First Instance of Pangasinan, defendants informed plaintiffs that they are
G.R. Nos. 58507-08, 26 February 1992, 206 SCRA offering to sell the premises and are giving
567, 579-580. them priority to acquire the same; that
[11]
Rollo, pp. 51-52. during the negotiations, Bobby Cu Unjieng
[12]
A distinction, however, should be made between offered a price of P6-million while
Municipal Law and Public International plaintiffs made a counter offer of P5-
Law. Custom is one of the primary sources of million; that plaintiffs thereafter asked the
International Law, and is thus a source of legal rights defendants to put their offer in writing to
within such sphere. which request defendants acceded; that in
[13]
Arco Metal Products Co., Inc. v. Samahan ng mga reply to defendant's letter, plaintiffs wrote
Manggagawa sa Arco Metal-NAFLU, G.R. No. them on October 24, 1986 asking that they
170734, 14 May 2008, 554 SCRA 110, 118. specify the terms and conditions of the
[14]
Rollo, p. 95. offer to sell; that when plaintiffs did not
receive any reply, they sent another letter
Republic of the Philippines dated January 28, 1987 with the same
SUPREME COURT request; that since defendants failed to
Manila specify the terms and conditions of the
offer to sell and because of information
received that defendants were about to sell
EN BANC
the property, plaintiffs were compelled to
file the complaint to compel defendants to
sell the property to them.

G.R. No. 109125 December 2, 1994 Defendants filed their answer denying the
material allegations of the complaint and
ANG YU ASUNCION, ARTHUR GO AND KEH interposing a special defense of lack of
TIONG, petitioners, cause of action.
vs.
THE HON. COURT OF APPEALS and BUEN After the issues were joined, defendants
REALTY DEVELOPMENT filed a motion for summary judgment
CORPORATION, respondents. which was granted by the lower court. The
trial court found that defendants' offer to
Antonio M. Albano for petitioners. sell was never accepted by the plaintiffs for
the reason that the parties did not agree
Umali, Soriano & Associates for private respondent. upon the terms and conditions of the
proposed sale, hence, there was no contract
of sale at all. Nonetheless, the lower court
ruled that should the defendants
subsequently offer their property for sale at
VITUG, J.:
a price of P11-million or below, plaintiffs
will have the right of first refusal. Thus the
Assailed, in this petition for review, is the decision of the dispositive portion of the decision states:
Court of Appeals, dated 04 December 1991, in CA-G.R. SP
No. 26345 setting aside and declaring without force and effect
WHEREFORE,
the orders of execution of the trial court, dated 30 August
judgment is hereby
1991 and 27 September 1991, in Civil Case No. 87-41058.
rendered in favor of the
defendants and against
The antecedents are recited in good detail by the appellate the plaintiffs summarily
court thusly: dismissing the complaint
subject to the
On July 29, 1987 a Second Amended aforementioned
Complaint for Specific Performance was condition that if the
filed by Ang Yu Asuncion and Keh Tiong, defendants subsequently
et al., against Bobby Cu Unjieng, Rose Cu decide to offer their
Unjieng and Jose Tan before the Regional property for sale for a
Trial Court, Branch 31, Manila in Civil purchase price of Eleven
Case No. 87-41058, alleging, among Million Pesos or lower,
others, that plaintiffs are tenants or lessees then the plaintiffs has the
 option to purchase the
property or of first
refusal, otherwise,
defendants need not
offer the property to the
plaintiffs if the purchase
price is higher than
Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs
appealed to this Court in
CA-G.R. CV No. 21123. In a decision
promulgated on September 21, 1990
(penned by Justice Segundino G. Chua and
concurred in by Justices Vicente V.
Mendoza and Fernando A. Santiago), this
Court affirmed with modification the lower
court's judgment, holding:
In resume, there was no
meeting of the minds
between the parties
concerning the sale of
the property. Absent
such requirement, the
claim for specific
performance will not lie.
Appellants' demand for
actual, moral and
exemplary damages will
likewise fail as there
exists no justifiable
ground for its award.
Summary judgment for
defendants was properly
granted. Courts may
render summary
judgment when there is
no genuine issue as to
any material fact and the
moving party is entitled
to a judgment as a matter
of law (Garcia vs. Court
of Appeals, 176 SCRA
815). All requisites
obtaining, the decision of
the court a quo is legally
justifiable.
WHEREFORE, finding
the appeal
unmeritorious, the
judgment appealed from
is hereby AFFIRMED,
but subject to the
following modification:
The court a quo in the
aforestated decision gave
the plaintiffs-appellants
the right of first refusal
only if the property is
sold for a purchase price
of Eleven Million pesos
or lower; however,
considering the
mercurial and uncertain
forces in our market
economy today. We find
no reason not to grant the
same right of first refusal
to herein appellants in
the event that the subject
property is sold for a
price in excess of Eleven
Million pesos. No
pronouncement as to
costs.
SO ORDERED.
The decision of this Court was brought to
the Supreme Court by petition for review
on certiorari. The Supreme Court denied
the appeal on May 6, 1991 "for
insufficiency in form and substances"
(Annex H, Petition).
On November 15, 1990, while CA-G.R.
CV No. 21123 was pending consideration
by this Court, the Cu Unjieng spouses
executed a Deed of Sale (Annex D,
Petition) transferring the property in
question to herein petitioner Buen Realty
and Development Corporation, subject to
the following terms and conditions:
1. That for and in
consideration of the sum
of FIFTEEN MILLION
PESOS
(P15,000,000.00),
receipt of which in full is
hereby acknowledged,
the VENDORS hereby
sells, transfers and
conveys for and in favor
of the VENDEE, his
heirs, executors,
administrators or
assigns, the above-
described property with
all the improvements
found therein including
all the rights and interest
in the said property free
from all liens and
encumbrances of
whatever nature, except
the pending ejectment
proceeding;
2. That the VENDEE
shall pay the
Documentary Stamp
Tax, registration fees for
the transfer of title in his
favor and other expenses
incidental to the sale of
above-described
 property including
capital gains tax and
accrued real estate taxes.
As a consequence of the sale, TCT No.
105254/T-881 in the name of the Cu
Unjieng spouses was cancelled and, in lieu
thereof, TCT No. 195816 was issued in the
name of petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new
owner of the subject property wrote a letter
to the lessees demanding that the latter
vacate the premises.
On July 16, 1991, the lessees wrote a reply
to petitioner stating that petitioner brought
the property subject to the notice of lis
pendens regarding Civil Case No. 87-
41058 annotated on TCT No. 105254/T-
881 in the name of the Cu Unjiengs.
The lessees filed a Motion for Execution
dated August 27, 1991 of the Decision in
Civil Case No. 87-41058 as modified by
the Court of Appeals in CA-G.R. CV No.
21123.
On August 30, 1991, respondent Judge
issued an order (Annex A, Petition) quoted
as follows:
Presented before the
Court is a Motion for
Execution filed by
plaintiff represented by
Atty. Antonio Albano.
Both defendants Bobby
Cu Unjieng and Rose Cu
Unjieng represented by
Atty. Vicente Sison and
Atty. Anacleto Magno
respectively were duly
notified in today's
consideration of the
motion as evidenced by
the rubber stamp and
signatures upon the copy
of the Motion for
Execution.
The gist of the motion is
that the Decision of the
Court dated September
21, 1990 as modified by
the Court of Appeals in
its decision in CA G.R.
CV-21123, and elevated
to the Supreme Court
upon the petition for
review and that the same
was denied by the
highest tribunal in its
resolution dated May 6,
1991 in G.R. No.
L-97276, had now
become final and
executory. As a
consequence, there was
an Entry of Judgment by
the Supreme Court as of
June 6, 1991, stating that
the aforesaid modified
decision had already
become final and
executory.
It is the observation of
the Court that this
property in dispute was
the subject of the Notice
of Lis Pendens and that
the modified decision of
this Court promulgated
by the Court of Appeals
which had become final
to the effect that should
the defendants decide to
offer the property for
sale for a price of P11
Million or lower, and
considering the
mercurial and uncertain
forces in our market
economy today, the same
right of first refusal to
herein
plaintiffs/appellants in
the event that the subject
property is sold for a
price in excess of Eleven
Million pesos or more.
WHEREFORE,
defendants are hereby
ordered to execute the
necessary Deed of Sale
of the property in
litigation in favor of
plaintiffs Ang Yu
Asuncion, Keh Tiong
and Arthur Go for the
consideration of P15
Million pesos in
recognition of plaintiffs'
right of first refusal and
that a new Transfer
Certificate of Title be
issued in favor of the
buyer.
All previous transactions
involving the same
property
notwithstanding the
issuance of another title
to Buen Realty
Corporation, is hereby
set aside as having been
executed in bad faith.
 SO ORDERED.
On September 22, 1991 respondent Judge
issued another order, the dispositive
portion of which reads:
WHEREFORE, let there
be Writ of Execution
issue in the above-
entitled case directing
the Deputy Sheriff
Ramon Enriquez of this
Court to implement said
Writ of Execution
ordering the defendants
among others to comply
with the aforesaid Order
of this Court within a
period of one (1) week
from receipt of this
Order and for defendants
to execute the necessary
Deed of Sale of the
property in litigation in
favor of the plaintiffs
Ang Yu Asuncion, Keh
Tiong and Arthur Go for
the consideration of
P15,000,000.00 and
ordering the Register of
Deeds of the City of
Manila, to cancel and set
aside the title already
issued in favor of Buen
Realty Corporation
which was previously
executed between the
latter and defendants and
to register the new title in
favor of the aforesaid
plaintiffs Ang Yu
Asuncion, Keh Tiong
and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the
corresponding writ of execution (Annex C,
Petition) was issued.1
On 04 December 1991, the appellate court, on appeal to it by
private respondent, set aside and declared without force and
effect the above questioned orders of the court a quo.
In this petition for review on certiorari, petitioners contend
that Buen Realty can be held bound by the writ of execution
by virtue of the notice of lis pendens, carried over on TCT
No. 195816 issued in the name of Buen Realty, at the time of
the latter's purchase of the property on 15 November 1991
from the Cu Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the
adoption of such arrangements as the right of first refusal, a
purchase option and a contract to sell. For ready reference, we
might point out some fundamental precepts that may find
some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to
do (Art. 1156, Civil Code). The obligation is constituted upon
the concurrence of the essential elements thereof, viz: (a)
The vinculum juris or juridical tie which is the efficient cause
established by the various sources of obligations (law,
contracts, quasi-contracts, delicts and quasi-delicts); (b)
the object which is the prestation or conduct; required to be
observed (to give, to do or not to do); and (c) the subject-
persons who, viewed from the demandability of the
obligation, are the active (obligee) and the passive (obligor)
subjects.
Among the sources of an obligation is a contract (Art. 1157,
Civil Code), which is a meeting of minds between two
persons whereby one binds himself, with respect to the other,
to give something or to render some service (Art. 1305, Civil
Code). A contract undergoes various stages that include its
negotiation or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time
the prospective contracting parties indicate interest in the
contract to the time the contract is concluded (perfected).
The perfection of the contract takes place upon the
concurrence of the essential elements thereof. A contract
which is consensual as to perfection is so established upon a
mere meeting of minds, i.e., the concurrence of offer and
acceptance, on the object and on the cause thereof. A contract
which requires, in addition to the above, the delivery of the
object of the agreement, as in a pledge or commodatum, is
commonly referred to as a real contract. In a solemn contract,
compliance with certain formalities prescribed by law, such
as in a donation of real property, is essential in order to make
the act valid, the prescribed form being thereby an essential
element thereof. The stage of consummation begins when the
parties perform their respective undertakings under the
contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation. In
sales, particularly, to which the topic for discussion about the
case at bench belongs, the contract is perfected when a
person, called the seller, obligates himself, for a price certain,
to deliver and to transfer ownership of a thing or right to
another, called the buyer, over which the latter agrees. Article
1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the
contracting parties obligates himself to
transfer the ownership of and to deliver a
determinate thing, and the other to pay
therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or
conditional.
When the sale is not absolute but conditional, such as in a
"Contract to Sell" where invariably the ownership of the thing
sold is retained until the fulfillment of a positive suspensive
condition (normally, the full payment of the purchase price),
the breach of the condition will prevent the obligation to
convey title from acquiring an obligatory force. 2 In Dignos
vs. Court of Appeals (158 SCRA 375), we have said that,
although denominated a "Deed of Conditional Sale," a sale is
still absolute where the contract is devoid of any proviso that
title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership
will then be transferred to the buyer upon actual or
constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is
imposed upon the perfection of the contract itself, the failure
of the condition would prevent such perfection.3 If the
condition is imposed on the obligation of a party which is not
fulfilled, the other party may either waive the condition or
refuse to proceed with the sale (Art. 1545, Civil Code). 4
An unconditional mutual promise to buy and sell, as long as
the object is made determinate and the price is fixed, can be
obligatory on the parties, and compliance therewith may
accordingly be exacted.5
An accepted unilateral promise which specifies the thing to
be sold and the price to be paid, when coupled with a
valuable consideration distinct and separate from the price,
is what may properly be termed a perfected contract
of option. This contract is legally binding, and in sales, it
conforms with the second paragraph of Article 1479 of the
Civil Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to
sell a determinate thing for a price certain
is binding upon the promissor if the
promise is supported by a consideration
distinct from the price. (1451a)6
Observe, however, that the option is not the contract of sale
itself.7 The optionee has the right, but not the obligation, to
buy. Once the option is exercised timely, i.e., the offer is
accepted before a breach of the option, a bilateral promise to
sell and to buy ensues and both parties are then reciprocally
bound to comply with their respective undertakings. 8
Let us elucidate a little. A negotiation is formally initiated by
an offer. An imperfect promise (policitacion) is merely an
offer. Public advertisements or solicitations and the like are
ordinarily construed as mere invitations to make offers or
only as proposals. These relations, until a contract is
perfected, are not considered binding commitments. Thus, at
any time prior to the perfection of the contract, either
negotiating party may stop the negotiation. The offer, at this
stage, may be withdrawn; the withdrawal is effective
immediately after its manifestation, such as by its mailing and
not necessarily when the offeree learns of the withdrawal
(Laudico vs. Arias, 43 Phil. 270). Where a period is given to
the offeree within which to accept the offer, the following
rules generally govern:
(1) If the period is not itself founded upon or supported by a
consideration, the offeror is still free and has the right to
withdraw the offer before its acceptance, or, if an acceptance
has been made, before the offeror's coming to know of such
fact, by communicating that withdrawal to the offeree
(see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs.
Cua, 102 Phil. 948, holding that this rule is applicable to a
unilateral promise to sell under Art. 1479, modifying the
previous decision in South Western Sugar vs. Atlantic Gulf,
97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of
Parañaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs.
Rigos, 45 SCRA 368). The right to withdraw, however, must
not be exercised whimsically or arbitrarily; otherwise, it
could give rise to a damage claim under Article 19 of the Civil
Code which ordains that "every person must, in the exercise
of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good
faith."
(2) If the period has a separate consideration, a contract of
"option" is deemed perfected, and it would be a breach of that
contract to withdraw the offer during the agreed period. The
option, however, is an independent contract by itself, and it is
to be distinguished from the projected main agreement
(subject matter of the option) which is obviously yet to be
concluded. If, in fact, the optioner-offeror withdraws the offer
before its acceptance (exercise of the option) by the optionee-
offeree, the latter may not sue for specific performance on the
proposed contract ("object" of the option) since it has failed
to reach its own stage of perfection. The optioner-offeror,
however, renders himself liable for damages for breach of the
option. In these cases, care should be taken of the real nature
of the consideration given, for if, in fact, it has been intended
to be part of the consideration for the main contract with a
right of withdrawal on the part of the optionee, the main
contract could be deemed perfected; a similar instance would
be an "earnest money" in a contract of sale that can evidence
its perfection (Art. 1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is an
innovative juridical relation. Needless to point out, it cannot
be deemed a perfected contract of sale under Article 1458 of
the Civil Code. Neither can the right of first refusal,
understood in its normal concept, per se be brought within the
purview of an option under the second paragraph of Article
1479, aforequoted, or possibly of an offer under Article
13199 of the same Code. An option or an offer would require,
among other things,10 a clear certainty on both the object and
the cause or consideration of the envisioned contract. In a
right of first refusal, while the object might be made
determinate, the exercise of the right, however, would be
dependent not only on the grantor's eventual intention to enter
into a binding juridical relation with another but also on
terms, including the price, that obviously are yet to be later
firmed up. Prior thereto, it can at best be so described as
merely belonging to a class of preparatory juridical relations
governed not by contracts (since the essential elements to
establish the vinculum juris would still be indefinite and
inconclusive) but by, among other laws of general
application, the pertinent scattered provisions of the Civil
Code on human conduct.
Even on the premise that such right of first refusal has been
decreed under a final judgment, like here, its breach cannot
justify correspondingly an issuance of a writ of execution
under a judgment that merely recognizes its existence, nor
would it sanction an action for specific performance without
thereby negating the indispensable element of consensuality
in the perfection of contracts.11 It is not to say, however, that
the right of first refusal would be inconsequential for, such as
already intimated above, an unjustified disregard thereof,
given, for instance, the circumstances expressed in Article
1912 of the Civil Code, can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be
stressed, has merely accorded a "right of first refusal" in favor
of petitioners. The consequence of such a declaration entails
no more than what has heretofore been said. In fine, if, as it is
here so conveyed to us, petitioners are aggrieved by the
failure of private respondents to honor the right of first
refusal, the remedy is not a writ of execution on the judgment,
since there is none to execute, but an action for damages in a
proper forum for the purpose.
Furthermore, whether private respondent Buen Realty
Development Corporation, the alleged purchaser of the
property, has acted in good faith or bad faith and whether or
not it should, in any case, be considered bound to respect the
registration of the lis pendens in Civil Case No. 87-41058 are
matters that must be independently addressed in appropriate
proceedings. Buen Realty, not having been impleaded in Civil
Case No. 87-41058, cannot be held subject to the writ of
execution issued by respondent Judge, let alone ousted from
the ownership and possession of the property, without first
being duly afforded its day in court.
We are also unable to agree with petitioners that the Court of
Appeals has erred in holding that the writ of execution varies
the terms of the judgment in Civil Case No. 87-41058, later
affirmed in CA-G.R. CV-21123. The Court of Appeals, in
this regard, has observed:
Finally, the questioned writ of execution is
in variance with the decision of the trial
court as modified by this Court. As already
stated, there was nothing in said
decision 13 that decreed the execution of a
deed of sale between the Cu Unjiengs and
respondent lessees, or the fixing of the
price of the sale, or the cancellation of title
in the name of petitioner (Limpin vs. IAC,
147 SCRA 516; Pamantasan ng Lungsod
ng Maynila vs. IAC, 143 SCRA 311; De
Guzman vs. CA, 137 SCRA 730; Pastor vs.
CA, 122 SCRA 885).
It is likewise quite obvious to us that the decision in Civil
Case No. 87-41058 could not have decreed at the time the
execution of any deed of sale between the Cu Unjiengs and
petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in
ultimately setting aside the questioned Orders, dated 30
August 1991 and 27 September 1991, of the court a quo.
Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Quiason, Puno and Mendoza, JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.
#Footnotes
1 Rollo, pp. 32-38.
2 Roque vs. Lapuz, 96 SCRA 741; Agustin
vs. CA, 186 SCRA 375.
3 See People's Homesite and Housing
Corp. vs. Court of Appeals, 133 SCRA
777.
4 Delta Motor Corporation vs. Genuino,
170 SCRA 29.
5 See Art. 1459; Atkins, Kroll and Co., Inc.
vs. Cua Hian Tek, 102 Phil. 948.
6 It is well to note that when the
consideration given, for what otherwise
would have been an option, partakes the
nature in reality of a part payment of the
purchase price (termed as "earnest money"
and considered as an initial payment
thereof), an actual contract of sale is
deemed entered into and enforceable as
such.
7 Enriquez de la Cavada vs. Diaz, 37 Phil.
982.
8 Atkins, Kroll & Co., Inc., vs. Cua Hian
Tek, 102 Phil. 948.
9 Article 1319, Civil Code, provides:
Art. 1319. Consent is manifested by the
meeting of the offer and the acceptance
upon the thing and the cause which are to
constitute the contract. The offer must be
certain and the acceptance absolute. A
qualified acceptance constitutes a counter-
offer. (Emphasis supplied.)
10 It is also essential for an option to be
binding that valuable consideration distinct
from the price should be given (see
Montilla vs. Court of Appeals, 161 SCRA
167; Sps. Natino vs. IAC, 197 SCRA 323;
Cronico vs. J.M. Tuason & Co., Inc., 78
SCRA 331).
11 See Article 1315 and 1318, Civil Code;
Madrigal & Co. vs. Stevenson & Co., 15
Phil. 38; Salonga vs. Ferrales, 105 SCRA
359).
12 Art. 19. Every person must, in the
exercise of his rights and in the
performance of his duties, act with justice,
give everyone his due, and observe honesty
and good faith.
13 The decision referred to reads:
 In resume, there was no meeting of the
minds between the parties concerning the
sale of the property. Absent such
requirement, the claim for specific
performance will not lie. Appellants'
demand for actual, moral and exemplary
damages will likewise fail as there exists no
justifiable ground for its award. Summary
judgment for defendants was properly
granted. Courts may render summary
judgment when there is no genuine issue as
to any material fact and the moving party is
entitled to a judgment as a matter of law
(Garcia vs. Court of Appeals, 176 SCRA
815). All requisites obtaining, the decision
of the court a quo is legally justifiable.
WHEREFORE, finding the appeal
unmeritorious, the judgment appealed from
is hereby AFFIRMED, but subject to the
following modification: The court a quo in
the aforestated decision, gave the plaintiffs
— considering the mercurial and uncertain
forces in our market economy today. We
find no reason not to grant the same right of
first refusal to herein appellants in the event
that the subject property is sold for a price
in excess of Eleven Million pesos. No
pronouncement as to costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26332 October 26, 1968
THE SWEDISH EAST ASIA CO., LTD., petitioner,
vs.
MANILA PORT SERVICE AND/OR MANILA
RAILROAD COMPANY, respondents.
Ross, Selph, Salcedo, Del Rosario, Bito & Misa for petitioner.
Government Corporate Counsel D. F. Macaranas for
respondents.
CASTRO, J.:
This is a petition for review of the decision of the Court of
Appeals in CA-G.R. 34279-R, entitled "The Swedish East
Asia Co., Ltd. vs. Manila Port Service, et al." The petitioner,
The Swedish East Asia Co., Ltd., a corporation duly
organized and existing under the laws of Sweden with
principal offices at Gothenburg, Sweden, is admittedly not
licensed to do business in the Philippines.
On December 3, 1967 the MS "SUDAN", owned and
operated by the petitioner, arrived at the port of Manila and
discharged cargo destined thereto unto the custody of the
respondent Manila Port Service, a subsidiary of the
respondent Manila Railroad Company, contractor and
operator of the arrastre service of the port of Manila. By
mistake, cargo destined for Hongkong consisting of sixteen
bundles of "lifts of mild steel tees window sections" covering
which the petitioner had issued a bill of lading in the name of
S.A. Citals Lodelinsart, as shipper, and of Welcome Trading
Co. of Hongkong, as consignee, were also landed at Manila.
The erroneous discharge was obviously engendered by the
fact that the same ship on the same day discharged forty
similar bundles destined for consignees in the Philippines.
Vicente Pacheco, claims manager of the International
Harvester McCleod and Company, the petitioner's agent in
Manila, upon being notified by letter from Hongkong of the
erroneous discharge, sent the company's customs men to
investigate, who found the sixteen bundles at the customs
piers. Pacheco then instructed their customs men to arrange
for the reshipment of the sixteen bundles to Hongkong and
accomplish all necessary papers for payment of customs,
arrastre and storage charges due on the goods, which charges
were as a matter of fact paid by the petitioner. However, the
reshipment of all the sixteen bundles was not effected,
because only eight of these were available at the time that all
were scheduled to be loaded on board the M.S. "Minikoi"
bound for Hongkong, as the remaining eight could not be
found. After an exchange of letters between Pacheco and the
Manila Port Service, in the last of which the latter advised the
International Harvester of its inability to locate the eight
missing bundles, the petitioner, on January 10, 1958,
presented a formal claim for the value of the missing cargo to
the Manila Port Service in the sum of P2,349.62. On March
8, 1960 the petitioner received a letter from the respondents
rejecting the claim.
On March 13, 1961 the petitioner filed a complaint in the
Court of First Instance of Manila, for recovery of the amount
of P2,349.62, the value of the missing goods, which sum it
had paid to the consignee in Hongkong, as well as the amount
of P2,000 in moral damages and P1,000 as attorney's fees, and
costs.
On April 29, 1964, after due trial, the lower court rendered
judgment ordering the respondents, jointly and severally, to
pay the petitioner the sum of P2,349.62, with interest thereon
at the rate of 6% per annum from March 13, 1961, the date of
the filing of the complaint, and the sum of P600 in attorney's
fees, plus costs.
From this judgment, the respondents interposed an appeal to
the Court of Appeals, which on April 30, 1966 promulgated
its decision reversing that of the lower court and absolving
the respondents.
Hence, the present recourse.
The petitioner contends in this appeal that the Court of
Appeals erred "(1) in holding that the obligation of the Manila
Port Service to a non-resident consignee of cargo not destined
for Manila but mistakenly discharged at Manila is governed
by its management contract with the Bureau of Customs and
not by article 2154 of the Civil Code of the Philippines; (2)
assuming arguendo that the management contract of the
Manila Port Service with the Bureau of Customs governs the
obligations of respondents and is binding on petitioner, in
holding that a claim filed thirty-eight days after the discharge
of the cargo but within fifteen days from the time the cargo
was placed at the disposal of the consignee is time-barred; and
(3) in not holding that suit against the Manila Port Service for
loss of cargo may be filed within one year from notice of the
rejection of consignee's claim."
The Court of Appeals held that the petitioner's action in the
lower court was time-barred, its claim having been filed only
on January 10, 1958, or thirty-eight days from December 3,
1957, when the cargo in question was landed at the port of
Manila, and court action having been commenced only on
March 13, 1961, or more than three years thereafter, in
violation of the provisions of the management contract
between the Manila Port Service and the Bureau of Customs,
which, in part, reads:
... in any event the CONTRACTOR shall be relieved
and released of any and all responsibility or liability
for loss, damage, misdelivery and/or non-delivery of
goods unless suit in the court of proper jurisdiction
is brought within a period one (1) year from the date
of the discharge of the goods, or from the date when
the claim for the value of such goods have [sic] been
rejected or denied by the CONTRACTOR, provided
that such claim shall have been filed with the
contractor within 15 days from the date of discharge
of the last package from the carrying vessel ...
The petitioner argues that the cases cited by the Court of
Appeals, on the basis of which it absolved the respondents
from liability, are not applicable to the case at bar, because
the said cases involved cargo destined for the Philippines, and
the consignees are residents of the Philippines who availed
themselves of the services of the customs arrastre operator.
These conditions, the petitioner states, do not exist in the
present case as (1) the cargo herein involved was destined not
for Manila but for Hongkong, (2) the consignee is not a
resident of the Philippines, (3) the cargo was mistakenly
discharged at Manila unto the custody of the arrastre operator,
and (4) the consignee cannot be said to have availed itself of
the services of the arrastre operator.
Admitting that the Hongkong consignee of the cargo involved
is not bound by the management contract, for the reason that
it was not charged with notice of the provisions thereof, the
respondents nonetheless maintain that the petitioner is bound
thereby, because the petitioner had been transacting business
with the respondents regularly in the past and is charged with
knowledge of the provisions of the management contract.
They further argue that since it was the petitioner, and not the
consignee, which had mistakenly delivered the goods, there
could be no subrogation in favor of the petitioner entitling it
to invoke in its favor the non-applicability of the management
contract to the consignee.
It is our view that the position taken by the petitioner is
correct. True it is that this Court has held in a number of cases
that it is not only the parties to a management contract that
are bound thereby, but also third parties who have availed
themselves of the services of the arrastre operator, taking
delivery therefrom in pursuance of a permit and a pass issued
by the latter.1 The disparate facts of the present case,
however, do not warrant application of this doctrine. For it is
not disputed that the petitioner had no intention of availing
itself of the services of the Manila Port Service, nor did it seek
to derive benefit therefrom, in so far as the cargo in question
is concerned. On the contrary, its intention was to have the
sixteen bundles discharged in Hongkong, pursuant to its
contract with the consignee, the Welmore Trading Co., to
deliver the cargo to that place. Discharge of the good in
Manila was made through mistake, in good faith.
The petitioner not being bound by the management contract
either as a party thereto or as one who has taken advantage of
the provisions thereof, it follows that its right to bring an
action to recover the value of the missing goods can not be
limited by the pre-conditions as to time set forth in the said
management contract.
The respondents who had no right to the sixteen bundles
delivered to them by mistake, had actually received them,
thereby giving rise to an obligation on their part to return them
to the one who delivered them by mistake, which, by virtue
of this circumstance, acquired the character of creditor of the
receiver, remaining at the same time answerable to the
consignee thereof.2 It results that the petitioner having
acquired the right to demand in its own capacity the return of
the shipment delivered by mistake to the respondents, this
Court may grant relief to it not as subrogee of the consignee,
but as creditor in its own right, in which capacity the
petitioner has brought this action as shown by the allegations
of the complaint considered as a whole.
In the case at bar, there is no question that the defendants
received the sixteen bundles which were mistakenly
discharged in Manila as in fact they were located at the piers,
and that the charges for their storage were paid by the
petitioner. There was therefore an obligation on the part of the
respondents to return them to the petitioner.
The defense that the agents of the shipper were negligent in
allowing the landing of the cargo at Manila by mistake, will
not exempt the respondents from liability, because the
obligation of one who has erroneously received a thing to
return the same to the one who delivered it by mistake
remains unaffected by such circumstance. And this holds true
even where, as in this case, the one who wrongfully delivered
the thing, pays its value to the rightful owner thereof.
The foregoing disquisition dispenses with the need of passing
upon the other two assignments of error.
The complaint having been filed on March 13, 1961, less than
four years from the date the petitioner's right of action
accrued, that is, from December 3, 1957, when the missing
cargo was admittedly landed unto the custody of the
defendants, the action of the petitioner has not prescribed,
whether we apply article 1146 of the new Civil Code which
provides for a prescriptive period of four years for an action
"upon an injury to the rights of the plaintiff," or article 1149
of the same Code which provides that "all other actions whose
periods are not fixed in this Code or in other laws must be
brought within five years from the time the right of action
accrues."
The respondents challenge the petitioner's capacity to sue, it
being admittedly a foreign corporation without license to
engage in business in the Philippines, citing section 69 of the
Corporation Law. It must be stated however that this section
is not applicable to a foreign corporation performing single
acts or "isolated transactions."3 There is nothing in the record
to show that the petitioner has been in the Philippines engaged
in continuing business or enterprise for which it was
organized, when the sixteen bundles were erroneously
discharged in Manila, for it to be cosidered as transacting
business in the Philippines. The fact is that the bundles, the
value of which is sought to be recovered, were landed not as
a result of a business transaction, "isolated" or otherwise, but
due to a mistaken belief that they were part of the shipment
of forty similar bundles consigned to persons or entities in the
Philippines. There is no justification, therefore, for invoking
the provisions of section 69 of the Corporation Law.
ACCORDINGLY, the judgment of the Court of Appeals is
reversed, and another judgment is hereby rendered ordering
the respondents, jointly and severally, to pay the petitioner the
sum of P2,349.62 with interest thereon at the rate of 6% per
annum from March 13, 1961, the date of the filing of the
complaint, until the amount shall have been fully paid, and
the sum of P600 as attorney's fees. Costs against the
respondents.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez,
Angeles, Fernando and Capistrano, JJ., concur.
Zaldivar, J., is on leave.
Footnotes
1
Northern Motors, Inc. vs. Prince Line, et al., L-
13884, February 29, 1960; Mendoza vs. Phil. Air
Lines, Inc., L-3678, February 29, 1952; Freixas &
Co. vs. Pacific Mail Steamship Co., 42 Phil. 199:
GSIS vs. MRR, et al., L-13276, February 25, 1961.
2
"In its broad sense, 'implied contract' has been
defined as contract which arises by legal inference
and upon principles of reason and justice from
certain facts, ...[A]n implied contract must depend
on substance for its existence, and it cannot arise
from nothing, such as a conjecture or a possibility;
in other words, there must be some act or conduct of
the party sought to be bound, from which an implied
contract arises, the implication arising only from
something which the party sought to be bound says
or does. They are created by circumstances. An
implied contract, in the proper sense, arises where
the intention of the parties is not expresed, but an
agreement in fact, creating an obligation, is implied
or presumed from their acts, or, as it has been
otherwise stated, where there are circumstances
which, according to the ordinary course of dealing
and the common understanding of men, show a
mutual intent to contract." (17 C.J.S. pp. 556-557)
Cf. Aquino vs. Deala, 63 Phil. 582: Pomar vs Perez,
2 Phil. 682.
3
Marshall Wells Co. vs. Elser, 46 Phil. 70; Central
Republic Bank, et al. vs. Bustamante, 71 Phil. 359.
THIRD DIVISION
[G.R. No. 119745. June 20, 1997]
POWER COMMERCIAL AND INDUSTRIAL
CORPORATION, petitioner, vs. COURT OF
APPEALS, SPOUSES REYNALDO and
ANGELITA R. QUIAMBAO and PHILIPPINE
NATIONAL BANK, respondents.
DECISION
PANGANIBAN, J.:
Is the sellers failure to eject the lessees from a lot that is
the subject of a contract of sale with assumption of mortgage
a ground (1) for rescission of such contract and (2) for a return
by the mortgagee of the amortization payments made by the
buyer who assumed such mortgage?
Petitioner posits an affirmative answer to such question
in this petition for review on certiorari of the March 27, 1995
Decision[1] of the Court of Appeals, Eighth Division, in CA-
G.R. CV Case No. 32298 upholding the validity of the
contract of sale with assumption of mortgage and absolving
the mortgagee from the liability of returning the mortgage
payments already made.[2]
The Facts
Petitioner Power Commercial & Industrial
Development Corporation, an industrial asbestos
manufacturer, needed a bigger office space and warehouse
for its products. For this purpose, on January 31, 1979, it
entered into a contract of sale with the spouses Reynaldo and
Angelita R. Quiambao, herein private respondents. The
contract involved a 612-sq. m. parcel of land covered by
Transfer Certificate of Title No. S-6686 located at the corner
of Bagtican and St. Paul Streets, San Antonio Village, Makati
City. The parties agreed that petitioner would pay private
respondents P108,000.00 as down payment, and the balance
of P295,000.00 upon the execution of the deed of transfer of
the title over the property. Further, petitioner assumed, as part
of the purchase price, the existing mortgage on the land. In
full satisfaction thereof, he paid P79,145.77 to Respondent
Philippine National Bank (PNB for brevity).
On June 1, 1979, respondent spouses mortgaged again
said land to PNB to guarantee a loan
of P145,000.00, P80,000.00 of which was paid to respondent
spouses. Petitioner agreed to assume payment of the loan.
On June 26, 1979, the parties executed a Deed of
Absolute Sale With Assumption of Mortgage which
contained the following terms and conditions:[3]
That for and in consideration of the sum of Two Hundred
Ninety-Five Thousand Pesos (P295,000.00) Philippine
Currency, to us in hand paid in cash, and which we hereby
acknowledge to be payment in full and received to our entire
satisfaction, by POWER COMMERCIAL AND
INDUSTRIAL DEVELOPMENT CORPORATION, a 100%
Filipino Corporation, organized and existing under and by
virtue of Philippine Laws with offices located at 252-C Vito
Cruz Extension, we hereby by these presents SELL,
TRANSFER and CONVEY by way of absolute sale the
above described property with all the improvements existing
thereon unto the said Power Commercial and Industrial
Development Corporation, its successors and assigns, free
from all liens and encumbrances.
We hereby certify that the aforesaid property is not subject to
nor covered by the provisions of the Land Reform Code -- the
same having no agricultural lessee and/or tenant.
We hereby also warrant that we are the lawful and absolute
owners of the above described property, free from any lien
and/or encumbrance, and we hereby agree and warrant to
defend its title and peaceful possession thereof in favor of the
said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims
whatsoever of any and all third persons; subject, however, to
the provisions hereunder provided to wit:
That the above described property is mortgaged to the
Philippine National Bank, Cubao, Branch, Quezon City for
the amount of one hundred forty-five thousand pesos,
Philippine, evidenced by document No. 163, found on page
No. 34 of Book No. XV, Series of 1979 of Notary Public
Herita L. Altamirano registered with the Register of Deeds of
Pasig (Makati), Rizal xxx;
That the said Power Commercial and Industrial Development
Corporation assumes to pay in full the entire amount of the
said mortgage above described plus interest and bank
charges, to the said mortgagee bank, thus holding the herein
vendor free from all claims by the said bank;
That both parties herein agree to seek and secure the
agreement and approval of the said Philippine National Bank
to the herein sale of this property, hereby agreeing to abide by
any and all requirements of the said bank, agreeing that failure
to do so shall give to the bank first lieu (sic) over the herein
described property.
On the same date, Mrs. C.D. Constantino, then General
Manager of petitioner-corporation, submitted to PNB said
deed with a formal application for assumption of mortgage. [4]
On February 15, 1980, PNB informed respondent
spouses that, for petitioners failure to submit the papers
necessary for approval pursuant to the formers letter dated
January 15, 1980, the application for assumption of mortgage
was considered withdrawn; that the outstanding balance
of P145,000.00 was deemed fully due and demandable; and
that said loan was to be paid in full within fifteen (15) days
from notice.[5]
Petitioner paid PNB P41,880.45 on June 24, 1980
and P20,283.14 on December 23, 1980, payments which were
to be applied to the outstanding loan. On December 23, 1980,
PNB received a letter from petitioner which reads:[6]
With regard to the presence of the people who are currently
in physical occupancy of the (l)ot xxx it is our desire as buyers
and new owners of this lot to make use of this lot for our own
purpose, which is why it is our desire and intention that all the
people who are currently physically present and in occupation
of said lot should be removed immediately.
For this purpose we respectfully request that xxx our
assumption of mortgage be given favorable consideration,
and that the mortgage and title be transferred to our name so
that we may undertake the necessary procedures to make use
of this lot ourselves.
It was our understanding that this lot was free and clear of
problems of this nature, and that the previous owner would be
responsible for the removal of the people who were
there. Inasmuch as the previous owner has not been able to
keep his commitment, it will be necessary for us to take legal
possession of this lot inorder (sic) to take physical possession.
On February 19, 1982, PNB sent petitioner a letter as
follows:[7]
(T)his refers to the loan granted to Mr. Reynaldo Quiambao
which was assumed by you on June 4, 1979
for P101,500.00. It was last renewed on December 24, 1980
to mature on June 4, 1981.
A review of our records show that it has been past due from
last maturity with interest arrearages amounting
to P25,826.08 as of February 19, 1982. The last payment
received by us was on December 24, 1980 for P20,283.14. In
order to place your account in current form, we request you
to remit payments to cover interest, charges, and at least part
of the principal.
On March 17, 1982, petitioner filed Civil Case No.
45217 against respondent spouses for rescission and damages
before the Regional Trial Court of Pasig, Branch 159. Then,
in its reply to PNBs letter of February 19, 1982, petitioner
demanded the return of the payments it made on the ground
that its assumption of mortgage was never approved. On May
31, 1983,[8] while this case was pending, the mortgage was
foreclosed. The property was subsequently bought by PNB
during the public auction. Thus, an amended complaint was
filed impleading PNB as party defendant.
On July 12, 1990, the trial court[9] ruled that the failure
of respondent spouses to deliver actual possession to
petitioner entitled the latter to rescind the sale, and in view of
such failure and of the denial of the latters assumption of
mortgage, PNB was obliged to return the payments made by
the latter. The dispositive portion of said decision states:[10]
IN VIEW OF ALL THE FOREGOING, the Court hereby
renders judgment in favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with
Assumption of Mortgage executed between plaintiff and
defendants Spouses Quiambao, dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to
plaintiff the amount of P187,144.77 (P108,000.00
plus P79,145.77) with legal interest of 12% per annum from
date of filing of herein complaint, that is, March 17, 1982
until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount
of P62,163.59 (P41,880.45 and P20,283.14) with 12%
interest thereon from date of herein judgment until the same
is fully paid.
No award of other damages and attorneys fees, the same not
being warranted under the facts and circumstances of the
case.
The counterclaim of both defendants spouses Quiambao and
PNB are dismissed for lack of merit.
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent
Court of Appeals reversed the trial court. In the assailed
Decision, it held that the deed of sale between respondent
spouses and petitioner did not obligate the former to eject the
lessees from the land in question as a condition of the sale,
nor was the occupation thereof by said lessees a violation of
the warranty against eviction. Hence, there was no substantial
breach to justify the rescission of said contract or the return
of the payments made. The dispositive portion of said
Decision reads:[11]
WHEREFORE, the Decision appealed from is hereby
REVERSED and the complaint filed by Power Commercial
and Industrial Development Corporation against the spouses
Reynaldo and Angelita Quiambao and the Philippine
National Bank is DISMISSED. No costs.
Hence, the recourse to this Court .
Issues
Petitioner contends that: (1) there was a substantial
breach of the contract between the parties warranting
rescission; and (2) there was a mistake in payment made by
petitioner, obligating PNB to return such payments. In its
Memorandum, it specifically assigns the following errors of
law on the part of Respondent Court:[12]
A. Respondent Court of Appeals gravely erred in failing
to consider in its decision that a breach of
implied warranty under Article 1547 in
relation to Article 1545 of the Civil Code
applies in the case-at-bar.
B. Respondent Court of Appeals gravely erred in failing
to consider in its decision that a mistake in
payment giving rise to a situation where the
principle of solutio indebiti applies is
obtaining in the case-at-bar.
The Courts Ruling
The petition is devoid of merit. It fails to appreciate the
difference between a condition and a warranty and the
consequences of such distinction.
Conspicuous Absence of an Imposed Condition
The alleged failure of respondent spouses to eject the
lessees from the lot in question and to deliver actual and
physical possession thereof cannot be considered a
substantial breach of a condition for two reasons: first, such
failure was not stipulated as a condition -- whether resolutory
or suspensive -- in the contract; and second, its effects and
consequences were not specified either.[13]
The provision adverted to by petitioner does not impose
a condition or an obligation to eject the lessees from the
lot. The deed of sale provides in part:[14]
We hereby also warrant that we are the lawful and absolute
owners of the above described property, free from any lien
and/or encumbrance, and we hereby agree and warrant to
defend its title and peaceful possession thereof in favor of the
said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims
whatsoever of any and all third persons; subject, however, to
the provisions hereunder provided to wit:
By his own admission, Anthony Powers, General
Manager of petitioner-corporation, did not ask the
corporations lawyers to stipulate in the contract that
Respondent Reynaldo was guaranteeing the ejectment of the
occupants, because there was already a provisoin said deed of
sale that the sellers were guaranteeing the peaceful possession
by the buyer of the land in question.[15] Any obscurity in a
contract, if the above-quoted provision can be so described,
must be construed against the party who caused
it.[16] Petitioner itself caused the obscurity because it omitted
this alleged condition when its lawyer drafted said contract.
If the parties intended to impose on respondent spouses
the obligation to eject the tenants from the lot sold, it should
have included in the contract a provision similar to that
referred to in Romero vs. Court of Appeals,[17] where the
ejectment of the occupants of the lot sold by private
respondent was the operative act which set into motion the
period of petitioners compliance with his own
obligation, i.e., to pay the balance of the purchase
price. Failure to remove the squatters within the stipulated
period gave the other party the right to either refuse to proceed
with the agreement or to waive that condition of ejectment in
consonance with Article 1545 of the Civil Code. In the case
cited, the contract specifically stipulated that the ejectment
was a condition to be fulfilled; otherwise, the obligation to
pay the balance would not arise. This is not so in the case at
bar.
Absent a stipulation therefor, we cannot say that the
parties intended to make its nonfulfillment a ground for
rescission. If they did intend this, their contract should have
expressly stipulated so. In Ang vs. C.A.,[18] rescission was
sought on the ground that the petitioners had failed to fulfill
their obligation to remove and clear the lot sold, the
performance of which would have given rise to the payment
of the consideration by private respondent. Rescission was
not allowed, however, because the breach was not substantial
and fundamental to the fulfillment by the petitioners of the
obligation to sell.
As stated, the provision adverted to in the contract
pertains to the usual warranty against eviction, and not to a
condition that was not met. The terms of the contract are so
clear as to leave no room for any other interpretation. [19]
Futhermore, petitioner was well aware of the presence
of the tenants at the time it entered into the sales
transaction. As testified to by Reynaldo,[20] petitioners
counsel during the sales negotiation even undertook the job
of ejecting the squatters. In fact, petitioner actually filed suit
to eject the occupants. Finally, petitioner in its letter to PNB
of December 23, 1980 admitted that it was the buyer(s) and
new owner(s) of this lot.
Effective Symbolic Delivery
The Court disagrees with petitioners allegation that the
respondent spouses failed to deliver the lot sold. Petitioner
asserts that the legal fiction of symbolic delivery yielded to
the truth that, at the execution of the deed of sale, transfer of
possession of said lot was impossible due to the presence of
occupants on the lot sold. We find this misleading.
Although most authorities consider transfer of
ownership as the primary purpose of sale, delivery remains
an indispensable requisite as our law does not admit the
doctrine of transfer of property by mere consent.[21] The Civil
Code provides that delivery can either be (1) actual (Article
1497) or (2) constructive (Articles 1498-1501). Symbolic
delivery (Article 1498), as a species of constructive delivery,
effects the transfer of ownership through the execution of a
public document. Its efficacy can, however, be prevented if
the vendor does not possess control over the thing sold, [22] in
which case this legal fiction must yield to reality.
The key word is control, not possession, of the land as
petitioner would like us to believe. The Court has consistently
held that:[23]
x x x (I)n order that this symbolic delivery may produce the
effect of tradition, it is necessary that the vendor shall have
had such control over the thing sold that xxx its material
delivery could have been made. It is not enough to confer
upon the purchaser the ownership and the right of
possession. The thing sold must be placed in
his control. When there is no impediment whatever to prevent
the thing sold passing into the tenancy of the purchaser by the
sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the
purchaser cannot have the enjoyment and material tenancy of
the thing and make use of it himself or through another in his
name, because such tenancy and enjoyment are opposed by
the interposition of another will, then fiction yields to reality
-- the delivery has not been effected.
Considering that the deed of sale between the parties did
not stipulate or infer otherwise, delivery was effected through
the execution of said deed. The lot sold had been placed under
the control of petitioner; thus, the filing of the ejectment suit
was subsequently done. It signified that its new owner
intended to obtain for itself and to terminate said occupants
actual possession thereof. Prior physical delivery or
possession is not legally required and the execution of the
deed of sale is deemed equivalent to delivery.[24] This deed
operates as a formal or symbolic delivery of the property sold
and authorizes the buyer to use the document as proof of
ownership. Nothing more is required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is
its failure to establish any breach of the warranty against
eviction. Despite its protestation that its acquisition of the lot
was to enable it to set up a warehouse for its asbestos products
and that failure to deliver actual possession thereof defeated
this purpose, still no breach of warranty against eviction can
be appreciated because the facts of the case do not show that
the requisites for such breach have been satisfied. A breach
of this warranty requires the concurrence of the following
circumstances:
(1) The purchaser has been deprived of the whole
or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to
the sale made by the vendor; and
(4) The vendor has been summoned and made co-
defendant in the suit for eviction at the instance
of the vendee.[25]
In the absence of these requisites, a breach of the warranty
against eviction under Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet
ejected the occupants of said lot, and not that it has been
evicted therefrom. As correctly pointed out by Respondent
Court, the presence of lessees does not constitute an
encumbrance of the land,[26] nor does it deprive petitioner of
its control thereof.
We note, however, that petitioners deprivation of
ownership and control finally occurred when it failed and/or
discontinued paying the amortizations on the mortgage,
causing the lot to be foreclosed and sold at public auction. But
this deprivation is due to petitioners fault, and not to any act
attributable to the vendor-spouses.
Because petitioner failed to impugn its integrity, the
contract is presumed, under the law, to be valid and
subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of
the payments it made to PNB is warranted under Article 2154
of the Code, solutio indebiti does not apply in this case. This
doctrine applies where: (1) a payment is made when there
exists no binding relation between the payor, who has no duty
to pay, and the person who received the payment, and (2) the
payment is made through mistake, and not through liberality
or some other cause.[27]
 [1]
In this case, petitioner was under obligation to pay the Penned by J. Jesus M. Elbinias and concurred in by JJ.
amortizations on the mortgage under the contract of sale and Lourdes K. Tayao-Jaguros and B.A. Adefuin-De la
the deed of real estate mortgage. Under the deed of sale (Exh. Cruz.
2),[28] both parties agreed to abide by any and all the [2]
requirements of PNB in connection with the real estate Rollo, p. 34.
mortgage. Petitioner was aware that the deed of mortgage [3]
Records, pp. 361-362.
(Exh. C) made it solidarily and, therefore, primarily [29] liable
[4]
for the mortgage obligation:[30] Records, pp. 261-264.
[5]
Records, p. 306.
(e) The Mortgagor shall neither lease the mortgaged property
[6]
xxx nor sell or dispose of the same in any manner, without the Records, p. 298.
written consent of the Mortgagee. However, if not [7]
Records, p. 299.
withstanding this stipulation and during the existence of this
mortgage, the property herein mortgaged, or any portion [8]
Notice of Extra-Judicial Sale, Records, p. 372.
thereof, is xxx sold, it shall be the obligation of the Mortgagor
[9]
to impose as a condition of the sale, alienation or The decision was penned by then Judge (now Justice of the
encumbrance that the vendee, or the party in whose favor the Court of Appeals) Maria Alicia M. Austria.
alienation or encumbrance is to be made, should take the [10]
Rollo, p. 44.
property subject to the obligation of this mortgage in the same
terms and condition under which it is constituted, it being [11]
Rollo, p. 34.
understood that the Mortgagor is not in any manner relieved [12]
of his obligation to the Mortgagee under this mortgage by Rollo, p. 148.
such sale, alienation or encumbrance; on the contrary both the [13]
Article 1458, 2nd paragraph, Civil Code; and Romero vs.
vendor and the vendee, or the party in whose favor the Court of Appeals, 250 SCRA 223, 232, November
alienation or encumbrance is made shall be jointly and 23, 1995.
severally liable for said mortgage obligations. xxx.
[14]
Records, p. 361.
Therefore, it cannot be said that it did not have a duty to pay [15]
TSN, April 1, 1987, pp. 19-21; and Rollo, p. 147.
to PNB the amortization on the mortgage.
[16]
Article 1377, Civil Code; Ang vs. Court of Appeals, 170
Also, petitioner insists that its payment of the SCRA 286, 294, February 13, 1989; and Lim Yhi
amortization was a mistake because PNB disapproved its Luya vs. Court of Appeals, 99 SCRA 668, 682-683,
assumption of mortgage after it failed to submit the necessary September 11, 1980.
papers for the approval of such assumption.
[17]
Supra, p. 234.
But even if petitioner was a third party in regard to the
[18]
mortgage of the land purchased, the payment of the loan by Supra, p. 296.
petitioner was a condition clearly imposed by the contract of [19]
sale. This fact alone disproves petitioners insistence that there Article 1370, Civil Code; Ang vs. C.A., ibid, p. 295;
was a mistake in payment. On the contrary, such payments Sy vs. Court of Appeals, 131 SCRA 116, 124, July
were necessary to protect its interest as a the buyer(s) and new 31, 1984; Labasan vs. Lacuesta, 86 SCRA 16, 21,
owner(s) of the lot. October 30, 1978.
[20]
The quasi-contract of solutio indebiti is one of the TSN, November 4, 1983, p.23 and November 14, 1983,
concrete manifestations of the ancient principle that no one pp. 28-30.
shall enrich himself unjustly at the expense of another.[31] But [21]
Article 1477 & 1495, Civil Code; Fidelity & Deposit
as shown earlier, the payment of the mortgage was an Co. vs. Wilson, 8 Phil. 51, 56-57 (1907); Tan
obligation petitioner assumed under the contract of Leonco vs. Go Inqui, 8 Phil. 531, 534 (1907); and
sale. There is no unjust enrichment where the transaction, as Kuenzle & Streiff vs. Macke & Chandler, 14 Phil.
in this case, is quid pro quo, value for value. 610, 611-612 (1909).
All told, respondent Court did not commit any [22]
Addison vs. Felix, 38 Phil. 404, 408 (1918); Vda. de
reversible error which would warrant the reversal of the Sarmiento vs. Lesaca, 108 Phil. 900, 902-903
assailed Decision. (1960); and Danguilan vs. Intermediate Appellate
WHEREFORE, the petition is hereby DENIED, and Court, 168 SCRA 22, 32, November 28, 1988.
the assailed Decision is AFFIRMED. [23]
Ibid.
SO ORDERED. [24]
Manuel R. Dulay Enterprises, Inc. vs. Court of Appeals,
Narvasa, C.J., (Chairman), Davide, Jr., and Melo, 225 SCRA 678, 687, August 27, 1993.
JJ., concur. [25]
Escaler v. Court of Appeals, 138 SCRA 1, 7, August 1,
Francisco, J., on leave. 1985; Canizares Tiana v. Torrejos, 21 Phil. 127, 130
(1911); Bautista vs. Laserna, 72 Phil. 506, 510
(1941); and Jovellano vs. Lualhati, 47 Phil. 371, 373
(1925).
[26]
Investment & Development Corp. vs. Court of Appeals,
162 SCRA 636, 641-642, June 27, 1988.
[27]
Velez vs. Balzarza, 73 Phil. 630, 632 (1942); City of
Cebu vs. Judge Piccio, 110 Phil. 558, 563 (1960);
and Andres vs. Manufacturers Hanover & Trust
Corporation, 177 SCRA 618, 622, September 15,
1989.
[28]
Records, p. 362.
[29]
Article 1216, Civil Code.
[30]
Records, p. 256.
[31]
Ibid.; and Ramie Textiles, Inc. vs. Mathay, Sr., 89 SCRA
586, 592, April 30, 1979.
SECOND DIVISION
[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 THIRTY-NINE & 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 donee-beneficiary 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.
Puno, (Chairman), Austria-Martinez, and Tinga,
JJ., concur.
Chico-Nazario, J., on leave.
[1]
Penned by Associate Justice Demetrio G. Demetria
(retired), with Associate Justices Ramon Mabutas, Jr.
(retired) and Jose L. Sabio, Jr., concurring.
[2]
Penned by Associate Justice Jose L. Sabio, Jr., with
Associate Justices Oswaldo Agcaoili (retired) and Sergio L.
Pestao, concurring.
[3]
Penned by Judge Zeus C. Abrogar.
[4]
Rollo, p. 104.
[5]
Exhibit I.
[6]
Rollo, p. 65.
[7]
Exhibit 24.
[8]
Exhibit 2.
[9] [43]
Exhibit 3. Tolentino, Arturo M., Commentaries and Jurisprudence
[10]
on the Civil Code of the Philippines, Vol. I, pp. 77;
Exhibit 4. In Albrecht v. Walter, 572 N.W.2d 809 (1997), it was held
[11]
Rollo, p. 109. that:
[12]
Ibid. (1) an enrichment; (2) an impoverishment; (3) some
connection between enrichment and impoverishment; (4) the
[13]
Exhibit 8. absence of justification for enrichment and impoverishment;
[14] and (5) the absence of a remedy provided by law.
Exhibit 7.
[44]
[15] Id. at 82.
Exhibit 9.
[16]
Exhibit 10. Republic of the Philippines
[17]
Exhibit 11. SUPREME COURT
Manila
[18]
Exhibit 12.
[19]
Exhibit 14. THIRD DIVISION
[20]
Exhibit 15. G.R. No. 82146 January 22, 1990
[21]
Exhibit 16.
EULOGIO OCCENA, petitioner,
[22]
Rollo, p. 45. vs.
[23]
Id. at 43-44. HON. PEDRO M. ICAMINA, Presiding Judge, Branch
X of the Regional Trial Court Sixth Judicial Region, San
[24]
Id. at 58. Jose, Antique; THE PEOPLE OF THE PHILIPPINES,
[25]
represented by the Honorable Provincial Fiscal of
Records, p. 52. Antique; and CRISTINA VEGAFRIA, respondents.
[26]
Rollo, p. 11.
[27]
Comelec Legal Assistance Office for petitioner.
Metropolitan Bank and Trust Company v. Wong, 359 Comelec Legal Assistance Officer for private respondent.
SCRA 608 (2001).
[28]
Tando v. Court of Appeals, 372 SCRA 321 (2001).
[29]
Spouses Constante Firme and Azucena E. Firme v. Bukal
Enterprises and Development Corporation, G.R. No.
FERNAN, C.J.:
146608, October 23, 2003.
[30]
Article 1311, New Civil Code. On May 31, 1979, herein petitioner Eulogio Occena instituted
[31] before the Second Municipal Circuit Trial Court of Sibalom,
Manila Port Services, Inc. v. Court of Appeals, 20 SCRA
San Remigio — Belison, Province of Antique, Criminal Case
1214 (1967).
No. 1717, a criminal complaint for Grave Oral Defamation
[32]
17 Corpus Juris Secundum, Contract, pp. 559-560. against herein private respondent Cristina Vegafria for
allegedly openly, publicly and maliciously uttering the
[33]
G. T. Fogle & Co. v. United States, 135 F.2d 117 (1943). following insulting words and statements: "Gago ikaw nga
[34]
Roebling v. Dillon, 288 F.2d 386 (1961). Barangay Captain, montisco, traidor, malugus, Hudas,"
which, freely translated, mean: "You are a foolish Barangay
[35]
Baltimore & O. R. Co. v. United States, 261 U.S. 592 Captain, ignoramus, traitor, tyrant, Judas" and other words
(1923). and statements of similar import which caused great and
[36]
irreparable damage and injury to his person and honor.
TSN, 17 August 1992, p. 14.
[37] Private respondent as accused therein entered a plea of not
Exhibit 12.
[38]
guilty. Trial thereafter ensued, at which petitioner, without
Exhibit 14. reserving his right to file a separate civil action for damages
[39]
Mon-Ray, Inc. v. Granite Re, Inc., 677 N.W.2d 434 (2004) actively intervened thru a private prosecutor.
citing First National Bank of St. Paul v. Ramier, 311 N.W. 2d
502, 504 (1981). After trial, private respondent was convicted of the offense of
[40]
Slight Oral Defamation and was sentenced to pay a fine of
ServiceMaster of St. Cloud v. GAB Bus. Services., Fifty Pesos (P50.00) with subsidiary imprisonment in case of
Inc., 544 N.W.2d 302, 306 (1996). insolvency and to pay the costs. No damages were awarded
[41]
Callaway Golf Company v. Dunlop Slazenger Group to petitioner in view of the trial court's opinion that "the facts
Americas, Inc., 318 F.Supp.2d 216 (2004); Dinosaur Dev., and circumstances of the case as adduced by the evidence do
Inc. v. White, 216 Cal.App.3d 1310, 265 Cal.Rptr. 525 not warrant the awarding of moral damages." 1
(1989).
[42]
Disagreeing, petitioner sought relief from the Regional Trial
Reeves v. Alyeska Pipeline Service Company, 926 P.2d Court, which in a decision dated March 16, 1987 disposed of
1130 (1996). petitioner's appeal as follows:
 IN VIEW OF ALL THE FOREGOING, the civil
aspect of the lower court's decision of April 20, 1981
subject of this appeal, for lack of merit, is hereby
DENIED.
After the decision shall have become final, remand
the records of this case to the court of origin, Second
Municipal Circuit Trial Court of Sibalom, San
Remigio-Belison, Antique, for the execution of its
decision on the criminal aspect.
SO ORDERED. 2
Petitioner is now before us by way of a petition for review
on certiorari seeking to annul the RTC decision for being
contrary to Article 100 of the Revised Penal Code providing
that every person criminally liable for a felony is also civilly
liable, and Article 2219 of the New Civil Code providing that
moral damages may be recovered in libel, slander or any other
form of defamation. He submits that public respondent RTC
erred in relying on the cases of Roa vs. de la Cruz, 107 Phil.
10 and Tan vs. Standard Vacuum Oil Co., et al., 91 Phil. 672
cited therein. He differentiates said cases from the case at bar
by saying that in the case of Roa, the decision of the trial court
had become final before Maria C. Roa instituted a civil action
for damages; whereas in the instant case, the decision of the
trial court has not yet become final by reason of the timely
appeal interposed by him and no civil action for damages has
been instituted by petitioner against private respondent for the
same cause. Tan, on the other hand, contemplates of two
actions, one criminal and one civil, and the prosecution of the
criminal case had resulted in the acquittal of the accused,
which is not the situation here where the civil aspect was
impliedly instituted with the criminal action in accordance
with Section 1, Rule 111, of the Rules of Court.
Private respondent for her part argues that the decision of the
trial court carries with it the final adjudication of her civil
liability. Since petitioner chose to actively intervene in the
criminal action without reserving his right to file a separate
civil action for damages, he assumed the risk that in the event
he failed to recover damages he cannot appeal from the
decision of the lower court.
We find merit in the petition.
The issues confronting us in the instant petition is whether or
not the decision of the Second Municipal Trial Court of
Sibalom, San-Remigio-Belison, Province of Antique
constitutes the final adjudication on the merits of private
respondent's civil liability; and whether or not petitioner is
entitled to an award of damages arising from the remarks
uttered by private respondent and found by the trial court to
be defamatory.
The decision of the Municipal Circuit Trial Court as affirmed
by the Regional Trial Court in Criminal Case No. 1709 cannot
be considered as a final adjudication on the civil liability of
private respondent simply because said decision has not yet
become final due to the timely appeal filed by petitioner with
respect to the civil liability of the accused in said case. It was
only the unappealed criminal aspect of the case which has
become final.
In the case of People vs. Coloma, 105 Phil. 1287, we
categorically stated that from a judgment convicting the
accused, two (2) appeals may, accordingly, be taken. The
accused may seek a review of said judgment, as regards both
civil and criminal actions; while the complainant may appeal
with respect only to the civil action, either because the lower
court has refused to award damages or because the award
made is unsatisfactory to him. The right of either to appeal or
not to appeal in the event of conviction of the accused is not
dependent upon the other. Thus, private respondent's theory
that in actively intervening in the criminal action, petitioner
waived his right to appeal from the decision that may be
rendered therein, is incorrect and inaccurate. Petitioner may,
as he did, appeal from the decision on the civil aspect which
is deemed instituted with the criminal action and such appeal,
timely taken, prevents the decision on the civil liability from
attaining finality.
We tackle the second issue by determining the basis of civil
liability arising from crime. Civil obligations arising from
criminal offenses are governed by Article 100 of the Revised
Penal Code which provides that "(E)very person criminally
liable for a felony is also civilly liable," in relation to Article
2177 of the Civil Code on quasi-delict, the provisions for
independent civil actions in the Chapter on Human Relations
and the provisions regulating damages, also found in the Civil
Code.
Underlying the legal principle that a person who is criminally
liable is also civilly liable is the view that from the standpoint
of its effects, a crime has dual character: (1) as an offense
against the state because of the disturbance of the social order;
and (2) as an offense against the private person injured by the
crime unless it involves the crime of treason, rebellion,
espionage, contempt and others wherein no civil liability
arises on the part of the offender either because there are no
damages to be compensated or there is no private person
injured by the crime. 3
In the ultimate analysis, what gives rise to the civil liability is
really the obligation of everyone to repair or to make whole
the damage caused to another by reason of his act or omission,
whether done intentional or negligently and whether or not
punishable by law. 4
In the case at bar, private respondent was found guilty of
slight oral defamation and sentenced to a fine of P50.00 with
subsidiary imprisonment in case of insolvency, but no civil
liability arising from the felonious act of the accused was
adjudged. This is erroneous. As a general rule, a person who
is found to be criminally liable offends two (2) entities: the
state or society in which he lives and the individual member
of the society or private person who was injured or damaged
by the punishable act or omission. The offense of which
private respondent was found guilty is not one of those
felonies where no civil liability results because either there is
no offended party or no damage was caused to a private
person. There is here an offended party, whose main
contention precisely is that he suffered damages in view of
the defamatory words and statements uttered by private
respondent, in the amount of Ten Thousand Pesos
(P10,000.00) as moral damages and the further sum of Ten
Thousand Pesos (P10,000) as exemplary damages.
Article 2219, par. (7) of the Civil Code allows the recovery
of moral damages in case of libel, slander or any other form
of defamation This provision of law establishes the right of
an offended party in a case for oral defamation to recover
from the guilty party damages for injury to his feelings and
reputation. The offended party is likewise allowed to recover
punitive or exemplary damages.
It must be remembered that every defamatory imputation is
presumed to be malicious, even if it be true, if no good
intention and justifiable motive for making it is shown. And
malice may be inferred from the style and tone of
publication 5 subject to certain exceptions which are not
present in the case at bar.
Calling petitioner who was a barangay captain an ignoramus,
traitor, tyrant and Judas is clearly an imputation of defects in
petitioner's character sufficient to cause him embarrassment
and social humiliation. Petitioner testified to the feelings of
shame and anguish he suffered as a result of the incident
complained of. 6 It is patently error for the trial court to
overlook this vital piece of evidence and to conclude that the
"facts and circumstances of the case as adduced by the
evidence do not warrant the awarding of moral damages."
Having misapprehended the facts, the trial court's findings
with respect thereto is not conclusive upon us.
From the evidence presented, we rule that for the injury to his
feelings and reputation, being a barangay captain, petitioner
is entitled to moral damages in the sum of P5,000.00 and a
further sum of P5,000.00 as exemplary damages.
WHEREFORE, the petition is hereby GRANTED. The
decision of the Regional Trial Court is hereby MODIFIED
and private respondent is ordered to pay petitioner the amount
of P5,000.00 as moral damages and another P5,000.00 as
exemplary damages. Costs against private respondent.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortés JJ., concur
Footnotes
1 p. 12, Rollo.
2 p. 15. Rollo.
3 H. Jarencio, Torts and Damages, 1983, ed., p. 237.
4 C. Sangco, Philippine Law on Torts and Damages,
Revised Edition pp. 246-257.
5 U.S. vs. Sedano, 14 Phil. 328.
6 tsn, March 10, 1980, pp. 5-6, p. 59, Rollo
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 78911-25 December 11, 1987
CHARMINA B. BANAL, petitioner,
vs.
THE HON. TOMAS V. TADEO, JR., Presiding Judge,
RTC-Quezon City, Branch 105 and Rosario
Claudia respondents.
GUTIERREZ, JR., J.:
This is a petition for certiorari to review and set aside the
orders of the respondent Regional Trial Court, Branch 105,
Quezon City dated (1) 8 January 1987 which rejected the
appearance of Atty. Nicolito L. Bustos as private prosecutor
in Criminal Cases Nos. Q-40909 to Q-40913 where
respondent Rosario Claudio is the accused for violation of
Batas Pambansa Blg. 22; and (2) 31 March 1987 which
denied the petitioner's motion for reconsideration of the order
dated 8 January 1987; and for mandamus to allow Atty.
Bustos to enter his appearance as private prosecutor in the
aforestated criminal cases.
It appears that fifteen (15) separate informations for violation
of Batas Pambansa Blg. 22 or the Bouncing Checks Law,
docketed as Criminal Cases Nos. 40909-40913, were filed
against respondent Claudio before the Regional Trial Court
of Quezon City and originally assigned to Branch 84.
The presiding judge of Branch 84 inhibited himself when
respondent Claudio, through counsel, filed a petition for
recuse dated May 19,1986.
The cases were re-raffled and consequently assigned on June
25, 1986 to Branch 105 which was then presided over by
Judge Johnico G. Serquina
During these proceedings, respondent Claudio was finally
arraigned on November 20, 1986 where she pleaded not
guilty to the charges. Pre-trial was then set on January 8,
1987.
In the meantime Judge Tomas V. Tadeo, Jr. replaced Judge
Serquina as presiding judge of Branch 105.
On January 8, 1987, the respondent court issued an order
rejecting the appearance of Atty. Nicolito L. Bustos as private
prosecutor on the ground that the charge is for the violation
of Batas Pambansa Blg. 22 which does not provide for any
civil liability or indemnity and hence, "it is not a crime against
property but public order."
The petitioner, through counsel filed a motion for
reconsideration of the order dated 8 January 1987 on March
10, 1987.
Respondent Claudio filed her opposition to the motion for
reconsideration on March 25, 1987.
In an order dated 31 March 1987, the respondent court denied
petitioner's motion for reconsideration.
Hence, this petition questioning the orders of the respondent
Court.
The issue to be resolved is whether or not the respondent
Court acted with grave abuse of discretion or in excess of its
jurisdiction in rejecting the appearance of a private
prosecutor.
The respondents make capital of the fact that Batas Pambansa
Blg. 22 punishes the act of knowingly issuing worthless
checks as an offense against public order. As such, it is argued
that it is the State and the public that are the principal
complainants and, therefore, no civil indemnity is provided
for by Batas Pambansa Blg. 22 for which a private party or
prosecutor may intervene.
On the other hand, the petitioner, relying on the legal axiom
that "Every man criminally liable is also civilly liable,"
contends that indemnity may be recovered from the offender
regardless of whether or not Batas Pambansa Blg. 22 so
provides.
A careful study of the concept of civil liability allows a
solution to the issue in the case at bar.
Generally, the basis of civil liability arising from crime is the
fundamental postulate of our law that "Every man criminally
liable is also civilly liable" (Art. 100, The Revised Penal
Code). Underlying this legal principle is the traditional theory
that when a person commits a crime he offends two entities
namely ( 1) the society in which he lives in or the political
entity called the State whose law he had violated; and (2) the
individual member of that society whose person, right, honor,
chastity or property was actually or directly injured or
damaged by the same punishable act or omission. However,
this rather broad and general provision is among the most
complex and controversial topics in criminal procedure. It can
be misleading in its implications especially where the same
act or omission may be treated as a crime in one instance and
as a tort in another or where the law allows a separate civil
action to proceed independently of the course of the criminal
prosecution with which it is intimately intertwined. Many
legal scholars treat as a misconception or fallacy the generally
accepted notion that, the civil liability actually arises from the
crime when, in the ultimate analysis, it does not. While an act
or omission is felonious because it is punishable by law, it
gives rise to civil liability not so much because it is a crime
but because it caused damage to another. Viewing things
pragmatically, we can readily see that what gives rise to the
civil liability is really the obligation and the moral duty of
everyone to repair or make whole the damage caused to
another by reason of his own act or omission, done
intentionally or negligently, whether or not the same be
punishable by law. In other words, criminal liability will give
rise to civil liability only if the same felonious act or omission
results in damage or injury to another and is the direct and
proximate cause thereof. Damage or injury to another is
evidently the foundation of the civil action. Such is not the
case in criminal actions for, to be criminally liable, it is
enough that the act or omission complained of is punishable,
regardless of whether or not it also causes material damage to
another. (See Sangco, Philippine Law on Torts and Damages,
1978, Revised Edition, pp. 246-247).
Article 20 of the New Civil Code provides:
Every person who, contrary to law, wilfully
or negligently causes damage to another,
shall indemnify the latter for the same.
Regardless, therefore, of whether or not a special law so
provides, indemnification of the offended party may be had
on account of the damage, loss or injury directly suffered as
a consequence of the wrongful act of another. The indemnity
which a person is sentenced to pay forms an integral part of
the penalty imposed by law for the commission of a crime
(Quemel v. Court of Appeals, 22 SCRA 44, citing Bagtas v.
Director of Prisons, 84 Phil. 692). Every crime gives rise to a
penal or criminal action for the punishment of the guilty
party, and also to civil action for the restitution of the thing,
repair of the damage, and indemnification for the losses.
(United States v. Bernardo, 19 Phil. 265).
Indeed one cannot disregard the private party in the case at
bar who suffered the offenses committed against her. Not
only the State but the petitioner too is entitled to relief as a
member of the public which the law seeks to protect. She was
assured that the checks were good when she parted with
money, property or services. She suffered with the State when
the checks bounced.
In Lozano v. Hon. Martinez (G.R. No. 63419, December 18,
1986) and the cases consolidated therewith, we held that "The
effects of a worthless check transcend the private interests of
the parties directly involved in the transaction and touch the
interests of the community at large." Yet, we too recognized
the wrong done to the private party defrauded when we stated
therein that "The mischief it creates is not only a wrong to the
payee or the holder, but also an injury to the public."
Civil liability to the offended private party cannot thus be
denied, The payee of the check is entitled to receive the
payment of money for which the worthless check was issued.
Having been caused the damage, she is entitled to
recompense.
Surely, it could not have been the intendment of the framers
of Batas Pambansa Big. 22 to leave the offended private party
defrauded and empty- handed by excluding the civil liability
of the offender, giving her only the remedy, which in many
cases results in a Pyrrhic victory, of having to file a separate
civil suit. To do so, may leave the offended party unable to
recover even the face value of the check due her, thereby
unjustly enriching the errant drawer at the expense of the
payee. The protection which the law seeks to provide would,
therefore, be brought to naught.
The petitioner's intervention in the prosecution of Criminal
Cases 40909 to 40913 is justified not only for the protection
of her interests but also in the interest of the speedy and
inexpensive administration of justice mandated by the
Constitution (Section 16, Article III, Bill of Rights,
Constitution of 1987). A separate civil action for the purpose
would only prove to be costly, burdensome, and time-
consuming for both parties and further delay the final
disposition of the case. This multiplicity of suits must be
avoided. Where petitioner's rights may be fulIy adjudicated in
the proceedings before the trial court, resort t o a separate
action to recover civil liability is clearly unwarranted.
WHEREFORE the petition is hereby GRANTED. The
respondent court is ordered to permit the intervention of a
private prosecutor in behalf of petitioner Charmina B. Banal,
in the prosecution of the civil aspect of Criminasl Cases Nos.
40909 to 40913. The temporary restraining order issued by
this court a quo for further proceedings. This decision is
immediately executory.
SO ORDERED.
Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.
SECOND DIVISION
[G.R. No. 107125. January 29, 2001]
GEORGE MANANTAN, petitioner, vs. THE COURT
OF APPEALS, SPOUSES MARCELINO
NICOLAS and MARIA NICOLAS, respondents.
DECISION
QUISUMBING, J.:
This is a petition for review of the decision dated
January 31, 1992 of the Court of Appeals in CA-G.R. CV No.
19240, modifying the judgment of the Regional Trial Court
of Santiago, Isabela, Branch 21, in Criminal Case No.
066. Petitioner George Manantan was acquitted by the trial
court of homicide through reckless imprudence without a
ruling on his civil liability. On appeal from the civil aspect of
the judgment in Criminal Case No. 066, the appellate court
found petitioner Manantan civilly liable and ordered him to
indemnify private respondents Marcelino Nicolas and Maria
Nicolas P104,400.00 representing loss of support, P50,000.00
as death indemnity, and moral damages of P20,000.00 or a
total of P174,400.00 for the death of their son, Ruben Nicolas.
The facts of this case are as follows:
On June 1, 1983, the Provincial Fiscal of Isabela filed
an information charging petitioner Manantan with reckless
imprudence resulting in homicide, allegedly committed as
follows:
That on or about the 25th day of September 1982, in the
municipality of Santiago, province of Isabela, Philippines,
and within the jurisdiction of this Honorable Court, the said
accused, being then the driver and person-in-charge of an
automobile bearing Plate No. NGA-816, willfully and
unlawfully drove and operated the same while along
the Daang Maharlika at Barangay Malvar, in said
municipality, in a negligent, careless and imprudent manner,
without due regard to traffic laws, regulations and ordinances
and without taking the necessary precaution to prevent
accident to person and damage to property, causing by such
negligence, carelessness and imprudence said automobile
driven and operated by him to sideswipe a passenger jeep
bearing plate No. 918-7F driven by Charles Codamon,
thereby causing the said automobile to turn down (sic)
resulting to the death of Ruben Nicolas a passenger of said
automobile.
CONTRARY TO LAW.[1]
On arraignment, petitioner pleaded not guilty to the
charge. Trial on the merits ensued.
The prosecutions evidence, as summarized by the trial
court and adopted by the appellate court, showed that:
[I]n the morning of September 25, 1982, Fiscal Wilfredo
Ambrocio decided to catch shrimps at the irrigation canal at
his farm. He invited the deceased who told him that they
(should) borrow the Ford Fiera of the accused George
Manantan who is also from Cordon. The deceased went to
borrow the Ford Fiera butsaid that the accused also wanted to
(come) along. So Fiscal Ambrocio and the deceased dropped
by the accused at the Manantan Technical School. They drank
beer there before they proceeded to the farm using the Toyota
Starlet of the accused. At the farm they consumed one (more)
case of beer. At about 12:00 oclock noon they went
home. Then at about 2:00 or 3:00 oclock that afternoon,
(defense witness Miguel) Tabangin and (Ruben) Nicolas and
the accused returned to the house of Fiscal Ambrocio with a
duck. They cooked the duck and ate the same with one more
case of beer. They ate and drank until about 8:30 in the
evening when the accused invited them to go bowling. They
went to Santiago, Isabela on board the Toyota Starlet of the
accused who drove the same. They went to the Vicap
Bowling Lanes at Mabini, Santiago, Isabela but unfortunately
there was no vacant alley. While waiting for a vacant alley
they drank one beer each. After waiting for about 40 minutes
and still no alley became vacant the accused invited his
companions to go to the LBC Night Club. They had drinks
and took some lady partners at the LBC. After one hour, they
left the LBC and proceeded to a nearby store where they
ate arroz caldoand then they decided to go home. Again the
accused drove the car. Miguel Tabangin sat with the accused
in the front seat while the deceased and Fiscal Ambrocio sat
at the back seat with the deceased immediately behind the
accused. The accused was driving at a speed of about 40
kilometers per hour along the Maharlika Highway at Malvar,
Santiago, Isabela, at the middle portion of the highway
(although according to Charles Cudamon, the car was running
at a speed of 80 to 90 kilometers per hours on [the] wrong
lane of the highway because the car was overtaking a tricycle)
when they met a passenger jeepney with bright lights on. The
accused immediately tried to swerve the car to the right and
move his body away from the steering wheel but he was not
able to avoid the oncoming vehicle and the two vehicles
collided with each other at the center of the road.
xxx
As a result of the collision the car turned turtle twice and
landed on its top at the side of the highway immediately at the
approach of the street going to the Flores Clinic while the jeep
swerved across the road so that one half front portion landed
on the lane of the car while the back half portion was at its
right lane five meters away from the point of impact as shown
by a sketch (Exhibit A) prepared by Cudamon the following
morning at the Police Headquarters at the instance of his
lawyer. Fiscal Ambrocio lost consciousness. When he
regained consciousness he was still inside the car (lying) on
his belly with the deceased on top of him. Ambrocio pushed
(away) the deceased and then he was pulled out of the car by
Tabangin. Afterwards, the deceased who was still
unconscious was pulled out from the car. Both Fiscal
Ambrocio and the deceased were brought to the Flores
Clinic. The deceased died that night (Exhibit B) while
Ambrocio suffered only minor injuries to his head and legs.[2]
The defense version as to the events prior to the incident
was essentially the same as that of the prosecution, except that
defense witness Miguel Tabangin declared that Manantan did
not drink beer that night. As to the accident, the defense
claimed that:
The accused was driving slowly at the right lane [at] about 20
inches from the center of the road at about 30 kilometers per
hour at the National Highway at Malvar, Santiago, Isabela,
when suddenly a passenger jeepney with bright lights which
was coming from the opposite direction and running very fast
suddenly swerve(d) to the cars lane and bumped the car which
turned turtle twice and rested on its top at the right edge of the
road while the jeep stopped across the center of the road as
shown by a picture taken after the incident (Exhibit 1) and a
sketch (Exhibit 3) drawn by the accused during his rebuttal
testimony. The car was hit on the drivers side. As a result of
the collision, the accused and Miguel Tabangin and Fiscal
Ambrocio were injured while Ruben Nicolas died at the
Flores Clinic where they were all brought for treatment. [3]
In its decision dated June 30, 1988, promulgated on
August 4, 1988, the trial court decided Criminal Case No. 066
in petitioners favor, thus:
WHEREFORE, in the light of the foregoing considerations,
the Court finds the accused NOT GUILTY of the crime
charged and hereby acquits him.
SO ORDERED.[4]
On August 8, 1988, private respondents filed their
notice of appeal on the civil aspect of the trial courts
judgment. In their appeal, docketed as CA-G.R. CV No.
19240, the Nicolas spouses prayed that the decision appealed
from be modified and that appellee be ordered to pay
indemnity and damages.
On January 31, 1992, the appellate court decided CA-
G.R. CV No. 19240 in favor of the Nicolas spouses, thus:
WHEREFORE, the decision appealed from is MODIFIED in
that defendant-appellee is hereby held civilly liable for his
negligent and reckless act of driving his car which was the
proximate cause of the vehicular accident, and sentenced to
indemnify plaintiffs-appellants in the amount of P174,400.00
for the death of Ruben Nicolas,
SO ORDERED.[5]
In finding petitioner civilly liable, the court a quo noted
that at the time the accident occurred, Manantan was in a state
of intoxication, due to his having consumed all in all, a total
of at least twelve (12) bottles of beerbetween 9 a.m. and 11
p.m.[6] It found that petitioners act of driving while
intoxicated was a clear violation of Section 53 of the Land
Transportation and Traffic Code (R.A. No. 4136) [7] and
pursuant to Article 2185 of the Civil Code,[8] a statutory
presumption of negligence existed. It held that petitioners act
of violating the Traffic Code is negligence in itself because
the mishap, which occurred, was the precise injury sought to
be prevented by the regulation.[9]
Petitioner moved for reconsideration, but the appellate
court in its resolution of August 24, 1992 denied the motion.
Hence, the present case. Petitioner, in his memorandum,
submits the following issues for our consideration:
FIRST THE DECISION OF THE TRIAL COURT
ACQUITTING THE PETITIONER OF THE CRIME OF
RECKLESS IMPRUDENCE RESULTING TO HOMICIDE
FORECLOSED ANY FURTHER INQUIRY ON THE
ACCUSEDS (PETITIONERS) NEGLIGENCE OR
RECKLESS IMPRUDENCE BECAUSE BY THEN HE
WILL BE PLACED IN DOUBLE JEOPARDY AND
THEREFORE THE COURT OF APPEALS ERRED IN
PASSING UPON THE SAME ISSUE AGAIN.
SECOND THE COURT OF APPEALS DID NOT HAVE
JURISDICTION TO AWARD DAMAGES AND
INDEMNITY TO THE PRIVATE RESPONDENTS
CONSIDERING THAT THE NON-DECLARATION OF
ANY INDEMNITY OR AWARD OF DAMAGES BY THE
REGIONAL TRIAL COURT OF ISABELA, BRANCH
XXI, WAS ITSELF CONSISTENT WITH THE
PETITIONERS ACQUITTAL FOR THE REASON THAT
THE CIVIL ACTION WAS IMPLIEDLY INSTITUTED
WITH THE CRIMINAL ACTION AND THERE WAS NO
EXPRESS WAIVER OF THE CIVIL ACTION OR
RESERVATION TO INSTITUTE IT SEPARATELY BY
THE PRIVATE RESPONDENTS IN THE TRIAL COURT.
THIRD THE COURT OF APPEALS DID NOT HAVE
JURISDICTION TO TAKE COGNIZANCE OF THE CASE
CA-G.R. CV No. 19240 ENTITLED: SPOUSES
MARCELINO NICOLAS AND MARIA NICOLAS v.
GEORGE MANANTAN, AND RENDER THE DECISION
SOUGHT TO BE REVIEWED WHEN THE SAME WAS
PROSECUTED BY THE PRIVATE RESPONDENTS IN
THEIR PERSONAL CAPACITIES AND THE FILING
FEES NOT HAVING BEEN PAID, THUS VIOLATING
THE MANCHESTER DOCTRINE.
In brief, the issues for our resolution are:
(1) Did the acquittal of petitioner foreclose any
further inquiry by the Court of Appeals as to
his negligence or reckless imprudence?
(2) Did the court a quo err in finding that
petitioners acquittal did not extinguish his civil
liability?
(3) Did the appellate court commit a reversible
error in failing to apply the Manchester
doctrine to CA-G.R. CV No. 19240?
On the first issue, petitioner opines that the Court of
Appeals should not have disturbed the findings of the trial
court on the lack of negligence or reckless imprudence under
the guise of determining his civil liability. He argues that the
trial courts finding that he was neither imprudent nor
negligent was the basis for his acquittal, and not reasonable
doubt. He submits that in finding him liable for indemnity and
damages, the appellate court not only placed his acquittal in
suspicion, but also put him in double jeopardy.
Private respondents contend that while the trial court
found that petitioners guilt had not been proven beyond
reasonable doubt, it did not state in clear and unequivocal
terms that petitioner was not recklessly imprudent or
negligent. Hence, impliedly the trial court acquitted him on
reasonable doubt. Since civil liability is not extinguished in
criminal cases, if the acquittal is based on reasonable doubt,
the Court of Appeals had to review the findings of the trial
court to determine if there was a basis for awarding indemnity
and damages.
Preliminarily, petitioners claim that the decision of the
appellate court awarding indemnity placed him in double
jeopardy is misplaced. The constitution provides that no
person shall be twice put in jeopardy for the same offense. If
an act is punished by a law and an ordinance, conviction or
acquittal under either shall constitute a bar to another
prosecution for the same act.[10] When a person is charged
with an offense and the case is terminated either by acquittal
or conviction or in any other manner without the consent of
the accused, the latter cannot again be charged with the same
or identical offense.[11] This is double jeopardy. For double
jeopardy to exist, the following elements must be established:
(a) a first jeopardy must have attached prior to the second; (2)
the first jeopardy must have terminated; and (3) the second
jeopardy must be for the same offense as the first.[12] In the
instant case, petitioner had once been placed in jeopardy by
the filing of Criminal Case No. 066 and the jeopardy was
terminated by his discharge. The judgment of acquittal
became immediately final. Note, however, that what was
elevated to the Court of Appeals by private respondents was
the civil aspect of Criminal Case No. 066. Petitioner was not
charged anew in CA-G.R. CV No. 19240 with a second
criminal offense identical to the first offense. The records
clearly show that no second criminal offense was being
imputed to petitioner on appeal. In modifying the lower
courts judgment, the appellate court did not modify the
judgment of acquittal. Nor did it order the filing of a second
criminal case against petitioner for the same
offense. Obviously, therefore, there was no second jeopardy
to speak of. Petitioners claim of having been placed in double
jeopardy is incorrect.
Our law recognizes two kinds of acquittal, with different
effects on the civil liability of the accused. First is an acquittal
on the ground that the accused is not the author of the act or
omission complained of. This instance closes the door to civil
liability, for a person who has been found to be not the
perpetrator of any act or omission cannot and can never be
held liable for such act or omission.[13] There being no delict,
civil liability ex delicto is out of the question, and the civil
action, if any, which may be instituted must be based on
grounds other than the delict complained of. This is the
situation contemplated in Rule 111 of the Rules of
Court.[14] The second instance is an acquittal based on
reasonable doubt on the guilt of the accused. In this case, even
if the guilt of the accused has not been satisfactorily
established, he is not exempt from civil liability which may
be proved by preponderance of evidence only. [15] This is the
situation contemplated in Article 29 of the Civil
Code,[16] where the civil action for damages is for the same
act or omission. Although the two actions have different
purposes, the matters discussed in the civil case are similar to
those discussed in the criminal case. However, the judgment
in the criminal proceeding cannot be read in evidence in the
civil action to establish any fact there determined, even
though both actions involve the same act or omission.[17] The
reason for this rule is that the parties are not the same and
secondarily, different rules of evidence are applicable. Hence,
notwithstanding herein petitioners acquittal, the Court of
Appeals in determining whether Article 29 applied, was not
precluded from looking into the question of petitioners
negligence or reckless imprudence.
On the second issue, petitioner insists that he was
acquitted on a finding that he was neither criminally negligent
nor recklessly imprudent. Inasmuch as his civil liability is
predicated on the criminal offense, he argues that when the
latter is not proved, civil liability cannot be demanded. He
concludes that his acquittal bars any civil action.
Private respondents counter that a closer look at the trial
courts judgment shows that the judgment of acquittal did not
clearly and categorically declare the non-existence of
petitioners negligence or imprudence. Hence, they argue that
his acquittal must be deemed based on reasonable doubt,
allowing Article 29 of the Civil Code to come into play.
Our scrutiny of the lower courts decision in Criminal
Case No. 066 supports the conclusion of the appellate court
that the acquittal was based on reasonable doubt; hence,
petitioners civil liability was not extinguished by his
discharge. We note the trial courts declaration that did not
discount the possibility that the accused was really negligent.
However, it found that a hypothesis inconsistent with the
negligence of the accused presented itself before the Court
and since said hypothesis is consistent with the recordthe
Courts mind cannot rest on a verdict of conviction.[18]The
foregoing clearly shows that petitioners acquittal was
predicated on the conclusion that his guilt had not been
established with moral certainty. Stated differently, it is an
acquittal based on reasonable doubt and a suit to enforce civil
liability for the same act or omission lies.
On the third issue, petitioner argues that the Court of
Appeals erred in awarding damages and indemnity, since
private respondents did not pay the corresponding filing fees
for their claims for damages when the civil case was
impliedly instituted with the criminal action. Petitioner
submits that the non-payment of filing fees on the amount of
the claim for damages violated the doctrine in Manchester
Development Corporation v. Court of Appeals, 149 SCRA
562 (1987) and Supreme Court Circular No. 7 dated March
24, 1988.[19] He avers that since Manchester held that The
Court acquires jurisdiction over any case only upon payment
of the prescribed docket fees, the appellate court was without
jurisdiction to hear and try CA-G.R. CV No. 19240, much
less award indemnity and damages.
Private respondents argue that the Manchester doctrine
is inapplicable to the instant case. They ask us to note that the
criminal case, with which the civil case was impliedly
instituted, was filed on July 1, 1983, while
the Manchester requirements as to docket and filing fees took
effect only with the promulgation of Supreme Court Circular
No. 7 on March 24, 1988. Moreover, the information filed by
the Provincial Prosecutor of Isabela did not allege the amount
of indemnity to be paid. Since it was not then customarily or
legally required that the civil damages sought be stated in the
information, the trial court had no basis in assessing the filing

fees and demanding payment thereof. Moreover, assuming
that the Manchester ruling is applied retroactively, under the
Rules of Court, the filing fees for the damages awarded are a
first lien on the judgment. Hence, there is no violation of
the Manchester doctrine to speak of.
At the time of the filing of the information in 1983, the
implied institution of civil actions with criminal actions was
governed by Rule 111, Section 1 of the 1964 Rules of
Court.[20] As correctly pointed out by private respondents,
under said rule, it was not required that the damages sought
by the offended party be stated in the complaint or
information. With the adoption of the 1985 Rules of Criminal
Procedure, and the amendment of Rule 111, Section 1 of the
1985 Rules of Criminal Procedure by a resolution of this
Court dated July 7, 1988, it is now required that:
When the offended party seeks to enforce civil liability
against the accused by way of moral, nominal, temperate or
exemplary damages, the filing fees for such civil action as
provided in these Rules shall constitute a first lien on the
judgment except in an award for actual damages.
In cases wherein the amount of damages, other than actual, is
alleged in the complaint or information, the corresponding
filing fees shall be paid by the offended party upon the filing
thereof in court for trial.
The foregoing were the applicable provisions of the
Rules of Criminal Procedure at the time private respondents
appealed the civil aspect of Criminal Case No. 066 to the
court a quo in 1989. Being in the nature of a curative statute,
the amendment applies retroactively and affects pending
actions as in this case.
Thus, where the civil action is impliedly instituted
together with the criminal action, the actual damages claimed
by the offended parties, as in this case, are not included in the
computation of the filing fees. Filing fees are to be paid only
if other items of damages such as moral, nominal, temperate,
or exemplary damages are alleged in the complaint or
information, or if they are not so alleged, shall constitute a
first lien on the judgment.[21] Recall that the information in
Criminal Case No. 066 contained no specific allegations of
damages. Considering that the Rules of Criminal Procedure
effectively guarantee that the filing fees for the award of
damages are a first lien on the judgment, the effect of the
enforcement of said lien must retroact to the institution of the
criminal action. The filing fees are deemed paid from the
filing of the criminal complaint or information.We therefore
find no basis for petitioners allegations that the filing fees
were not paid or improperly paid and that the appellate court
acquired no jurisdiction.
WHEREFORE, the instant petition is DISMISSED for
lack of merit. The assailed decision of the Court of Appeals
in CA-G.R. CV No. 19240 promulgated on January 31, 1992,
as well as its resolution dated August 24, 1992, denying
herein petitioners motion for reconsideration, are
AFFIRMED. Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon,
Jr., JJ., concur.
[1]
Records, p. 1.
[2]
CA Rollo, pp. 53-55.
[3]
Id. at 56-57.
[4]
Records, p. 429.
[5]
CA Rollo, p. 60.
[6]
Id. at 57.
[7]
SEC. 53. Driving while under the influence of liquor or
narcotic drug. No person shall drive a motor vehicle while
under the influence of liquor or narcotic drug.
[8]
CIVIL CODE, ART. 2185. Unless there is proof to the
contrary, it is presumed that a person driving a motor vehicle
has been negligent if at the time of the mishap, he was
violating any traffic regulation.
[9]
Supra note 6, at 58.
[10]
CONST., Art. III, Sec. 21.
[11]
Melo v. People, 85 Phil. 766, 768 (1950).
[12]
People v. Bocar, 138 SCRA 166, 171 (1985).
[13]
Almeida, et al. v. Abaroa, 8 Phil, 178, 181 (1907). See also
Almeida Chantangco and Lete v. Abaroa, 40 Phil. 1056
(1910), 218 US 476, 54 L. Ed. 1116 (1910); Wise & Co. v.
Larion, 45 Phil. 314 (1923), Francisco v. Onrubia, 46 Phil.
327 (1924). Article 29 of the Civil Code serves only to limit
and qualify the application of the Almeida doctrine.
[14]
Rules of Court, Rule 111, Sec. 2. Institution of separate
civil action.
xxx
(b) Extinction of the penal action does not carry with it
extinction of the civil, unless the extinction proceeds from a
declaration in a final judgment that the fact from which the
civil might arise did not exist. (stress supplied)
[15]
Manahan, Jr. v. Court of Appeals, 255 SCRA 202, 214
(1996), citing Padilla v. Court of Appeals, 129 SCRA 558
(1984).
[16]
CIVIL CODE, Art. 29. When the accused in a criminal
prosecution is acquitted on the ground that his guilt has not
been proved beyond reasonable doubt, a civil action for
damages for the same act or omission may be
instituted (stress supplied). Such action requires only a
preponderance of evidence. Upon motion of the defendant,
the court may require the plaintiff to file a bond to answer for
damages in case the complaint should be found to be
malicious.
If in a criminal case, the judgment of acquittal is based upon
reasonable doubt, the court shall so declare. In the absence of
any declaration to that effect, it may be inferred from the text
of the decision whether or not the acquittal is due to that
ground.
[17]
Almeida Chantangco and Lete v. Abaroa, supra note 13,
at 1061.
[18]
Supra note 4.
[19]
The subject of which reads: ALL COMPLAINTS MUST
SPECIFY THE AMOUNT OF DAMAGES SOUGHT NOT
ONLY IN THE BODY OF THE PLEADINGS, BUT ALSO
IN THE PRAYER IN ORDER TO BE ACCEPTED AND
ADMITTED FOR FILING. THE AMOUNT OF
DAMAGES SO SPECIFIED IN THE COMPLAINT SHALL
BE THE BASIS FOR ASSESSING THE AMOUNT OF THE
FILING FEES.
[20]
Sec. 1. Institution of criminal and civil actions. When a
criminal action is instituted, the civil action for recovery of
civil liability arising from the offense charged is impliedly
instituted with the criminal action, unless the offended party
expressly waives the civil action or reserves his right to
institute it separately.
[21]
People v. Escano, Jr., 193 SCRA 662, 665 (1991).