SECOND DIVISION

[ G.R. No. 175949, January 30, 2017 ]

UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES
DAVID C. CHUA AND LUTEN CHUA, PETITIONERS, VS.
UNITED COCONUT PLANTERS BANK, RESPONDENT.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari  seeking the reversal and
setting aside of the Decision[1] and Resolution[2] of the Court of Appeals (CA),  dated
September 21, 2006 and December 11, 2006, respectively, in CA-G.R. CV No.
81079. The assailed Decision affirmed the Decision of the Regional Trial
Court (RTC) of Makati City, Branch 135, in Civil Case No. 01-1332, while the
questioned Resolution denied petitioners' Motion for Reconsideration.

The pertinent factual and procedural antecedents of the case are as follows:

On December 18, 2000, herein petitioner corporation, United Alloy Philippines

Corporation (UNIALLOY)  applied for and was granted a credit accommodation by
herein respondent United Coconut Planters Bank (UCPB) in the amount of
PhP50,000,000.00, as evidenced by a Credit Agreement.[3] Part of UNIALLOY's
obligation under the Credit Agreement was secured by a Surety Agreement, [4] dated
December 18, 2000, executed by UNIALLOY Chairman, Jakob Van Der Sluis (Van
Der Sluis), UNIALLOY President, David Chua and his spouse, Luten Chua (Spouses
Chua),  and one Yang Kim Eng (Yang).  Six (6) Promissory Notes,[5] were later
executed by UNIALLOY in UCPB's favor, to wit:

1) #8111-00-20031-1, executed on December 18, 2000, in the amount of

US$110,000.00;
2) #8111-00-00110-6, executed on December 18, 2000, in the amount of
PhP6,000,000.00;
3) #8111-00-00112-2, executed on December 27, 2000, in the amount of
PhP3,900,000.00;
4) #8111-01-20005-6, executed on February 7, 2001, in the amount of
US$320,000.00;
5) #8111-01-00009-0, executed on February 26, 2001, in the amount of
PhP1,600,000.00;
6) #8111-01-00030-8, executed on April 30, 2001, in the amount of
PhP16,029,320.88.

In addition, as part of the consideration for the credit accommodation, UNIALLOY

and UCPB also entered into a "lease-purchase" contract wherein the former assured
the latter that it will purchase several real properties which UCPB co-owns with the
Development Bank of the Philippines.

Subsequently, UNIALLOY failed to pay its loan obligations. As a result, UCPB filed
against UNIALLOY, the spouses Chua, Yang and Van Der Sluis an action for Sum of
Money with Prayer for Preliminary Attachment[6] on August 27, 2001. The collection
case was filed with the Regional Trial Court of Makati City (RTC of Makati) and
docketed as Civil Case No. 01-1332. Consequently, UCPB also unilaterally rescinded
its lease-purchase contract with UNIALLOY.

On the other hand, on even date, UNIALLOY filed against UCPB, UCPB Vice-
President Robert Chua and Van Der Sluis a complaint for Annulment and/or
Reformation of Contract with Damages, with Prayer for a Writ of Preliminary
Injunction or Temporary Restraining Order.[7] Claiming that it holds office and
conducts its business operations in Tagoloan, Misamis Oriental, UNIALLOY filed the
case with the Regional Trial Court of Cagayan De Oro City (RTC of CDO) and was
docketed as Civil Case No. 2001-219. UNIALLOY contended that Van Der Sluis, in
cahoots with UCPB Vice-President Robert Chua, committed fraud, manipulation and
misrepresentation to obtain the subject loan for their own benefit. UNIALLOY
prayed, among others, that three (3) of the six (6) Promissory Notes it executed be
annulled or reformed or that it be released from liability thereon.

On September 12, 2001, UNIALLOY filed an Urgent Motion to Dismiss [8] the

collection case (Civil Case No. 01-1332) filed by UCPB on the ground of litis
pendentia  and forum shopping. UNIALLOY contended that its complaint for
annulment of contract (Civil Case No. 2001-219) and the collection case filed by
UCPB involves the same parties and causes of action. On October 31, 2001, the
RTC of Makati issued an Order[9] denying UNIALLOY's motion to dismiss.

In the meantime, UCPB and its co-defendants also filed a Motion to Dismiss
UNIALLOY's complaint for annulment of contract on the grounds of improper venue,
forum shopping, litis pendentia, and harassment or nuisance suit. On September
13, 2001, the RTC of CDO issued an Order[10] dismissing UNIALLOY's complaint for
annulment of contract. The dispositive portion of the Order reads, thus:
ACCORDINGLY, finding meritorious that the venue is improperly laid and the
complain[ant] engaged in forum-shopping and harassment of defendant Jakob Van
Der Sluis, this case is hereby DISMISSED rendering the prayer for issuance of a
writ of preliminary injunction moot and academic, and ordering plaintiff to turn over
possession of the subject premises of the properties in question at Barangay
Gracia, Tagoloan, Misamis Oriental to defendant United Coconut Planters Bank.

SO ORDERED.[11]

Thereafter, on motion, the RTC of CDO issued an Order of Execution, dated

September 14, 2001, directing UNIALLOY to tum over to UCPB the property subject
of their lease-purchase agreement.

UNIALLOY then filed a petition for certiorari and mandamus  with the CA

questioning the September 13 and September 14, 2001 Orders of the RTC of CDO.
UNIALLOY also prayed for the issuance of a writ of preliminary injunction. The case
was docketed as CA G.R. SP. No. 67079.

On February 18, 2002, the CA promulgated a Resolution [12] granting UNIALLOY's

prayer for the issuance of a writ of preliminary injunction. UCPB questioned the
above CA Resolution by filing a petition for certiorari with this Court, which was
docketed as G.R. No. 152238. On March 18, 2002, this Court issued a Resolution
which restrained the CA from enforcing its February 18, 2002 Resolution.

On January 28, 2005, this Court, rendered its Decision in G.R. No. 152238 denying
UCPB's petition for certiorari and affirming the CA Resolution granting the writ of
preliminary injunction.

Thereafter, on August 17, 2007, the CA promulgated a Decision dismissing

UNIALLOY's certiorari petition and affirming the September 13 and September 14,
2001 Orders of the RTC of CDO. UNIALLOY then filed a petition for review
on certiorari  challenging the above CA Decision. The case was docketed as G.R. No.
179257.

On November 23, 2015, this Court promulgated a Decision in G.R. No. 179257
denying UNIALLOY's petition. This Court held that the CA did not err in affirming the
dismissal of UNIALLOY's complaint on the grounds of improper venue, forum
shopping and for being a harassment suit. This Court also ruled that the August 17,
2007 Decision of the CA neither violated this Court's January 28, 2005 Decision in
G.R. No. 152238 nor contradicted the CA's February 18, 2002 Resolution granting
the preliminary injunction prayed for by UNIALLOY because the dismissal of
UNIALLOY's main action carried with it the dissolution of any ancillary relief
previously granted in the said case, such as the abovementioned preliminary
injunction. Subsequently, this Court's Decision in G.R. No. 179257 became final and
executory per Entry of Judgment dated January 20, 2016.

Meanwhile, on March 15, 2002, UNIALLOY filed with the RTC of Makati an omnibus
motion praying for the suspension of the proceedings of the collection case in the
said court on the ground of pendency of the certiorari petition it filed with this
Court.[13] However, the RTC denied UNIALLOY's motion in its Order[14] dated August
19, 2002.

Subsequently, on June 17, 2003, the RTC of Makati rendered Judgment in the
collection case in favor of UCPB. The dispositive portion of the RTC Decision reads,
thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of

plaintiff. Defendants are hereby ordered to pay plaintiff the following:

a. The sum of US DOLLARS: (US$435,494.44) with interest and penalty charges

from August 1, 2001 until fully paid.

b. The sum of P26,940,950.80 with interest and penalty charges from August 1,
2001 until fully paid.

c. Attorney's fees in the amount of P1,000,000.00.

d. Costs of suit.

SO ORDERED.[15]

UNIALLOY appealed the above RTC Decision with the CA.

On September 21, 2006, the CA rendered its assailed judgment denying

UNIALLOY's appeal and affirming the questioned RTC Decision.

Hence, the instant petition raising the following issues:

5.01 THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS, REVERSIBLE

ERROR, IF NOT GRAVE ABUSE OF DISCRETION, IN REFUSING TO RESOLVE AS TO
–

I
WHETHER OR NOT THE TRIAL COURT ERRED IN DENYING PETITIONERS' URGENT
MOTION TO DISMISS

II
WHETHER OR NOT THE TRIAL COURT ERRED IN DENYING PETITIONERS' OMNIBUS
MOTION TO SUSPEND PROCEEDINGS AND TO LIFT WRIT OF PRELIMINARY
ATTACHMENT

III
WHETHER OR NOT THE TRIAL COURT ERRED AND/OR COMMITTED GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN
RENDERING THE ASSAILED QUESTIONED DECISION WHEN THERE IS A PENDING
CIVIL ACTION BEFORE THE REGIONAL TRIAL COURT OF CAGAYAN DE ORO,
BRANCH 40, INVOLVING THE SAME PARTIES AND SUBJECT MATTER WHICH CASE,
IS NOW PENDING AND ASSAILED BY THE PLAINTIFF-APPELLEE VIA PETITION
BEFORE THE HONORABLE SUPREME COURT.

5.02 THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS, REVERSIBLE

ERROR IF NOT GRAVE ABUSE OF DISCRETION, IN DENYING PETITIONERS' URGENT
MOTION FOR RECONSIDERATION WITHOUT STATING CLEARLY AND DISTINCTLY
THE FACTUAL AND LEGAL BASIS THEREOF.[16]

Petitioners' basic argument is that the resolution of the instant petition basically
hinges on the outcome of the petition filed under G.R. No. 179257. Considering that
the promissory notes subject of G.R. No. 179257 are among the promissory notes
which are also involved in the present case, petitioner contends that a judgment by
this Court in G.R. No. 179257 that reverses the Decision of the RTC of Cagayan de
Oro City, which in effect would declare the nullity of the subject promissory notes,
may conflict with the Decision of this Court in the present petition, which involves
the collection of the sum being represented in the same promissory notes. Thus,
petitioner prays for the dismissal of the collection case (Civil Case No. 01-1332)
filed by UCPB or the suspension of proceedings therein pending resolution of its
petition in G.R. No. 179257.

However, as mentioned above, on November 23, 2015, the 2 nd Division of this

Court already came up with a Decision in G.R. No. 179257 which affirmed the RTC's
dismissal of UNIALLOY's complaint. Pertinent portions of the said Decision read as
follows:
CA CDO did not err in affirming the
dismissal of UniAiloy's Complaint on the
grounds of improper venue, forum shopping
and for being a harassment suit

The RTC was correct in dismissing UniAlloy's Complaint on the ground of improper
venue. In general, personal actions must be commenced and tried (i) where the
plaintiff or any of the principal plaintiffs resides, (ii) where the defendant or any of
the principal defendants resides, or (III) in the case of a resident defendant where
he may be found, at the election of the plaintiff. Nevertheless, the parties may
agree in writing to limit the venue of future actions between them to a specified
place.

In the case at bench, paragraph 18 of the LPA expressly provides that "[a]ny legal
action arising out of or in connection with this Agreement shall be
brought exclusively in the proper courts of Makati City, Metro Manila." Hence,
UniAlloy should have filed its complaint before the RTC of Makati City, and not with
the RTC of Cagayan de Oro City.

But to justify its choice of venue, UniAlloy insists that the subject matter of its
Complaint in Civil Case No. 2001-219 is not the LPA, but the fictitious loans that
purportedly matured on April 17, 2001.

UniAlloy's insistence lacks merit. Its Complaint unequivocally sought to declare "as
null and void the unilateral rescission made by defendant UCPB of its subsisting
Lease Purchase Agreement with [UniAlloy]." What UCPB unilaterally rescinded is the
LPA and without it there can be no unilateral rescission to speak of. Hence, the LPA
is the subject matter or at least one of the subject matters of the Complaint.
Moreover, and to paraphrase the aforecited paragraph 18 of the LPA, as long as the
controversy arises out of or is connected therewith, any legal action should be filed
exclusively before the proper courts of Makati City. Thus, even assuming that the
LPA is not the main subject matter, considering that what is being sought to be
annulled is an act connected and inseparably related thereto, the Complaint should
have been filed before the proper courts in Makati City.

With regard forum-shopping, our review of the records of this case revealed that
UniAlloy did not disclose in the Verification/Certification of the Complaint the
pendency of Civil Case No. 2001-156 entitled "Ernesto Paraiso and United Alloy
Philippines Corporation v. Jakob Van Der Sluis."  The trial court took judicial notice
of its pendency as said case is also assigned and pending before it. Thus, we adopt
the following unrebutted finding of the RTC:
These two civil cases have identical causes of action or issues against defendant
Jakob Van Der Sluis for having misrepresented to plaintiff and its stockholders that
he can extend financial assistance in running the operation of the corporation, such
that on April 6, 2001 plaintiff adopted a Stockholders Resolution making defendant
Jakob chairman of the corporation for having the financial capability to provide the
financial needs of plaintiff and willing to finance the operational needs thereof; that
a Memorandum of Agreement was subsequently entered between the parties
whereby defendant Jakob obligated to provide sufficient financial loan to plaintiff to
make it profitable; that Jakob maliciously and willfiilly reneged [on] his financial
commitments to plaintiff prompting the stockholders to call his attention and
warned him of avoiding the said agreement; that defendant who had then complete
control of plaintiffs bank account with defendant UCPB, through fraudulent
machinations and manipulations, was able to maliciously convince David C. Chua to
pre-sign several checks; that defendant Jakob facilitated several huge loans
purportedly obtained by plaintiff which defendant himself could not even account
and did not even pay the debts of the corporation but instead abused and
maliciously manipulated plaintiffs account.

Forum-shopping indeed exists in this case, for both actions involve the same
transactions and same essential facts and circumstances as well as identical causes
of action, subject matter and issues, x x x

As mentioned above, this Court's Decision m the above case has become final and
executory on January 20, 2016.

Thus, contrary to petitioners' position, there is no longer any possibility that the
Decision of the RTC of CDO may conflict with the disposition of the present case
because UNIALLOY's complaint for annulment of contract has already been
dismissed with finality. This Court will, thus, proceed to resolve the merits of the
instant case.

The fundamental issue here is whether or not herein petitioners, together with their
co-defendants Van Der Sluis and Yang, are liable to pay respondent the amounts
awarded by the RTC of Makati City in its June 17, 2003 Decision. [17]

The Court rules in the affirmative.

As ruled upon by both the RTC and the CA, UNIALLOY failed to pay its obligations
under the above promissory notes and that herein petitioner Spouses Chua,
together with their co-defendants Van Der Sluis and Yang freely executed a Surety
Agreement whereby they bound themselves jointly and severally with UNIALLOY, to
pay the latter's loan obligations with UCPB. Pertinent portions of the said Surety
Agreement are reproduced hereunder, to wit:

xxxx

ARTICLE I

LIABILITIES OF SURETIES

Section 1.01. The SURETIES, jointly and severally with the PRINCIPAL, hereby

unconditionally and irrevocably guarantee the full and complete payment when due,
whether at stated maturity, by acceleration or otherwise, of all sums payable by
the PRINCIPAL under the Credit Agreement, the Note/s and other related
documents or instruments referred to therein (hereinafter referred to collectively as
the "Loan Documents") the terms and conditions of which are hereby deemed
incorporated by reference.

The liability of the SURETIES shall not be limited to the aggregate principal amount

of FIFTY MILLION PESOS (P50,000,000.00), Philippine Currency, or its
foreign currency equivalent, but shall include such interest, fees, penalties and
other charges due thereon, as well as any and all renewals, extensions,
restructurings or conversions of the Accommodation or any portion thereof, as
may appear in the books and records of account of the BANK.

Such extension/s, renewal/s, restructuring/s, or conversion/s of

the Accommodation or any portion thereof, including any increase in the principal
amount thereof, or the imposable interest rates and other bank charges, shall be
binding upon the SURETIES under the terms of this SURETY
AGREEMENT, without need of any further notice to or consent or conformity of
the SURETIES, all of which are hereby expressly waived.

Section 1.02. This SURETY AGREEMENT is a guarantee of payment and not

merely of collection and is intended to be a perfect and continuing indemnity in
favor of the BANK for the amounts and to the extent stated above. For this
purpose, the SURETIES hereby commit that for as long as this SURETY
AGREEMENT is in effect, the SURETIES shall not sell, lease, transfer, assign or
encumber any of its present and future properties without the written consent of
the BANK, which consent will not be unreasonably withheld.

The liability of the SURETIES shall be absolute, irrevocable, unconditional, direct,

immediate and not contingent upon the pursuit by the BANK of whatever remedies
it may have against the PRINCIPAL or the other sureties for the Accommodation,
and shall be performed by the SURETIES strictly in accordance with the terms
hereof and under any and all circumstances, including the existence of any claim,
set-off, defense or other rights which the SURETIES or any person or entity may
have at any time against the BANK for any reason whatsoever, whether or not
related to this SURETY AGREEMENT, the Loan Documents or under such other
documents executed in relation thereto, or contemplated hereunder.

ARTICLE II

TERM

Section 2.01. This SURETY AGREEMENT shall remain in full force and effect until
payment in full of all amount for which the PRINCIPAL is or may be liable as set
forth in ARTICLE I hereof, regardless of the absence of any further or other assent
or conformity of, or notice to the SURETIES, or any circumstance, or provision of
law which might otherwise constitute a defense or discharge of the SURETIES, all
of which are hereby expressly waived.

ARTICLE III

DEFAULT

Section 3.01. If the BANK shall declare the obligation of the PRINCIPAL to be due

and payable because of the happening of any of the event of default as defined in
the Credit Agreement, the SURETIES, upon receipt of written notice from the
BANK, shall forthwith pay to the BANK the full amount of the said obligations,
without need of demand, protest or notice of any kind, other than the notice
provided herein, all of which are likewise expressly waived by the SURETIES.

In this connection, the BANK is hereby given full power and authority to apply
whatever moneys or things of value belonging to the SURETIES which may be in
the possession or control of the BANK in payment of the obligations mentioned
above.

ARTICLE IV

BINDING EFFECT

Section 4.01. This SURETY AGREEMENT shall except upon the other SURETIES, if

any whose liability(ies) is/are extinguished by way of compromise or otherwise be
binding upon the SURETIES, their heirs and successors in interest and shall inure
to the benefit of and be enforceable by the BANK, its assigns and successors in
interest. For this purpose, the SURETIES have agreed, as they hereby agree, that
an extinguishment of liability(ies) of any of the SURETIES shall not be an obstacle
to the BANK from demanding payment from the other SURETIES, if any, so long
as the Accommodation has not been fully collected.

x x x x[18]

Petitioners do not deny their liability under the abovequoted Surety Agreement.

As correctly held by both the RTC and the CA, Article 1159 of the Civil Code
expressly provides that "[o]bligations arising from contracts have the force of law
between the contracting parties and should be complied with in good faith." The
RTC as well as the CA found nothing which would justify or excuse petitioners from
non-compliance with their obligations under the contract they have entered into.
Thus, it becomes apparent that petitioners are merely attempting to evade or, at
least, delay the inevitable performance of their obligation to pay under the Surety
Agreement and the subject promissory notes which were executed in respondent's
favor.

The Court notes, however, that the interest rates imposed on the subject
promissory notes were made subject to review and adjustment at the sole
discretion and under the exclusive will of UCPB. Moreover, aside from the
Consolidated Statement of Account attached to the demand letters addressed to
petitioner spouses Chua and their co-defendants, [19] no other competent evidence
was shown to prove the total amount of interest due on the above promissory
notes. In fact, based on the attached Consolidated Statement of Account, UCPB has
already imposed a 24% interest rate on the total amount due on respondents' peso
obligation for a short period of six months. Settled is the rule that any contract
which appears to be heavily weighed in favor of one of the parties so as to lead to
an unconscionable result is void.[19] Any stipulation regarding the validity or
compliance of the contract which is left solely to the will of one of the parties, is
likewise, invalid.[20]

Moreover, courts have the authority to strike down or to modify provisions in

promissory notes that grant the lenders unrestrained power to increase interest
rates, penalties and other charges at the latter's sole discretion and without giving
prior notice to and securing the consent of the borrowers. [21] This unilateral
authority is anathema to the mutuality of contracts and enable lenders to take
undue advantage of borrowers.[22] Although the Usury Law has been effectively
repealed, courts may still reduce iniquitous or unconscionable rates charged for the
use of money.[23] Furthermore, excessive interests, penalties and other charges not
revealed in disclosure statements issued by banks, even if stipulated in the
promissory notes, cannot be given effect under the Truth in Lending Act. [24]

The Court, thus, finds it proper to modify the interest rates imposed on
respondents' obligation. Pursuant to the ruling in Nacar v. Gallery Frames, et. al.,
[25]
 the sums of US$435,494.44 and PhP26,940,950.80 due to UCPB shall earn
interest at the rate of 12% per annum from the date of default, on August, 1, 2001,
until June 30, 2013 and thereafter, at the rate of 6% per annum, from July 1, 2013
until finality of this Decision. The total amount owing to UCPB as set forth in this
Decision shall further earn legal interest at the rate of 6% per annum from its
finality until full payment thereof, this interim period being deemed to be by then
an equivalent to a forbearance of credit.

Finally, pursuant to the parties' Credit Agreement as well as the subject Promissory
Notes, respondents are also liable to pay a penalty charge at the rate of 1% per
month or 12% per annum.

WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the

Court of Appeals, dated September 21, 2006 and December 11, 2006, respectively,
in CA-G.R. CV No. 81079, are AFFIRMED with MODIFICATION by directing
petitioners and their co-defendants to pay respondent UCPB the following:

(1) the principal amounts of US$435,494.44 and PhP26,940,950.80;

(2) legal interest of 12% per annum on the above principal amounts reckoned from
August 1, 2001 until June 30, 2013;

(3) penalty charge of 12% per annum from August 1, 2001 until fully paid; and

(4) an interest of 6% from July 1, 2013 until fully paid.

SO ORDERED.

SECOND DIVISION
 [ G.R. No. 181986, December 04, 2013 ]
ELIZALDE S. CO, PETITIONER, VS. LUDOLFO P. MUÑOZ, JR.,
RESPONDENT.

DECISION

BRION, J.:

Before us is a petition for review on certiorari[1] seeking to set aside the

decision[2] dated January 31, 2007 and resolution[3] dated March 3, 2008 of the
Court of Appeals (CA) in CA-G.R. CR No. 29355. The CA rulings reversed and set
aside the decision[4] dated February 24, 2004 of the Regional Trial Court (RTC) of
Legaspi City, Branch 5, in Criminal Case Nos. 9704, 9705 and 9737, and acquitted
respondent Ludolfo P. Muñoz, Jr. (Muñoz) of three counts of libel.

Factual Antecedents

The case springs from the statements made by the respondent against the
petitioner, Elizalde S. Co (Co), in several interviews with radio stations in Legaspi
City. Muñoz, a contractor, was charged and arrested for perjury. Suspecting that
Co, a wealthy businessman, was behind the filing of the suit, Muñoz made the
following statements:
(a) Co influenced the Office of the City Prosecutor of Legaspi City to expedite the issuance of
warrant of arrest against Muñoz in connection with the perjury case;
(b) Co manipulated the results of the government bidding involving the Masarawag-San
Francisco dredging project, and;
(c) Co received P2,000,000.00 from Muñoz on the condition that Co will sub-contract the
project to Muñoz, which condition Co did not comply with.[5]
Consequently, Co filed his complaint-affidavit which led to the filing of three
criminal informations for libel before the RTC.[6] Notably, Co did not waive, institute
or reserve his right to file a separate civil action arising from Muñoz’s libelous
remarks against him.[7]

In his defense,[8] Muñoz countered that he revealed the anomalous government

bidding as a call of public duty. In fact, he filed cases against Co before the
Ombudsman involving the anomalous dredging project. Although the Ombudsman
dismissed the cases, Muñoz claimed that the dismissal did not disprove the truth of
his statements. He further argued that Co is a public figure considering his
participation in government projects and his prominence in the business circles. He
also emphasized that the imputations dealt with matters of public interest and are,
thus, privileged. Applying the rules on privileged communication to libel
suits, the prosecution has the burden of proving the existence of actual
malice, which, Muñoz claimed, it failed to do.
In its decision, the RTC found Muñoz guilty of three counts of libel. The RTC ruled
that the prosecution established the elements of libel. In contrast, Muñoz failed to
show that the imputations were true and published with good motives and for
justifiable ends, as required in Article 361 of the Revised Penal Code (RPC).[9] In
light of the Ombudsman’s dismissal of Muñoz’ charges against Co, the RTC also
held that Muñoz’ statements were baseless accusations which are not protected as
privileged communication.[10]

In addition to imprisonment, Muñoz was ordered to pay P5,000,000.00 for each

count of libel as moral damages, P1,200,000.00 for expenses paid for legal
services, and P297,699.00 for litigation expense. [11] Muñoz appealed his conviction
with the CA.

The CA Ruling

The CA held that the subject matter of the interviews was impressed with public
interest and Muñoz’ statements were protected as privileged communication under
the first paragraph of Article 354 of the RPC. [12] It also declared that Co was a public
figure based on the RTC’s findings that he was a “well-known, highly-regarded and
recognized in business circles.”[13] As a public figure, Co is subject to criticisms on
his acts that are imbued with public interest.[14] Hence, the CA reversed the RTC
decision and acquitted Muñoz of the libel charges due to the prosecution’s failure
to establish the existence of actual malice.

The Petitioner’s Arguments

In the present petition, Co acknowledges that he may no longer appeal the criminal
aspect of the libel suits because that would violate Muñoz’ right against double
jeopardy. Hence, he claims damages only on the basis of Section 2, Rule 111 of
the Rules of Court (ROC), which states that the extinction of the penal action
does not carry with it the extinction of the civil action. He avers that this principle
applies in general whether the civil action is instituted with or separately from the
criminal action.[15] He also claims that the civil liability of an accused may be
appealed in case of acquittal.[16]

Co further makes the following submissions:

First, the CA erred when it disregarded the presumption of malice under Article
354[17] of the RPC. To overcome this presumption, Muñoz should have presented
evidence on good or justifiable motive for his statements.[18] On the contrary, the
context of Muñoz’s radio interviews reflects his evident motive to injure Co’s
reputation instead of a sincere call of public duty.[19]

Second, the CA erred in declaring Co as a public figure based on the RTC findings
that he is known in his community. He claims this as a relatively limited community
comprising of his business associates.[20]

The Respondent’s Arguments

Muñoz argues that Co misunderstood Section 2, Rule 111 of the ROC because,
as its title suggests, the provision presupposes the filing of a civil
action separately from the criminal action. Thus, when there is no reservation of the
right to separately institute the civil action arising from the offense, the extinction
of the criminal action extinguishes the civil action. Since Co did not reserve his
right to separately institute a civil action arising from the offense, the
dismissal of the criminal action bars him from filing the present petition to
enforce the civil liability.[21]

Muñoz further posits that Co is not entitled to recover damages because there is no
wrongful act to speak of. Citing De la Rosa, et al. v. Maristela,[22] he argues that if
there is no libel due to the privileged character of the communication and actual
malice is not proved, there should be no award of moral damages.[23]

Lastly, Muñoz avers that Co is indirectly challenging the factual and legal issues
which the CA has already settled in acquitting him. Muñoz explains that this Court
may no longer overturn the CA’s findings as the doctrine of double jeopardy has set
in.[24]

The Issues

The parties’ arguments, properly joined, present to us the following issues:

1. whether a private party may appeal the judgment of acquittal insofar as he

seeks to enforce the accused’s civil liability; and

2. whether the respondent is liable for damages arising from the libelous
remarks despite his acquittal.

The Court's Ruling

We do not find the petition meritorious.

The private party may appeal the judgment of acquittal insofar as he seeks
to enforce the accused’s civil liability.

The parties have conflicting interpretations of the last paragraph of Section 2, Rule
111 of the ROC, which states:
The extinction of the penal action does not carry with it extinction of the
civil action. However, the civil action based on delict shall be deemed extinguished
if there is a finding in a final judgment in the criminal action that the act or
omission from which the civil liability may arise did not exist. (Emphasis ours)
Muñoz claims that the last paragraph of Section 2, Rule 111 of the ROC applies only
if the civil liability ex delicto is separately instituted or when the right to file it
separately was properly reserved. In contrast, Co claims that Muñoz’ acquittal of
the crime of libel did not extinguish the civil aspect of the case because Muñoz’
utterance of the libelous remarks remains undisputed.
We reject Muñoz’ claim. The last paragraph of Section 2, Rule 111 of the ROC
applies to civil actions to claim civil liability arising from the offense charged,
regardless if the action is instituted with or filed separately from the criminal
action. Undoubtedly, Section 2, Rule 111 of the ROC governs situations when the
offended party opts to institute the civil action separately from the criminal action;
hence, its title “When separate civil action is suspended.” Despite this wording, the
last paragraph, by its terms, governs all claims for civil liability ex delicto. This is
based on Article 100 of the RPC which states that that “[e]very person criminally
liable for a felony is also civilly liable.” Each criminal act gives rise to two liabilities:
one criminal and one civil.

Reflecting this policy, our procedural rules provide for two modes by which civil
liability ex delicto may be enforced: (1) through a civil action that is deemed
impliedly instituted in the criminal action;[25] (2) through a civil action that is filed
separately, either before the criminal action or after, upon reservation of the right
to file it separately in the criminal action.[26] The offended party may also choose to
waive the civil action.[27] This dual mode of enforcing civil liability ex delicto does
not affect its nature, as may be apparent from a reading of the second paragraph of
Section 2, Rule 120 of the ROC, which states:
Section 2. Contents of the judgment. – x x x

In case the judgment is of acquittal, it shall state whether the evidence of the
prosecution absolutely failed to prove the guilt of the accused or merely failed to
prove his guilt beyond reasonable doubt. In either case, the judgment shall
determine if the act or omission from which the civil liability might arise
did not exist. (Emphasis ours)
If, as Muñoz suggests, the extinction of the penal action carries with it the
extinction of the civil action that was instituted with the criminal action, then
Section 2, Rule 120 of the ROC becomes an irrelevant provision. There would be no
need for the judgment of the acquittal to determine whether “the act or omission
from which the civil liability may arise did not exist.” The Rules precisely require the
judgment to declare if there remains a basis to hold the accused civilly liable
despite acquittal so that the offended party may avail of the proper remedies to
enforce his claim for civil liability ex delicto.

In Ching v. Nicdao and CA,[28] the Court ruled that an appeal is the proper remedy
that a party – whether the accused or the offended party – may avail with respect
to the judgment:
If the accused is acquitted on reasonable doubt but the court renders judgment on
the civil aspect of the criminal case, the prosecution cannot appeal from the
judgment of acquittal as it would place the accused in double jeopardy. However,
the aggrieved party, the offended party or the accused or both may appeal
from the judgment on the civil aspect of the case within the period
therefor.

From the foregoing, petitioner Ching correctly argued that he, as the
offended party, may appeal the civil aspect of the case notwithstanding
respondent Nicdao’s acquittal by the CA. The civil action was impliedly
instituted with the criminal action since he did not reserve his right to
institute it separately nor did he institute the civil action prior to the
criminal action. (Emphasis ours)
Moreover, an appeal is favored over the institution of a separate civil action
because the latter would only add to our clogged dockets. [29]

To reiterate, the extinction of the penal action does not necessarily carry with it the
extinction of the civil action, whether the latter is instituted with or separately from
the criminal action. The offended party may still claim civil liability ex delicto if
there is a finding in the final judgment in the criminal action that the act or
omission from which the liability may arise exists. Jurisprudence has enumerated
three instances when, notwithstanding the accused’s acquittal, the offended party
may still claim civil liability ex delicto: (a) if the acquittal is based on reasonable
doubt as only preponderance of evidence is required; (b) if the court declared that
the liability of the accused is only civil; and (c) if the civil liability of the accused
does not arise from or is not based upon the crime of which the accused is
acquitted. We thus now proceed to determine if Co’s claim falls under any of these
three situations.

The respondent is not civilly liable because no libel was committed.

The CA has acquitted Muñoz of libel because his statement is a privileged

communication. In libel, the existence of malice is essential as it is an element of
the crime.[30] The law presumes that every imputation is malicious; [31] this is
referred to as malice in law. The presumption relieves the prosecution of the
burden of proving that the imputations were made with malice. This presumption is
rebutted if the accused proved that the imputation is true and published with good
intention and justifiable motive.[32]

There are few circumstances wherein malice in law is inapplicable. For instance,

Article 354 of the RPC further states that malice is not presumed when:
(1) a private communication made by any person to another in the performance of any legal,
moral or social duty;[33] and
(2) a fair and true report, made in good faith, without any comments or remarks, of any judicial,
legislative or other official proceedings which are not of confidential nature, or of any
statement, report or speech delivered in said proceedings, or of any other act performed by
public officers in the exercise of their functions.[34]
Jurisprudence supplements the enumeration in Article 354 of the RPC. In Borjal v.
CA,[35] we held that in view of the constitutional right on the freedoms of speech
and of the press, fair commentaries on matters of public interest are privileged.
In Guingguing v. CA,[36] we ruled that the remarks directed against a public
figure are likewise privileged. In order to justify a conviction in libel involving
privileged communication, the prosecution must establish that the libelous
statements were made or published with actual malice or malice in fact – the
knowledge that the statement is false or with reckless disregard as to whether or
not it was true.[37] In other words, our rulings in Borjal and Guingguing show that
privileged communication has the effect of destroying the presumption of malice
or malice in law and consequently requiring the prosecution to prove the existence
of malice in fact.

In the present case, the CA declared that the libelous remarks are privileged. The
legal conclusion was arrived at from the fact that Co is a public figure, the subject
matter of the libelous remarks was of public interest, and the context of Muñoz’
statements were fair comments. Consequently, malice is no longer presumed and
the prosecution has the burden of proving that Muñoz acted with malice in fact. The
CA found that the prosecution failed in this respect.

Co assails the CA’s ruling by raising arguments that essentially require a review of
the CA’s factual and legal findings. However, the Court cannot, through the present
petition, review these findings without going against the requirements of Rule 45
with respect to factual matters, and without violating Muñoz’ right against double
jeopardy given that the acquittal is essentially anchored on a question of fact.

In light of the privileged nature of Muñoz’ statements and the failure of the
prosecution to prove malice in fact, there was no libel that was committed by
Muñoz. Without the crime, no civil liability ex delicto may be claimed by Co that can
be pursued in the present petition. There is no act from which civil liability may
arise that exists.

WHEREFORE, premises considered, we DENY the petition. The Decision of the

Court of Appeals (CA) in CA-G.R. CR No. 29355 dated January 31, 2007
is AFFIRMED.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 227704, April 10, 2019 ]
PEOPLE OF THE PHILIPPINES, PLAINTIFF-APPELLEE, VS.
SUSAN SAYO Y REYES AND ALFREDO ROXAS Y SAGON,
ACCUSED-APPELLANTS.

DECISION

CAGUIOA, J:

Subject of this appeal[1] is the Decision[2] of June 26, 2015 of the Court of Appeals
(CA) in CA-G.R. CR-H.C. No. 04914 which affirmed the Decision [3] dated September
23, 2010 of the Regional Trial Court (RTC), Pasig City, Branch 261, convicting
accused-appellants Susan Sayo y Reyes (Sayo) and Alfredo Roxas y Sagon (Roxas)
(collectively referred to as accused-appellants) for violation of Republic Act No. (RA)
9208 or the Anti-Trafficking in Persons Act of 2003.[4]

Facts

On November 16, 2005, accused-appellants were indicted under the following

Information:[5]

That on November 15, 2005, in Pasig City, and within the jurisdiction of the
Honorable Court, accused Susan Sayo, willfully and unlawfully, did then and there,
recruit and transport minors [AAA[6]], 15 years old, [BBB[7]] 16 years old, together
with [CCC[8]], by taking advantage of their vulnerability, for the purpose of
prostitution and sexual exploitation; while accused Alfredo Roxas, in conspiracy
with accused Sayo, did then and there, willfully, and unlawfully, own, manage and
operate a room in his apartment in Pasig City used as a prostitution den, receive
and harbor said trafficked persons, also by taking advantage of their vulnerability
and for the purpose of prostitution and sexual exploitation.

Contrary to law.[9]

Accused-appellants pleaded not guilty upon arraignment.

The prosecution's and defense's contrasting versions of the events, as summarized

by theCA, are as follows:

The Prosecution's Evidence

The combined testimonies of AAA, BBB, and CCC known as the "plaza girls"
disclosed that several months prior to November 15, 2005, these "plaza girls" have
been under the control and supervision of SAYO as commercial sex workers. AAA
testified in open court that she was only fifteen (15) years old at the time she
began working for SAYO in December 2004. The Certificate of Live Birth issued by
the National Statistics Office showed that she was born on May 2, 1990. Same is
true with BBB who testified that she was born on November 11, 1989 and thus,
indeed, a minor during their rescue on November 15, 2005.

The "plaza girls" were introduced to SAYO on different occasions in 2004 by other
"plaza girls." SAYO then started to act as a pimp providing them with male
customers for a certain percentage. The "plaza girls" give her a flat rate of Fifty
Pesos (P50.00) for every male customer who will pay them Three Hundred Pesos
(P300.00) and Two Hundred Pesos (P200.00) for every Seven Hundred Pesos
(P700.00) paying customer.

SAYO would regularly furnish AAA, BBB and CCC with male customers on the
average five (5) customers per week. Whenever they have customers, SAYO would
bring them either to a motel or to ALFREDO ROXAS's house who provides them a
room for One Hundred Pesos (P100.00) for thirty (30) minutes use of the room.
ROXAS also provides condom for the male customers at Thirty Pesos (P30.00).

On November 3, 2005, the Criminal Investigation and Detection Group-Women and

Children Complaint Division (CIDG-WCCD) received a letter from the International
Justice Mission (IJM), an International Non Government Human Rights
Organization, requesting for police assistance on the possible rescue of three (3)
minors exploited for prostitution in Pasig City.

Acting on said request, PO2 Leonardo So conducted on November 8, 2005 further

surveillance to confirm the veracity of the report. It was verified and confirmed that
there were rampant offerings of minor prostitutes at the Pasig Plaza, specifically by
a pimp named SUSAN SAYO. Hence, on November 15, 2005, the CIDG-WCCD
headed by Superintendent Sotera P. Macatangay conceptualized an entrapment
operation called "Oplan Sagip Angel." A team was organized composed of WCCD
operatives, representatives from IJM and DSWD-NCR for the rescue operation.

During the briefing, PO3 Anthony Ong, PO2 Leonardo So and an agent from IJM
were designated to act as poseur-costumers. Then, one (1) five hundred peso bill
and fifteen (15) one hundred peso bills amounting to Two Thousand Pesos
(P2,000.00) were prepared and sent to PNP-Crime Laboratory for Ultra Violet
Powder dusting. The peso bills would be utilized during the entrapment operation as
payments to the owner of the apartment/room, for the pimp and for the services of
the "plaza girls".

The "Oplan Sagip Angel" operatives proceeded to the target area in Pasig City. The
three men who were tasked to pretend as customers stayed in front of the church
at the Pasig Plaza. They were approached by SAYO who bluntly asked if they
wanted women and she further inquired if they wanted 15 year-old girls. The three
customers agreed to take the 15 year-old girls offered by SAYO for Three Hundred
Pesos (P300.00) each. Thereafter, SAYO informed the three customers about a
room in Baltazar Street which they could rent for P100.00 for each couple. The
customers agreed on the price.

Meanwhile, SAYO informed the "plaza girls" on November 15, 2005 that they have
customers for that night. AAA, BBB and CCC met SAYO at the Pasig Plaza. There,
she introduced them to the three men. The three male customers were actually the
agents of the ClOG-WCCD and IJM. After the negotiation was concluded, all of them
proceeded to the house of ALFREDO ROXAS at No. 638 Baltazar Street, Brgy. Sto.
Tomas, Pasig City on board a tricycle. Upon reaching the house, they were greeted
by "FRED" ROXAS who openly discussed with SAYO in front of the customers and
the ["]plaza girls["] regarding the transaction for the night. ROXAS told that the
room rate for each couple is P100.00. AAA saw the customers gave to ROXAS the
Three Hundred Pesos (P300.00).

The undercover agents, SAYO and ROXAS talked about the payment for the girls'
services outside the house. When the Nine Hundred Pesos (P900.00) was handed
by one of the customers to SAYO to cover the payment for the services of AAA, BBB
and CCC, the CIDG-WCCO agents announced that it was a raid. At that point, PO3
Anthony Ong executed the pre-arranged signal, in reaction to which, the back-up
operatives who were deployed in different strategic locations rushed towards them
and arrested SAYO and ROXAS.

Recovered from the possession of ALFREDO ROXAS was the marked money
amounting to Three Hundred Pesos (P300.00), the payment for the use of the room
for sexual activities while the Nine Hundred Pesos (P900.00) intended for the sexual
services to be provided by the "plaza girls" was recovered from SUSAN SAYO.
Thereafter, the two [accused-]appellants and the "plaza girls" were brought to the
headquarters of CIDG-WCCD in Camp Crame Quezon City for investigation,
documentation and medico-legal examination. After staying there for a day, the
"plaza girls" were brought under the care of the Department of Social Welfare and
Development (DSWD) in Marilac Hills, Alabang, Muntinlupa City.

The [Defense's] Evidence

xxxx

SAYO testified on direct examination that on November 15, 2005, between 9:00 to
9:30 o'clock in the evening, while barking for jeepney passengers in front of the
Pasig Cathedral Church, she saw CCC, AAA and BBB together with the three male
persons. This group of men and CCC approached her and arrested her. CCC asked
her to accompany them to ALFREDO's house in exchange for One Hundred Pesos (Pl
00.00). SAYO agreed and they boarded a tricycle heading towards Sto. Tomas,
Pasig City. Thereat, SAYO was surprised when a man suddenly grabbed her arm
when she alighted from the tricycle. She was taken to a dark place and hauled
immediately to a vehicle and brought to jail where she met for the first time her co
accused ROXAS.

xxxx

ALFREDO ROXAS, on the other hand, claimed that on the night of November 15,
2005, he was sleeping in his house in Baltazar Street, Sto. Tomas. He was
awakened by the barks of the dogs. He went outside to see for himself what was
that commotion all about. He saw CCC and Susan [Sayo] along with the men[,]
AAA and BBB. One of the men asked him if they could rent his room since it was
the birthday of [CCC's] compadre, but he refused. After rejecting their request for
several times, the male persons forced him to accept the money which turned out
to be dusted with ultra violet powder. He admitted having known CCC, AAA and
BBB for about 6 to 7 months prior to the incident. As for SAYO, he just only met her
on that day of November 15, 2005 in front of the church in the Pasig Plaza. When
asked how he came to know CCC, AAA and BBB, he said that they were just
introduced to him by someone in their place.[10]

Ruling of the RTC

The RTC promulgated its Decision[11] on September 23, 2010.

The RTC first discussed the procedural infirmity in the Information as it contained
more than one offense. Under Section 13, Rule 110 of the Revised Rules of Criminal
Procedure, the Information must charge only one offense except when the law
prescribes a single punishment for various offenses.

Sayo was charged with recruiting and transporting AAA and BBB (minors), as well
as CCC (of legal age) for prostitution. In the same Information, Roxas was
separately accused of managing and operating a room in his apartment to be used
for prostitution. Thus, the Information was duplicitous. Be that as it may, the RTC
held that the accused-appellants had waived any objection to the Information as
they failed to object prior to their arraignment. Citing Dimayacyac v. Court of
Appeals,[12] the RTC held that with the waiver, the accused may be charged and
convicted of as many offenses as those charged in the Information and proved
during trial.[13]

On the substantive issue, the RTC held that the prosecution was able to prove the
guilt of accused-appellants beyond reasonable doubt. The testimonies of AAA, BBB,
and. CCC were clear, categorical, and corroborative of each other's testimony. The
testimony of the arresting officer, PO2 Anthony Ong (PO2 Ong), was also
categorical and straightforward regarding the investigation, pre-surveillance,
entrapment procedure, and arrest of the accused-appellants. [14]

On the other hand, both accused-appellants merely interposed the defenses of

denial and alibi which are both inherently weak defenses. For denial to prosper,
there must be strong evidence that the accused was not capable of committing the
crime. For alibi, the accused must prove that he was at some other place which
made it physically impossible for him to be at the locus criminis at the time of
commission. Contrary to the accused's defenses, the RTC held that in fact, both the
accused in this case were arrested as a result of an entrapment operations. [15]

The dispositive portion of the RTC Decision held:

WHEREFORE, in light of all the foregoing considerations, accused SUSAN SAYO y

REYES is hereby found. GUILTY beyond reasonable doubt of Qualified Trafficking in
Persons under Section 4 (a,e) and Section 6 (a) of R.A. 9208 insofar as minors AAA
and BBB, and is sentenced to suffer life imprisonment and to pay a fine of Two
Million Pesos ([P]2,000,000.00) insofar as minors AAA and BBB are concerned.

Accused ALFREDO ROXAS y SAGON is likewise found GUILTY beyond reasonable

doubt of Qualified Trafficking in Persons under Section 5 (a) and Section 6 (a) of
R.A. 9208, insofar as minors AAA and BBB are concerned, and is sentenced to
suffer life imprisonment and to pay a fine of Two Million Pesos ([P]2,000,000.00).

As for complainant [CCC] who was no longer a minor at the time of commission of
the offense, accused Susan Sayo is found GUILTY beyond reasonable doubt of the
offense of trafficking in persons under Section 4 (a, e) of R.A. 9208 and is
sentenced to suffer imprisonment of twenty (20) years and to pay a fine of One
million pesos (P1,000,000.00). Accused Alfredo Roxas y Sagon is likewise found
GUILTY beyond reasonable doubt of the offense of trafficking in persons under
Section S(a) of R.A. 9208 and is sentenced to suffer the penalty of imprisonment of
fifteen (15) years and to pay a fine of Five hundred thousand pesos (P500,000.00).

SO ORDERED.[16]

The CA Decision

On appeal, the CA affirmed the RTC Decision with modification, by adding an award
of moral and exemplary damages, but only to AAA and BBB. There was no
discussion on the omission of CCC in the award of damages. [17]

The dispositive portion of the CA Decision stated:

WHEREFORE, premises considered, the assailed Decision of the trial court dated

September 23, 2010 is AFFIRMED with MODIFICATIONS. As modified:

(1) SUSAN SAYO Y REYES is hereby found GUILTY beyond reasonable doubt of

violating Section 4 (a) (e) qualified by Section 6 (a) of Republic Act No. 9208
insofar as minors AAA and BBB are concerned and is sentenced to suffer the
penalty of LIFE  IMPRISONMENT without eligibility for parole and to pay a fine of
Two Million Pesos (P2,000,000.00). In addition, she is ordered to pay each AAA and
BBB P500,000.00 as moral damages; and P100,000.00 as exemplary damages.

(2) ALFREDO ROXAS Y SAGON is likewise found GUILTY beyond reasonable

doubt of violating Section 5 (a) qualified by Section 6 (a) of R.A. No. 9208, insofar
as minors AAA and BBB are concerned, and is sentenced to suffer the penalty
of LIFE IMPRISONMENT without eligibility for parole and to pay a fine of Two
Million Pesos (P2,000,000.00). In addition, he is ordered to pay each AAA and BBB
P500,000.00 as moral damages; and P100,000.00 as exemplary damages.

(3) As for the complainant CCC, who was no longer a minor at the time of the
commission of the offense, SUSAN SAYO Y REYES is found GUILTY beyond
reasonable doubt of violating Section 4 (a) (e) of R.A. 9208 and is sentenced to
suffer imprisonment of Twenty (20) years and to pay a fine of One Million Pesos
(P1,000,000.00). ALFREDO ROXAS Y SAGON is likewise found GUILTY beyond
reasonable doubt of violating Section 5 (a) of R.A. 9208 and is sentenced to suffer
the penalty of imprisonment of Fifteen (15) years and to pay a fine of Five Hundred
Thousand Pesos (P500,000.00).

SO ORDERED.[18]

Accused-appellants filed a Notice of Appeal[19] on July 30, 2015, which was given
due course by the CA in its Resolution[20] dated August 20, 2015. Both plaintiff-
appellee and accused-appellants manifested before the Court that they would not
be filing supplemental briefs.[21]

In a Certification[22] issued on May 12, 2017, the Correctional Institution for

Women, Bureau of Corrections, certified that Sayo had died on November 30, 2011
due to multiple organ failure, secondary to cervical cancer, attaching thereto the
Certificate of Death[23] issued by the Office of the Civil Registrar.

Issue

Whether the guilt of Roxas was proven beyond reasonable doubt.

The Court's Ruling

Sayo's death extinguished her

criminal and civil liability

At the outset, the Court notes that Sayo had already died on November 30, 2011.
Thus, the death of Sayo extinguished her criminal liability. Article 89, paragraph 1
of the Revised Penal Code provides:

ART. 89. How criminal liability is totally extinguished. —  Criminal liability is totally

extinguished:

1. By the death of the convict, as to the personal penalties; and as to pecuniary

penalties, liability therefor is ·extinguished only when the death of the offender
occurs before final judgment[.]

Likewise, the civil liability of Sayo arising from her criminal liability is extinguished
upon her death. The rules on the effect of the death of the accused on civil liability
pending appeal are summarized in People v. Bayotas:[24]

1. Death of the accused pending appeal of his conviction extinguishes his criminal
liability as well as the civil liability based solely thereon. As opined by Justice
Regalado, in this regard, "the death of the accused prior to final judgment
terminates his criminal liability and only  the civil liability directly arising from and
based solely on the offense committed, i.e., civil liability ex delicto in senso
strictiore."

2. Corollarily, the claim for civil liability survives notwithstanding the death of
accused, if the same may also be predicated on a source of obligation other than
delict Article 1157 of the Civil Code enumerates these other sources of obligation
from which the civil liability may arise as a result of the same act or omission:
a) Law

b) Contracts

c) Quasi-contracts

d) x x x

e) Quasi-delicts

3. Where the civil liability survives, as explained in Number 2 above, an action for
recovery therefor may be pursued but only by way of filing a separate civil action
and subject to Section I, Rule 111 of the 1985 Rules on Criminal Procedure as
amended. This separate civil action may be enforced either against the
executor/administrator or the estate of the accused, depending on the source of
obligation upon which the same is based as explained above. [25]

Applying these established rules in the instant case, the death of Sayo extinguished
her criminal and civil liability inasmuch as she is no longer a defendant to stand as
the accused; the civil action is also extinguished, as it is grounded on the criminal
action.[26]

Thus, the Decision of the Court will now solely focus on the criminal liability of
Roxas.

Affirmed factual findings of the RTC

are afforded great respect by the
Court

Upon judicious review of the records of the case, the Court affirms the factual
findings of the RTC, as affirmed by the CA. The Court upholds the findings of the
courts a quo that Roxas knowingly leased a room in his house for the purpose of
prostitution.

It is an established doctrine in appellate review that factual findings of the trial

court, including its assessment of the credibility of witnesses, probative weight of
their testimonies, as well as of the documentary evidence, are accorded great
weight and respect, especially when these are affirmed by the CA, as in this case.
[27]

As correctly held by the RTC and affirmed by the CA, the testimonies of AAA, BBB,
and CCC were direct, straightforward, and corroborative of each other's
testimonies. Likewise, the testimony of the arresting officer, PO2 Ong detailed the
conduct of the whole entrapment procedure. On the other hand, Roxas merely
interposed the weak defenses of denial and alibi. The positive identification and
testimonies of the witnesses greatly outweigh Roxas' bare denials.
However, the Court deems it fit to modify the legal conclusions of the courts a
quo, with regard to the offense committed and the appropriate penalty.

Roxas committed Acts that Promote

Trafficking in Persons as defined
under Section 5(a) of RA 9208

Roxas was convicted of Qualified Trafficking of Persons, under Section 5(a) in

relation to Section 6 of RA 9208 in connection with minors AAA and BBB and was
sentenced to suffer life imprisonment and to pay a fine of Two Million Pesos
(P2,000,000.00). With regard to CCC, who was of legal age at the time of the
offense, Roxas was convicted of Trafficking in Persons under Section 5(a) of RA
9208 and was sentenced to imprisonment of fifteen (15) years and to pay a fine of
Five Hundred Thousand Pesos (P500,000.00).

The courts a quo committed serious error in convicting Roxas for Qualified

Trafficking of Persons and Trafficking in Persons as the offenses proscribed under
Section 5 of RA 9208 are properly denominated as Acts that Promote Trafficking in
Persons.

Thus, the Court affirms with modification Roxas' conviction and holds that he is
guilty of one count of violation of Section 5(a) of RA 9208 for Acts that Promote
Trafficking in Persons and not Trafficking in Persons, qualified or otherwise.

There are four punishable acts under RA 9208: (1) Acts ofTrafficking in Persons
under Section 4;[28] (2) Acts that Promote Trafficking in Persons under Section 5;
[29]
 (3) Violation of the Confidentiality Rule under Section 7[30] in relation to Section
10(d); and (4) Use of Trafficked Persons under Section 11. [31]

The offense of Trafficking in Persons under Section 4 and Acts that Promote
Trafficking in Persons under Section 5 of RA 9208 are separate and distinct offenses
with their own corresponding penalties. Section 6 provides for qualifying
circumstances of Trafficking in Persons under Section 4, which when alleged and
proved, will merit the imposition of the maximum penalty of life imprisonment and
a fine of Two Million Pesos (P2,000,000.00) but not more than Five Million Pesos
(P5,000,000.00) under Section 10(c).

The relevant portions of the provisions are quoted below:

SEC. 4. Acts of Trafficking in Persons. — It shall be unlawful for any person, natural
or juridical, to commit any of the following acts:

(a) To recruit, transport, transfer; harbor, provide, or receive a person by any

means, including those done under the pretext of domestic or overseas
employment or training or apprenticeship, for the purpose of prostitution,
pornography, sexual exploitation, forced labor, slavery, involuntary servitude or
debt bondage;
xxxx

(e) To maintain or hire a person to engage in prostitution or pornography;

xxxx

SEC. 5. Acts that Promote Trafficking in Persons. — The following acts which
promote or facilitate trafficking in persons, shall be unlawful:

(a) To knowingly lease or sublease, use or allow to be used any house, building or
establishment for the purpose of promoting trafficking in persons;

xxxx

SEC. 6. Qualified Trafficking in Persons. — The following are considered as qualified

trafficking:

(a) When the trafficked person is a child[.] (Emphasis supplied)

Section 10 of RA 9208 provides for the penalties of the above:

SEC. 10. Penalties and Sanctions. — The following penalties and sanctions are
hereby established for the offenses enumerated in this Act:

(a) Any person found guilty of committing any of the acts enumerated in Section 4
shall suffer the penalty of imprisonment of twenty (20) years and a fine of not less
than One million pesos (P1,000,000.00) but not more than Two million pesos
(P2,000,000.00);

(b) Any person found guilty of committing any of the acts enumerated in Section 5
shall suffer the penalty of imprisonment of fifteen (15) years and a fine of not less
than Five hundred thousand pesos (P500,000.00) but not more than One million
pesos (P1,000,000.00);

(c) Any person found guilty of qualified trafficking under Section 6 shall suffer the
penalty of life imprisonment and a fine of not less than Two million pesos
(P2,000,000.00) but not more than Five million pesos (P5,000,000.00)[.]

Thus, Section 4 of RA 9208 refers to those acts which directly involve trafficking in
persons, such as recruitment, transport, transfer, harboring, receiving, buying,
offering, selling, or trading persons to engage in prostitution, pornography, sexual
exploitation, forced labor, slavery, involuntary servitude, or debt bondage.
Meanwhile, Section 5 refers to those acts that promote or facilitate any of the
aforementioned predicate acts of Trafficking in Persons.

In arriving at its Decision, the RTC reasoned:

As for accused Alfredo Roxas, based on the evidence adduced during trial, the
prosecution was able to establish that Alfredo Roxas owned a house/apartment;
that said house/apartment had a room; that the room was offered for lease for
every paying customer of the complainants; that accused Roxas, in consideration of
the sum of One Hundred (100) pesos, would allow the complainants and
her (sic)  customers to use the room and engage in sex therein; that Roxas had
knowledge of the fact that the complainants engaged in sex for a fee as he cleaned
the room after the complainant and her customer finished using it; that, moreover,
he sold condoms to complainant's male customers before using the room. All of
these acts promoted trafficking in persons as defined under Section 5 of
[RA 9208].[32] (Emphasis and underscoring supplied)

The RTC found that Roxas violated Section 5(a) of RA 9208 for knowingly leasing a
room for the purpose of prostitution. Unfortunately, in spite of this, it still convicted
Roxas of Qualified Trafficking in Persons as regards minors AAA and BBB and
Trafficking in Persons as regards CCC. The CA, for its part, affirmed the RTC's
ruling.

The RTC and the CA thus committed serious error as the proper denomination of
the offense is Acts that Promote Trafficking in Persons under Section 5(a). In this
regard, it should be noted that the offenses punished under Section 5 cannot be
qualified by Section 6 as what the latter seeks to qualify is the act of trafficking and
not the promotion of trafficking. To be sure, this was clarified in the amendatory
law, RA 10364[33] or the Expanded Anti-Trafficking in Persons Act of 2012 where
Section 6 was amended accordingly:

SEC. 9. Section 6 of Republic Act No. 9208 is hereby amended to read as follows:

"SEC. 6. Qualified Trafficking in Persons.  – Violations of Section 4 of this Act

shall be considered as qualified trafficking:
"x x x

"(d) When the offender is a spouse, an ascendant, parent, sibling, guardian or a

person who exercises authority over the trafficked person or when the offense is
committed by a public officer or employee;

"x x x

"(f) When the offender is a member of the military or law enforcement agencies;

"(g) When by reason or on occasion of the act of trafficking in persons, the

offended party dies, becomes insane, suffers mutilation or is afflicted with Human
Immunodeficiency Virus (HIV) or the Acquired Immune Deficiency Syndrome
(AIDS);

"(h) When the offender commits one or more violations of Section 4 over a period
of sixty (60) or more days, whether those days are continuous or not; and
"(i) When the offender directs or through another manages the trafficking victim in
carrying out the exploitative purpose of trafficking." (Emphasis and underscoring
supplied)

As can be gleaned from the above amendment, only violations of Section 4 on

Trafficking in Persons can be qualified. Section 5 on Acts that Promote Trafficking in
Persons, being separate and distinct offenses, cannot be qualified as the law does
not expressly provide therefor. The clarificatory amendment, being beneficial to the
accused, must be applied in his favor.[34]

Accordingly, Roxas' conviction of Qualified Trafficking in Persons and Trafficking in

Persons as well as the sentence of life imprisonment and a fine of Two Million Pesos
(P2,000,000.00) must be modified.

The denomination of his conviction is corrected to Acts that Promote Trafficking in

Persons under Section 5(a) of RA 9208 with the appropriate penalty of
imprisonment of fifteen (15) years and a fine of Five Hundred Thousand Pesos
(P500,000.00).

Roxas is liable for moral and

exemplary damages to AAA, BBB,
and CCC

The award of damages is likewise modified. Moral damages are prescribed under
Articles 2217 and 2219 of the Civil Code:

ART. 2217. Moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of the defendant's
wrongful act or omission.

xxxx

ART. 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape, or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;

(9) Acts mentioned in Article 309;

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3
of this article, may also recover moral damages.

The spouse, descendants, ascendants, and brothers and sisters may bring the
action mentioned in No. 9 of this article, in the order named. (Emphasis supplied)

In turn, exemplary damages are awarded in addition to moral damages by way of

example of correction for the public good:

ART. 2229. Exemplary or corrective damages are imposed, by way of example or

correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.

ART. 2230. In criminal offenses, exemplary damages as a part of the civil liability
may be imposed when the crime was committed with one or more aggravating
circumstances. Such damages are separate and distinct from fines and shall be paid
to the offended party.

Moral and exemplary damages of P500,000.00 and P100,000.00, respectively, are

ordinarily awarded in cases of Trafficking in Persons as a prostitute. The ratio for
the award of damages in said cases was explained in People v. Lalli:[35]

The criminal case of Trafficking in Persons as a Prostitute is an analogous case to

the crimes of seduction, abduction, rape, or other lascivious acts. In fact, it is
worse. To be trafficked as a prostitute without one's consent and to be sexually
violated four to five times a day by different strangers is horrendous and atrocious.
There is no doubt that Lolita experienced physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, and social
humiliation when she was trafficked as a prostitute in Malaysia. Since the crime of
Trafficking in Persons was aggravated, being committed by a syndicate, the award
of exemplary damages is likewise justified.[36]

In the instant case, while the Information alleged that Roxas "received and
harbored" AAA, BBB, and CCC, it was not proven during the trial that Roxas directly
participated in their prostitution or solicited or assigned customers for them.
However, his act of renting out a room in his house promoted and facilitated their
prostitution. Roxas profited from the rental of the room and his actions are just as
deplorable.

In Planteras, Jr. v. People,[37] the Court set the award of moral and exemplary;
damages at P100,000.00 and 50,000.00 in cases of Acts that Promote Trafficking in
Persons under Section 5(a) of RA 9208.

Thus, Roxas is liable to pay moral and exemplary damages to AAA, BBB, and CCC
of P100,000.00 and P50,000.00 each. The monetary awards due to the victims shall
earn legal interest of six percent (6%) per annum from finality of judgment until full
payment.[38]

WHEREFORE, in view of the foregoing, the Court RESOLVES to:

1. DECLARE accused-appellant ALFREDO ROXAS y SAGON, GUILTY of ACTS

THAT PROMOTE TRAFFICKING IN PERSONS under Section 5(a) of
Republic Act No. 9208, as amended, for which he is sentenced to suffer the
penalty of imprisonment of fifteen (15) years and a fine of Five Hundred
Thousand Pesos (P500,000.00) as provided for under Section 10(b) of the
same law.

2. ORDER accused-appellant ALFREDO ROXAS y SAGON to PAY AAA, BBB, and

CCC, the amounts of P100,000.00 and P50,000.00 each, as moral and
exemplary damages, subject to legal interest of six percent (6%) per annum
from finality of judgment until full payment.

3. DISMISS the case insofar as accused-appellant SUSAN SAYO y REYES is

concerned, in view of her death.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 192912, June 04, 2014 ]
PEOPLE OF THE PHILIPPINES, PLAINTIFF-APPELLEE, VS.
DEMOCRITO PARAS, ACCUSED-APPELLANT.

DECISION
LEONARDO-DE CASTRO, J.:

The Court resolves the appeal of the accused-appellant Democrito Paras from the
Decision[1] dated February 2, 2010 of the Court of Appeals in CA-G.R. CEB CR.-H.C.
No. 00465.  The appellate court affirmed the Decision[2] dated October 18, 2005 of
the Regional Trial Court (RTC) of Toledo City, Branch 29, in Criminal Case No. TCS-
2729, which found the accused-appellant guilty of the crime of rape.

The prosecution charged the accused-appellant of committing rape against AAA, [3] a
17-year old girl, allegedly committed as follows:

That at noon in March 1996 or for sometime subsequent thereto, in [XXX] and
within the jurisdiction of this Honorable Court, the above-named accused, with the
use of a gun of unknown caliber, by force and intimidation, did then and there
willfully, unlawfully and feloniously have carnal knowledge with [AAA] against the
latter’s will and as a result of which the latter became pregnant, to the damage and
prejudice of the offended party.[4]

The accused-appellant pleaded not guilty to the charge.[5]  In the trial that ensued,
the prosecution presented the testimonies of AAA,[6] Department of Social Welfare
and Development (DSWD) Field Officer Ma. Pamela Jusay,[7] and Dr. Marcelo Pilapil,
[8]
 the physician who physically examined AAA.  The defense thereafter presented
the testimonies of the accused-appellant[9] and his mother, Luisa Paras.[10]

In their brief before the Court of Appeals, the prosecution summarized their version
of the facts in this wise:

Around noon of March 19, 1996, or subsequent thereto, while the victim [AAA], a
house-helper of spouses Sergio and Heny Agua, was weeding grass using a bolo at
her employer’s farm in [XXX], appellant Democrito Paras approached her from
behind (TSN, July 15, 1999, pp. 6-7).  He pulled [AAA] towards the lower portion of
the farm and pointed a short firearm at her mouth.  While pointing the gun at
[AAA], appellant pulled down her long pants and panties.  Appellant also pulled
down his pants and underwear.  He laid [AAA] on the grassy ground and mounted
her.  He spread [AAA’s] legs with his two hands after putting down his firearm.  He
then inserted his penis into [AAA’s] vagina.  [AAA] felt pain (Ibid., p. 8).  [AAA]
struggled and tried to kick appellant but all proved futile as appellant was physically
stronger (TSN, Nov. 19, 1999, p. 10)[.]

Since [AAA] was afraid of appellant and that she was also afraid to kill a person,
she did not strike appellant with the bolo she was holding (TSN, Jan. 11, 2000, p.
3).  Appellant told [AAA] not to shout.  He made a push and pull movement.  [AAA]
felt appellant’s organ inside her while she continued to struggle.  While struggling,
[AAA] even threw stones at appellant (Ibid. p. 4).

After appellant consummated his bestial lust, he dressed up and fled, while [AAA]
went back to the house of her employers (Ibid.).

Subsequently, [AAA] got pregnant due to the incident.  She gave birth to a child
who was more than a year old when [AAA] testified on January 11, 2000. (TSN,
Jan. 11, 2000, p. 5)[.][11]

The defense, on the other hand, laid out the following narrative of denial and alibi:

Accused-appellant, Democrito Paras, knows the private complainant because she

was the helper at the house of his elder sister.  He vehemently denie[d] having
raped AAA.  On March 19, 1996, he was at the Lusaran market to buy dried fish
and other household items to be consumed for the whole week because he lived in
a mountain barangay.  He could not estimate the distance between Lusaran Market
and his house but it would take two (2) hours of travel time by walking only.  It
was about 8:00 o’clock in the morning when he went to Lusaran Market on March
19, 1996 and arrived home at about 4:00 o’clock in the afternoon already.  AAA
accused him of rape because of the misunderstanding he had with the husband of
his elder sister regarding the mango trees owned by his mother.  AAA is an
employee of his brother-in-law, Sergio Agua, whose house is about seventy (70)
meters away from his house.  Aside from their houses, there are also other houses,
about five (5) of them, located in their locality.  The mango trees were already
allocated by his mother to each and every child.  One of his brothers transferred
residence to Compostela abandoning the mango trees allocated to him.  Accused-
appellant took over the said mango trees and sprayed them with chemicals. 
However, Sergio Agua also sprayed them and accused-appellant chided him.  This
made his brother-in-law angry who pulled out his bolo.  Thereafter, he told
accused-appellant to “beware”.  After that incident, accused-appellant and Sergio
no longer talked about the mango trees.  Aside from this, accused-appellant and
Sergio also had a disagreement regarding the five (5) hectares of land owned by
the latter’s mother.  Sergio wanted it divided but accused-appellant objected since
he has other siblings who are still single.  Sergio got mad and again threatened
accused-appellant to “beware”[.][12]

The Decision of the RTC

In a Decision dated October 18, 2005, the RTC convicted the accused-appellant of
the crime charged.  The trial court gave credence to the testimony of AAA, finding
the same frank, candid, and straightforward.  In contrast, the trial court rejected
the accused-appellant’s defenses of denial and alibi since the same were not
corroborated even by the testimony of his mother, Luisa Paras.  The latter merely
testified on an alleged feud between the accused-appellant and Sergio Agua, who
happened to be the employer of AAA.  The RTC sentenced the accused-appellant as
follows:

WHEREFORE, all the foregoing considered, this Court finds the guilt of the
accused DEMOCRITO PARAS to have been proved beyond peradventure of a
reasonable doubt and he is hereby sentenced to suffer the penalty of RECLUSION
PERPETUA and to indemnify the offended party [AAA] the sum of P50,000.00 by
way of compensatory damages plus the amount of P100,000.00 as and for moral
damages.[13]

The Decision of the Court of Appeals

On appeal, the Court of Appeals upheld the judgment of the RTC in a Decision
dated February 2, 2010.  The appellate court affirmed the trial court’s appreciation
of AAA’s testimony, which was held to be steadfast and unyielding throughout the
direct and cross-examinations.  The testimony of Luisa Paras on the alleged
misunderstanding between the accused-appellant and Sergio Agua was found to be
insufficient to overturn the candid testimony of AAA and her positive identification
of the accused-appellant as the malefactor.  The Court of Appeals also brushed
aside the accused-appellant’s arguments of alleged inconsistencies and
improbabilities in AAA’s testimony, i.e., that AAA could recall the details of the rape
but not the birth date of her child and the name of her neighbor, that AAA did not
seize the opportunities given her to save herself, and that the supposed date of the
rape was not clearly established by the prosecution evidence.  The appellate court
ruled that said inconsistencies were on inconsequential matters that did not bear
upon the essential elements of the crime of rape.  The Court of Appeals decreed:

WHEREFORE, premises considered the Decision dated October 18, 2005 of the
Regional Trial Court, Branch 29, Toledo City, in Criminal Case No. TCS-2729 is
hereby AFFIRMED with MODIFICATION.

As modified, accused-appellant is found guilty beyond reasonable doubt of the

crime of qualified rape as defined and penalized in Article 335 of the Revised Penal
Code, as amended by Section 11 of Republic Act No. 7659, and is hereby sentenced
to suffer the penalty of reclusion perpetua.  Accused-appellant is ordered to pay the
private complainant the amount of P50,000.00 only as moral damages plus
exemplary damages in the amount of P25,000.00.  The award of civil indemnity in
the amount of P50,000.00 stands.[14]
The Ruling of the Court

The accused-appellant again appealed his case to this Court, arguing that the trial
court erred in convicting him of the crime charged even if his guilt was not proven
beyond reasonable doubt.[15]

The appeal lacks merit.

As the accused-appellant was charged to have committed the rape “in March 1996
or for sometime subsequent thereto,” the applicable provision of the law in this
case is Article 335[16] of the Revised Penal Code.[17] The relevant portions of said
statutory provision read:

Art. 335. When and how rape is committed. - Rape is committed by having carnal
knowledge of a woman under any of the following circumstances:

1. By using force or intimidation;

2. When the woman is deprived of reason or otherwise unconscious; and
3. When the woman is under twelve years of age or is demented.

xxxx

Whenever the crime of rape is committed with the use of a deadly weapon or by
two or more persons, the penalty shall be reclusion perpetua to death.

In this case, both the RTC and the Court of Appeals adjudged the accused-appellant
guilty of rape by having carnal knowledge of AAA without her consent using force or
intimidation.  The courts a quo relied on the testimony of AAA and her positive
identification of the accused-appellant as the perpetrator of the sexual abuse.  After
thoroughly reviewing the records of this case, the Court finds that AAA was indeed
categorical and consistent in her testimony that the accused-appellant was the one
who pointed a gun to her mouth and forcibly had sexual intercourse with her.  We,
thus, see no reason to disturb the lower courts’ appreciation of the credibility of
AAA’s testimony. People v. De Guzman[18] teaches that:

In the resolution of the factual issues, the court relies heavily on the trial court for
its evaluation of the witnesses and their credibility. Having the opportunity to
observe them on the stand, the trial judge is able to detect that sometimes thin line
between fact and prevarication that will determine the guilt or innocence of the
accused. That line may not be discernible from a mere reading of the impersonal
record by the reviewing court. The record will not reveal those tell-tale signs that
will affirm the truth or expose the contrivance, like the angry flush of an insisted
assertion or the sudden pallor of a discovered lie or the tremulous mutter of a
reluctant answer or the forthright tone of a ready reply. The record will not show if
the eyes have darted in evasion or looked down in confession or gazed steadily with
a serenity that has nothing to distort or conceal. The record will not show if tears
were shed in anger, or in shame, or in remembered pain, or in feigned innocence.
Only the judge trying the case can see all these and on the basis of his observations
arrive at an informed and reasoned verdict.

The Court likewise upholds the ruling of the Court of Appeals that the
inconsistencies pointed out by the accused-appellant in the testimony of AAA,
namely, her inability to remember the birth date of her child and the name of her
neighbor, did not destroy her credibility as a witness.  These details had nothing to
do with the essential elements of rape, that is, carnal knowledge of a person
through force or intimidation.  As held in People v. Maglente[19]:

Inconsistencies and discrepancies in details which are irrelevant to the elements of

the crime are not grounds for acquittal.  As long as the inaccuracies concern only
minor matters, the same do not affect the credibility of witnesses.  Truth-telling
witnesses are not always expected to give error-free testimonies considering the
lapse of time and treachery of human memory.  Inaccuracies may even suggest
that the witnesses are telling the truth and have not been rehearsed.  (Citations
omitted.)

Before the Court of Appeals and this Court, the accused-appellant also capitalized
on the findings of Dr. Pilapil that AAA was already three months pregnant when she
was examined on October 7, 1996.  If that were the case, the accused-appellant
argued that AAA could have had sexual intercourse sometime in June or July 1996
and not in March 1996 when the rape was supposed to have been committed.  We
find that the Court of Appeals correctly rejected this contention.  We had occasion
to state in People v. Adora[20] that “authorities in forensic medicine agree that the
determination of the exact date of fertilization is problematic.  The exact date
thereof is unknown; thus, the difficulty in determining the actual normal duration of
pregnancy.”  At any rate, we ruled in People v. Bejic[21] that:

Pregnancy is not an essential element of the crime of rape.  Whether the child
which the rape victim bore was fathered by the accused, or by some unknown
individual, is of no moment.  What is important and decisive is that the accused had
carnal knowledge of the victim against the latter's will or without her consent, and
such fact was testified to by the victim in a truthful manner. (Citation omitted.)

Anent the alleged failure of AAA to defend herself despite having many
opportunities to do so, we are not persuaded.  We reiterated in Sison v.
People[22] that:

[P]eople react differently under emotional stress.  There is no standard form of

behavior when one is confronted by a shocking incident, especially if the assailant is
physically near.  The workings of the human mind when placed under emotional
stress are unpredictable. In a given situation, some may shout, others may faint,
and still others may be frozen into silence.  Consequently, the failure of
complainant to run away or shout for help at the very first opportunity cannot be
construed consent to the sexual intercourse.  (Citations omitted.)

Finally, the accused-appellant’s defenses of denial and alibi also fail to convince the
Court.  Given that the accused-appellant failed to support the same with strong
evidence of his lack of guilt, said defenses cannot prevail over the positive
identification of AAA.

All told, the accused-appellant failed to show that the RTC and the Court of Appeals
committed any reversible error in finding him guilty beyond reasonable doubt of
sexually abusing AAA.

Under Article 335 of the Revised Penal Code, as amended, whenever the crime of
rape is committed with the use of a deadly weapon the penalty shall be reclusion
perpetua  to death.  In this case, the accused-appellant’s use of a gun in the
commission of the rape against AAA was both specifically alleged in the information
and proven during the trial of the case.  Considering that there was neither any
mitigating nor aggravating circumstance in the commission of the offense, the
lesser penalty of reclusion perpetua was properly imposed.[23]

As to the award of damages, the Court of Appeals properly imposed the amounts of
P50,000.00 as civil indemnity and P50,000.00 as moral damages.  On the award of
exemplary damages, the same is increased from P25,000.00 to P30,000.00 in line
with recent jurisprudence.[24]

WHEREFORE, the Court AFFIRMS with MODIFICATIONS the Decision dated

February 2, 2010 of the Court of Appeals in CA-G.R. CEB CR.-H.C. No. 00465.  The
accused-appellant is found GUILTY beyond reasonable doubt of one count of rape
and is sentenced to suffer the penalty of reclusion perpetua.  The accused-appellant
is ORDERED to pay AAA Fifty Thousand Pesos (P50,000.00) as civil indemnity, Fifty
Thousand Pesos (P50,000.00) as moral damages, and Thirty Thousand Pesos
(P30,000.00) as exemplary damages, plus legal interest on all damages awarded at
the rate of 6% per annum from the date of finality of this Decision.
Costs against the accused-appellant.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 182210, October 05, 2015 ]
PAZ T. BERNARDO, SUBSTITUTED BY HEIRS, MAPALAD G.
BERNARDO, EMILIE B. KO, MARILOU B. VALDEZ, EDWIN T.
BERNARDO AND GERVY B. SANTOS, PETITIONERS, VS.
PEOPLE OF THE PHILIPPINES, RESPONDENT.

DECISION

BRION, J.:

We resolve the Petition for Review on Certiorari filed by accused petitioner Paz T.
Bernardo (Bernardo) under Rule 45 of the Rules of Court, assailing the Court of
Appeals (CA) August 31, 2007 decision[1] and the March 14, 2008 resolution[2] in
CA-G.R. CR 28721, entitled "People of the Philippines v. Paz T. Bernardo." The
appellate court affirmed the decision of the Regional Trial Court (RTC), Branch 56,
Makati City, finding Bernardo guilty beyond reasonable doubt of five (5) counts of
violation of Batas Pambansa Blg. 22 (B.P. 22).

The Factual Antecedents

In June 1991, Bernardo obtained a loan from the private complainant Carmencita
C. Bumanglag (Bumanglag) in the amount of P460,000.00 payable on or before its
maturity on November 30, 1991. That loan was evidenced by a promissory
note[3] Bernardo and her husband had executed, whereby the couple solidarity
bound themselves to pay the loan with corresponding interest at 12% per annum
payable upon default.[4] As additional security, Bernardo gave Bumanglag the
owner's duplicate copy of Transfer Certificate of Title No. (T-1034) 151841.
Prior to the loan's maturity, Bernardo took back the title from Bumanglag to use as
a collateral in another transaction. In place of the title, Bernardo issued to
Bumanglag the following five (5) Far East Bank and Trust Company (FEBTC)
checks,[5] posted on different dates in June 1992, covering the loan's aggregate
amount:

Check No. Amount Date

FEBTC No. 391033 Php 100,000.00 June 1, 1992

FEBTC No. 391034 Php 100,000.00 June 8, 1992

FEBTC No. 391035 Php 100,000.00 June 15, 1992

FEBTC No. 391036 Php 100,000.00 June 22, 1992

FEBTC No. 391037 Php 60,000.00 June 29, 1992

In September 1992, Bumanglag deposited these checks to Bernardo's account but

they were dishonored; the reason given was "Account Closed." Bumanglag thus
sent Bernardo a notice informing her of the dishonor of the checks. The demand
went unheeded, prompting Bumanglag to initiate a criminal complaint against
Bernardo with the Office of the City Prosecutor of Makati for five (5) counts of
violation of B.P. 22.

After the requisite preliminary investigation, the Office of the City Prosecutor of
Makati City found probable cause to indict Bernardo for the offenses charged.
Bernardo entered a not guilty plea on arraignment.

The prosecution rested its case on September 21, 1994. Bernardo took the witness
stand only on May 9, 1996, to present her defense evidence.

In her testimony, Bernardo argued that she could not be held liable for violation of
B.P. 22 because the questioned checks were presented beyond the 90-day period
provided under the law. She also denied having received any notice of dishonor,
which she insisted was essential to prove the material element of knowledge of
insufficiency of funds.

In any case, she maintained that the checks were never meant to be presented as
she had always paid her loans in cash, which she claimed to have done in the
aggregate amount of P717,000.00. According to Bernardo, although Bumanglag
returned to her the title to the property after payment, Bumanglag never bothered
to issue her receipts. Bumanglag did not return the checks either.

Following Bernardo's cross-examination, the RTC reset the hearing for redirect
examination to September 4, 1996.[6] That hearing, however, was again reset to
April 3, 1997, in view of the absence of Bernardo's counsel. When Bernardo and her
counsel again failed to appear during the April 3, 1997 hearing, and in view of the
numerous previous postponements the defense had asked for, the RTC considered
her right to present additional evidence waived.

Bernardo moved for reconsideration but the RTC denied her motion. The RTC,
however, gave her ten (10) days within which to submit her formal offer of
evidence, which she failed to do. As a result, the RTC declared that Bernardo had
waived her right to submit her formal offer of evidence.

RTC Ruling

On May 28, 2003, the RTC issued its ruling finding Bernardo guilty of five counts of
violation of B.P. 22.[7] The RTC held that Bernardo failed to substantiate her claim of
payment. The RTC further ruled that it is not the nonpayment of the obligation but
the issuance of a worthless check that B.P. 22 punishes.

The RTC sentenced Bernardo to one (1) year imprisonment for each count of the
offense charged and ordered her to indemnify Bumanglag the amount of
P460,000.00, plus 12% interest and 5% penalty charges, from December 1, 1991,
until full payment.[8]

CA Ruling

On appeal, the CA affirmed Bernardo's conviction but deleted the penalty of

imprisonment and in lieu thereof, imposed a P460,000.00 fine. [9] The CA also
retained the civil indemnity of P460,000.00 that the lower court imposed, plus 12%
interest from the time of the institution of the criminal charges until full payment. [10]

In denying Bernardo's appeal, the CA noted that Bernardo failed to adduce

sufficient evidence of payment. The CA further held that the 90-day period within
which to present a check under B.P. 22 is not an element of the crime.

The CA also did not recognize any merit in Bernardo's claim that she had been
denied due process, in view of the RTC's order waiving her right to present
additional evidence.[11] To the CA, Bernardo had sufficient opportunity to present
her defense but did not avail of these opportunities. Instead, she and her counsel
moved for postponement at least nine (9) times, not to mention their subsequent
failure to appear four (4) times despite due notice of the scheduled hearings. These
developments led the RTC to consider Bernardo's right to present additional
evidence waived.[12]
Bernardo moved for reconsideration but the CA denied her motion; [13] hence, the
present petition.[14]

The Petition and Comment

Bernardo insists in her present petition[15] that the CA erred in finding that she had
been accorded due process; she was denied the full opportunity to present her
defense and was thus deprived of the chance to prove her innocence of the crime
charged.

She likewise avers that the CA erred in affirming her criminal and civil liabilities
because the prosecution failed to prove her knowledge of insufficiency of funds.
According to Bernardo, there was no violation of B.P. 22 because the checks were
presented beyond the mandatory 90-day period. Moreover, Bernardo claimed that
these subject checks were issued without consideration as she had already paid the
loan.

The Office of the Solicitor General (OSG) posits in its Comment that Bernardo was
given the opportunity to present her defense evidence. [16] Citing Wong v. CA,[17] the
OSG further points out that the 90-day period provided in the law is not an element
of the offense;[18] it is simply one of the conditions to establish a prima
facie presumption of knowledge of lack of funds.[19]

The OSG also claims that Bumanglag failed to substantiate her claim that she had
settled the obligation.[20] In any event, the OSG asserted B.P. 22 penalizes the act
of making and issuing a worthless check, not the nonpayment of the obligation. [21]

Subsequent Developments

On March 14, 2011, Bernardo's counsel informed the Court of the petitioner's death
on February 3, 2011, and provided, as well, the names of her heirs (her widower,
Mapalad Bernardo, and children: Emilie B. Ko, Marilou B. Valdez, Edwin T.
Bernardo, and Gervy B. Santos), and their address (26 Magdiwang St., Real Village
2, Tandang Sora, Quezon City). In due course, in our March 7, 2012 Resolution,
[22]
 we required Bernardo's heirs to appear as substitutes for the deceased Bernardo
in the present petition for purposes of Bernardo's civil liability.

Bernardo's heirs moved to reconsider our March 7, 2012 resolution. They argued
that Bernardo's death extinguished her civil liability. In the alternative, they
contended that any civil liability should be settled in a separate civil case.
We denied the heirs' motion in our June 27, 2012 resolution. We explained that
Bernardo's civil liability survived her death as it is based on contract. Moreover, we
observed that it would be costly, burdensome, and time-consuming to dismiss the
present case and require the Bumanglags to file a separate civil action.

The Court's Ruling

We deny the petition for lack of merit. Preliminary Matters

Classes of Civil Liabilities

An act or omission causing damage to another may give rise to several distinct civil
liabilities on the part of the offender.[23] If the conduct constitutes a felony, the
accused may be held civilly liable under Article 100 of the Revised Penal Code (ex
delicto).[24] This particular civil liability due the offended party is rooted on facts that
constitute a crime.[25] Otherwise stated, civil liability arises from the offense
charged.[26] It is not required that the accused be convicted to be entitled to civil
liability based on delict. As long as the facts constituting the offense charged are
established by preponderance of evidence, civil liability may be awarded.
[27]
 Moreover, the civil liability based on delict is deemed instituted with the criminal
action unless the offended party waives the civil action, reserves the right to
institute it separately, or institutes the civil action prior to the criminal action. [28]

The same act or omission, however, may also give rise to independent civil
liabilities based on other sources of obligation. Article 1157 of the Civil Code
enumerates these other sources of obligation from which the civil liability may arise
as a result of the same act or omission: (a) law (b) contracts; (c) quasi-contracts,
and (d) quasi-delicts. Among these are the civil liabilities for intentional torts under
Articles 32[29] and 34[30] of the Civil Code and for quasi-delicts  under Article 2176 of
Civil Code.[31] For conduct constituting defamation, fraud, and physical injuries, the
Civil Code likewise grants the offended party the right to institute a civil action
independently of the criminal action under Article-33 of the Civil Code.

Thus, it is entirely possible for one to be free from civil ability directly arising from a
violation of the penal law and to still be liable civilly based on contract or by laws
other than the criminal law.[32] Such civil actions may proceed independently of the
criminal proceedings and regardless of the result of the criminal action,[33] subject
however, to the caveat that the offended party cannot recover damages twice for
the same act or omission.[34]

Bernardo's civil liability may be enforced in the present case despite her death.
As a general rule, the death of an accused pending appeal extinguishes her criminal
liability and the corresponding civil liability based solely on the offense (delict). The
death amounts to an acquittal of the accused based on the constitutionally
mandated presumption of innocence in her favor, which can be overcome only by a
finding of guilt - something that death prevents the court from making. [35] In a
sense, death absolves the accused from any earthly responsibility arising
from the offense — a divine act that no human court can reverse, qualify, much
less disregard.[36] The intervention of death of the accused in any case is an
injunction by fate itself so that no criminal liability and the corresponding civil
liability arising from the offense should be imposed on him. [37]

The independent civil liabilities, however, survive death and an action for recovery
therefore may be generally pursued but only by filing a separate civil action and
subject to Section 1, Rule 111 of the Rules on Criminal Procedure as amended.
[38]
 This separate civil action may be enforced against the estate of the accused. [39]

In B.P. 22 cases, the criminal action shall be deemed to include the corresponding
civil actions. Instead of instituting two separate cases, only a single suit is filed and
tried.[40] This rule was enacted to help declog court dockets, which had been packed
with B.P. 22 because creditors used the courts as collectors. As we observed
in Hyatt v. Asia Dynamic Electrix Corp.:[41]

Because ordinarily no filing fee is charged in criminal cases for actual damages, the
payee uses the intimidating effect of a criminal charge to collect his
credit gratis and sometimes, upon being paid, the trial court is not even informed
thereof. The inclusion of the civil action in the criminal case is expected to
significantly lower the number of cases filed before the courts for collection based
on dishonored checks. It is also expected to expedite the disposition of these cases.
Instead of instituting two separate cases, one for criminal and another for civil, only
a single suit shall be filed and tried. It should be stressed that the policy laid down
by the Rules is to discourage the separate filing of the civil action.

As a necessary consequence of this special rule, the civil liabilities arising from the
issuance of a worthless check are deemed instituted in a case for violation of B.P.
22; the death of Bernardo did not automatically extinguish the action. The
independent civil liability based on contract, which was deemed instituted in the
criminal action for B.P. 22, may still be enforced against her estate in the present
case. We thus rule on the present action to determine Bumanglag's civil liability.

Substantive Aspect

Bernardo was not denied due process.

We meticulously went over the entire record, and confirmed that Bernardo had not
at all been deprived of her day in court. She was afforded ample opportunity to
present evidence in her defense but she did not give this case the serious attention
it deserved. For good reason - i.e., the repeated absences of Bernardo and her
counsel - the trial court eventually considered her right to present defense evidence
waived.

To be sure, the postponement of the trial of a case to allow the presentation of

evidence is a matter that lies with the discretion of the trial court; but it is a
discretion that must be exercised wisely, considering the peculiar circumstances of
each case and with a view to doing substantial justice.[42] In the present case, the
records show that the RTC took all the steps necessary to safeguard Bernardo's
rights and to accord her the opportunity to present whatever evidence she had in
her defense.

In particular, the prosecution formally rested its case on September 21, 1994.
Bernardo, through counsel, thereupon moved for leave to file a demurrer to
evidence prompting the RTC to reset the hearing for initial presentation of defense
evidence to December 15 and 20, 1994.[43] Bernardo filed her demurrer to evidence
on November 10, 1994,[44] after previously requesting the RTC for a 10-day
extension.

The pendency of the demurrer to evidence prompted several resettings until the
RTC finally denied it on March 30, 1995.[45] The RTC then set the initial presentation
of defense evidence on April 11, 18, and 25, 1995, [46] but these were reset to May
9, 18, and 25, 1995,[47] at the motion of Bernardo's counsel who expressed his
desire to seek relief from the CA for the denial of the demurrer.

Despite the RTC's accommodation, Bernardo's counsel failed to appear during

the May 9, 1995 hearing as he was busy attending to the canvassing of
votes in Quezon City.[48] Eventually, the initial presentation of defense evidence
was reset to July 20, 1995, and August 3, 1995. [49]

Notably, during the July 20, 1995 hearing, Bernardo's counsel again moved for
another resetting as he was not prepared to conduct a direct examination.
[50]
 Despite this flimsy ground, the RTC granted the request and allowed Bernardo to
testify on August 3, 1995.

Bernardo and her counsel, however, failed to appear during the August 3,

1995 hearing despite due notice, prompting the RTC to waive their right to present
defense evidence.[51] Bernardo moved for reconsideration and the RTC granted her
motion in the interest of substantial justice. [52] Thus, the hearing for the
presentation of defense evidence was reset to November 28, 1995. [53]

Bernardo and her counsel again failed to appear during the November 28,
1995 hearing, despite due notice, prompting the RTC again to consider that
Bernardo had waived her right to present defense evidence. [54]

Bernardo again moved for reconsideration on the ground that it was the
first time she and her counsel were absent at the same time.[55] Despite this
hollow excuse, the RTC granted the motion in the spirit of compassionate
justice and gave Bernardo the final opportunity to present her defense evidence.
[56]
 The parties mutually agreed to set the hearing for initial presentation of defense
evidence on April 18, 1996.[57]

Bernardo again failed to appear during the scheduled April 18, 1996 hearing.58
Although Bernardo did not offer any excuse for this absence, [59] RTC exercised
compassion and permitted Bernardo to testify, as she did in fact testify, on May 9,
1996,[60] - one (1) year and eight (8) months after the prosecution had rested its
case. At the conclusion of the cross-examination, the parties mutually agreed to
adjourn the hearing for September 4, 1996, for redirect examination. [61]

Bernardo's counsel, however, failed to appear during the scheduled September 4,

1996 hearing, prompting the RTC to consider her failure as a waiver on her part to
present additional evidence.[62] Bernardo moved for reconsideration; she claimed
that her counsel had to attend another hearing in a different sala. Why Bernardo's
counsel accepted another engagement on the same day, which was in conflict with
the RTC's hearing dates, was never properly explained. Nonetheless, the RTC
granted the motion to give her the last chance to complete the
presentation of evidence on April 3, 17, and 22, 1997.[63]

Despite the RTC's warning, Bernardo and her counsel again failed to
appear at the April 3,1997 hearing.[64] Instead, they filed a motion to reset
because Bernardo's counsel was to attend a wedding in the United States of
America.[65] This time, the RTC, mindful that there should be a limit to
postponements, ordered the case submitted for decision sans the presentation of
evidence from the defense.[66]

Under these facts, the RTC was clearly driven by Bernardo and her counsel's
repeated failure, without justifiable reason, to appear at the scheduled hearing
dates.[67] The order considering Bernardo's right to present evidence waived,
followed as a necessary and unavoidable consequence. As we held in People v.
Angco:[68]
His failure to appear with counsel of his choice at the hearing of the case,
notwithstanding repeated postponements and warnings that failure to so appear
would be deemed a waiver to present evidence in his defense, and that the case
would be deemed submitted for judgment upon the evidence presented by the
prosecution, was sufficient legal justification for the trial court to proceed and
render judgment upon the evidence before it.

The records show that the RTC leniently granted repeated continuances to
safeguard Bernardo's rights as an accused. But Bernardo obviously did not
recognize the need for expeditious handling of her case and was already trifling
with judicial process.[69]

Bernardo failed to adduce sufficient

evidence of payment; thus she is civilly
liable.

Bernardo's death pending appeal  converted the present action to purely an

enforcement of the civil liability incurred. In particular, the focal issue in the
present petition is no longer Bernardo's criminal liability for violation of
B.P. 22 but her civil liability, which is principally based on contract and the
corresponding damage Bumanglag suffered due to Bernardo's failure to
pay. Under these circumstances, Bernardo's B.P. 22 defense (that the checks were
presented beyond the 90-day period and that she never received a notice of
dishonor) were no longer relevant.

Jurisprudence tells us that one who pleads payment carries the burden of proving
it.[70] Indeed, once the existence of an indebtedness is established by evidence, the
burden of showing with legal certainty that the obligation has been discharged by
payment rests with the debtor.[71] After the debtor introduces evidence of payment,
the burden of going forward with the evidence - as distinct from the general burden
of proof - again shifts to the creditor, who then labors under a duty to produce
evidence to show nonpayment.[72]

In the present case, the existence of the obligation to pay has sufficiently been
established through the promissory note[73] and the checks[74] submitted in
evidence. Notably, Bernardo even confirmed due execution of these instruments
during her testimony. During the offer of Bernardo's testimony, her counsel stated:

ATTY. MIRAVITE:

With the court's permission. Your Honor, we are presenting the witness for the
following purposes: to x x x show that she borrowed money from [Bumanglag] x x
x and that in 1991 her total obligation reached Php460,000.000; x x x that
all the checks issued by the accused were only as proof of her obligation to
the private complainant x x x.[75]  [emphasis supplied]

In the course of Bernardo's testimony, she even confirmed the issuance of the
checks and promissory note. In particular, she stated:

ATTY. MIRAVITE:

Q: I am showing to you this promissory note marked as Exhibit H for the

prosecution and Exhibit 2 for the defense. There appears a signature over the name
Paz T. Bernardo at the middle portion thereof, do you know whose signature is
that?

A: It is mine sir.

xxxx

Q: This document, Madame Witness, mentions of your loan obligations of Php

460,000.00. Can you tell us, Madame Witness, what is covered by this promissory
note?

xxxx

A: The promissory note covers the principal loan, plus interest and penalties, sir.

Q: So, are you saying that this promissory note of Php 460,000.00 was your total
obligation as of June 1991 and includes all other charges?

A: Yes, sir.

x  x x x

Q: Madam Witness, can you remember when you issued the checks subject of these
cases?

A: It was on June 20, 1991, sir.[76]

Bernardo's principal defense rests on the supposition that she had settled the
obligation, which settlement led Bumanglag to return to her the title to the
property.[77] A meticulous review, of the records, however, firmly dissuades us from
believing Bernardo's bare allegation.
At the outset, the handwritten note[78] evidencing that transaction, which was
submitted by the prosecution in evidence, states that:

                                                                                                                                              
             10/28/91
Received original copy of Title No. T-151841 in the name of Mapalad Bernardo for
loan purposes to pay Mrs. Carmencita Bumanglag

                                                                                                                                              
                 Sgd
                                                                                                                                              
                Paz T. Bernardo
                                                                                                                                              
              10/28/91

The document evidencing this transaction strongly suggests that she asked for the
title from Bumanglag to obtain another loan whose proceeds she would use to pay
Bumanglag. Notably, the defense even admitted the genuineness of Bernardo's
signature in this document.[79] When Bernardo therefore failed to fulfill her promise
to pay, Bumanglag had to request for checks to secure the obligation, which checks
were eventually dishonored upon presentment.

Under the circumstances, we find that Bernardo's claim of payment was nothing
more than an allegation unsupported by adequate proof. If indeed there had been
payment, she should have redeemed or taken back the checks and the promissory
note, in the ordinary course of business. [80] Instead, the checks and the promissory
note remained in the possession of Bumanglag, who had to demand the satisfaction
of Bernardo's obligation when the checks became due and were subsequently
dishonored by the drawee bank. Bumanglag's possession of the promissory note,
coupled with the dishonored checks, strongly buttresses her claim that Bernardo's
obligation had not been extinguished.[81]

We thus find that the weight of evidence preponderates in favor of Bumanglag's

position that Bernardo has not yet settled her obligation. [82]

WHEREFORE, premises considered, the August 31, 2007 decision of the Court of
Appeals in CA-G.R.' CR No. 28721 is AFFIRMED with MODIFICATION. The heirs
of Paz T. Bernardo are ordered to pay the amount of P460,000.00, with interest at
12% per annum from the time of the institution of criminal charges in court.

The total amount adjudged shall earn interest at the rate of 6% per annum on the
balance and interest due, from the finality of this Decision until fully paid.

The fine in the amount of P460,000.00 is DELETED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 211564, November 20, 2017 ]
BENJAMIN EVANGELISTA, PETITIONER, V. SCREENEX,[1] INC.,
REPRESENTED BY ALEXANDER G, YU, RESPONDENT.

DECISION

SERENO, C.J.:

This is a Petition[2] for Review on Certiorari  seeking to set aside the Decision[3] and

Resolution[4] rendered by the Court of Appeals (CA) Manila, Fifth Division, in CA-
G.R. SP No. 110680.

ANTECEDENT FACTS

The facts as summarized by the CA are as follows:

Sometime in 1991, [Evangelista] obtained a loan from respondent Screenex, Inc.

which issued two (2) checks to [Evangelista]. The first check was UCPB Check No.
275345 for P1,000,000 and the other one is China Banking Corporation Check No.
BDO 8159110 for P500,000. There were also vouchers of Screenex that were
signed by the accused evidencing that he received the 2 checks in acceptance of
the loan granted to him.

As security for the payment of the loan, [Evangelista] gave two (2) open dated
checks: UCPB Check Nos. 616656 and 616657, both pay to the order of Screenex,
Inc. From the time the checks were issued by [Evangelista], they were held in safe
keeping together with the other documents and papers of the company by Philip
Gotuaco, Sr., father-in-law of respondent Alexander Yu, until the former's death on
19 November 2004.
Before the checks were deposited, there was a personal demand from the family for
[Evangelista] to settle the loan and likewise a demand letter sent by the family
lawyer.[5]

On 25 August 2005, petitioner was charged with violation of Batas Pambansa (BP)
Blg. 22 in Criminal Case Nos. 343615-16 filed with the Metropolitan Trial Court
(MeTC) of Makati City, Branch 61.[6] The Information reads:

That sometime in 1991, in the City of Makati, Metro Manila, Philippines, a place
within the jurisdiction of this Honorable Court, the above-named accused, did then
and there, willfully, unlawfully and feloniously make out, draw, and issue to
SCREENEX INC., herein represented by ALEXANDER G. YU, to apply on account or
for value the checks described below:

  Check No. Date Amount

United Coconut AGR 616656 12-22-04 P1,000,000.00

Planters Bank AGR 616657 12-22-04 500,000.00

said accused well knowing that at the time of issue thereof, said accused did not
have sufficient funds in or credit with the drawee bank for the payment in full of the
face amount of such check upon its presentment which check when presented for
payment within ninety (90) days from the date thereof, was subsequently
dishonored by the drawee bank for the reason "ACCOUNT CLOSED" and despite
receipt of notice of such dishonor, the said accused failed to pay said payee the face
amount of said checks or to make arrangement for full payment thereof within five
(5) banking days after receiving notice.

CONTRARY TO LAW.[7]

Petitioner pleaded not guilty when arraigned, and trial proceeded. [8]

THE RULING OF THE MeTC

The MeTC found that the prosecution had indeed proved the first two elements of
cases involving violation of BP 22: i.e. the accused makes, draws or issues any
check to apply to account or for value, and the check is subsequently dishonored by
the drawee bank for insufficiency of funds or credit; or the check would have been
dishonored for the same reason had not the drawer, without any valid reason,
ordered the bank to stop payment. The trial court pointed out, though, that the
prosecution failed to prove the third element; i.e. at the time of the issuance of the
check to the payee, the latter did not have sufficient funds in, or credit with, the
drawee bank for payment of the check in full upon its presentment. [9] In the instant
case, the court held that while prosecution witness Alexander G. Yu declared that
the lawyer had sent a demand letter to Evangelista, Yu failed to prove that the
letter had actually been received by addressee. Because there was no way to
determine when the five-day period should start to toll, there was a failure to
establish  prima facie evidence of knowledge of the insufficiency of funds on the part
of Evangelista.[10] Hence, the court acquitted him of the criminal charges.

Ruling on the civil aspect of the cases, the court held that while Evangelista
admitted to having issued and delivered the checks to Gotuaco and to having fully
paid the amounts indicated therein, no evidence of payment was presented. [11] It
further held that the creditor's possession of the instrument of credit was sufficient
evidence that the debt claimed had not yet been paid. [12] In the end, Evangelista
was declared liable for the corresponding civil obligation.[13]

The dispositive portion of the Decision[14] reads:

WHEREFORE, judgment is rendered acquitting the accused BENJAMIN

EVANGELISTA for failure of the prosecution to establish all the elements
constituting the offense of Violation of B.P. 22 for two (2) counts. However, accused
is hereby ordered to pay his civil obligation to the private complainant in the total
amount of ONE MILLION FIVE HUNDRED THOUSAND PESOS (P1,500,000) plus
twelve (12%) percent interest per annum from the date of the filing of the two sets
of Information until fully paid and to pay the costs of suit.

SO ORDERED.[15]

THE RULING OF THE RTC

Evangelista filed a timely Notice of Appeal [16] and raised two errors of the MeTC
before the Regional Trial Court (RTC) of Makati City, Branch 147. Docketed therein
as Criminal Case Nos. 08-1723 and 08-1724, the appeal posed the following issues:
(1) the lower court erred in not appreciating the fact that the prosecution failed to
prove the civil liability of Evangelista to private complainant; and (2) any civil
liability attributable to Evangelista had been extinguished and/or was barred by
prescription.[17]

After the parties submitted their respective Memoranda, [18] the RTC ruled that the
checks should be taken as evidence of Evangelista's indebtedness to Gotuaco, such
that even if the criminal aspect of the charge had not been established, the
obligation subsisted.[19] Also, the alleged payment by Evangelista was an affirmative
defense that he had the burden of proving, but that he failed to discharge. [20] With
respect to the defense of prescription, the RTC ruled in this wise:

As to the defense of prescription, the same cannot be successfully invoked in this

appeal. The 10-year prescriptive period of the action under Art. 1144 of the New
Civil Code is computed from the time the right of action accrues. The terms and
conditions of the loan obligation have not been shown, as only the checks evidence
the same. It has not been shown when the loan obligation was to mature such that
there is no basis to show or from which to infer, when the cause of action (non-
payment of the loan) which would give the obligee the right to seek redress for the
non-payment of the obligation, accrued. In other words, the reckoning point of
prescription has not been established.

Prosecution witness Alexander G. Yu was not competent to state that the loan was
contracted in 1991 as in fact, Yu admitted that it was a few months before his
father-in-law (Philip Gotuaco) died when the latter told him about accused's failure
to pay his obligation. That was a few months before November 19, 2004, date of
death of his father-in-law.

At any rate, the right of action in this case is not upon a written contract, for which
reason, Art. 1144, New Civil Code, on prescription does not apply. [21]

In a Decision[22] dated 18 December 2008, the RTC dismissed the appeal and

affirmed the MeTC decision in toto.[23] The Motion for Reconsideration [24] was
likewise denied in an Order[25] dated 19 August 2009.

THE RULING OF THE CA

Evangelista filed a petition for review[26] before the CA insisting that the lower court
erred in finding him liable to pay the sum with interest at 12% per annum from the
date of filing until full payment. He further alleged that witness Yu was not
competent to testify on the loan transaction; that the insertion of the date on the
checks without the knowledge of the accused was an alteration that avoided the
checks; and that the obligation had been extinguished by prescription. [27]

Screenex, Inc., represented by Yu, filed its Comment. [28] Yu claimed that he had
testified on the basis of his personal dealings with his father-in law, whom
Evangelista dealt with in obtaining the loan. He further claimed that during the trial,
petitioner never raised the competence of the witness as an issue. [29] Moreover, Yu
argued that prescription set in from the accrual of the obligation; hence, while the
loan was transacted in 1991, the demand was made in February 2005, which was
within the 10-year prescriptive period.[30] Yu also argued that while Evangelista
claimed under oath that the loan had been paid in 1992, he was not able to present
any proof of payment.[31] Meanwhile, Yu insisted that the material alteration invoked
by Evangelista was unavailing, since the checks were undated; hence, nothing had
been altered.[32] Finally, Yu argued that Evangelista should not be allowed to invoke
prescription, which he was raising for the first time on appeal, and for which no
evidence was adduced in the court of origin.[33]

The CA denied the petition. [34] It held that (1) the reckoning time for the
prescriptive period began when the instrument was issued and the corresponding
check returned by the bank to its depositor;[35] (2) the issue of prescription was
raised for the first time on appeal with the RTC; [36] (3) the writing of the date on the
check cannot be considered as an alteration, as the checks were undated, so there
was nothing to change to begin with;[37] (4) the loan obligation was never denied by
petitioner, who claimed that it was settled in 1992, but failed to show any proof of
payment.[38] Quoting the MeTC Decision, the CA declared:
[t]he mere possession of a document evidencing an obligation by the person in
whose favor it was executed, merely raises a presumption of nonpayment which
may be overcome by proof of payment, or by satisfactory explanation of the fact
that the instrument is found in the hands of the original creditor not inconsistent
with the fact of payment.[39]

The dispositive portion reads:

WHEREFORE, premises considered, the petition is DENIED. The assailed August

19, 2009 Order of the Regional Trial Court, Branch 147, Makati City, denying
petitioner's Motion for Reconsideration of the Court's December 18, 2008 Decision
in Crim. Case Nos. 08-1723 and 08-1724 are AFFIRMED.

SO ORDERED.[40]

Petitioner filed a Motion for Reconsideration, [41] which was similarly denied in a

Resolution[42] dated 27 February 2014.

Hence, this Petition,[43] in which petitioner contends that the lower court erred in
ordering the accused to pay his alleged civil obligation to private complainant. In
particular, he argues that the court did not consider the prosecution's failure to
prove his civil liability to respondent, and that any civil liability there might have
been was already extinguished and/or barred by prescription. [44]

Meanwhile, respondent filed its Comment, [45] arguing that the date of prescription
was reckoned from the date of the check, 22 December 2004. So when the
complaint was filed on 25 August 2005, it was supposedly well within the
prescriptive period of ten (10) years under Article 1144 of the New Civil Code. [46]

OUR RULING

With petitioner's acquittal of the criminal charges for violation of BP 22, the only
issue to be resolved in this petition is whether the CA committed a reversible error
in holding that petitioner is still liable for the total amount of P1.5 million indicated
in the two checks.

We rule in favor of petitioner.

A check is discharged by any other

act which will discharge a simple
contract for the payment of money.

In BP 22 cases, the action for the corresponding civil obligation is deemed instituted
with the criminal action.[47] The criminal action for violation of BP 22 necessarily
includes the corresponding civil action, and no reservation to file such civil action
separately shall be allowed or recognized.[48]
The rationale for this rule has been elucidated in this wise:

Generally, no filing fees are required for criminal cases, but because of the inclusion
of the civil action in complaints for violation of B.P. 22, the Rules require the
payment of docket fees upon the filing of the complaint. This rule was enacted to
help declog court dockets which are filled with B.P. 22 cases as creditors actually
use the courts as collectors. Because ordinarily no filing fee is charged in criminal
cases for actual damages, the payee uses the intimidating effect of a criminal
charge to collect his credit gratis  and sometimes, upon being paid, the trial court is
not even informed thereof. The inclusion of the civil action in the criminal case is
expected to significantly lower the number of cases filed before the courts for
collection based on dishonored checks. It is also expected to expedite the
disposition of these cases. Instead of instituting two separate cases, one for
criminal and another for civil, only a single suit shall be filed and tried. It should be
stressed that the policy laid down by the Rules is to discourage the separate filing
of the civil action. The Rules even prohibit the reservation of a separate civil action,
which means that one can no longer file a separate civil case after the criminal
complaint is filed in court. The only instance when separate proceedings are allowed
is when the civil action is filed ahead of the criminal case. Even then, the Rules
encourage the consolidation of the civil and criminal cases. We have previously
observed that a separate civil action for the purpose of recovering the amount of
the dishonored checks would only prove to be costly, burdensome and time-
consuming for both parties and would further delay the final disposition of the case.
This multiplicity of suits must be avoided.[49] (Citations omitted)

This notwithstanding, the civil action deemed instituted with the criminal action is
treated as an "independent civil liability based on contract." [50]

By definition, a check is a bill of exchange drawn on a bank 'payable on demand.

[51]
 It is a negotiable instrument - written and signed by a drawer containing an
unconditional order to pay on demand a sum certain in money. [52] It is an
undertaking that the drawer will pay the amount indicated thereon. Section 119 of
the NIL, however, states that a negotiable instrument like a check may be
discharged by any other act which will discharge a simple contract for the payment
of money, to wit:

Sec. 119. Instrument; how discharged. - A negotiable instrument is discharged:

(a) By payment in due course by or on behalf of the principal debtor;

(b) By payment in due course by the party accommodated, where the instrument is
made or accepted for his accommodation;

(c) By the intentional cancellation thereof by the holder;

(d) By any other act which will discharge a simple contract for the payment
of money;
(e) When the principal debtor becomes the holder of the instrument at or after
maturity in his own right. (Emphasis supplied)

A check therefore is subject to prescription of actions upon a written contract.

Article 1144 of the Civil Code provides:

Article 1144. The following actions must be brought within ten years from the time
the right of action accrues:

1) Upon a written contract;

2) Upon an obligation created by law;
3) Upon a judgment. (Emphasis supplied)

Barring any extrajudicial or judicial demand that may toll the 10-year prescription
period and any evidence which may indicate any other time when the obligation to
pay is due, the cause of action based on a check is reckoned from the date
indicated on the check.

If the check is undated, however, as in the present petition, the cause of action is
reckoned from the date of the issuance of the check. This is so because regardless
of the omission of the date indicated on the check, Section 17 [53] of the Negotiable
Instruments Law instructs that an undated check is presumed dated as of the time
of its issuance.

While the space for the date on a check may also be filled, it must, however, be
filled up strictly in accordance with the authority given and within a reasonable
time.[54] Assuming that Yu had authority to insert the dates in the checks, the fact
that he did so after a lapse of more than 10 years from their issuance certainly
cannot qualify as changes made within a reasonable time.

Given the foregoing, the cause of action on the checks has become stale, hence,
time-barred. No written extrajudicial or judicial demand was shown to have been
made within 10 years which could have tolled the period. Prescription has indeed
set in.

Prescription allows the court to

dismiss the case motu proprio.

We therefore have no other recourse but to grant the instant petition on the ground
of prescription. Even if that defense was belatedly raised before the RTC for the first
time on appeal from the ruling of the MeTC, we nonetheless dismiss the complaint,
seeking to enforce the civil liability of Evangelista based on the undated checks, by
applying Section 1 of Rule 9 of the Rules of Court, to wit:

Section 1. Defenses and objections not pleaded. - Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the evidence on record that the
court has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the action is barred
by a prior judgment or by statute of limitations, the court shall dismiss the claim.

While it was on appeal before the RTC that petitioner invoked the defense of
prescription, we find that the pleadings and the evidence on record indubitably
establish that the action to hold petitioner liable for the two checks has already
prescribed.

The delivery of the check produces

the effect of payment when through
the fault of the creditor they have
been impaired

It is a settled rule that the creditor's possession of the evidence of debt is proof that
the debt has not been discharged by payment.[55] It is likewise an established tenet
that a negotiable instrument is only a substitute for money and not money, and the
delivery of such an instrument does not, by itself, operate as payment. [56] Thus,
in BPI v. Spouses Royeca,[57] we ruled that despite the lapse of three years from the
time the checks were issued, the obligation still subsisted and was merely
suspended until the payment by commercial document could actually be realized. [58]

However, payment is deemed effected and the obligation for which the check was
given as conditional payment is treated discharged, if a period of 10 years or more
has elapsed from the date indicated on the check until the date of encashment or
presentment for payment. The failure to encash the checks within a reasonable
time after issue, or more than 1 0 years in this instance, not only results in the
checks becoming stale but also in the obligation to pay being deemed fulfilled by
operation of law.

Art. 1249 of the Civil Code specifically provides that checks should be presented for
payment within a reasonable period after their issuance, to wit:

Art. 1249. The payment of debts in money shall be made in the currency stipulated,
and if it is not possible to deliver such currency, then in the currency which is legal
tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or

other mercantile documents shall produce the effect of payment only when
they have been cashed, or when through the fault of the creditor they have
been impaired.

In the meantime, the action derived from the original obligation shall be held in the
abeyance. (Emphasis supplied)

This rule is similarly stated in the Negotiable Instruments Law as follows:

Sec. 186. Within what time a check must be presented. — A check must be
presented for payment within a reasonable time after its issue or the drawer
will be discharged from liability thereon to the extent of the loss caused by
the delay. (Emphasis supplied)

These provisions were the very same ones we cited when we discharged a check by
reason of the creditor's unreasonable or unexplained delay in encashing it. In Papa
v. Valencia,[59] the respondents supposedly paid the petitioner the purchase price of
the lots in cash and in check. The latter disputed this claim and argued that he had
never encashed the checks, and that he could no longer recall the transaction that
happened 10 years earlier. This Court ruled:

Granting that petitioner had never encashed the check, his failure to do so for more
than ten (10) years undoubtedly resulted in the impairment of the check through
his unreasonable and unexplained delay.

While it is true that the delivery of a check produces the effect of payment only
when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if
the debtor is prejudiced by the creditor's unreasonable delay in presentment. The
acceptance of a check implies an undertaking of due diligence in
presenting it for payment, and if he from whom it is received sustains loss
by want of such diligence, it will be held to operate as actual payment of
the debt or obligation for which it was given. It has, likewise, been held that if
no presentment is made at all, the drawer cannot be held liable irrespective of loss
or injury unless presentment is otherwise excused. This is in harmony with Article
1249 of the Civil Code under which payment by way of check or other negotiable
instrument is conditioned on its being cashed, except when through the fault of the
creditor, the instrument is impaired. The payee of a check would be a creditor
under this provision and if its no-payment is caused by his negligence, payment will
be deemed effected and the obligation for which the check was given as conditional
payment will be discharged.[60] (Citations omitted and emphasis supplied)

Similarly in this case, we find that the delivery of the checks, despite the
subsequent failure to encash them within a period of 10 years or more, had the
effect of payment. Petitioner is considered discharged from his obligation to pay
and can no longer be pronounced civilly liable for the amounts indicated thereon.

WHEREFORE, the instant Petition is GRANTED. The Decision dated 1 October

2013 and Resolution dated 27 February 2014 in CA-G.R. SP No. 110680 are SET
ASIDE. The Complaint against petitioner is hereby DISMISSED.

SO ORDERED.

SECOND DIVISION
 [ G.R. No. 169467, February 25, 2010 ]
ALFREDO P. PACIS AND CLEOPATRA D. PACIS, PETITIONERS,
VS. JEROME JOVANNE MORALES, RESPONDENT.

DECISION

CARPIO, J.:

The Case

This petition for review[1] assails the 11 May 2005 Decision[2] and the 19 August
2005 Resolution of the Court of Appeals in CA-G.R. CV No. 60669.

The Facts

On 17 January 1995, petitioners Alfredo P. Pacis and Cleopatra D. Pacis

(petitioners) filed with the trial court a civil case for damages against respondent
Jerome Jovanne Morales (respondent). Petitioners are the parents of Alfred Dennis
Pacis, Jr. (Alfred), a 17-year old student who died in a shooting incident inside the
Top Gun Firearms and Ammunitions Store (gun store) in Baguio City. Respondent is
the owner of the gun store.

The facts as found by the trial court are as follows:

On January 19, 1991, Alfred Dennis Pacis, then 17 years old and a first year
student at the Baguio Colleges Foundation taking up BS Computer Science, died
due to a gunshot wound in the head which he sustained while he was at the Top
Gun Firearm[s] and Ammunition[s] Store located at Upper Mabini Street, Baguio
City. The gun store was owned and operated by defendant Jerome Jovanne
Morales.

With Alfred Pacis at the time of the shooting were Aristedes Matibag and Jason
Herbolario. They were sales agents of the defendant, and at that particular time,
the caretakers of the gun store.

The bullet which killed Alfred Dennis Pacis was fired from a gun brought in by a
customer of the gun store for repair.

The gun, an AMT Automag II Cal. 22 Rimfire Magnum with Serial No. SN-H34194
(Exhibit "Q"), was left by defendant Morales in a drawer of a table located inside
the gun store.

Defendant Morales was in Manila at the time. His employee Armando Jarnague, who
was the regular caretaker of the gun store was also not around. He left earlier and
requested sales agents Matibag and Herbolario to look after the gun store while he
and defendant Morales were away. Jarnague entrusted to Matibag and Herbolario a
bunch of keys used in the gun store which included the key to the drawer where the
fatal gun was kept.

It appears that Matibag and Herbolario later brought out the gun from the drawer
and placed it on top of the table. Attracted by the sight of the gun, the young Alfred
Dennis Pacis got hold of the same. Matibag asked Alfred Dennis Pacis to return the
gun. The latter followed and handed the gun to Matibag. It went off, the bullet
hitting the young Alfred in the head.

A criminal case for homicide was filed against Matibag before branch VII of this
Court. Matibag, however, was acquitted of the charge against him because of the
exempting circumstance of "accident" under Art. 12, par. 4 of the Revised Penal
Code.

By agreement of the parties, the evidence adduced in the criminal case for
homicide against Matibag was reproduced and adopted by them as part of their
evidence in the instant case.[3]

On 8 April 1998, the trial court rendered its decision in favor of petitioners. The
dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiffs [Spouses Alfredo P. Pacis and Cleopatra D. Pacis] and against the
defendant [Jerome Jovanne Morales] ordering the defendant to pay plaintiffs --

(1) P30,000.00 as indemnity for the death of Alfred Pacis;

(2) P29,437.65 as actual damages for the hospitalization and burial
expenses incurred by the plaintiffs;
(3) P100,000.00 as compensatory damages;
(4) P100,000.00 as moral damages;
(5) P50,000.00 as attorney's fees.

SO ORDERED.[4]

Respondent appealed to the Court of Appeals. In its Decision [5] dated 11 May 2005,
the Court of Appeals reversed the trial court's Decision and absolved respondent
from civil liability under Article 2180 of the Civil Code.[6]

Petitioners filed a motion for reconsideration, which the Court of Appeals denied in
its Resolution dated 19 August 2005.

Hence, this petition.

The Trial Court's Ruling

The trial court held respondent civilly liable for the death of Alfred under Article
2180 in relation to Article 2176 of the Civil Code.[7] The trial court held that the
accidental shooting of Alfred which caused his death was partly due to the
negligence of respondent's employee Aristedes Matibag (Matibag). Matibag and
Jason Herbolario (Herbolario) were employees of respondent even if they were only
paid on a commission basis. Under the Civil Code, respondent is liable for the
damages caused by Matibag on the occasion of the performance of his duties,
unless respondent proved that he observed the diligence of a good father of a
family to prevent the damage. The trial court held that respondent failed to observe
the required diligence when he left the key to the drawer containing the loaded
defective gun without instructing his employees to be careful in handling the loaded
gun.

The Court of Appeals' Ruling

The Court of Appeals held that respondent cannot be held civilly liable since there
was no employer-employee relationship between respondent and Matibag. The
Court of Appeals found that Matibag was not under the control of respondent with
respect to the means and methods in the performance of his work. There can be no
employer-employee relationship where the element of control is absent. Thus,
Article 2180 of the Civil Code does not apply in this case and respondent cannot be
held liable.

Furthermore, the Court of Appeals ruled that even if respondent is considered an

employer of Matibag, still respondent cannot be held liable since no negligence can
be attributed to him. As explained by the Court of Appeals:

Granting arguendo that an employer-employee relationship existed between

Aristedes Matibag and the defendant-appellant, we find that no negligence can be
attributed to him.

Negligence is best exemplified in the case of Picart vs. Smith (37 Phil. 809). The
test of negligence is this:

"x x x. Could a prudent man, in the position of the person to whom negligence is
attributed, foresee harm to the person injured as a reasonable consequence of the
course about to be pursued? If so, the law imposes a duty on the actor to refrain
from that course or take precaution against its mischievous results, and the failure
to do so constitutes negligence. x x x."

Defendant-appellant maintains that he is not guilty of negligence and lack of due

care as he did not fail to observe the diligence of a good father of a family. He
submits that he kept the firearm in one of his table drawers, which he locked and
such is already an indication that he took the necessary diligence and care that the
said gun would not be accessible to anyone. He puts [sic] that his store is engaged
in selling firearms and ammunitions. Such items which are per se dangerous are
kept in a place which is properly secured in order that the persons coming into the
gun store would not be able to take hold of it unless it is done intentionally, such as
when a customer is interested to purchase any of the firearms, ammunitions and
other related items, in which case, he may be allowed to handle the same.
We agree. Much as We sympathize with the family of the deceased, defendant-
appellant is not to be blamed. He exercised due diligence in keeping his loaded gun
while he was on a business trip in Manila. He placed it inside the drawer and locked
it. It was taken away without his knowledge and authority. Whatever happened to
the deceased was purely accidental.[8]

The Issues

Petitioners raise the following issues:

I. THE APPELLATE COURT COMMITTED SERIOUS ERROR IN RENDERING THE

DECISION AND RESOLUTION IN QUESTION IN DISREGARD OF LAW AND
JURISPRUDENCE BY REVERSING THE ORDER OF THE REGIONAL TRIAL
COURT (BRANCH 59) OF BAGUIO CITY NOTWITHSTANDING CLEAR,
AUTHENTIC RECORDS AND TESTIMONIES PRESENTED DURING THE TRIAL
WHICH NEGATE AND CONTRADICT ITS FINDINGS.

II. THE APPELLATE COURT COMMITTED GRAVE, REVERSIBLE ERROR IN

RENDERING THE DECISION AND RESOLUTION IN QUESTION BY DEPARTING
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
THEREBY IGNORING THE FACTUAL FINDINGS OF THE REGIONAL TRIAL
COURT (BRANCH 59) OF BAGUIO CITY SHOWING PETITIONER'S CLEAR
RIGHTS TO THE AWARD OF DAMAGES.[9]

The Ruling of the Court

We find the petition meritorious.

This case for damages arose out of the accidental shooting of petitioners' son.
Under Article 1161[10] of the Civil Code, petitioners may enforce their claim for
damages based on the civil liability arising from the crime under Article 100 [11] of
the Revised Penal Code or they may opt to file an independent civil action for
damages under the Civil Code. In this case, instead of enforcing their claim for
damages in the homicide case filed against Matibag, petitioners opted to file an
independent civil action for damages against respondent whom they alleged was
Matibag's employer. Petitioners based their claim for damages under Articles 2176
and 2180 of the Civil Code.

Unlike the subsidiary liability of the employer under Article 103 [12] of the Revised
Penal Code,[13] the liability of the employer, or any person for that matter, under
Article 2176 of the Civil Code is primary and direct, based on a person's own
negligence. Article 2176 states:

Art. 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called quasi-
delict and is governed by the provisions of this Chapter.

This case involves the accidental discharge of a firearm inside a gun store. Under
PNP Circular No. 9, entitled the "Policy on Firearms and Ammunition
Dealership/Repair," a person who is in the business of purchasing and selling of
firearms and ammunition must maintain basic security and safety requirements of a
gun dealer, otherwise his License to Operate Dealership will be suspended or
canceled.[14]

Indeed, a higher degree of care is required of someone who has in his possession
or under his control an instrumentality extremely dangerous in character, such as
dangerous weapons or substances. Such person in possession or control of
dangerous instrumentalities has the duty to take exceptional precautions to prevent
any injury being done thereby.[15] Unlike the ordinary affairs of life or business
which involve little or no risk, a business dealing with dangerous weapons requires
the exercise of a higher degree of care.

As a gun store owner, respondent is presumed to be knowledgeable about firearms

safety and should have known never to keep a loaded weapon in his store to avoid
unreasonable risk of harm or injury to others. Respondent has the duty to ensure
that all the guns in his store are not loaded. Firearms should be stored unloaded
and separate from ammunition when the firearms are not needed for ready-access
defensive use.[16] With more reason, guns accepted by the store for repair should
not be loaded precisely because they are defective and may cause an accidental
discharge such as what happened in this case. Respondent was clearly negligent
when he accepted the gun for repair and placed it inside the drawer without
ensuring first that it was not loaded. In the first place, the defective gun should
have been stored in a vault. Before accepting the defective gun for repair,
respondent should have made sure that it was not loaded to prevent any untoward
accident. Indeed, respondent should never accept a firearm from another person,
until the cylinder or action is open and he has personally checked that the weapon
is completely unloaded.[17] For failing to insure that the gun was not loaded,
respondent himself was negligent. Furthermore, it was not shown in this case
whether respondent had a License to Repair which authorizes him to repair
defective firearms to restore its original composition or enhance or upgrade
firearms.[18]

Clearly, respondent did not exercise the degree of care and diligence required of a
good father of a family, much less the degree of care required of someone dealing
with dangerous weapons, as would exempt him from liability in this case.

WHEREFORE, we GRANT the petition. We SET ASIDE the 11 May 2005 Decision

and the 19 August 2005 Resolution of the Court of Appeals in CA-G.R. CV No.
60669. We REINSTATE the trial court's Decision dated 8 April 1998.

SO ORDERED.
 THIRD DIVISION
[ G.R. No. 120639, September 25, 1998 ]
BPI EXPRESS CARD CORPORATION, PETITIONER, VS. COURT
OF APPEALS AND RICARDO J. MARASIGAN, RESPONDENTS.

DECISION

KAPUNAN, J.:

The question before this Court is whether private respondent can recover moral
damages arising from the cancellation of his credit card by petitioner credit card
corporation.

The facts of the case are as stated in the decision of the respondent court, [1] to wit:

The case arose from the dishonor of the credit card of the plaintiff Atty. Ricardo J.
Marasigan by Cafe Adriatico, a business establishment accredited with the
defendant-appellant BPI Express Card Corporation (BECC for brevity) on December
8, 1989 when the plaintiff entertained some guests thereat.

The records of this case show that plaintiff, who is a lawyer by profession was a
complimentary member of BECC from February 1988 to February 1989 and was
issued Credit Card No. 100-012-5534 with a credit limit of P3,000.00 and with a
monthly billing every 27th of the month (Exh. N), subject to the terms and
conditions stipulated in the contract (Exh. 1-b). His membership was renewed for
another year or until February 1990 and the credit limit was increased to P5,000.00
(Exh. A). The plaintiff oftentimes exceeded his credit limits (Exhs. I, I-1 to I-12) but
this was never taken against him by the defendant and even his mode of paying his
monthly bills in check was tolerated. Their contractual relations went on smoothly
until his statement of account for October, 1989 amounting to P8,987.84 was not
paid in due time. The plaintiff admitted having inadvertently failed to pay his
account for the said month because he was in Quezon province attending to some
professional and personal commitments. He was informed by his secretary that
defendant was demanding immediate payment of his outstanding account, was
requiring him to issue a check for P15,000.00 which would include his future bills,
and was threatening to suspend his credit card. Plaintiff issued Far East Bank and
Trust Co. Check No. 494675 in the amount of P15,000.00, postdated December 15,
1989 which was received on November 23, 1989 by Tess Lorenzo, an employee of
the defendant (Exhs. J and J-1), who in turn gave the said check to Jeng Angeles, a
co-employee who handles the account of the plaintiff. The check remained in the
custody of Jeng Angeles. Mr. Roberto Maniquiz, head of the collection department
of defendant was formally informed of the postdated check about a week later. On
November 28, 1989, defendant served plaintiff a letter by ordinary mail informing
him of the temporary suspension of the privileges of his credit card and the
inclusion of his account number in their Caution List. He was also told to refrain
from further use of his credit card to avoid any inconvenience/embarrassment and
that unless he settles his outstanding account with the defendant within 5 days
from receipt of the letter, his membership will be permanently cancelled (Exh. 3).
There is no showing that the plaintiff received this letter before December 8, 1989.
Confident that he had settled his account with the issuance of the postdated check,
plaintiff invited some guests on December 8, 1989 and entertained them at Café
Adriatico. When he presented his credit card to Café Adriatico for the bill amounting
to P735.32, said card was dishonored. One of his guests, Mary Ellen Ringler, paid
the bill by using her own credit card, a Unibankard (Exhs. M, M-1 and M-2).

In a letter addressed to the defendant dated December 12, 1989, plaintiff

requested that he be sent the exact billing due him as of December 15, 1989, to
withhold the deposit of his postdated check and that said check be returned to him
because he had already instructed his bank to stop the payment thereof as the
defendant violated their agreement that the plaintiff issue the check to the
defendant to cover his account amounting to only P8,987.84 on the condition that
the defendant will not suspend the effectivity of the card (Exh. D). A letter dated
December 16, 1989 was sent by the plaintiff to the manager of FEBTC, Ramada
Branch, Manila requesting the bank to stop the payment of the check (Exhs. E, E-
1). No reply was received by plaintiff from the defendant to his letter dated
December 12, 1989. Plaintiff sent defendant another letter dated March 12, 1990
reminding the latter that he had long rescinded and cancelled whatever
arrangement he entered into with defendant and requesting for his correct billing,
less the improper charges and penalties, and for an explanation within five (5) days
from receipt thereof why his card was dishonored on December 8, 1989 despite
assurance to the contrary by defendant's personnel-in-charge, otherwise the
necessary court action shall be filed to hold defendant responsible for the
humiliation and embarrassment suffered by him (Exh. F). Plaintiff alleged further
that after a few days, a certain Atty. Albano, representing himself to be working
with office of Atty. Lopez, called him inquiring as to how the matter can be threshed
out extrajudicially but the latter said that such is a serious matter which cannot be
discussed over the phone. The defendant served its final demand to the plaintiff
dated March 21, 1990 requiring him to pay in full his overdue account, including
stipulated fees and charges, within 5 days from receipt thereof or face court action
also to replace the postdated check with cash within the same period or face
criminal suit for violation of the Bouncing Check Law (Exh. G/Exh. 13). The plaintiff,
in a reply letter dated April 5, 1990 (Exh. H), demanded defendant's compliance
with his request in his first letter dated March 12, 1990 within three (3) days from
receipt, otherwise the plaintiff will file a case against them, x x x.[2]

Thus, on May 7, 1990 private respondent filed a complaint for damages against
petitioner before the Regional Trial Court of Makati, Branch 150, docketed as Civil
Case No. 90-1174.

After trial, the trial court ruled for private respondent, finding that herein petitioner
abused its right in contravention of Article 19 of the Civil Code. [3] The dispositive
portion of the decision reads:

Wherefore, judgment is hereby rendered ordering the defendant to pay plaintiff the
following:

1. P100,000.00 as moral damages;

2. P50,000.00 as exemplary damages; and
3. P20,000.00 by way of attorney's fees.

On the other hand, plaintiff is ordered to pay defendant its outstanding obligation in
the amount of P14,439.41, amount due as of December 15, 1989. [4]

The trial court's ruling was based on its findings and conclusions, to wit:

There is no question that plaintiff had been in default in the payment of his billings
for more than two months, prompting defendant to call him and reminded him of
his obligation. Unable to personally talk with him, this Court is convinced that
somehow one or another employee of defendant called him up more than once.

However, while it is true that, as indicated in the terms and conditions of the
application for BPI credit card, upon failure of the cardholder to pay his outstanding
obligation for more than thirty (30) days, the defendant can automatically suspend
or cancel the credit card, that reserved right should not have been abused, as it
was in fact abused, in plaintiff's case. What is more peculiar here is that there have
been admitted communications between plaintiff and defendant prior to the
suspension or cancellation of plaintiff's credit card and his inclusion in the caution
list. However, nowhere in any of these communications was there ever a hint given
to plaintiff that his card had already been suspended or cancelled. In fact, the Court
observed that while defendant was trying its best to persuade plaintiff to update its
account and pay its obligation, it had already taken steps to suspend/cancel
plaintiff's card and include him in the caution list. While the Court admires
defendant's diplomacy in dealing with its clients, it cannot help but frown upon the
backhanded way defendant dealt with plaintiff's case. For despite Tess Lorenzo's
denial, there is reason to believe that plaintiff was indeed assured by defendant of
the continued honoring of his credit card so long as he pays his obligation of
P15,000.00. Worst, upon receipt of the postdated check, defendant kept the same
until a few days before it became due and said check was presented to the head of
the collection department, Mr. Maniquiz, to take steps thereon, resulting to the
embarrassing situation plaintiff found himself in on December 8, 1989. Moreover,
Mr. Maniquiz himself admitted that his request for plaintiff to replace the check with
cash was not because it was a postdated check but merely to tally the payment
with the account due.

Likewise, the Court is not persuaded by the sweeping denials made by Tess Lorenzo
and her claim that her only participation was to receive the subject check. Her
immediate superior, Mr. Maniquiz testified that he had instructed Lorenzo to
communicate with plaintiff once or twice to request the latter to replace the
questioned check with cash, thus giving support to the testimony of plaintiff's
witness, Dolores Quizon, that it was one Tess Lorenzo who she had talked over the
phone regarding plaintiff's account and plaintiff's own statement that it was this
woman who assured him that his card has not yet been and will not be
cancelled/suspended if he would pay defendant the sum of P15,000.00.

Now, on the issue of whether or not upon receipt of the subject check, defendant
had agreed that the card shall remain effective, the Court takes note of the
following:

1. An employee of defendant corporation unconditionally accepted the subject

check upon its delivery, despite its being a postdated one; and the amount did not
tally with plaintiff's obligation;

2. Defendant did not deny nor controvert plaintiff's claim that all his payments were
made in checks;

3. Defendant's main witness, Mr. Maniquiz, categorically stated that the request for
plaintiff to replace his postdated check with cash was merely for the purpose of
tallying plaintiff's outstanding obligation with his payment and not to question the
postdated check;

4. That the card was suspended almost a week after receipt of the postdated check;
5. That despite the many instances that defendant could have informed plaintiff
over the phone of the cancellation or suspension of his credit card, it did not do so,
which could have prevented the incident of December 8, 1989, the notice allegedly
sent thru ordinary mail is not only unreliable but takes a long time. Such action as
suspension of credit card must be immediately relayed to the person affected so as
to avoid embarrassing situations.

6. And that the postdated check was deposited on December 20, 1989.

In view of the foregoing observations, it is needless to say that there was indeed an
arrangement between plaintiff and the defendant, as can be inferred from the acts
of the defendant's employees, that the subject credit card is still good and could
still be used by the plaintiff as it would be honored by the duly accredited
establishment of defendant.[5]

Not satisfied with the Regional Trial Court's decision, petitioner appealed to the
Court of Appeals, which, in a decision promulgated on March 9, 1995 ruled in its
dispositive portion:

WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED

with the MODIFICATION that the defendant-appellant shall pay the plaintiff-
appellee the following: P50,000.00 as moral damages; P25,000.00 as exemplary
damages; and P10,000.00 by way of attorney's fees.

SO ORDERED.[6]

Hence, the present petition on the following assignment of errors:

THE LOWER COURT ERRED IN DECLARING THAT THERE WAS INDEED AN

AGREEMENT OR ARRANGEMENT ENTERED INTO BETWEEN THE PARTIES WHEREIN
THE DEFENDANT REQUIRED THE PLAINTIFF TO ISSUE A POSTDATED CHECK IN ITS
FAVOR IN THE AMOUNT OF P15,000.00 AS PAYMENT FOR HIS OVERDUE
ACCOUNTS, WITH THE CONDITION THAT THE PLAINTIFF'S CREDIT CARD WILL NOT
BE SUSPENDED OR CANCELLED.

II

THE LOWER COURT ERRED IN HOLDING DEFENDANT LIABLE FOR DAMAGES AND
ATTORNEY'S FEES ARISING OUT FROM THE DISHONOR OF THE PLAINTIFF'S
CREDIT CARD.[7]
We find the petition meritorious.

The first issue to be resolved is whether petitioner had the right to suspend the
credit card of the private respondent.

Under the terms and conditions of the credit card, signed by the private
respondent, any card with outstanding balances after thirty (30) days from original
billing/statement shall automatically be suspended, thus:

PAYMENT OF CHARGES - BECC shall furnish the Cardholder a monthly statement of

account made through the use of the CARD and the Cardholder agrees that all
charges made through the use of the CARD shall be paid by the Cardholder on or
before the last day for payments, which is twenty (20) days from the date of the
said statement of account, and such payment due date may be changed to an
earlier date if the Cardholder's account is considered overdue and/or with balances
in excess of the approved credit limit; or to such other date as may be deemed
proper by the CARD issuer with notice to the Cardholder on the same monthly
statement of account. If the last day for payment falls on a Saturday, Sunday or
Holiday, the last day for payment automatically becomes the last working day prior
to said payment date. However, notwithstanding the absence or lack of proof of
service of the statement of charges to the Cardholder, the latter shall pay any or all
charges made through the use of the CARD within thirty (30) days from the date or
dates thereof. Failure of Cardholder to pay any and all charges made through the
CARD within the payment period as stated in the statement of charges or within
thirty (30) days from actual date or dates whichever occur earlier, shall render him
in default without the necessity of demand from BECC, which the Cardholder
expressly waives. These charges or balance thereof remaining unpaid after the
payment due date indicated on the monthly statement of account shall bear interest
at the rate of 3% per month and an additional penalty fee equivalent to another 3%
of the amount due for every month or a fraction of a month's delay. PROVIDED,
that if there occurs any change on the prevailing market rates. BECC shall have the
option to adjust the rate of interest and/or penalty fee due on the outstanding
obligation with prior notice to the Cardholder.

xxx                               xxx                               xxx

Any CARD with outstanding balances unpaid after thirty (30) days from original
billing/statement date shall automatically be suspended, and those with accounts
unpaid after sixty (60) days from said original billing/statement date shall
automatically be cancelled, without prejudice to BECC's right to suspend or cancel
any CARD any time and for whatever reason. In case of default in his obligation as
provided for in the preceding paragraph, Cardholder shall surrender his CARD to
BECC and shall in addition to the interest and penalty charges aforementioned, pay
the following liquidated damages and/or fees (a) a collection fee of 25% of the
amount due if the account is referred to a collection agency or attorney; (b) a
service fee of P100 for every dishonored check issued by the Cardholder in payment
of his account, with prejudice, however, to BECC's right of considering Cardholder's
obligation unpaid, cable cost for demanding payment or advising cancellation of
membership shall also be for Cardholder's account; and (c) a final fee equivalent to
25% of the unpaid balance, exclusive of litigation expenses and judicial costs, if the
payment of the account is enforced through court action. [8]

The aforequoted provision of the credit card cannot be any clearer. By his own
admission, private respondent made no payment within thirty days for his original
billing/statement dated 27 September 1989. Neither did he make payment for his
original billing/statement dated 27 October 1989. Consequently, as early as 28
October 1989, thirty days from the non-payment of his billing dated 27 September
1989, petitioner corporation could automatically suspend his credit card.

The next issue is whether prior to the suspension of private respondent's credit card
on 28 November 1989, the parties entered into an agreement whereby the card
could still be used and would be duly honored by duly accredited establisments.

We agree with the findings of the respondent court, that there was an arrangement
between the parties, wherein the petitioner required the private respondent to issue
a check worth P15,000 as payment for the latter's billings. However, we find that
the private respondent was not able to comply with his obligation.

As the testimony of private respondent himself bears out, the agreement was for
the immediate payment of the outstanding account:

In said statement of account that you are supposed to pay the P8,974.84 the charge of
Q
interest and penalties, did you note that?

A Yes, sir. I noted the date.

Q When?

A When I returned from the Quezon province, sir.

Q When?

A I think November 22, sir.

So that before you used again the credit card you were not able to pay immediately this
Q
P8,987.84 in cash?
A I paid P15,000.00, sir.

My question Mr. Witness is, did you pay this P8,987.84 in charge of interest and penalties
Q
immediately in cash?

A In cash no, but in check, sir.

You said that you noted the word "immediately" in bold letters in your statement of account,
Q
why did you not pay immediately?

A Because I received that late, sir.

Yes, on November 22 when you received from the secretary of the defendant telling you to
Q
pay the principal amount of P8,987.84, why did you not pay?

There was a communication between me and the defendant, I was required to pay P8,000.00
A
but I paid in check for P15,000.00, sir.

Do you have any evidence to show that the defendant required you to pay in check for
Q
P15,000.00?

A Yes, sir.

Q Where is it?

A It was by telecommunication, sir.

Q So there is no written communication between you and the defendant?

A There was none, sir.

There is no written agreement which says that P8,987.84 should be paid for P15,000.00 in
Q
check, there is none?

A Yes, no written agreement, sir.

And you as a lawyer you know that a check is not considered as cash specially when it is
Q
postdated sent to the defendant?

A That is correct, sir.

Clearly, the purpose of the arrangement between the parties on November 22,
1989, was for the immediate payment of the private respondent's outstanding
account, in order that his credit card would not be suspended.

As agreed upon by the parties, on the following day, private respondent did issue a
check for P15,000. However, the check was postdated 15 December 1989. Settled
is the doctrine that a check is only a substitute for money and not money, the
delivery of such an instrument does not, by itself operate as payment. [9] This is
especially true in the case of a postdated check.

Thus, the issuance by the private respondent of the postdated check was not
effective payment. It did not comply with his obligation under the arrangement with
Miss Lorenzo. Petitioner corporation was therefore justified in suspending his credit
card.

Finally, we find no legal and factual basis for private respondent's assertion that in
canceling the credit card of the private respondent, petitioner abused its right under
the terms and conditions of the contract.

To find the existence of an abuse of right under Article 19 the following elements
must be present: (1) There is a legal right or duty; (2) which is exercised in bad
faith; (3) for the sole intent of prejudicing or injuring another.[10]

Time and again this Court has held that good faith is presumed and the burden of
proving bad faith is on the party alleging it.[11] This private respondent failed to do.
In fact, the action of the petitioner belies the existence of bad faith. As early as 28
October 1989, petitioner could have suspended private respondent's card outright.
Instead, petitioner allowed private respondent to use his card for several weeks.
Petitioner had even notified private respondent of the impending suspension of his
credit card and made special accommodations for him for settling his outstanding
account. As such, petitioner cannot be said to have capriciously and arbitrarily
canceled the private respondent's credit card.

We do not dispute the findings of the lower court that private respondent suffered
damages as a result of the cancellation of his credit card. However, there is a
material distinction between damages and injury. Injury is the illegal invasion of a
legal right; damage is the loss, hurt, or harm which results from the injury; and
damages are the recompense or compensation awarded for the damage suffered.
Thus, there can be damage without injury in those instances in which the loss or
harm was not the result of a violation of a legal duty. In such cases, the
consequences must be borne by the injured person alone, the law affords no
remedy for damages resulting from an act which does not amount to a legal injury
or wrong. These situations are often called damnum absque injuria.[12]

In other words, in order that a plaintiff may maintain an action for the injuries of
which he complains, he must establish that such injuries resulted from a breach of
duty which the defendant owed to the plaintiff - a concurrence of injury to the
plaintiff and legal responsibility by the person causing it. The underlying basis for
the award of tort damages is the premise that an individual was injured in
contemplation of law. Thus, there must first be a breach of some duty and the
imposition of liability for that breach before damages may be awarded; [13] and the
breach of such duty should be the proximate cause of the injury.

We therefore disagree with the ruling of the respondent court that the dishonor of
the credit card of the private respondent by Café Adriatico is attributable to
petitioner for its willful or gross neglect to inform the private respondent of the
suspension of his credit card, the unfortunate consequence of which brought social
humiliation and embarrassment to the private respondent. [14]

It was petitioner's failure to settle his obligation which caused the suspension of his
credit card and subsequent dishonor at Café Adriatico. He can not now pass the
blame to the petitioner for not notifying him of the suspension of his card. As
quoted earlier, the application contained the stipulation that the petitioner could
automatically suspend a card whose billing has not been paid for more than thirty
days. Nowhere is it stated in the terms and conditions of the application that there
is a need of notice before suspension may be effected as private respondent claims.
[15]

This notwithstanding, on November 28, 1989, the day of the suspension of private
respondent's card, petitioner sent a letter by ordinary mail notifying private
respondent that his card had been temporarily suspended. Under the Rules on
Evidence, there is a disputable presumption that letters duly directed and mailed
were received on the regular course of mail.[16] Aside from the private respondent's
bare denial, he failed to present evidence to rebut the presumption that he received
said notice. In fact upon cross examination, private respondent admitted that he
did received the letter notifying him of the cancellation:

Q Now you were saying that there was a first letter sent to you by the defendant?

A Your letter, sir.

Q Was that the first letter that you received?

A Yes, sir.

Q Is it that there was a communication first between you and the defendant?

A There was none, sir. I received a cancellation notice but that was after November 27. [17]

As it was private respondent's own negligence which was the proximate cause of his
embarrassing and humiliating experience, we find the award of damages by the
respondent court clearly unjustified. We take note of the fact that private
respondent has not yet paid his outstanding account with petitioner.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals ordering
petitioner to pay private respondent P100,000.00 as moral damages, P50,000.00 as
exemplary damages and P20,000.00 as attorney's fees, is SET ASIDE. Private
respondent is DIRECTED to pay his outstanding obligation with the petitioner in
the amount of P14,439.41.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 206709, February 06, 2019 ]
VDM TRADING, INC. AND SPOUSES LUIS AND NENA
DOMINGO, REPRESENTED BY THEIR ATTORNEY-IN-FACT,
ATTY. F. WILLIAM L. VILLAREAL, PETITIONERS, VS. LEONITA
CARUNGCONG AND WACK WACK TWIN TOWERS
CONDOMINIUM ASSOCIATION, INC., RESPONDENTS.

DECISION

CAGUIOA, J:

Before the Court is a Petition for Review on Certiorari[1] (Petition) under Rule 45 of

the Rules of Court filed by petitioners VDM Trading, Inc. (petitioner VDM) and
Spouses Luis and Nena Domingo (collectively referred to as the petitioners Sps.
Domingo), assailing the Decision[2] dated July 13, 2012 (assailed Decision) and
Resolution[3] dated March 20, 2013 (assailed Resolution) of the Court of Appeals
(CA) Eleventh Division in CA-G.R. CV No. 89479.

The Facts and Antecedent Proceedings

As narrated by the CA in the assailed Decision and as culled from the records of the
instant case, the essential facts and antecedent proceedings of the case are as
follows:

On August 21, 2002, petitioner VDM and the petitioners Sps. Domingo filed before
the Regional Trial Court of Mandaluyong City, Branch 213 (RTC) a Complaint for
Damages[4] (Complaint) against respondents Leonita Carungcong (respondent
Carungcong), Wack Wack Twin Towers Condominium Association, Inc. (respondent
Wack Wack), and Hak Yek Tan (Tan).

In the said Complaint, it was alleged that petitioner VDM is the owner of Unit
2208B-1 (the Unit) located at Wack Wack Twin Towers Condominium (the
Condominium) at Wack Wack Road, Mandaluyong City. Petitioner Nena Domingo
(petitioner Nena), the majority stockholder of petitioner VDM, and her husband,
petitioner Luis Domingo (petitioner Luis), are the actual occupants of the Unit.

Sometime in December 1998, while the petitioners Sps. Domingo were in the
United States, petitioner Nena's sister, Nancy Lagman-Castillo (Lagman-Castillo),
discovered that soapy water was heavily penetrating through the ceiling of the Unit.
With the leak persisting for several days, Lagman-Castillo reported the matter with
the petitioners Sps. Domingo's counsel and attorney-in-fact, Atty. William Villareal
(Atty. Villareal), as well as respondent Wack Wack's building administrator.

On December 10, 1998, Atty. Villareal allegedly met with respondent Wack Wack's
Acting Property Manager, Arlene Cruz (Cruz), who supposedly revealed that she
previously conducted an inspection on the Unit and found that the strong leak
apparently came from Unit 2308B-1, which is located directly above the Unit. Unit
2308B-1 is owned by respondent Carungcong, but was being leased by Tan at that
time. Cruz allegedly explained that Unit 2308B-1's balcony, which was being utilized
as a laundry area, had unauthorized piping and plumbing works installed therein,
which were in violation of respondent Wack Wack's rules and regulations, as well as
the building's original plans.

Atty. Villareal conducted his own inspection of the Unit in the presence of Lagman-
Castillo and Cruz, and noted damages on the following: (1) ceilings and walls,
including the wall paper and panel board; (2) cabinets and other improvements on
the wall; (3) narra flooring, which showed warping and permanent discoloration;
(4) bed, mattress, sheets, and covers; (5) curtains, which showed signs of
shrinking and deterioration; (6) personal clothing, articles of personal use, and
important documents inside the cabinet; and (7) miscellaneous damages.

For this reason, on behalf of the petitioners Sps. Domingo, Atty. Villareal sent a
letter[5] dated December 16, 1998, demanding that respondents Wack Wack and
Carungcong make restoration works and/or pay for the damages caused upon the
Unit.

When no action was taken by respondents Wack Wack and Carungcong after the
lapse of a considerable length of time, Atty. Villareal allegedly sent another
letter[6] dated September 1, 1999 to respondents Wack Wack, Carungcong, and
Tan, as well as Golden Dragon Real Estate Corporation (Golden Dragon), the
developer of the Condominium, demanding that repairs be made on the Unit.

Subsequently, repair works on the Unit were referred to M. Laher Construction (M.
Laher) for a quotation. In its letter[7] dated September 1, 2000 addressed to
petitioner Luis, M. Laher stated that the estimated cost in repairing the Unit's
balcony, master bedroom, dining and living room, and the children's room
amounted to P490,635.00. Afterwards, several demand letters [8] were sent by the
counsel of the petitioners Sps. Domingo to respondents Wack Wack, Carungcong,
Tan, and Golden Dragon for the payment of the amount quoted by M. Laher, but to
no avail.

Hence, the petitioners Sps. Domingo were constrained to file their Complaint. As
stated in the Complaint, the cause of action against Tan is based on the supposed
"unauthorized installation of plumbing in the balcony of Unit 2308-B1 and x x x
unauthorized conversion of said balcony into a laundry/wash area" [9] undertaken by
Tan. As regards, respondent Carungcong, she was being held solidarity liable with
respondent Tan as the registered owner of Unit 2308-B1, allegedly failing in her
responsibility of ensuring that Tan is complying with all of the rules and regulations
of respondent Wack Wack.[10] With respect to respondent Wack Wack, the cause of
action was based on the latter's alleged act of being "utterly negligent in failing to
enforce and implement the Association's Rules and Regulations prohibiting illegal or
unauthorized constructions, additions, or alteration by tenants to their units." [11]

The petitioners Sps. Domingo prayed for the award of P490,635.00 as actual
damages, P300,000.00 as exemplary damages, and P40,000.00 as attorney's fees,
litigation expenses, and costs of suit.

Summonses were served upon all the respondents, except Tan who was no longer
residing at the given address.

Subsequently, respondent Wack Wack filed an Answer with Counterclaim and

Crossclaim[12] against respondent Carungcong and Tan. It was respondent Wack
Wack's contention that the responsibility of enforcing and monitoring the policies on
the use and occupancy of condominium units lied solely with Golden Dragon, as
embodied in the Amended Master Deed with Declaration of Restrictions of Wack
Wack Twin Towers (Amended Master Deed).[13] As stipulated therein, Golden
Dragon had the duty to orient the unit owners of the Condominium on the
prohibitions and restrictions regarding the construction, repair, or alteration of any
structure within the units. On the other hand, respondent Wack Wack's obligation
was limited to the implementation of the house rules and regulations affecting only
the common and limited areas of the Condominium.

In its crossclaim, respondent Wack Wack alleged that if there was indeed any
damage caused on the Unit, it would have been due to Tan's wrongdoing and the
failure of respondent Carungcong to diligently and regularly monitor the former's
activities.

For her part, respondent Carungcong filed her Answer with Third Party
Complaint[14] against Golden Dragon and its specialty contractor, Stalwart Builders
Corporation (Stalwart). Respondent Carungcong argued that the soapy water which
seeped through the ceiling of the Unit did not come from the balcony of her unit,
Unit 2308B-1. Also, the installation of piping and plumbing works done by Stalwart
was done with the permission and approval of Golden Dragon. She countered that if
there was any defect in the plumbing works, the damages on the Unit should be
assessed against Golden Dragon and Stalwart.

Summonses were not served upon Golden Dragon and Stalwart as they were no
longer holding office in the addresses supplied by respondent Carungcong. [15] As
such, the RTC did not tackle anymore the Third Party Complaint.

The Ruling of the RTC

On December 19, 2006, the RTC rendered its Decision [16] granting the Complaint
against respondent Carungcong, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing[,] judgment is hereby rendered granting the

[C]omplaint against [respondent] Carungcong, and ordering the said [respondent]
to pay [petitioner] the following amounts:

(1) Php 490,635.00 as actual damages;

(2) Php 100,000.00 as legal fees.

SO ORDERED.[17]

The petitioners VDM and Sps. Domingo filed their Motion for Partial
Reconsideration[18] dated January 10, 2007, praying that respondent Wack Wack be
held solidarity liable with respondent Carungcong pursuant to the provisions of the
Amended Master Deed.

Respondent Carungcong likewise moved for a reconsideration [19] of the RTC's

Decision, maintaining that the petitioners VDM and Sps. Domingo's causes of action
should be directed and litigated against Golden Dragon instead.

In its Order[20] dated July 18, 2007, the RTC modified its Decision and held that
respondent Wack Wack is solidarity liable with respondent Carungcong for the
award of damages granted to the petitioners. Meanwhile, the Motion for
Reconsideration filed by respondent Carungcong was denied for lack of merit.

Hence, respondents Carungcong and Wack Wack appealed the RTC's Decision and
Order before the CA.

The Ruling of the CA

In the assailed Decision, the CA granted the appeal of respondents Carungcong and
Wack Wack, reversing the RTC's Decision dated December 19, 2006 and Order
dated July 18,2007. The dispositive portion of the assailed Decision reads:

WHEREFORE, the appeal is GRANTED. The

appealed Decision and Order are REVERSED and SET ASIDE. The complaint for
damages is hereby DISMISSED.

SO ORDERED.[21]

In sum, the CA found that the records are bereft of any evidence showing that the
damage to the petitioners' Unit was caused by the plumbing works done on the
balcony of Unit 2308B-1. Further, the CA took cognizance of an already settled case
previously initiated by the petitioners before the Housing and Land Use Regulatory
Board (HLURB) concerning the Unit. The said case decided by the HLURB found that
water leakage in the Unit was caused by the defective and substandard construction
of the Unit by Golden Dragon, and not the plumbing works on the balcony of Unit
2308B-1.

The petitioners filed their Motion for Reconsideration of the assailed Decision on
August 17, 2012, which was denied by the CA in the assailed Resolution.

Hence, this appeal via Petition for Review on Certiorari under Rule 45 of the Rules

of Court.[22]

On October 30, 2013, respondent Carungcong filed her Comments [To The Petition
for Review on Certiorari under Rule 45][23] dated October 24, 2013. In response, on
November 29, 2013, the petitioners filed their Omnibus Motion and Reply Ad
Cautelam (To Respondent Leonita Carungcong's Comments)[24] dated November 28,
2013. In their Omnibus Motion, the petitioners prayed that the counsel of
respondent Carungcong, i.e., Atty. Adriano I. Gaddi, be ordered to show cause for
the late filling of respondent Carungcong's Comment. In a Resolution [25] dated
January 27, 2014, the Court denied the petitioners' Omnibus Motion.

After having been fined a sum of P1,000.00 by the Court in its Resolution [26] dated
February 16, 2015 for failing to file a comment on the instant Petition within the
required period, on May 13, 2015, respondent Wack Wack filed its Comment [27] [on
the Petition for Review on Certiorari dated 28 May 2013] dated May 11, 2015.

Issue

Stripped to its core, the central issued to be decided by the Court is whether the CA
erred in reversing the RTC's Decision dated December 19, 2006 and Order dated
July 18, 2007, thus dismissing the petitioners' Complaint for Damages against
respondents Carungcong and Wack Wack.

The Court's Ruling

The instant Petition is denied for lack of merit.

First and foremost, it must be stressed that the instant Petition centers on the
petitioners' contention that the CA's assailed Decision and Resolution "are based on
a misapprehension of facts."[28] The instant Petition then proceeds to reiterate the
contents of the testimony of their sole witness, Atty. Villareal, and the various
documents he produced, arguing that the evidence on record allegedly establish the
fact that the proximate cause of the damage to the Unit is the plumbing works
made on the balcony of Unit 2308B-1 owned by respondent Carungcong.

Simply stated, the instant Petition raises pure questions of fact.

A question of facts exists when the doubt or difference arises as to the truth or
falsehood of facts or when the query invites calibration of the whole evidence
considering mainly the credibility of the witnesses, the existence and relevancy of
specific surrounding circumstances as well as their relation to each other and to the
whole, and the probability of the situation.[29] That is precisely what the petitioners
are asking the Court to do - to reassess, reexamine, and recalibrate the evidence
on record.

A catena of cases has consistently held that questions of fact cannot be raised in an
appeal via certiorari before the Court and are not proper for its consideration.
[30]
 The Court is not a trier of facts. It is not the Court's function to examine and
weigh all over again the evidence presented in the proceedings below. [31]
For this reason alone, the instant Petition warrants dismissal.

Nonetheless, after a careful review of the records of the instant case, the Court
finds no cogent reason to reverse the CA's holding that the petitioners' Complaint
for Damages against the respondents should be dismissed.

By alleging that damage was caused to their property by virtue of the respondents'
individual and collective fault and/or negligence, the petitioners' cause of action is
anchored on quasi-delict.

According to Article 2176 of the Civil Code, whoever by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict.

A quasi-delict has the following elements: a) the damage suffered by the plaintiff;

b) the act or omission of the defendant supposedly constituting fault or
negligence; and c) the causal connection between the act and the damage
sustained by the plaintiff, or proximate cause.[32]

A perusal of the evidence on record shows that the foregoing elements of a quasi-
delict are absent insofar as respondents Carungcong and Wack Wack are
concerned.

The full extent of the damage caused to the petitioners' Unit was not sufficiently
proven.

Aside from the purely self-serving testimony of Atty. Villareal, the sole witness of
the petitioners who is also the petitioners' counsel, there was no sufficient evidence
presented to show the extent of the damage caused to the Unit.

As correctly found by the CA, the photographs offered into evidence by the
petitioners merely depict a wet bed, wet floor, and wet cabinet apparently taken
from one room only, i.e., the master bedroom. The CA was correct in its
assessment that "[n]o photographs were presented to prove that the other rooms
of Unit 2208B-1 were also damaged by the leak."[33]

The petitioners maintain that the letter-quotation from M. Laher, a private

document, proves the foil extent of the damage caused to the Unit.

Such contention is erroneous.

As a prerequisite to its admission in evidence, the identity and authenticity of a
private document must be properly laid and reasonably established. According to
Section 20, Rule 132 of the Rules of Court, the identification and authentication of a
private document may only be proven by either: (1) a person who saw the
execution of the document, or (2) a person who has knowledge and can testify as
to the genuineness of the signature or handwriting of the maker.

In the instant case, with Atty. Villareal having not seen the execution of the
document, and having no personal knowledge whatsoever as regards the execution
of the document, the letter-quotation from M. Laher was not deemed to have been
properly identified and authenticated, thus making it inadmissible in evidence. The
petitioners should have instead presented a witness from M. Laher who actually
executed the letter-quotation, or any other witness who saw the actual execution of
the document or can testify as to the signatures and handwritings found on the
document. Therefore, the petitioners cannot rely on M. Laher's letter-quotation to
prove their claims for damages.

The petitioners also heavily rely on the handwritten report of the petitioners' sister,
Lagman-Castillo, which purportedly show the extent and location of the damage
caused to the Unit.

Atty. Villareal's testimony on the observations contained in the handwritten report

of Lagman-Castillo is inadmissible. Atty. Villareal is not competent to testify on the
veracity of the observations contained in the said handwritten report because he
may only testify to those facts which he has personal knowledge, and derived from
his own perception. Simply stated, as to the contents of the handwritten report of
Lagman-Castillo, Atty. Villareal's testimony is hearsay. The petitioners should have
instead presented Lagman-Castillo herself to testify on her own observations, which
was not done.

The petitioners argue that the presentation of Lagman-Castillo was not needed
anymore due to certain stipulations made by the respondents. But it must be
stressed that the stipulations of the respondents regarding the handwritten report
of Lagman-Castillo were merely limited to: (1) the authorship of the said report, (2)
the fact that the photographs attached in the said report were taken by Lagman-
Castillo, and (3) the fact that Lagman-Castillo is the sister of petitioner Nena. There
was no stipulation made as to the accuracy and veracity of the contents of the
handwritten report. Hence, it was still incumbent upon the petitioners to present
Lagman-Castillo to prove the truthfulness of the contents of her handwritten report.

The petitioners also argue that the principle of admission of silence applies vis-a-
vis Lagman-Castillo's handwritten report because the respondents supposedly failed
to issue a response to the said report. The argument is not convincing. As correctly
cited by respondent Wack Wack in its Comment, jurisprudence holds that the rule
on admission by silence applies to adverse statements in writing if the party was
carrying on a mutual correspondence with the declarant. However, if there was no
such mutual correspondence, the rule is relaxed on the theory that while the party
would have immediately reacted by a denial if the statements were orally made in
his presence, such prompt response can generally not be expected if the party still
has to resort to a written reply.[34]

In the case at hand, it is not disputed that Lagman-Castillo's handwritten report

was not addressed to the respondents. Instead, the report was addressed to Atty.
Villareal. Hence, the rule on admission on silence is negated.

Aside from the foregoing, the petitioners likewise rely on the supposed statements
made by Cruz, the Acting Property Manager of respondent Wack Wack, who
supposedly intimated that the strong leak apparently came from Unit 2308B-1,
which is located directly above the Unit. However, it must be emphasized that Cruz
herself was not presented as a witness. Atty. Villareal was not competent to testify
as to the truth of Cruz's supposed observations and findings because, to reiterate,
Atty. Villareal may only testify to those facts which he has personal knowledge, and
derived from his own perception. Hearsay evidence such as this, whether objected
to or not, cannot be given credence for it has no probative value. [35]

Lastly, the petitioners cite the various demand letters as evidence of the supposed
damage caused to their Unit. It goes without saying that these letters are self-
serving documents that deserve scant consideration in the determination of
damages. As previously held by the Court, one cannot make evidence for himself by
writing a letter containing the statements that he wishes to prove. He does not
make the letter evidence by sending it to the party against whom he wishes to
prove the facts stated therein.[36]

Fault or negligence on the part of respondents Carungcong and Wack Wack was not
proven.

As regards the second element of a quasi-delict, a careful perusal of the evidence

on record shows that the petitioners failed to present even a shred of evidence that
there was fault or negligence on the part of the respondents Carungcong and Wack
Wack.

The Court has held that in a cause of action based on quasi-delict, the negligence or
fault should be clearly established as it is the basis of the action. The burden of
proof is thus placed on the plaintiff, as it is the duty of a party to present evidence
on the facts in issue necessary to establish his claim or defense by the amount of
evidence required by law. Therefore, if the plaintiff alleged in his complaint that he
was damaged because of the negligent acts of the defendant, he has the burden of
proving such negligence.[37]

Applying the foregoing in the instant case, the burden of proving fault or negligence
was clearly not discharged by the petitioners.

As to the supposed fault or negligence of respondent Carungcong, while it is

undisputed that plumbing works were done on the balcony of the unit owned by
respondent Carungcong, there is no evidence presented that suggests that such
plumbing works were illegally or negligently made. The petitioners could not even
point out what specific rule or regulation was supposedly violated by respondent
Carungcong or her lessee, Tan, in undertaking the plumbing works. There was no
proof offered showing that such plumbing works were even prohibited, disallowed,
or undertaken in a negligent manner.

The closest piece of evidence presented that remotely suggests some negligence or
wrongdoing on the part of respondent Carungcong or her lessee, Tan, was the
supposed statements made by respondent Wack Wack's Acting Property Manager,
Cruz. However, as already explained, as Atty. Villareal's testimony on Cruz's
statements is pure hearsay, the veracity of Cruz's findings was not sufficiently
proven.

With respect to the supposed negligence on the part of respondent Wack Wack, the
petitioners do not even dispute that under the Amended Master Deed, respondent
Wack Wack holds title over and exercises maintenance and supervision only with
respect to the common areas. It is also not disputed that the maintenance and
repair of the condominium units shall be made solely on the account of the unit
owners, with each unit owner being "responsible for all the damages to any other
Units and/or to any portion of the Projects resulting from his failure to effect the
required maintenance and repairs of his unit." [38]

Proximate cause between the supposed damage caused and the plumbing works
undertaken was not established.

To constitute quasi-delict, the alleged fault or negligence committed by the

defendant must be the proximate cause of the damage or injury suffered by the
plaintiff.

Proximate cause is that cause which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury and without which the result
would not have occurred.[39]

Stated in simple terms, it must be proven that the supposed fault or negligence
committed by the respondents, i.e., the undertaking of plumbing works on Unit
2308B-1, was the cause of the damage to the Unit.

Such was not proven by the petitioners.

First, as correctly observed by the CA, the claim that a supposed leak in the
plumbing works located in the balcony of Unit 2308B-1 caused the leakage of soapy
water in various parts of the Unit, including the various bedrooms inside the Unit, is
highly doubtful and illogical. As noted by the CA, the subject plumbing works are
isolated in the balcony area of Unit 2308B-1. The petitioners do not dispute that the
said area is separated from the other areas of the unit and sealed off by a wall and
beam. Hence, if a leakage in the plumbing works on the balcony of Unit 2308B-1
indeed occurred, it is highly improbable that such leak would spread to a wide area
of the Unit.

Second, aside from the unsubstantiated self-serving testimony of Atty. Villareal,

there was no evidence presented to show that the supposed widespread leak of
soapy water in the various parts of the Unit was caused by plumbing works on the
balcony of Unit 2308B-1. No witness or document establishing a causal link
between the plumbing works and the damage to the Unit was offered. The
petitioners could have utilized assessors or technical experts on building and
plumbing works to personally examine and assess the damage caused to the Unit to
provide some substantiation to the claim of proximate cause. However, no such
witness was presented. The petitioners relied solely on the testimony of their own
counsel, Atty. Villareal. Proximate cause cannot be established by the mere say-so
of a self-serving witness.

Lastly, the fact that the plumbing works done in Unit 2308B-1 was not the cause of
the damage suffered by the petitioners' Unit is further supported by the factual
finding of the CA that a case before the HLURB was previously filed by the
petitioners against Golden Dragon. In this complaint, which was offered in evidence
by the petitioners themselves, the latter alleged that in 1996, way before the
installation of the subject plumbing works in Unit 2308B-1, they had already
discovered water leaks in the Unit which damaged the interiors thereof. It was the
petitioners' allegation that the water leakage in the Unit was made possible due to
Golden Dragon's delivery of a "defective and/or substandard unit." [40] In fact, the
CA noted that the HLURB issued a Decision dated July 9, 2009 holding Golden
Dragon liable for the water leakage suffered by the petitioners. It is of no
coincidence that the award for actual damages granted to the petitioners is similar
to the award for actual damages sought by the petitioners in the instant case. [41]

The petitioners attempt to downplay the aforesaid complaint that was lodged and
subsequently settled by the HLURB by arguing that the said complaint was offered
for a different purpose, i.e., to prove that Golden Dragon previously refused to
execute a Deed of Absolute Sale covering the Unit. Such argument fails to convince.
As correctly held by the CA, as the said HLURB complaint was formally offered by
the petitioners, thus forming part of the records of the case, "this Court shall not
close its eyes" to the contents of the said document.[42] Section 24, Rule 132 merely
states that the court shall consider no evidence which has not been formally
offered, and that the purpose for which the evidence is offered must be specified.
There is nothing in the Rules of Court which limits the appreciation of the court to
the specified purpose for which the evidence was offered.

All in all, with the petitioners failing to prove the existence of the elements of a
quasi-delict in the instant case, the CA committed no reversible error that warrants
the Court's exercise of its discretionary appellate power.

WHEREFORE, the appeal is hereby DENIED. The Decision dated July 13, 2012 and
Resolution dated March 20, 2013 rendered by the Court of Appeals, Eleventh
Division in CA-G.R. CV No. 89479 are AFFIRMED.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 219649, July 26, 2017 ]
AL DELA CRUZ, PETITIONER, V. CAPT. RENATO OCTAVIANO AND
WILMA OCTAVIANO, RESPONDENTS.

DECISION

PERALTA, J.:

Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules
of Court, dated August 12, 2015, of petitioner Al Dela Cruz that seeks to reverse
and set aside the Decision[1] dated January 30, 2014 and Resolution[2] dated June
22, 2015 of the Court of Appeals (CA) reversing the Decision dated February 24,
2009 of the Regional Trial Court (RTC), Branch 275, Las Piñas City in a civil case for
damages.
The facts follow.

Around 9:00 p.m. on April 1, 1999, respondent Captain Renato Octaviano, a

military dentist assigned at the Office of the Chief Dental Service, Armed Forces of
the Philippines, Camp Aguinaldo, Quezon City, respondent Wilma Octaviano,
Renato's mother and Janet Octaviano, Renato's sister, rode a tricycle driven by
Eduardo Y. Padilla. Respondent Wilma and Janet were inside the sidecar of the
vehicle, while Renato rode at the back of the tricycle driver. They then proceeded to
Naga Road towards the direction of CAA and BF Homes. Renato was asking his
mother for a change to complete his P10.00 bill when he looked at the road and
saw a light from an oncoming car which was going too fast. The car, driven by
petitioner, hit the back portion of the tricycle where Renato was riding. The force of
the impact caused the tricycle to turn around and land on the pavement near the
gutter. Thus, Renato was thrown from the tricycle and landed on the gutter about
two meters away. Renato felt severe pain in his lower extremities and went
momentarily unconscious and when he regained consciousness, he heard his sister
shouting for help. A man came followed by other people. The first man who
answered Janet's call for help shouted to another man at a distance saying: "Ikaw,
dalhin mo yung sasakyan mo dito. Ikaw ang nakabangga sa kanila. Dalhin mo sila
sa ospital." They pulled Renato out of the gutter and carried him to the car.
Petitioner brought them to his house and alighted thereat for two to three minutes
and then he brought the passengers to a clinic. Renato insisted on being brought to
a hospital because he realized the severity of his injuries. Thus, Renato, his mother,
and Janet were brought to Perpetual Help Medical Center where Renato's leg was
amputated from below the knee on that same night. After his treatment at
Perpetual Help Medical Center, Renato was brought to the AFP Medical Center at V.
Luna General Hospital and stayed there for nine months for rehabilitation. Shortly
before his discharge at V. Luna, he suffered bone infection. He was brought to Fort
Bonifacio Hospital where he was operated on thrice for bone infection. Thereafter,
he was treated at the same hospital for six months. In the year 2000, he had a
prosthesics attached to his leg at V. Luna at his own expense. Renato spent a total
of P623,268.00 for his medical bills and prosthetics.

Thus, Renato and his mother Wilma filed with the RTC a civil case for damages
against petitioner and the owner of the vehicle.

Aside from their testimonies, the complainants, herein respondents presented the
testimonies of S/Sgt. Joselito Lacuesta (S/Sgt. Lacuesta) and Antonio Fernandez.

According to S/Sgt. Lacuesta, he was somewhere along Naga Road around 9:00
p.m. when the incident occurred. He was talking with his three friends when he felt
like urinating, so he moved a few paces away from his companions. When he was
about to relieve himself, he saw an oncoming vehicle with bright lights and also saw
a tricycle which was not moving fast and after the latter passed him by, it collided
with the vehicle. He then saw someone fell down near him and when he saw that
the car was about to move, he told his companions to stop the car from leaving.
Thereafter, he noticed that the person who landed in front of him was already
unconscious so he helped him and called one of his companions to carry the injured
man to the car. He told the driver of the car "Isakay mo ito, nabangga mo ito," and
then proceeded to board the injured man in front of the car, while he told the other
passengers of the tricycle to board at the back of the car. His companions forcibly
took ("pinilas") the license plate of the car and he also noticed that the driver of the
car was drunk ("nakainom"). After the car left, he and his companions stayed in the
area wherein a policeman later arrived and towed the tricycle.

Witness Antonio Fernandez, one of S/Sgt. Lacuesta's companions, corroborated the

latter's testimony.

Petitioner, on the other hand, testified that on April 1, 1999, he borrowed the car of
Dr. Isagani Cirilo, a Honda Civic registered under the name of the latter, to bring
his mother to church. Thus, he then brought his mother to the Jehovah's Witness
church in Greenview which was about 20 to 25 minute drive from their house in
Naga Road, Pulanlupa. Around 6:25 p.m., he went home directly from the church
and waited for the call of his mother. Thereafter, he left the house around 8:30
p.m. and went to pick up fish food that he previously ordered before fetching his
mother. When he was along Naga Road, he noticed a tricycle from a distance of
about 100 to 120 meters away and was going the opposite direction. He also
noticed an Elf van parked along the road on the opposite side. He flashed his low
beam and high beam light to signal the tricycle. The tricycle then slowed down and
stopped a bit, hence, he also slowed down. Suddenly, the tricycle picked up speed
from its stop position and the two vehicles collided. He then stopped his car a few
meters away from the collision site and made a u-turn to confront the driver of the
tricycle. He also noticed that there were already about a dozen people around the
site of the collision. He saw a man sitting on the gutter and proceeded to move the
car towards the former and asked him and his companions to help board the
injured man and the latter's co-passengers of the tricycle in the car he was driving.
Thereafter, he drove them to Perpetual Help Hospital where the man was treated
for his injuries.

The testimony of Imelda Cirilo, the wife of the owner of the car, was also
presented. She testified, among others, that on the night of the accident, petitioner
borrowed their car to bring the latter's mother to the church and that upon learning
of the incident, she went to Perpetual Help Hospital and signed on the Admission
Slip so that respondent Renato could be operated on without the former admitting
any liability. She also testified that she offered to help the victims, but the latter
refused and that she admitted that she did not give any financial assistance for the
hospital bills nor for medicines.

Renato Martinez, a traffic enforcer, was also presented and testified that he
received a call through radio about an incident along Naga Road, Pulanlupa, Las
Pinas City around 8:30 p.m. so he proceeded to the area and arrived there around
9:00 p.m. When he arrived at the scene, nobody was there and that the vehicles
involved in the collision were no longer there. At the scene of the accident, he saw
splinters of glass on the road but there was no blood and he also saw an Elf van
parked along the street fronting CAA. He then proceeded to Perpetual Help Hospital
after he received a call on his radio that the people involved in the accident were
already at the said hospital. At the hospital, he was able to talk with petitioner.
Thereafter, he called up his base and informed the base that the driver of the
Honda Civic was at the hospital. Later on, Sgt. Soriano, the investigator-on-duty
arrived at the hospital and instructed Sgt. Martinez to accompany petitioner to the
headquarters because some relatives of respondents were asking that petitioner be
brought to Fort Bonifacio. Thus, Sgt. Martinez and petitioner boarded the Honda
Civic involved in the accident and proceeded to the headquarters.

The RTC, in its Decision dated February 24, 2009, dismissed the claim of
respondents. According to the RTC, petitioner's version of the incident was more
believable because it was corroborated by Sgt. Martinez who testified that he saw
an Elf van parked along the street. The RTC also ruled that petitioner did everything
that was expected of a cautious driver. The court further ruled that the owner of
the Honda Civic, Isagani Cirilo could not be held liable because petitioner was a
family friend who merely borrowed the car and not his driver nor his employee. It
was also ruled that the liability rests on the tricycle driver who drove without
license and petitioner's contributory negligence in riding at the back of the driver in
violation of Municipal Ordinance No. 35-88 that limits the passengers of a tricycle to
three persons including the driver.

Respondents appealed the RTC decision to the CA.

In its Decision dated January 30, 2014, the CA reversed the RTC's decision.
According to the CA, petitioner was negligent as shown in the police report. It also
found that petitioner was positive for alcoholic breath, thus, he violated Republic
Act (R.A.) No. 4136 that prohibits any person from driving a motor vehicle while
under the influence of alcohol or narcotic drug. It also ruled that the owner of the
vehicle is equally responsible and liable for the accident and the resulting injuries
that the victims sustained. As such, the CA disposed of the case as follows:

WHEREFORE, in view of the foregoing, the decision appealed from is hereby

REVERSED and SET ASIDE. Defendants are held solidarily liable to plaintiffs and
ordered to pay the plaintiffs in the following manner:

1. pay plaintiff Wilma Octaviano the following: medical expenses, P1,500.00,

hospital expenses, P1,450.00 and transportation expenses, P6,000.00;
2. pay plaintiff Renato Octaviano the following: hospital expenses, P369,354.00,
medical expenses, P60,462.23, loss of income, P90,000.00;
3. pay [plaintiff] Wilma Octaviano P50,000.00 as and by way of moral damages;
4. pay plaintiff Renato Octaviano P100,000.00 as and by way of moral damages;
5. pay plaintiffs P20,000.00 each as and by way of exemplary damages; and
6. pay plaintiffs P100,000.00 as attorney's fees.

SO ORDERED.[3]

Thus, the present petition after the CA denied petitioner's motion for
reconsideration.
Petitioner relies upon the following grounds:

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE PETITIONER WAS
NEGLIGENT WHILE DRIVING HIS CAR.

II

THE FINDINGS OF FACT OF THE COURT OF APPEALS ARE NOT SUPPORTED BY THE
EVIDENCE ADDUCED.

III

THE COURT OF APPEALS GRAVELY ERRED IN FAILING TO CONSIDER THAT THE

PROXIMATE CAUSE OF THE INCIDENT WAS THE FAULT OR GROSS NEGLIGENCE OF
THE TRICYCLE DRIVER.

IV

THE COURT OF APPEALS MANIFESTLY OVERLOOKED CERTAIN FACTS NOT

DISPUTED BY THE PARTIES AND WHICH, IF PROPERLY CONSIDERED, WOULD
JUSTIFY A DIFFERENT CONCLUSION.[4]

Petitioner insists that he was not negligent and that the driver of the tricycle was
the one at fault. He also argues that the investigation report relied upon by the CA
should not have been used in determining what actually transpired because the
traffic investigator was not presented as a witness and petitioner was not able to
confront or cross-examine him regarding the report. Petitioner further denies that
he was drunk when the incident happened and that the CA erred in appreciating the
mere opinions of the witnesses that he appeared drunk at that time.

In their Comment, respondents contend that the issues raised by petitioner are
factual in nature and are not the proper subjects of a petition for review under Rule
45. They also contend that the CA did not err in their finding that petitioner was
negligent at the time of the incident.

A close reading of the present petition would show that the issues raised are factual
in nature. This Court has recognized exceptions to the rule that the findings of fact
of the CA are conclusive and binding in the following instances: (1) when the
findings are grounded entirely on speculation, surmises or conjectures; (2) when
the inference made is manifestly mistaken, absurd or impossible; (3) when there is
grave abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of facts are conflicting; (6) when in making its findings
the CA went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are
contrary to the trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioner's main and reply briefs are not disputed by the
respondent; (10) when the findings of fact are premised on the supposed absence
of evidence and contradicted by the evidence on record; and (11) when the CA
manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion. [5] Inasmuch as the RTC
and the CA arrived at conflicting findings of fact on who was the negligent party,
the Court holds that an examination of the evidence of the parties needs to be
undertaken to properly determine the issue.[6]

The concept of negligence has been thoroughly discussed by this Court in Romulo
Abrogar, et al. v. Cosmos Bottling Company, et al.,[7] thus:

Negligence is the failure to observe for the protection of the interests of another
person that degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury.[8] Under Article 1173 of the Civil
Code, it consists of the "omission of that diligence which is required by the nature
of the obligation and corresponds with the circumstances of the person, of the time
and of the place."[9] The Civil Code makes liability for negligence clear under Article
2176,[10] and Article 20.[11]

To determine the existence of negligence, the following time-honored test has been
set in Picart v. Smith:[12]

The test by which to determine the existence of negligence in a particular case may
be stated as follows: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence. The law here in effect
adopts the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias  of the Roman law. The existence of negligence in a given
case is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability
by that.

The question as to what would constitute the conduct of a prudent man in a given
situation must of course be always determined in the light of human experience and
in view of the facts involved in the particular case. Abstract speculation cannot here
be of much value but this much can be profitably said: Reasonable men govern
their conduct by the circumstances which are before them or known to them. They
are not, and are not supposed to be, omniscient of the future. Hence, they can be
expected to take care only when there is something before them to suggest or warn
of danger. Could a prudent man, in the case under consideration, foresee harm as a
result of the course actually pursued? If so, it was the duty of the actor to take
precautions to guard against that harm. Reasonable foresight of harm, followed by
the ignoring of the suggestion born of this prevision, is always necessary before
negligence can be held to exist. Stated in these terms, the proper criterion for
determining the existence of negligence in a given case is this: Conduct is said to
be negligent when a prudent man in the position of the tortfeasor would have
foreseen that an effect harmful to another was sufficiently probable to warrant his
foregoing the conduct or guarding against its consequences.[13]

xxxx

In order for liability from negligence to arise, there must be not only proof of
damage and negligence, but also proof that the damage was the consequence of
the negligence. The Court has said in Vda. de Gregorio v. Go Chong Bing:[14]

x x x Negligence as a source of obligation both under the civil law and in American
cases was carefully considered and it was held:

We agree with counsel for appellant that under the Civil Code, as under the
generally accepted doctrine in the United States, the plaintiff in an action such as
that under consideration, in order to establish his right to a recovery, must
establish by competent evidence:

(1) Damages to the plaintiff.

(2) Negligence by act or omission of which defendant personally or some person for
whose acts it must respond, was guilty.
(3) The connection of cause and effect between the negligence and the damage."

In this case, the RTC found no reason to conclude that petitioner was negligent. The
CA, however, found the contrary. This Court must then ascertain whose evidence
was preponderant, for Section 1, [15] Rule 133 of the Rules of Court mandates that in
civil cases, like this one, the party having the burden of proof must establish his
case by a preponderance of evidence. Burden of proof is the duty of a party to
present evidence on the facts in issue necessary to establish his claim or defense by
the amount of evidence required by law.[16] It is basic that whoever alleges a fact
has the burden of proving it because a mere allegation is not evidence.
[17]
 Generally, the party who denies has no burden to prove. [18] In civil cases, the
burden of proof is on the party who would be defeated if no evidence is given on
either side.[19] The burden of proof is on the plaintiff if the defendant denies the
factual allegations of the complaint in the manner required by the Rules of Court,
but it may rest on the defendant if he admits expressly or impliedly the essential
allegations but raises affirmative defense or defenses, which if proved, will
exculpate him from liability.[20]

By preponderance of evidence, according to Raymundo v. Lunaria:[21]

x x x is meant that the evidence as a whole adduced by one side is superior to that
of the other. It refers to the weight, credit and value of the aggregate evidence on
either side and is usually considered to be synonymous with the term "greater
weight of evidence" or "greater weight of the credible evidence." It is evidence
which is more convincing to the court as worthy of belief than that which is offered
in opposition thereto.
In addition, according to United Airlines, Inc. v. Court of Appeals,[22] the plaintiff
must rely on the strength of his own evidence and not upon the weakness of the
defendant's.

After reviewing the records of the case, this Court affirms the findings of the CA. In
ruling that petitioner was negligent, the CA correctly appreciated the pieces of
evidence presented by the respondents, thus:

First, with regard to the damage or injury, there is no question that the plaintiffs
suffered damage due to the incident on April 1, 1999. Plaintiff Renato Octaviano's
right leg was crushed by the impact of the Honda Civic driven by defendant Dela
Cruz against the tricycle where the Octavianos were riding and as a result thereof,
Renato's right leg was amputated. Plaintiff Wilma Octaviano suffered traumatic
injuries/hematoma on different parts of her body as borne by the evidence
submitted to the trial court. The damages or injuries were duly proved by
preponderant evidence.

Second, with regard to the wrongful act or omission imputable to the negligence of
defendant Al Dela Cruz, We hold that the trial court missed the glaring fact that
defendant Dela Cruz was guilty of negligence.

The police report prepared by the traffic investigator SPO2 Vicente Soriano detailed
what happened on the night of April 1, 1999, to wit:

xxxx

On the Spot Investigation conducted by the undersigned, showed that Vehicle 2

while moving ahead and upon arriving in front of said motor shop, Vehicle 2
avoided hitting another tricycle which vehicle (Tricycle) was standing while waiting
for a would-be passenger. Said Veh-2 driver swerved the car to the left and it was
at this instance when said Veh-1 was sideswiped by said Veh-2.

xxx

Weather Condition: Fair

Road condition: Concrete and Dry
Driver's Condition: Veh-1, Normal; Veh-2 Positive for Alcoholic Breath (AB)"

For a clearer understanding of the said police report, Vehicle-1 referred to by

Soriano is the tricycle where plaintiffs were riding, and Vehicle-2 is the Honda Civic
driven by Dela Cruz.

Was the statement in the police report that Al Dela Cruz was positive for alcoholic
breath substantiated/corroborated?

Yes. Two witnesses testified that Dela Cruz appeared to be drunk on that fateful
night. Joey Lacuesta and Antonio Fernandez were there on the spot when the
incident happened. They were the first ones to assist the victim Renato Octaviano
who was slumped unconscious in the gutter. Lacuesta was the one who boarded the
injured Renato into the front seat of the car and he noticed that the driver was
drunk:

Q: You said that you placed the injured person in front of the Honda Civic, the
driver was there in the car, what, if anything did you notice about the condition of
the driver of the car?
A: Nakainom, I noticed that because when I boarded the injured person into the
front passenger seat, I noticed that he is drunk.

Antonio Fernandez heard his friend Aries Sy shout at the driver of the car to stop
when it appeared to by continuously moving. Fernandez also noted that the driver
appeared to be drunk, thus:

Q: Now you said that the driver of the car was drunk. Did you say that when you
testified?
A: Yes, sir. Lasing yung driver.

Q: What made you think that this driver of the car was drunk?
A: Because of his actions and he was also mad.

Q: Because he was mad, then you thought that he was drunk, x x x?

A: No, Sir. You can see or you can observe the actions of a person if he is drunk.

xxxx

More importantly, the law prohibits drunk driving. Republic Act No. 4136, Chapter
IV, Article V, Section 53 known as Land Transportation and Traffic Code provides
that no person shall drive a motor vehicle while under the influence of liquor or
narcotic drug. It is established by plaintiffs evidence that defendant Dela Cruz drove
the Honda Civic while under the influence of alcohol thus proving his negligence.

With regard to the third requisite, that there be a direct relation of cause and effect
between the damage or injury and the fault or negligence is clearly present in the
case at bar. Had defendant Dela Cruz exercised caution, his Honda Civic would not
have collided with the tricycle and plaintiffs leg would not be crushed necessitating
its amputation. The cause of the injury or damage to the plaintiffs leg is the
negligent act of defendant Dela Cruz.

The last requisite is that there be no pre-existing contractual relation between the
parties. It is undeniable that defendant and plaintiffs had no prior contractual
relation, that they were strangers to each other before the incident happened.
Thus, the four requisites that must concur under Article 2176 are clearly
established in the present case. Plaintiffs are entitled to claim damages. [23]

Petitioner argues that the CA erred in relying on the police report without petitioner
having the chance to cross-examine the police officer who prepared the same. Be
that as it may, the contents of the said police report are corroborated by the
testimonies of the other witnesses presented before the court. The said contents of
the police report are more believable than the version of petitioner of what
transpired. As correctly observed by the CA:

Dela Cruz narrated in his testimony that he saw a parked Elf van on the opposite
road and the tricycle also on the opposite road going to the opposite direction. He
claims that he flashed his low beam and high beam to warn the tricycle, the tricycle
stopped momentarily and then picked up speed "umarangkada" and that was why
the two vehicles collided. However, he admitted that the point of impact of the two
vehicles was "lagpas lang konti" from the front of the parked Elf. He could not stop.
He did not know what to do. He slowed down. He did not stop but continued
driving. If it were true that as far as about 100-120 meters away he already saw
the parked Elf van and the tricycle, he could have slowed down or stopped to give
way to the tricycle to avoid collision. In fact, if the collision point was right ahead of
the front of the parked Elf van, it means that the tricycle was already past the
parked Elf and it was Dela Cruz who forced his way into the two-way road. More
evident is that the tricycle was hit at the back portion meaning it was already
turning after passing the parked Elf. Had Dela Cruz slowed down or stopped a short
while to let the tricycle pass clear of the van, then the incident would not have
happened. The reasonable foresight required of a cautious driver was not exercised
by defendant Dela Cruz.[24]

As to the denial of petitioner that he was drunk at the time of the accident, whether
or not he was in a state of inebriation is inconsequential given the above findings.
His being sober does not and will not erase the fact that he was still negligent and
that the proximate cause of the collision was due to his said negligence. Proximate
cause is "that which, in natural and continuous sequence, unbroken by any new
cause, produces an event, and without which the event would not have
occurred."[25] As such, petitioner is wrong when he claims that the proximate cause
of the accident was the fault of the tricycle driver.

Neither is it correct to impute contributory negligence on the part of the tricycle

driver and respondent Renato when the latter had violated a municipal ordinance
that limits the number of passengers for each tricycle for hire to three persons
including the driver. Contributory negligence is conduct on the part of the injured
party, contributing as a legal cause to the harm he has suffered, which falls below
the standard to which he is required to conform for his own protection. [26] To hold a
person as having contributed to his injuries, it must be shown that he performed an
act that brought about his injuries in disregard of warning or signs of an impending
danger to health and body.[27] To prove contributory negligence, it is still necessary
to establish a causal link, although not proximate, between the negligence of the
party and the succeeding injury. In a legal sense, negligence is contributory only
when it contributes proximately to the injury, and not simply a condition for its
occurrence.[28] In this case, the causal link between the alleged negligence of the
tricycle driver and respondent Renato was not established. This court has
appreciated that negligence  per se, arising from the mere violation of a traffic
statute, need not be sufficient in itself in establishing liability for damages. [29] Also,
noteworthy is the ruling of the CA as to the matter, thus:
The trial court absolved defendants of liability because of the failure of the plaintiffs
to present the tricycle driver and thus concluding that plaintiffs suppressed
evidence adverse to them. This is error on the part of the trial court. The non-
presentation of the tricycle driver as a witness does not affect the claim of the
plaintiffs-appellants against herein defendants-appellees. Even granting that the
tricycle driver was presented in court and was proved negligent, his negligence
cannot cancel out the negligence of defendant Dela Cruz, because their liabilities
arose from different sources. The obligation or liability of the tricycle driver arose
out of the contract of carriage between him and petitioners whereas defendant Dela
Cruz is liable under Article 2176 of the Civil Code or under quasi-delicts. There is
ample evidence to show that defendant Dela Cruz was negligent within the purview
of Article 2176 of the Civil Code, hence, he cannot escape liability.[30]

This Court further agrees with the CA that the respondents are entitled to the
award of moral and exemplary damages. Moral damages, x x x, may be awarded to
compensate one for manifold injuries such as physical suffering, mental anguish,
serious anxiety, besmirched reputation, wounded feelings and social humiliation.
These damages must be understood to be in the concept of grants, not punitive or
corrective in nature, calculated to compensate the claimant for the injury suffered.
Although incapable of exactness and no proof of pecuniary loss is necessary in
order that moral damages may be awarded, the amount of indemnity being left to
the discretion of the court, it is imperative, nevertheless, that (1) injury must have
been suffered by the claimant, and (2) such injury must have sprung from any of
the cases expressed in Article 2219[31] and Article 2220[32] of the Civil Code, x x
x[33] Also known as "punitive" or "vindictive" damages, exemplary or corrective
damages are intended to serve as a deterrent to serious wrongdoings, and as a
vindication of undue sufferings and wanton invasion of the rights of an injured or a
punishment for those guilty of outrageous conduct. These terms are generally, but
not always, used interchangeably. In common law, there is preference in the use of
exemplary damages when the award is to account for injury to feelings and for the
sense of indignity and humiliation suffered by a person as a result of an injury that
has been maliciously and wantonly inflicted, [34] the theory being that there should
be compensation for the hurt caused by the highly reprehensible conduct of the
defendant - associated with such circumstances as willfulness, wantonness, malice,
gross negligence or recklessness, oppression, insult or fraud or gross fraud [35] - that
intensifies the injury. The terms punitive or vindictive damages are often used to
refer to those species of damages that may be awarded against a person to punish
him for his outrageous conduct. In either case, these damages are intended in good
measure to deter the wrongdoer and others like him from similar conduct in the
future.[36]

In awarding the above, the CA correctly ruled that:

It is extant in the records that defendants did not overturn or disprove the plaintiffs'
claim for actual damages such as the hospital bills/expenses which were duly
supported by documentary evidence (receipts). It was also duly proven that
defendant Al Dela Cruz acted with gross disregard for the suffering of his victims
when he refused to board them in his car and only did so when forced by the by-
standers who assisted the victims, when he drove to his house first before driving
to a clinic then to [the] hospital when it was obvious that Renato Octaviano's wound
was severe and needed immediate professional attention. These insensitivity of
defendant caused suffering to the plaintiffs that must be compensated. [37]

As to the award of attorney's fees, Article 2208 of the New Civil Code provides the
following:

ART. 2208. In the absence of stipulation, attorney's fees and expenses of litigation,
other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy
the plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled
workers;
(8) In actions for indemnity under workmen's compensation and employer's liability
laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's
fees and expenses of litigation should be recovered.

In this case, since exemplary damages are awarded, the award of attorney's fees is
necessary.

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of

Court, dated August 12, 2015, of petitioner Al Dela Cruz is DENIED for lack of
merit. Consequently, the Decision dated January 30, 2014 and Resolution dated
June 22, 2015 of the Court of Appeals in CA-G.R. CV No. 93399 are AFFIRMED.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 190022, February 15, 2012 ]
PHILIPPINE NATIONAL RAILWAYS CORPORATION, JAPHET
ESTRANAS AND BEN SAGA, PETITIONERS, VS.
PURIFICACION VIZCARA, MARIVIC VIZCARA, CRESENCIA A.
 NATIVIDAD, HECTOR VIZCARA, JOEL VIZCARA AND
DOMINADOR ANTONIO, RESPONDENTS.

DECISION

REYES, J.:

Nature of the Petition

Before this Court is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, seeking to annul and set aside the Decision [1] dated July
21, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 90021, which affirmed
with modification the Decision[2] dated March 20, 2007 of the Regional Trial Court
(RTC), Branch 40, Palayan City, and Resolution[3] dated October 26, 2009, which
denied the petitioners’ motion for reconsideration.

The Antecedent Facts

On May 14, 2004, at about three o’clock in the morning, Reynaldo Vizcara
(Reynaldo) was driving a passenger jeepney headed towards Bicol to deliver onion
crops, with his companions, namely, Cresencio Vizcara (Cresencio), Crispin
Natividad (Crispin), Samuel Natividad (Samuel), Dominador Antonio (Dominador)
and Joel Vizcara (Joel). While crossing the railroad track in Tiaong, Quezon, a
Philippine National Railways (PNR) train, then being operated by respondent Japhet
Estranas (Estranas), suddenly turned up and rammed the passenger jeepney. The
collision resulted to the instantaneous death of Reynaldo, Cresencio, Crispin, and
Samuel. On the other hand, Dominador and Joel, sustained serious physical
injuries.[4]

At the time of the accident, there was no level crossing installed at the railroad
crossing. Additionally, the “Stop, Look and Listen” signage was poorly maintained.
The “Stop” signage was already faded while the “Listen” signage was partly blocked
by another signboard.[5]

On September 15, 2004, the survivors of the mishap, Joel and Dominador, together
with the heirs of the deceased victims, namely, Purificacion Vizcara, Marivic Vizcara,
Cresencia Natividad and Hector Vizcara, filed an action for damages against PNR,
Estranas and Ben Saga, the alternate driver of the train, before the RTC of Palayan
City. The case was raffled to Branch 40 and was docketed as Civil Case No. 0365-P.
In their complaint, the respondents alleged that the proximate cause of the
fatalities and serious physical injuries sustained by the victims of the accident was
the petitioners’ gross negligence in not providing adequate safety measures to
prevent injury to persons and properties. They pointed out that in the railroad track
of Tiaong, Quezon where the accident happened, there was no level crossing bar,
lighting equipment or bell installed to warn motorists of the existence of the track
and of the approaching train.  They concluded their complaint with a prayer for
actual, moral and compensatory damages, as well as attorney’s fees. [6]

For their part, the petitioners claimed that they exercised due diligence in operating
the train and monitoring its roadworthiness. They asseverate that right before the
collision, Estranas was driving the train at a moderate speed. Four hundred (400)
meters away from the railroad crossing, he started blowing his horn to warn
motorists of the approaching train. When the train was only fifty (50) meters away
from the intersection, respondent Estranas noticed that all vehicles on both sides of
the track were already at a full stop.  Thus, he carefully proceeded at a speed of
twenty-five (25) kilometers per hour, still blowing the train’s horn. However, when
the train was already ten (10) meters away from the intersection, the passenger
jeepney being driven by Reynaldo suddenly crossed the tracks. Estranas
immediately stepped on the brakes to avoid hitting the jeepney but due to the
sheer weight of the train, it did not instantly come to a complete stop until the
jeepney was dragged 20 to 30 meters away from the point of collision.[7]

The Ruling of the Trial Court

After trial on the merits, the RTC rendered its Decision[8] dated March 20, 2007,
ruling in favor of the respondents, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering

defendants Philippine National Railways Corporation (PNR), Japhet Estranas and
Ben Saga to, jointly and severally pay the following amounts to:

1.  a)  PURIFICACION VIZCARA:

1) P50,000.00, as indemnity for the death of Reynaldo Vizcara;

2) P35,000.00, for funeral expenses;
3) P5,000.00 for re-embalming expenses;
4) P40,000.00 for wake/interment expenses;
5) P300,000.00 as reimbursement for the value of the jeepney with license plate
no. DTW-387;
6) P200,000.00 as moral damages;
7) P100,000.00 as exemplary damages; and
8) P20,000.00 for Attorney’s fees.
b)  MARIVIC VIZCARA:

1) P50,000.00, as indemnity for the death of Cresencio Vizcara;

2) P200,000.00 as moral damages;
3) P100,000.00 as exemplary damages; and
4)  P20,000.00 for Attorney’s fees.

c)  HECTOR VIZCARA:

1) P50,000.00 as indemnity for the death of Samuel Vizcara;

2) P200,000.00 as moral damages;
3) P100,000.00 as exemplary damages; and
4) P20,000.00 for Attorney’s fees.

d)  CRESENCIA NATIVIDAD:

1) P50,000.00 as indemnity  for the death of Crispin Natividad;

2) P200,000.00 as moral damages;
3) P100,000.00 as exemplary damages; and
4) P20,000.00 for Attorney’s fees.

e)      JOEL VIZCARA

1)  P9,870.00 as reimbursement for his actual expenses;

2)  P50,000.00 as moral damages;
3)  P25,000.00 as exemplary damages; and
4)  P10,000.00 for Attorney’s fees.

f)  DOMINADOR ANTONIO

1) P63,427.00 as reimbursement for his actual expenses;

2) P50,000.00 as moral damages;
3) P25,000.00 as exemplary damages; and
4) P10,000.00 for Attorney’s fees.

and

2.  Costs of suit.

SO ORDERED.[9]
 The Ruling of the CA

Unyielding, the petitioners appealed the RTC decision to the CA.  Subsequently, on
July 21, 2009, the CA rendered the assailed decision, affirming the RTC decision
with modification with respect to the amount of damages awarded to the
respondents. The CA disposed, thus:

WHEREFORE, instant appeal is PARTIALLY GRANTED.  The assailed Decision

is AFFIRMED WITH MODIFICATION, as follows:

(1) The award of P5,000.00 for re-embalming expenses and P40,000.00 for
wake/interment expenses to PURIFICACION VIZCARA is deleted. In lieu
thereof, P25,000.00 as temperate damages is awarded;

(2) The award of moral damages to PURIFICACION VIZCARA, MARIVIC

VIZCARA, HECTOR VIZCARA and CRESENCIA NATIVIDAD is hereby reduced from
P200,000.00 to P100,000.00 each while moral damages awarded to JOEL
VIZCARA and DOMINADOR ANTONIO are likewise reduced from P50,000.00
to P25,000.00;

(3) The award of exemplary damages to PURIFICACION VIZCARA, MARIVIC

VIZCARA, HECTOR VIZCARA and CRESENCIA NATIVIDAD is hereby reduced from
P100,000.00 to P50,000.00 each while exemplary damages awarded to JOEL
VIZCARA and DOMINADOR ANTONIO are likewise reduced from P25,000.00
to P12,500.00; and

(4) The award for attorney’s fees in favor of the Appellees as well as the award of
P300,000.00 to Appellee PURIFICACION as  reimbursement  for the value of the
jeepney is DELETED.

SO ORDERED.[10]

In the assailed decision, the CA affirmed the RTC’s finding of negligence on the part
of the petitioners. It concurred with the trial court's conclusion that petitioner PNR's
failure to install sufficient safety devices in the area, such as flagbars or safety
railroad bars and signage, was the proximate cause of the accident. Nonetheless, in
order to conform with established jurisprudence, it modified the monetary awards
to the victims and the heirs of those who perished due to the collision.

The petitioners filed a Motion for Reconsideration [11] of the decision of the CA.
However, in a Resolution[12] dated October 26, 2009, the CA denied the same.
Aggrieved, the petitioners filed the present petition for review on certiorari, raising
the following grounds:

THE CA ERRED IN FINDING THAT THE PROXIMATE CAUSE OF THE

ACCIDENT WAS THE NEGLIGENCE OF THE PETITIONERS;

II

THE CA ERRED IN HOLDING THAT THE DOCTRINE OF LAST CLEAR CHANCE

FINDS NO APPLICATION IN THE INSTANT CASE;

III

THE CA ERRED IN FINDING NEGLIGENCE ON THE PART OF THE

PETITIONERS OR ERRED IN NOT FINDING AT THE LEAST, CONTRIBUTORY
NEGLIGENCE ON THE PART OF THE RESPONDENTS.[13]

The petitioners maintain that the proximate cause of the collision was the
negligence and recklessness of the driver of the jeepney. They argue that as a
professional driver, Reynaldo is presumed to be familiar with traffic rules and
regulations, including the right of way accorded to trains at railroad crossing and
the precautionary measures to observe in traversing the same. However, in utter
disregard of the right of way enjoyed by PNR trains, he failed to bring his jeepney
to a full stop before crossing the railroad track and thoughtlessly followed the ten-
wheeler truck ahead of them.  His failure to maintain a safe distance between the
jeepney he was driving and the truck ahead of the same prevented him from seeing
the PNR signage displayed along the crossing.[14]

In their Comment,[15] the respondents reiterate the findings of the RTC and the CA
that the petitioners' negligence in maintaining adequate and necessary public safety
devices in the area of the accident was the proximate cause of the mishap. They
asseverate that if there was only a level crossing bar, warning light or sound, or
flagman in the intersection, the accident would not have happened. Thus, there is
no other party to blame but the petitioners for their failure to ensure that adequate
warning devices are installed along the railroad crossing.[16]

This Court’s Ruling

The petition lacks merit.

The petitioners’ negligence was the
proximate cause of the accident. 

Article 2176 of the New Civil Code prescribes a civil liability for damages caused by
a person's act or omission constituting fault or negligence. It states:

Article 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done.  Such fault or
negligence, if there was no pre-existing contractual relation between the parties, is
called quasi-delict and is governed by the provisions of this chapter.

In Layugan v. Intermediate Appellate Court,[17] negligence was defined as the

omission to do something which a reasonable man, guided by considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do. It is the failure to
observe for the protection of the interests of another person, that degree of care,
precaution, and vigilance which the circumstances justly demand, whereby such
other person suffers injury.[18] To determine the existence of negligence, the time-
honored test was: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence. The law here in effect
adopts the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of negligence in a given case
is not determined by reference to the personal judgment of the actor in the
situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability
by that.[19]

In the instant petition, this Court is called upon to determine whose negligence
occasioned the ill-fated incident. The records however reveal that this issue had
been rigorously discussed by both the RTC and the CA. To emphasize, the RTC
ruled that it was the petitioners’ failure to install adequate safety devices at the
railroad crossing which proximately caused the collision. This finding was affirmed
by the CA in its July 21, 2009 Decision. It is a well-established rule that factual
findings by the CA are conclusive on the parties and are not reviewable by this
Court. They are entitled to great weight and respect, even finality, especially when,
as in this case, the CA affirmed the factual findings arrived at by the trial court. [20]

Furthermore, in petitions for review on certiorari, only questions of law may be put
into issue. Questions of fact cannot be entertained. [21] To distinguish one from the
other, a question of law exists when the doubt or difference centers on what the
law is on a certain state of facts. A question of fact, on the other hand, exists if the
doubt centers on the truth or falsity of the alleged facts. [22] Certainly, the finding of
negligence by the RTC, which was affirmed by the CA, is a question of fact which
this Court cannot pass upon as this would entail going into the factual matters on
which the negligence was based.[23] Moreover, it was not shown that the present
case falls under any of the recognized exceptions[24] to the oft repeated principle
according great weight and respect to the factual findings of the trial court and the
CA.

At any rate, the records bear out that the factual circumstances of the case were
meticulously scrutinized by both the RTC and the CA before arriving at the same
finding of negligence on the part of the petitioners, and we found no compelling
reason to disturb the same. Both courts ruled that the petitioners fell short of the
diligence expected of it, taking into consideration the nature of its business, to
forestall any untoward incident. In particular, the petitioners failed to install safety
railroad bars to prevent motorists from crossing the tracks in order to give way to
an approaching train. Aside from the absence of a crossing bar, the “Stop, Look and
Listen” signage installed in the area was poorly maintained, hence, inadequate to
alert the public of the impending danger. A reliable signaling device in good
condition, not just a dilapidated “Stop, Look and Listen” signage, is needed to give
notice to the public. It is the responsibility of the railroad company to use
reasonable care to keep the signal devices in working order. Failure to do so would
be an indication of negligence.[25] Having established the fact of negligence on the
part of the petitioners, they were rightfully held liable for damages.

There was no contributory negligence

on the part of the respondents. 

As to whether there was contributory negligence on the part of the respondents,

this court rule in the negative. Contributory negligence is conduct on the part of the
injured party, contributing as a legal cause to the harm he has suffered, which falls
below the standard which he is required to conform for his own protection. It is an
act or omission amounting to want of ordinary care on the part of the person
injured which, concurring with the defendant’s negligence, is the proximate cause
of the injury.[26] Here, we cannot see how the respondents could have contributed
to their injury when they were not even aware of the forthcoming danger. It was
established during the trial that the jeepney carrying the respondents was following
a ten-wheeler truck which was only about three to five meters ahead. When the
truck proceeded to traverse the railroad track, Reynaldo, the driver of the jeepney,
simply followed through. He did so under the impression that it was safe to
proceed. It bears noting that the prevailing circumstances immediately before the
collision did not manifest even the slightest indication of an imminent harm. To
begin with, the truck they were trailing was able to safely cross the track. Likewise,
there was no crossing bar to prevent them from proceeding or, at least, a stoplight
or signage to forewarn them of the approaching peril. Thus, relying on his faculties
of sight and hearing, Reynaldo had no reason to anticipate the impending danger.
[27]
 He proceeded to cross the track and, all of a sudden, his jeepney was rammed
by the train being operated by the petitioners. Even then, the circumstances before
the collision negate the imputation of contributory negligence on the part of the
respondents. What clearly appears is that the accident would not have happened
had the petitioners installed reliable and adequate safety devices along the crossing
to ensure the safety of all those who may utilize the same.

At this age of modern transportation, it behooves the PNR to exert serious efforts to
catch up with the trend, including the contemporary standards in railroad safety. As
an institution established to alleviate public transportation, it is the duty of the PNR
to promote the safety and security of the general riding public and provide for their
convenience, which to a considerable degree may be accomplished by the
installation of precautionary warning devices. Every railroad crossing must be
installed with barriers on each side of the track to block the full width of the road
until after the train runs past the crossing. To even draw closer attention, the
railroad crossing may be equipped with a device which rings a bell or turns on a
signal light to signify the danger or risk of crossing. It is similarly beneficial to
mount advance warning signs at the railroad crossing, such as a reflectorized
crossbuck sign to inform motorists of the existence of the track, and a stop, look
and listen signage to prompt the public to take caution. These warning signs must
be erected in a place where they will have ample lighting and unobstructed visibility
both day and night. If only these safety devices were installed at the Tiaong
railroad crossing and the accident nevertheless occurred, we could have reached a
different disposition in the extent of the petitioner’s liability.

The exacting nature of the responsibility of railroad companies to secure public

safety by the installation of warning devices was emphasized in Philippine National
Railways v. Court of Appeals,[28] thus:

[I]t may broadly be stated that railroad companies owe to the public a duty of
exercising a reasonable degree of care to avoid injury to persons and property at
railroad crossings, which duties pertain both to the operation of trains and to the
maintenance of the crossings. Moreover, every corporation constructing or
operating a railway shall make and construct at all points where such railway
crosses any public road, good, sufficient, and safe crossings, and erect at such
points, at sufficient elevation from such road as to admit a free passage of vehicles
of every kind, a sign with large and distinct letters placed thereon, to give notice of
the proximity of the railway, and warn persons of the necessity of looking out for
trains. The failure of the PNR to put a cross bar, or signal light, flagman or
switchman, or semaphore is evidence of negligence and disregard of the safety of
the public, even if there is no law or ordinance requiring it, because public safety
demands that said device or equipment be installed.[29]

The responsibility of the PNR to secure public safety does not end with the
installation of safety equipment and signages but, with equal measure of
accountability, with the upkeep and repair of the same. Thus, in Cusi v. Philippine
National Railways,[30] we held:

Jurisprudence recognizes that if warning devices are installed in railroad crossings,

the travelling public has the right to rely on such warning devices to put them on
their guard and take the necessary precautions before crossing the tracks. A need,
therefore, exists for the railroad company to use reasonable care to keep such
devices in good condition and in working order, or to give notice that they are not
operating, since if such a signal is misunderstood it is a menace. Thus, it has been
held that if a railroad company maintains a signalling device at a crossing to give
warning of the approach of a train, the failure of the device to operate is generally
held to be evidence of negligence, which maybe considered with all the
circumstances of the case in determining whether the railroad company was
negligent as a matter of fact. [31]

The maintenance of safety equipment and warning signals at railroad crossings is

equally important as their installation since poorly maintained safety warning
devices court as much danger as when none was installed at all. The presence of
safety warning signals at railroad crossing carries with it the presumption that they
are in good working condition and that the public may depend on them for
assistance. If they happen to be neglected and inoperative, the public may be
misled into relying on the impression of safety they normally convey and eventually
bring injury to themselves in doing so.

The doctrine of last clear

chance is not applicable.

Finally, the CA correctly ruled that the doctrine of last clear chance is not applicable
in the instant case. The doctrine of last clear chance provides that where both
parties are negligent but the negligent act of one is appreciably later in point of
time than that of the other, or where it is impossible to determine whose fault or
negligence brought about the occurrence of the incident, the one who had the last
clear opportunity to avoid the impending harm but failed to do so, is chargeable
with the consequences arising therefrom. Stated differently, the rule is that the
antecedent negligence of a person does not preclude recovery of damages caused
by the supervening negligence of the latter, who had the last fair chance to prevent
the impending harm by the exercise of due diligence.[32] To reiterate, the proximate
cause of the collision was the petitioners’ negligence in ensuring that motorists and
pedestrians alike may safely cross the railroad track. The unsuspecting driver and
passengers of the jeepney did not have any participation in the occurrence of the
unfortunate incident which befell them. Likewise, they did not exhibit any overt act
manifesting disregard for their own safety. Thus, absent preceding negligence on
the part of the respondents, the doctrine of last clear chance cannot be applied.

WHEREFORE, premises considered, the petition is DENIED. The Decision of the

Court of Appeals dated July 21, 2009 in CA-G.R. CV No. 90021 is
hereby AFFIRMED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 175256, August 23, 2012 ]
LILY LIM, PETITIONER. VS. KOU CO PING A.K.A. CHARLIE CO,
RESPONDENT.

[G.R. NO. 179160]

KOU CO PING A.K.A CHARLIE CO, PETITIONER, VS. LILY LIM,

RESPONDENT.

DECISION

DEL CASTILLO, J.:

Is it forum shopping for a private complainant to pursue a civil complaint

for specific performance and damages, while appealing the judgment on
the civil aspect of a criminal case for estafa?

Before the Court are consolidated Petitions for Review assailing the separate
Decisions or the Second and Seventeenth Divisions or the Court of Appeals (CA) on
the above issue.
Lily Lim’s (Lim) Petition for Review[1] assails the October 20, 2005 Resolution[2] of
the Second Division in CA-G.R. CV No. 85138, which ruled on the above issue in the
affirmative:

Due to the filing of the said civil complaint (Civil Case No. 5112396), Charlie Co
filed the instant motion to dismiss [Lily Lim’s] appeal, alleging that in filing said civil
case, Lily Lim violated the rule against forum shopping as the elements of litis
pendentia are present.

This Court agrees.[3]

xxxx

IN VIEW OF THE FOREGOING, the appeal is DISMISSED.

SO ORDERED.[4]

On the other hand, Charlie Co’s (Co) Petition for Review [5] assails the April 10, 2007
Decision[6] of the Seventeenth Division in CA-G.R. SP No. 93395 for ruling on the
same issue in the negative:

We find no grave abuse of discretion committed by respondent judge. The elements

of litis pendentia and forum-shopping were not met in this case. [7]

xxxx

WHEREFORE, in view of the foregoing, the instant petition is DENIED. This case
is REMANDED to the court of origin for further proceedings.

SO ORDERED.[8]

Factual Antecedents

In February 1999, FR Cement Corporation (FRCC), owner/operator of a cement

manufacturing plant, issued several withdrawal authorities[9] for the account of
cement dealers and traders, Fil-Cement Center and Tigerbilt. These withdrawal
authorities state the number of bags that the dealer/trader paid for and can
withdraw from the plant. Each withdrawal authority contained a provision that it is
valid for six months from its date of issuance, unless revoked by FRCC Marketing
Department.
Fil-Cement Center and Tigerbilt, through their administrative manager, Gail Borja
(Borja), sold the withdrawal authorities covering 50,000 bags of cement to Co for
the amount of P3.15 million or P63.00 per bag.[10] On February 15, 1999, Co sold
these withdrawal authorities to Lim allegedly at the price of P64.00 per bag or a
total of P3.2 million.[11]

Using the withdrawal authorities, Lim withdrew the cement bags from FRCC on a
staggered basis. She successfully withdrew 2,800 bags of cement, and sold back
some of the withdrawal authorities, covering 10,000 bags, to Co.

Sometime in April 1999, FRCC did not allow Lim to withdraw the remaining 37,200
bags covered by the withdrawal authorities. Lim clarified the matter with Co and
Borja, who explained that the plant implemented a price increase and would only
release the goods once Lim pays for the price difference or agrees to receive a
lesser quantity of cement. Lim objected and maintained that the withdrawal
authorities she bought were not subject to price fluctuations. Lim sought legal
recourse after her demands for Co to resolve the problem with the plant or for the
return of her money had failed.

The criminal case

An Information for Estafa through Misappropriation or Conversion was filed against

Co before Branch 154 of the Regional Trial Court (RTC) of Pasig City. The
accusatory portion thereof reads:

On or about between the months of February and April 1999, in San Juan, Metro
Manila and within the jurisdiction of this Honorable Court, the accused, with intent
to defraud Lily Lim, with grave abuse of confidence, with unfaithfulness, received in
trust from Lily Lim cash money in the amount of P2,380,800.00 as payment for the
37,200 bags of cement, under obligation to deliver the 37,200 bags of cement to
said Lily Lim, but far from complying with his obligation, misappropriated,
misapplied and converted to his own personal use and benefit the said amount of
P2,300,800.00 [sic] and despite demands, the accused failed and refused to return
said amount, to the damage and prejudice of Lily Lim in the amount of
P2,380,800.00.

Contrary to Law.[12]

The private complainant, Lily Lim, participated in the criminal proceedings to prove
her damages. She prayed for Co to return her money amounting to P2,380,800.00,
foregone profits, and legal interest, and for an award of moral and exemplary
damages, as well as attorney’s fees.[13]
On November 19, 2003, the RTC of Pasig City, Branch 154, rendered its
Order[14] acquitting Co of the estafa charge for insufficiency of evidence. The
criminal court’s Order reads:

The first and second elements of the crime of estafa [with abuse of confidence
under Article 315, paragraph 1(b)] for which the accused is being charged and
prosecuted were not established by the prosecution’s evidence.

xxxx

In view of the absence of the essential requisites of the crime of estafa for which
the accused is being charged and prosecuted, as above discussed, the Court has no
alternative but to dismiss the case against the accused for insufficiency of evidence.
[15]

WHEREFORE, in view of the foregoing, the Demurrer to Evidence is GRANTED, and

the accused is hereby ACQUITTED of the crime of estafa charged against him
under the present information for insufficiency of evidence.

Insofar as the civil liability of the accused is concerned, however, set this case for
the reception of his evidence on the matter on December 11, 2003 at 8:30 o’clock
[sic] in the morning.

SO ORDERED.[16]

After the trial on the civil aspect of the criminal case, the Pasig City RTC also
relieved Co of civil liability to Lim in its December 1, 2004 Order. [17] The dispositive
portion of the Order reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered holding the

accused CHARLIE CO not civilly liable to the private complainant Lily Lim.

SO ORDERED.[18]

Lim sought a reconsideration of the above Order, arguing that she has presented
preponderant evidence that Co committed estafa against her. [19]

The trial court denied the motion in its Order[20] dated February 21, 2005.

On March 14, 2005, Lim filed her notice of appeal[21] on the civil aspect of the
criminal case. Her appeal was docketed as CA-G.R. CV No. 85138 and raffled to the
Second Division of the CA.

The civil action for specific performance 

On April 19, 2005, Lim filed a complaint for specific performance and damages
before Branch 21 of the RTC of Manila. The defendants in the civil case were Co and
all other parties to the withdrawal authorities, Tigerbilt, Fil-Cement Center, FRCC,
Southeast Asia Cement, and La Farge Corporation. The complaint, docketed as Civil
Case No. 05-112396, asserted two causes of action: breach of contract and abuse
of rights. Her allegations read:

ALLEGATIONS COMMON TO
ALL CAUSES OF ACTION

xxxx

23. Charlie Co obligated himself to deliver to Lily Lim 50,000 bags of cement of
P64.00 per bag on an x-plant basis within 3 months from the date of their
transaction, i.e. February 15, 1999. Pursuant to said agreement, Lily Lim paid
Charlie Co P3.2 Million while Charlie Co delivered to Lily Lim FR Cement Withdrawal
Authorities representing 50,000 bags of cement.

24. The withdrawal authorities issued by FR Cement Corp. allowed the assignee or
holder thereof to withdraw within a six-month period from date a certain amount of
cement indicated therein. The Withdrawal Authorities given to Lily Lim were dated
either 3 February 1999 or 23 February 1999. The Withdrawal Authorities were first
issued to Tigerbilt and Fil-Cement Center which in turn assigned them to Charlie Co.
Charlie Co then assigned the Withdrawal Authorities to Lily Lim on February 15,
1999. Through these series of assignments, Lily Lim acquired all the rights (rights
to withdraw cement) granted in said Withdrawal Authorities.

25. That these Withdrawal Authorities are valid is established by the fact that FR
Cement earlier allowed Lily Lim to withdraw 2,800 bags of cement on the basis
thereof.

26. However, sometime 19 April 1999 (within the three (3)-month period agreed
upon by Charlie Co and Lily Lim and certainly within the six (6)month period
indicated in the Withdrawal Authorities issued by FR Cement Corp.), Lily Lim
attempted but failed to withdraw the remaining bags of cement on account of FR
Cement’s unjustified refusal to honor the Withdrawal Authorities. x x x

xxxx
 FIRST CAUSE OF ACTION:
BREACH OF CONTRACT

30. Charlie Co committed and is therefore liable to deliver to Lily Lim 37,200 bags
of cement. If he cannot, then he must pay her the current fair market value
thereof.

31. FR Cement Corporation is also liable to deliver to Lily Lim the amount of cement
as indicated in the Withdrawal Authorities it issued. xxx FR Cement Corporation has
no right to impose price adjustments as a qualification for honoring the Withdrawal
Authorities.

32. Fil-Cement Center, Tigerbilt and Gail Borja as the original holders/ assignees of
the Withdrawal Authorities repeatedly assured Lily Lim that the same were valid
and would be honored. They are liable to make good on their assurances.

SECOND CAUSE OF ACTION:

ABUSE OF RIGHTS AND UNJUST ENRICHMENT

33. Charlie Co’s acts of falsely representing to Lily Lim that she may be able to
withdraw the cement from FR Cement Corp. caused Lily Lim to incur expenses and
losses. Such act was made without justice, without giving Lily Lim what is due her
and without observing honesty and good faith, all violative of the law, more
specifically Articles 19 and 20 of the Civil Code. Such willful act was also made by
Charlie Co in a manner contrary to morals, good customs or public policy, in
violation of Article 21 of the Civil Code.

34. FR Cement Corporation’s unjust refusal to honor the Withdrawal Authorities

they issued also caused damage to Lily Lim. Further, FR Cement Corporation’s act
of withholding the 37,200 bags of cement despite earning income therefor
constitutes as an unjust enrichment because FR Cement Corporation acquired
income through an act or performance by another or any other means at the
expense of another without just or legal ground in violation of Article 22 of the Civil
Code.

35. Fil-Cement Center, Tigerbilt and Gail Borja’s false assurances that Lily Lim
would be able to withdraw the remaining 37,200 bags of cement caused Lily Lim to
incur expenses and losses. x x x Moreover, Fil-Cement Center admitted receiving
payment for said amount of cement, thus they are deemed to have come into
possession of money at the expense of Lily Lim without just or legal ground, in
violation of Article 22 of the Civil Code.
 THIRD CAUSE OF ACTION:
MORAL AND EXEMPLARY DAMAGES and
ATTORNEY’S FEES AND COSTS OF SUIT[22]

Lim prayed for Co to honor his contractual commitments either by delivering the
37,200 bags of cement, making arrangements with FRCC to allow Lim to withdraw
the cement, or to pay for their value. She likewise asked that the defendants be
held solidarily liable to her for the damages she incurred in her failed attempts to
withdraw the cement and for the damages they inflicted on her as a result of their
abuse of their rights.[23]

Motions to dismiss both actions

In reaction to the filing of the civil complaint for specific performance and damages,
Co filed motions to dismiss the said civil case [24] and Lim’s appeal in the civil aspect
of the estafa case or CA-G.R. CV No. 85138.[25] He maintained that the two actions
raise the same issue, which is Co’s liability to Lim for her inability to withdraw the
bags of cement,[26] and should be dismissed on the ground of lis pendens and forum
shopping.

Ruling of the Court of Appeals Second Division in CA-G.R CV No. 85138 

The appellate court (Second Division) favorably resolved Co’s motion and dismissed
Lim’s appeal from the civil aspect of the estafa case. In its Resolution dated October
20, 2005, the CA Second Division held that the parties, causes of action, and reliefs
prayed for in Lim’s appeal and in her civil complaint are identical. Both actions seek
the same relief, which is the payment of the value of the 37,200 bags of cement.
[27]
 Thus, the CA Second Division dismissed Lim’s appeal for forum shopping. [28] The
CA denied[29] Lim’s motion for reconsideration.[30]

Lim filed the instant petition for review, which was docketed as G.R. No. 175256.

Ruling of the Manila Regional Trial Court in Civil Case No. 05-112396 

Meanwhile, the Manila RTC denied Co’s Motion to Dismiss in an Order [31] dated
December 6, 2005. The Manila RTC held that there was no forum shopping because
the causes of action invoked in the two cases are different. It observed that the civil
complaint before it is based on an obligation arising from contract and quasi-delict,
whereas the civil liability involved in the appeal of the criminal case arose from a
felony.

Co filed a petition for certiorari,[32] docketed as CA-G.R. SP No. 93395, before the

appellate court. He prayed for the nullification of the Manila RTC’s Order in Civil
Case No. 05-112396 for having been issued with grave abuse of discretion. [33]

Ruling of the Court of Appeals Seventeenth Division in CA-G.R. SP No.

93395 

The CA Seventeenth Division denied Co’s petition and remanded the civil complaint
to the trial court for further proceedings. The CA Seventeenth Division agreed with
the Manila RTC that the elements of litis pendentia and forum shopping are not met
in the two proceedings because they do not share the same cause of action. [34]

The CA denied[35] Co’s motion for reconsideration.[36]

Co filed the instant Petition for Review, which was docketed as G.R. No. 179160.

Upon Co’s motion,[37] the Court resolved to consolidate the two petitions. [38]

Kou Co Ping’s arguments

Co maintains that Lim is guilty of forum shopping because she is asserting only one
cause of action in CA-G.R. CV No. 85138 (the appeal from the civil aspect of
Criminal Case No. 116377) and in Civil Case No. 05-112396, which is for Co’s
violation of her right to receive 37,200 bags of cement. Likewise, the reliefs sought
in both cases are the same, that is, for Co to deliver the 37,200 bags of cement or
its value to Lim. That Lim utilized different methods of presenting her case – a
criminal action for estafa and a civil complaint for specific performance and
damages – should not detract from the fact that she is attempting to litigate the
same cause of action twice.[39]

Co makes light of the distinction between civil liability ex contractu and ex delicto.

According to him, granting that the two civil liabilities are independent of each
other, nevertheless, the two cases arising from them would have to be decided
using the same evidence and going over the same set of facts. Thus, any judgment
rendered in one of these cases will constitute res judicata on the other.[40]

In G.R. No. 179160, Co prays for the annulment of the CA Decision and Resolution
in CA-G.R. SP No. 93395, for a declaration that Lim is guilty of forum shopping, and
for the dismissal of Civil Case No. 05-112396. [41]

In G.R. No. 175256, Co prays for the affirmation of the CA Decision in CA-G.R. CV

No. 85138 (which dismissed Lim’s appeal from the trial court’s decision in Criminal
Case No. 116377).[42]
Lily Lim’s arguments

Lim admits that the two proceedings involve substantially the same set of facts
because they arose from only one transaction.[43] She is quick to add, however, that
a single act or omission does not always make a single cause of action. [44] It can
possibly give rise to two separate civil liabilities on the part of the offender – (1) ex
delicto or civil liability arising from crimes, and (2) independent civil liabilities or
those arising from contracts or intentional torts. The only caveat provided in Article
2177 of the Civil Code is that the offended party cannot recover damages twice for
the same act or omission.[45] Because the law allows her two independent causes of
action, Lim contends that it is not forum shopping to pursue them. [46]

She then explains the separate and distinct causes of action involved in the two
cases. Her cause of action in CA-G.R CV No. 85138 is based on the crime of estafa.
Co violated Lim’s right to be protected against swindling. He represented to Lim
that she can withdraw 37,200 bags of cement using the authorities she bought from
him. This is a fraudulent representation because Co knew, at the time that they
entered into the contract, that he could not deliver what he promised. [47] On the
other hand, Lim’s cause of action in Civil Case No. 05-112396 is based on contract.
Co violated Lim’s rights as a buyer in a contract of sale. Co received payment for
the 37,200 bags of cement but did not deliver the goods that were the subject of
the sale.[48]

In G.R. No. 179160, Lim prays for the denial of Co’s petition.
[49]
 In G.R. No. 175256, she prays for the reversal of the CA Decision in CA-G.R. CV
No. 85138, for a declaration that she is not guilty of forum shopping, and for the
reinstatement of her appeal in Criminal Case No. 116377 to the CA. [50]

Issue

Did Lim commit forum shopping in filing the civil case for specific performance and
damages during the pendency of her appeal on the civil aspect of the criminal case
for estafa?

Our Ruling

A single act or omission that causes damage to an offended party may give rise to
two separate civil liabilities on the part of the offender[51] . (1) civil liability ex
delicto, that is, civil liability arising from the criminal offense under Article 100 of
the Revised Penal Code,[52] and (2) independent civil liability, that is, civil liability
that may be pursued independently of the criminal proceedings. The independent
civil liability may be based on “an obligation not arising from the act or omission
complained of as a felony,” as provided in Article 31 of the Civil Code (such as for
breach of contract or for tort[53]). It may also be based on an act or omission that
may constitute felony but, nevertheless, treated independently from the criminal
action by specific provision of Article 33 of the Civil Code (“in cases of defamation,
fraud and physical injuries”).

The civil liability arising from the offense or ex delicto is based on the acts or
omissions that constitute the criminal offense; hence, its trial is inherently
intertwined with the criminal action. For this reason, the civil liability ex delicto is
impliedly instituted with the criminal offense.[54] If the action for the civil liability ex
delicto is instituted prior to or subsequent to the filing of the criminal action, its
proceedings are suspended until the final outcome of the criminal action. [55] The civil
liability based on delict is extinguished when the court hearing the criminal action
declares that “the act or omission from which the civil liability may arise did not
exist.”[56]

On the other hand, the independent civil liabilities are separate from the criminal
action and may be pursued independently, as provided in Articles 31 and 33 of the
Civil Code, which state that:

ART. 31. When the civil action is based on an obligation not arising from the act
or omission complained of as a felony, such civil action may proceed
independently of the criminal proceedings and regardless of the result of the latter.
(Emphasis supplied.)

ART. 33. In cases of defamation, fraud, and physical injuries a civil action for
damages, entirely separate and distinct from the criminal action, may be brought
by the injured party. Such civil action shall proceed independently of the
criminal prosecution, and shall require only a preponderance of evidence.
(Emphasis supplied.)

Because of the distinct and independent nature of the two kinds of civil liabilities,
jurisprudence holds that the offended party may pursue the two types of civil
liabilities simultaneously or cumulatively, without offending the rules on forum
shopping,  litis pendentia, or res judicata.[57] As explained in Cancio, Jr. v. Isip:[58]

One of the elements of res judicata is identity of causes of action. In the instant
case, it must be stressed that the action filed by petitioner is an independent civil
action, which remains separate and distinct from any criminal prosecution based on
the same act. Not being deemed instituted in the criminal action based on culpa
criminal, a ruling on the culpability of the offender will have no bearing on said
independent civil action based on an entirely different cause of action, i.e., culpa
contractual.

In the same vein, the filing of the collection case after the dismissal of the estafa
cases against [the offender] did not amount to forum-shopping. The essence of
forum shopping is the filing of multiple suits involving the same parties for the
same cause of action, either simultaneously or successively, to secure a favorable
judgment. Although the cases filed by [the offended party] arose from the same act
or omission of [the offender], they are, however, based on different causes of
action. The criminal cases for estafa are based on culpa criminal while the civil
action for collection is anchored on culpa contractual. Moreover, there can be no
forum-shopping in the instant case because the law expressly allows the filing of a
separate civil action which can proceed independently of the criminal action. [59]

Since civil liabilities arising from felonies and those arising from other sources of
obligations are authorized by law to proceed independently of each other, the
resolution of the present issue hinges on whether the two cases herein involve
different kinds of civil obligations such that they can proceed independently of each
other. The answer is in the affirmative.

The first action is clearly a civil action ex delicto, it having been instituted together
with the criminal action.[60]

On the other hand, the second action, judging by the allegations contained in the
complaint,[61] is a civil action arising from a contractual obligation and for tortious
conduct (abuse of rights).  In her civil complaint, Lim basically alleges that she
entered into a sale contract with Co under the following terms: that she bought
37,200 bags of cement at the rate of P64.00 per bag from Co; that, after full
payment, Co delivered to her the withdrawal authorities issued by FRCC
corresponding to these bags of cement; that these withdrawal authorities will be
honored by FRCC for six months from the dates written thereon. Lim then
maintains that the defendants breached their contractual obligations to her under
the sale contract and under the withdrawal authorities; that Co and his co-
defendants wanted her to pay more for each bag of cement, contrary to their
agreement to fix the price at P64.00 per bag and to the wording of the withdrawal
authorities; that FRCC did not honor the terms of the withdrawal authorities it
issued; and that Co did not comply with his obligation under the sale contract to
deliver the 37,200 bags of cement to Lim. From the foregoing allegations, it is
evident that Lim seeks to enforce the defendants’ contractual obligations, given that
she has already performed her obligations. She prays that the defendants either
honor their part of the contract or pay for the damages that their breach has
caused her.
Lim also includes allegations that the actions of the defendants were committed in
such manner as to cause damage to Lim without regard for morals, good customs
and public policy. These allegations, if proven, would constitute tortious
conduct (abuse of rights under the Human Relations provisions of the Civil Code).

Thus, Civil Case No. 05-112396 involves only the obligations arising from
contract and from tort, whereas the appeal in the estafa case involves only the civil
obligations of Co arising from the offense charged.  They present different causes of
action, which , under the law, are considered "separate, distinct, and
independent"[62] from each other.  Both cases can proceed to their final
adjudication, subject to the prohibition on double recovery under Article 2177 of the
Civil Code.[63]

WHEREFORE, premises considered, Lily Lim's Petition

in G.R. No. 175256 is GRANTED.  The assailed October 20, 2005 Resolution of the
Second Division of the Court of Appeals in CA-G.R. CV No. 85138
is REVERSED and SET ASIDE. Lily Lim's appeal in CA-G.R. CV No. 85138 is
ordered REINSTATED and the Court of Appeals is DIRECTED to RESOLVE the
same with DELIBERATE DISPATCH.

Charlie Co's Petition in G.R. No. 179160 is DENIED.  The assailed April 10, 2007
Decision of the Seventeenth Division of the Court of Appeals in CA-G.R. SP No.
93395 is AFFIRMED  in toto.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 189316, July 01, 2013 ]
PHILIPPINE NATIONAL BANK, PETITIONER, VS. SPOUSES
BERNARD AND CRESENCIA MARAÑON, RESPONDENTS.

DECISION

REYES, J.:
This is a petition for review on certiorari[1] under Rule 45 of the Rules of Court,
assailing the Decision[2] dated June 18, 2008 and Resolution[3] dated August 10,
2009 of the Court of Appeals (CA) in CA-G.R. SP No. 02513, which affirmed in
toto the Orders dated September 8, 2006[4] and December 6, 2006[5] of the
Regional Trial Court (RTC) of Bacolod City, Branch 54, directing petitioner Philippine
National Bank (PNB) to release in favor of Spouses Bernard and Cresencia Marañon
(Spouses Marañon) the rental fees it received amounting to Thirty Thousand Pesos
(P30,000.00).

The Facts

The controversy at bar involves a 152-square meter parcel of land located at

Cuadra-Smith Streets, Downtown, Bacolod (subject lot) erected with a building
leased by various tenants.  The subject lot was among the properties mortgaged by
Spouses Rodolfo and Emilie Montealegre (Spouses Montealegre) to PNB as a
security for a loan.  In their transactions with PNB, Spouses Montealegre used
Transfer Certificate of Title (TCT) No. T-156512 over the subject lot purportedly
registered in the name of Emilie Montealegre (Emilie).[6]

When Spouses Montealegre failed to pay the loan, PNB initiated foreclosure
proceedings on the mortgaged properties, including the subject lot.  In the auction
sale held on August 16, 1991, PNB emerged as the highest bidder.  It was issued
the corresponding Certificate of Sale dated December 17, 1991 [7] which was
subsequently registered on February 4, 1992.[8]

Before the expiration of the redemption period or on July 29, 1992, Spouses
Marañon filed before the RTC a complaint for  Annulment of Title, Reconveyance
and Damages[9] against Spouses Montealegre, PNB, the Register of Deeds of
Bacolod City and the Ex-Officio Provincial Sheriff of Negros Occidental.  The
complaint, docketed as Civil Case No. 7213, alleged that Spouses Marañon are the
true registered owners of the subject lot by virtue of TCT No. T-129577 which was
illegally cancelled by TCT No. T-156512 under the name of Emilie who used a
falsified Deed of Sale bearing the forged signatures of Spouse Marañon [10] to effect
the transfer of title to the property in her name.

In its Answer,[11] PNB averred that it is a mortgagee in good faith and for value and
that its mortgage lien on the property was registered thus valid and binding against
the whole world.

As reflected in the Pre-trial Order[12] dated March 12, 1996, the parties stipulated,
among others, that the period for legal redemption of the subject lot has already
expired.
While the trial proceedings were ongoing, Paterio Tolete (Tolete), one of the tenants
of the building erected on the subject lot deposited his rental payments with the
Clerk of Court of Bacolod City which, as of October 24, 2002, amounted to
P144,000.00.

On June 2, 2006, the RTC rendered its Decision [13] in favor of the respondents after
finding, based on the expert testimony of Colonel Rodolfo Castillo, Head of the
Forensic Technology Section of Bacolod City Philippine National Police, that the
signatures of Spouses Marañon in the Deed of Sale presented by Spouses
Montealegre before the Register of Deeds to cause the cancellation of TCT No. T-
129577 were forged.  Hence, the RTC concluded the sale to be null and void and as
such it did not transfer any right or title in law.  PNB was adjudged to be a
mortgagee in good faith whose lien on the subject lot must be respected. 
Accordingly, the Decision disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs [herein

respondents]:

1. The cancellation of TCT No. 129577 over Lot 177-A-1 Bacolod Cadastre in the
name of Bernard Marañon and the issuance of new TCT No. 156512 in the name of
defendant Emilie Montealegre are hereby declared null and void;

2. The defendant Emilie Montealegre is ordered to reconvey the title over Lot No.
177-A-1, Bacolod Cadastre back to the plaintiffs Marañon [herein respondents];

3. The Real Estate Mortgage lien of the Philippine National Bank registered on the
title of Lot No. 177-A-1 Bacolod Cadastre shall stay and be respected; and

4. The defendants - Emilie Montealegre and spouse are ordered to pay attorney’s
fees in the sum of Php50,000.00, and to pay the costs of the suit.

SO ORDERED.[14]

Neither of the parties sought a reconsideration of the above decision or any portion
thereof nor did they elevate the same for appellate review.

What precipitated the controversy at hand were the subsequent motions filed by
Spouses Marañon for release of the rental payments deposited with the Clerk of
Court and paid to PNB by Tolete.

On June 13, 2006, Spouses Marañon filed an Urgent Motion for the Withdrawal of
Deposited Rentals[15] praying that the P144,000.00 rental fees deposited by Tolete
with the Clerk of Court be released in their favor for having been adjudged as the
real owner of the subject lot.  The RTC granted the motion in its Order[16] dated
June 28, 2006.

On September 5, 2006, Spouses Marañon again filed with the RTC an Urgent Ex-
Parte Motion for Withdrawal of Deposited Rentals [17] praying that the P30,000.00
rental fees paid to PNB by Tolete on December 12, 1999 be released in their favor. 
The said lease payments were for the five (5)-month period from August 1999 to
December 1999 at the monthly lease rate of P6,000.00.

The RTC granted the motion in its Order[18] dated September 8, 2006 reasoning that
pursuant to its Decision dated June 2, 2006 declaring Spouses Marañon to be the
true registered owners of the subject lot, they are entitled to its fruits.

The PNB differed with the RTC’s ruling and moved for reconsideration averring that
as declared by the RTC in its Decision dated June 2, 2006, its mortgage lien should
be carried over to the new title reconveying the lot to Spouses Marañon.  PNB
further argued that with the expiration of the redemption period on February 4,
1993, or one (1) year from the registration of the certificate of sale, PNB is now the
owner of the subject lot hence, entitled to its fruits.  PNB prayed that (1) the Order
dated September 8, 2006 be set aside, and (2) an order be issued directing
Spouses Marañon to turn over to PNB the amount of P144,000.00 released in their
favor by the Clerk of Court.[19]

On November 20, 2006, the RTC issued an Order again directing PNB to release to
Spouses Marañon the P30,000.00 rental payments considering that they were
adjudged to have retained ownership over the property. [20]

On December 6, 2006, the RTC issued another Order denying PNB’s motion for
reconsideration and reiterating the directives in its Order dated September 8, 2006.
[21]

Aggrieved, PNB sought recourse with the CA via a petition

for certiorari and mandamus[22] claiming that as the lawful owner of the subject lot
per the RTC’s judgment dated June 2, 2006, it is entitled to the fruits of the same
such as rentals paid by tenants hence, the ruling that “the real estate mortgage lien
of the [PNB] registered on the title of Lot No. 177-A-1 Bacolod Cadastre shall stay
and be respected.”  PNB also contended that it is an innocent mortgagee.

In its Decision[23] dated June 18, 2008, the CA denied the petition and affirmed the
RTC’s judgment ratiocinating that not being parties to the mortgage transaction
between PNB and Spouses Montealegre, Spouses Marañon cannot be deprived of
the fruits of the subject lot as the same will amount to deprivation of property
without due process of law.  The RTC further held that PNB is not a mortgagee in
good faith because as a financial institution imbued with public interest, it should
have looked beyond the certificate of title presented by Spouses Montealegre and
conducted an inspection on the circumstances surrounding the transfer to Spouses
Montealegre.  The decretal portion of the Decision thus read:

WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED.  The

Orders dated September 8, 2006 and December 6, 2006, rendered by the
respondent Presiding Judge of the Regional Trial Court, Branch 54, Bacolod City, in
Civil Case NO. 7213 directing the release of the deposited rental in the amount of
THIRTY THOUSAND PESOS ([P]30,000.00) to private respondents are
hereby AFFIRMED.

SO ORDERED.[24]

PNB moved for reconsideration[25] but the motion was denied in the CA Resolution
dated August 10, 2009.[26]  Hence, the present recourse whereby PNB argues that
the RTC Decision dated June 2, 2006 lapsed into finality when it was not appealed
or submitted for reconsideration.  As such, all conclusions therein are immutable
and can no longer be modified by any court even by the RTC that rendered the
same.  The CA however erroneously altered the RTC Decision by reversing the
pronouncement that PNB is a mortgagee-in-good-faith.

PNB further asseverates that its mortgage lien was carried over to the new title
issued to Spouses Marañon and thus it retained the right to foreclose the subject lot
upon non-payment of the secured debt.  PNB asserts that it is entitled to the rent
because it became the subject lot’s new owner when the redemption period expired
without the property being redeemed.

Ruling of the Court

We deny the petition.

It is readily apparent from the facts at hand that the status of PNB’s lien on the
subject lot has already been settled by the RTC in its Decision dated June 2, 2006
where it was adjudged as a mortgagee in good faith whose lien shall subsist and be
respected.  The decision lapsed into finality when neither of the parties moved for
its reconsideration or appealed.

Being a final judgment, the dispositions and conclusions therein have become
immutable and unalterable not only as against the parties but even the courts.  This
is known as the doctrine of immutability of judgments which espouses that a
judgment that has acquired finality becomes immutable and unalterable, and may
no longer be modified in any respect even if the modification is meant to correct
erroneous conclusions of fact or law and whether it will be made by the court that
rendered it or by the highest court of the land.[27]  The significance of this rule was
emphasized in Apo Fruits Corporation v. Court of Appeals,[28] to wit:

The reason for the rule is that if, on the application of one party, the court could
change its judgment to the prejudice of the other, it could thereafter, on application
of the latter, again change the judgment and continue this practice indefinitely. 
The equity of a particular case must yield to the overmastering need of certainty
and unalterability of judicial pronouncements.

The doctrine of immutability and inalterability of a final judgment has a two-

fold purpose: (1) to avoid delay in the administration of justice and thus,
procedurally, to make orderly the discharge of judicial business and (2) to put an
end to judicial controversies, at the risk of occasional errors, which is precisely why
courts exist. Controversies cannot drag on indefinitely.  The rights and obligations
of every litigant must not hang in suspense for an indefinite period of time.  The
doctrine is not a mere technicality to be easily brushed aside, but a matter of public
policy as well as a time-honored principle of procedural law.[29]  (Citations omitted)

Hence, as correctly argued by PNB, the issue on its status as a mortgagee in good
faith have been adjudged with finality and it was error for the CA to still delve into
and, worse, overturn, the same.  The CA had no other recourse but to uphold the
status of PNB as a mortgagee in good faith regardless of its defects for the sake of
maintaining stability of judicial pronouncements.  “The main role of the courts of
justice is to assist in the enforcement of the law and in the maintenance of peace
and order by putting an end to judiciable controversies with finality.  Nothing better
serves this role than the long established doctrine of immutability of judgments.” [30]

Further, it must be remembered that what reached the CA on certiorari were RTC

resolutions issued long after the finality of the Decision dated June 2, 2006.  The
RTC Orders dated September 8, 2006 and December 6, 2006 were implements of
the pronouncement that Spouses Marañon are still the rightful owners of the
subject lot, a matter that has been settled with finality as well.  This
notwithstanding, the Court agrees with the ultimate outcome of the CA’s assailed
resolutions.

Rent is a civil fruit[31] that belongs to the owner of the property[32]  producing it by

right of accession[33].[34]  The rightful recipient of the disputed rent in this case
should thus be the owner of the subject lot at the time the rent accrued.  It is
beyond question that Spouses Marañon never lost ownership over the subject lot. 
This is the precise consequence of the final and executory judgment in Civil Case
No. 7213 rendered by the RTC on June 3, 2006 whereby the title to the subject lot
was reconveyed to them and the cloud thereon consisting of Emilie’s fraudulently
obtained title was removed.  Ideally, the present dispute can be simply resolved on
the basis of such pronouncement.  However, the application of related legal
principles ought to be clarified in order to settle the intervening right of PNB as a
mortgagee in good faith.

The protection afforded to PNB as a mortgagee in good faith refers to the right to
have its mortgage lien carried over and annotated on the new certificate of title
issued to Spouses Marañon[35] as so adjudged by the RTC. Thereafter, to enforce
such lien thru foreclosure proceedings in case of non-payment of the secured debt,
[36]
 as PNB did so pursue.  The principle, however, is not the singular rule that
governs real estate mortgages and foreclosures attended by fraudulent transfers to
the mortgagor.

Rent, as an accessory follow the principal.[37]  In fact, when the principal property is
mortgaged, the mortgage shall include all natural or civil fruits and improvements
found thereon when the secured obligation becomes due as provided in Article 2127
of the Civil Code, viz:

Art. 2127. The mortgage extends to the natural accessions, to the improvements,
growing fruits, and the rents or income not yet received when the obligation
becomes due, and to the amount of the indemnity granted or owing to the
proprietor from the insurers of the property mortgaged, or in virtue of expropriation
for public use, with the declarations, amplifications and limitations established by
law, whether the estate remains in the possession of the mortgagor, or it passes
into the hands of a third person.

Consequently, in case of non-payment of the secured debt, foreclosure proceedings

shall cover not only the hypothecated property but all its accessions and
accessories as well.  This was illustrated in the early case of Cu Unjieng e Hijos v.
Mabalacat Sugar Co.[38] where the Court held:

That a mortgage constituted on a sugar central includes not only the land on which
it is built but also the buildings, machinery, and accessories installed at the time the
mortgage was constituted as well as the buildings, machinery and accessories
belonging to the mortgagor, installed after the constitution thereof x x x [.] [39]

Applying such pronouncement in the subsequent case of Spouses Paderes v. Court

of Appeals,[40] the Court declared that the improvements constructed by the
mortgagor on the subject lot are covered by the real estate mortgage contract with
the mortgagee bank and thus included in the foreclosure proceedings instituted by
the latter.[41]

However, the rule is not without qualifications.  In Castro, Jr. v. CA[42] the Court
explained that Article 2127 is predicated on the presumption that the ownership of
accessions and accessories also belongs to the mortgagor as the owner of the
principal.  After all, it is an indispensable requisite of a valid real estate mortgage
that the mortgagor be the absolute owner of the encumbered property, thus:

[A]ll improvements subsequently introduced or owned by the mortgagor on the

encumbered property are deemed to form part of the mortgage. That the
improvements are to be considered so incorporated only if so owned by the
mortgagor is a rule that can hardly be debated since a contract of security,
whether, real or personal, needs as an indispensable element thereof the ownership
by the pledgor or mortgagor of the property pledged or mortgaged. x x x. [43] 
(Citation omitted)

Otherwise stated, absent an adverse claimant or any evidence to the contrary, all
accessories and accessions accruing or attached to the mortgaged property are
included in the mortgage contract and may thus also be foreclosed together with
the principal property in case of non-payment of the debt secured.

Corollary, any evidence sufficiently overthrowing the presumption that the

mortgagor owns the mortgaged property precludes the application of Article 2127. 
Otherwise stated, the provision is irrelevant and inapplicable to mortgages and their
resultant foreclosures if the mortgagor is later on found or declared to be not the
true owner of the property, as in the instant case.

It is beyond question that PNB’s mortgagors, Spouses Montealegre, are not the true
owners of the subject lot much less of the building which produced the disputed
rent.  The foreclosure proceedings on August 16, 1991 caused by PNB could not
have, thus, included the building found on the subject lot and the rent it yields. 
PNB’s lien as a mortgagee in good faith pertains to the subject lot alone because
the rule that improvements shall follow the principal in a mortgage under Article
2127 of the Civil Code does not apply under the premises.  Accordingly, since the
building was not foreclosed, it remains a property of Spouses Marañon; it is not
affected by non-redemption and is excluded from any consolidation of title made by
PNB over the subject lot.  Thus, PNB’s claim for the rent paid by Tolete has no
basis.
It must be remembered that there is technically no juridical tie created by a valid
mortgage contract that binds PNB to the subject lot because its mortgagor was not
the true owner.  But by virtue of the mortgagee in good faith principle, the law
allows PNB to enforce its lien.  We cannot, however, extend such principle so as to
create a juridical tie between PNB and the improvements attached to the subject lot
despite clear and undeniable evidence showing that no such juridical tie exists.

Lastly, it is worthy to note that the effects of the foreclosure of the subject lot is in
fact still contentious considering that as a purchaser in the public sale, PNB was
only substituted to and acquired the right, title, interest and claim of the mortgagor
to the property as of the time of the levy.[44]  There being already a final judgment
reconveying the subject lot to Spouses Marañon and declaring as null and void
Emilie’s purported claim of ownership, the legal consequences of the foreclosure
sale, expiration of the redemption period and even the consolidation of the subject
lot’s title in PNB’s name shall be subjected to such final judgment.  This is the clear
import of the ruling in Unionbank of the Philippines v. Court of Appeals:[45]

This is because as purchaser at a public auction, UNIONBANK is only substituted to

and acquires the right, title, interest and claim of the judgment debtors or
mortgagors to the property at the time of levy. Perforce, the judgment in the main
action for reconveyance will not be rendered ineffectual by the consolidation of
ownership and the issuance of title in the name of UNIONBANK. [46]  (Citation
omitted)

Nonetheless, since the present recourse stemmed from a mere motion claiming
ownership of rent and not from a main action for annulment of the foreclosure sale
or of its succeeding incidents, the Court cannot proceed to make a ruling on the
bearing of the CA’s Decision dated June 18, 2008 to PNB’s standing as a purchaser
in the public auction.  Such matter will have to be threshed out in the proper forum.

All told, albeit the dispositive portions of the assailed CA decision and resolution are
differently premised, they ought to be upheld as they convey the similar conclusion
that Spouses Marañon are the rightful owners of the rent earned by the building on
the subject lot.

WHEREFORE, foregoing considered, the petition is hereby DENIED.  The Decision

dated June 18, 2008 and Resolution dated August 10, 2009 of the Court of Appeals
in CA-G.R. SP No. 02513 are AFFIRMED.

SO ORDERED.

THIRD DIVISION
 [ G.R. No. 187013, April 22, 2015 ]
SPOUSES MAGDALINO AND CLEOFE BADILLA, PETITIONERS,
VS. FE BRAGAT, RESPONDENT.

DECISION

PERALTA, J.:

This is a petition for review on certiorari, under Rule 45 of the Rules of Court,
assailing the Decision dated October 9, 2008 and Resolution dated February 12,
2009 of the Court of Appeals rendered in CA-G.R. CV No. 70423-MIN.

The case involves the issue of ownership of the subject real property.

The facts follow.

Azur Pastrano and his wife Profitiza Ebaning (Spouses Pastrano) were the original
owners of Lot No. 19986 (subject property), located at Tablon, Cagayan de Oro
City. Its Original Certificate of Title (OCT) No. P-2035, consisting of 1,015 sq. m.
was issued on November 18, 1980.[1] The OCT was in the name of Azur Pastrano. [2]

Before the issuance of the OCT, however, the Spouses Pastrano, on November 18,
1968, sold the lot to Eustaquio P. Ledesma, Jr. (Ledesma), as evidenced by a Deed
of Definite Sale of Unregistered Coconut and Residential Land. [3]

The petitioners, the spouses Magdalino and Cleofe Badilla (Spouses Badilla) claimed
that in 1970, Ledesma sold to them, "on installment" basis, a portion amounting to
200 sq. m. of Lot No. 19986 (subject property). The sale was not reduced in
writing, however, possession of the portion sold was transferred to the Badillas,
which portion the Badillas claim was designated as Lot No. 19986-B.[4]

On April 18, 1978, the spouses Florito Bragat and Fe Bragat (Spouses Bragat)
bought 991 sq. m. of the property from Ledesma and his wife, via a Deed of
Absolute Sale of a Residential Lot.[5] Two (2) tax declarations were allegedly issued
as a result of the sale: one designated a lot as Lot No. 19986-A with an area of 642
sq. m.,[6] while another designated the other lot as Lot No. 19986-B with an area of
349 sq. m.[7]

On May 5, 1984, the Spouses Pastrano executed another Deed of Absolute Sale of
Registered Land in favor of herein petitioner Fe Bragat (Bragat), covered by OCT
No. P-2035 and with an area of 1,015 sq. m.[8] On the same date, Azur Pastrano
executed an Affidavit of Loss reporting the loss of the owner's duplicate copy of
OCT No. P-2035.[9]

It was Bragat, however, who petitioned the court for the issuance of a new owner's
duplicate copy of OCT No. P-2035. Thus, on July 24, 1987, the RTC ordered the
issuance of a new owner's copy of OCT No. P-2035.[10]

On October 2, 1987, the Spouses Pastrano executed yet another Deed of Sale of
Registered Land in favor of Bragat, which land is again covered by OCT No. P-2035
with an area of 1,015 sq. m.[11] As a result, OCT No. P-2035 was canceled and TCT
No. T-47759 was issued in the name of Bragat. [12]

On March 7, 1991, Bragat, through her counsel, made a written demand to vacate
against the Spouses Badilla. In response, the Spouses Badilla, also through their
counsel's letter, refused the demand and raised the earlier sale made by the
Spouses Pastrano to Ledesma and the subsequent sale by Ledesma to the Badillas.
[13]

Hence, the parties filed their respective complaints within days of each other.

Bragat filed her Complaint for Recovery of Posession and Damages against the
spouses Magdalino and Cleofe Badilla on June 5, 1992, alleging therein that she is
the absolute owner of Lot No. 19986, covered by TCT No. T-47759. She claimed to
have purchased the property, first, from Eustaquio Ledesma, Jr., but later, when
she found out that Ledesma was "unauthorized" to sell, she again allegedly made
another purchase of the same property from Azur Pastrano, on May 5, 1984. This
led to the cancellation of Pastrano's OCT No. P-2035 and the issuance of Bragat's
TCT No. T-47759. Thus, she prays for the Spouses Badilla to be ordered to vacate
the around 149-square-meter portion that they occupy in the property.[14]

Just six days later, on June 11, 1992, the Spouses Badilla filed their own Complaint
for Quieting of Title, Declaration of Nullity of TCT No. T-47759 and Damages against
Bragat, claiming that the Spouses Badilla are the lawful owners and possessors of
Lot No. 19986-B (a portion of Lot No. 19986), having acquired it in 1970 from
Ledesma. The latter, on his part, allegedly bought the bigger Lot No. 19986 from
Pastrano earlier on November 18, 1968. The Spouses Badilla alleged that they took
possession of and built a house on the property upon their purchase thereof from
Ledesma and has since remained in possession. However, they claimed that
Pastrano was subsequently able to obtain a free patent and a title, OCT No. P-2035,
over Lot No. 19986. According to the Badillas, Pastrano made a sale to Bragat on
October 2, 1987, but such sale is not valid since Pastrano was no longer the owner
of the property on that date. Consequently, the Spouses Badilla prayed that TCT
No. T-47759 issued to Bragat pursuant to that sale be declared null and void. [15]

After Answers were filed for both complaints, the two cases were consolidated and
heard by one court, Branch 25 of the RTC of Cagayan de Oro City, as they involved
exactly the same parties and subject lot.

After trial, the RTC found for Bragat, noting that the sketch map shows the 152-
square-meter portion occupied by the Spouses .Badilla is within the titled property
of Bragat.[16] It also found Bragat's title as valid for what it saw as the result of a
purchase in good faith and. for value.[17] In contrast, the trial court observed a lack
of evidence of the Spouses Badilla. The latter allegedly presented handwritten and
typewritten receipts which were purportedly signed by Ledesma, dated March 5,
1989, March 1, 1991 and March 23, 1991 acknowledging Ledesma's receipt of
certain amounts, but the court claimed that it found no evidence of (Ledesma's)
absolute ownership on these dates. The court noted that Ledesma had sold
previously to the Spouses Bragat via a Deed of Absolute Sale of Residential Land
dated April 18, 1978. Hence, in the trial court's view, on March 5, 1989, March 1,
1991 and March 23, 1991, Ledesma no longer owned the land and transferred
nothing to the Badillas.[18] The dispositive portion of the RTC decision states:

IN THE LIGHT OF THE FOREGOING, by preponderance of evidence, judgment is

hereby rendered in favor of Spouses Fe Bragat and Florito Bragat and against
Spouses Magdalino and Cleofe Badilla and dismissing Civil Case No. 92-287 for
failure of Spouses Magdalino and Cleofe Badilla to substantiate their complaint and
for lack of merit and ordering defendants Cleofe Badilla and Magdalino Badilla in
Civil Case No. 92-273:

a) to vacate immediately the 152-square-meter property they are occupying as shown in Exh. N-2-A,
P;

b) to pay Twenty Thousand Pesos (P20,000.00) by way of moral damages;

c) to pay a reasonable rental of One Hundred Pesos (P100.00) a month from March 1, 1991 at 6%
legal interest until they vacate the premises;

d) to reimburse Ten Thousand Pesos (P10,000.00) attorney's fees and Five Thousand Pesos
(P5,000.00) as expenses for litigation as part of consequential damages; and

e) pay the costs.

SO ORDERED.[19]
Upon appeal to the CA, the appellate court affirmed the RTC's decision but modified
the same on a finding that Ledesma sold only 991 sq. of the property to Bragat in
1978; hence, it held that the remaining 24 sq. of the 1,015-sq.-m. property was
validly sold to the Badillas in 1991 and, therefore, must be reconveyed to the latter.
[20]
 It also removed the award of damages. The dispositive portion of the CA's
decision is as follows:

WHEREFORE, the instant appeal is PARTIALLY GRANTED. The January 14, 2001
Judgment (of the RTC) is MODIFIED in that:

a) appellants are ordered to VACATE 128 square meters of the disputed lot and appellee is ordered to
RECONVEY 24 square meters of the disputed lot to appellants, and

b) the reimbursement of attorney's fees and expenses of litigation and the payment of costs are
DELETED.

This case is REMANDED to the court of origin for the purpose of determining the 24-
square-meter lot to be reconveyed to appellants.

SO ORDERED.[21]

Hence, this petition.

Petitioners Spouses Badijla contend that ownership of the 200-sq.-m. portion was
transferred to them when they purchased the same and possession was delivered
to them by Ledesma in 1970.[22] They also contend that when OCT No. P-2035 was
actually issued in 1980, it was first delivered by Pastrano to Ledesma and, the
latter delivered the same to them (the Badillas).[23] Thus, Bragat allegedly falsely
claimed the "loss" of the title when she petitioned the court for a new duplicate
original, because such title was not lost but had been with the Badillas all along.
[24]
 Another fraud that Bragat allegedly committed was the Deed of Sale dated
October 2, 1987, in which Profitiza Pastrano signed (in marital consent) although
she had been dead since March 30, 1985.[25]

In her Comment, Bragat claims that the sale of October 2, 1987 was only a "re-
execution" of the sale of May 5, 1984, in order to avoid tax surcharges. [26] Further,
she alleges that the Badillas1 documentary evidence were all executed only after
she had the property titled to her name.[27]

The Court resolves to GRANT the petition.

The issue is one of ownership of the subject property.

This Court notes that the arguments raised call for a re-examination of the factual
findings of the trial court and the appellate court. It must be stressed that it is a
time-honored rule that in a petition for review on certiorari under Rule 45, only
questions of law may be raised.[28] Certainly, it is equally observed that factual
findings of the Court of Appeals, affirming those of the trial court, are binding on
this Court.[29]

However, these rules admit of certain exceptions, such as when the judgment of
the Court of Appeals is premised on a misapprehension of facts, or is belied by the
evidence on record, or fails to notice certain relevant facts which, if properly
considered, will justify a different conclusion.[30] After a thorough examination of the
findings of the trial court and Court of Appeals, this Court concludes that the case
falls under these exceptional situations. Such findings must be reversed.

The error of the courts below is in misapprehending the fact that ownership' passed
to the Spouses Badilla upon their purchase of the subject property from Eustaquio
Ledesma.

It is not disputed that the spouses Azur and Profitiza Pastrano had previously sold
on November 18, 1968, via a Deed of Definite Sale of Unregistered Coconut and
Residential Land, the property to Eustaquio Ledesma. [31] Therefore, as early as such
date, it is established that the Pastranos no longer had ownership over the
property.

Then, as Ledesma subsequently sold, in 1970, a portion of the property to the

petitioner Spouses Badilla, who immediately took delivery and possession,
ownership of this portion had also been transferred to the said spouses. Although
that sale appears to be merely verbal, and payment therefor was to be made on
installment, it is a partially consummated sale, with the Badillas paying the initial
purchase price and Ledesma surrendering possession. [32] That the parties intended
for ownership to be transferred may be inferred from their lack of any agreement
stipulating that ownership of the property is reserved by the seller and shall not
pass to the buyer until the latter has fully paid the purchase price.[33] The fact is,
Ledesma even delivered to the Badillas the owner's duplicate copy of OCT No. P-
2035.[34] The Civil Code states that ownership of the thing sold is transferred to the
vendee upon the actual or constructive delivery of the same.[35] And the thing is
understood as delivered when it is placed in the control and possession of the
vendee.[36] Payment of the purchase price is not essential to the transfer of
ownership as long as the property sold has been delivered; and such delivery
(traditio) operated to divest the vendor of title to the property which may not be
regained or recovered until and unless the contract is resolved or rescinded in
accordance with law.[37]
The same is true even if the sale is a verbal one, because it is held that when a
verbal contract has been completed, executed or partially consummated, its
enforceability will not be barred by the Statute of Frauds, which applies only to an
executory agreement.[38] Thus, where a party has performed his obligation, oral
evidence will be admitted to prove the agreement. And, where it was proven that
one party had delivered the thing sold to another, then the contract was partially
executed and the Statute of Frauds does not apply.[39]

Therefore, with the Spouses Bad ilia owning and occupying the said 152-square-
meter portion since 1970, it may be concluded that TCT No. T-47759 (which
canceled OCT No. P-2035) covering the said portion has been wrongfully issued. [40]

In addition, TCT No. T-47759 was issued to Fe Bragat on the strength of a Deed of
Sale of Registered Land dated October 2, 1987.[41] This deed of sale, however, is
void for being simulated, since both the vendor (Pastrano) and the vendee (Bragat)
knew at the time of its execution of the vendor's lack of ownership over Lot No.
19986, the property being sold. At that time, it was not Pastrano but Ledesma who
was absolute owner of the property by virtue of the latter's earlier purchase of Lot
No. 19986 from the Spouses Pastrano on November 18, 1968, via a Deed of
Definite Sale of Unregistered Coconut and Residential Land. [42] Bragat herself knew
this, as she and her husband themselves first bought the property from Ledesma
through a Deed of Absolute Sale of Residential Land dated April 18, 1978. [43]

In fact, it is from this sale in 1978 that Fe Bragat derives title on the property and
not from tjhe Deeds of Sale dated May 5, 1984 and October 2, 1987 executed
between her as vendee and Pastrano as vendor. Pastrano could no longer sell any
part of the property to Bragat on such later dates since he had already sold the
same as early as November 18, 1968 to Ledesma. Well-settled is the rule that no
one can give what one does not have - nemodat quod non habet - and, accordingly,
one can sell only what one owns or is authorized to sell, and the buyer acquires no
better title than the seller.[44] Thus, the sales made on the dates May 5, 1984 and
October 2, 1987 are void for being [simulated and for lack of a subject matter. On
these sales, Bragat cannot clajim good faith as she herself knew of Pastrano's lack
of ownership.

It needs emphasis, however, that Bragat's property bought from Ledesma in 1978
does not include the 152-sq.-m. portion that was already bought by the Badillas.

Therefore, Fe Bragat is entitled to a new transfer certificate of title issued in her

name, but on the basis of the Deed of Absolute Sale dated April 18, 1978, and
excluding the 152 sq. m. in area that the Spouses Badilla have already bought and
have been occupying since 1970, but which are currently covered by Bragat's
existing title, TCT No. T-47759. Hence, Bragat's TCT No. T-47759 (which canceled
OCT No. P-2035), covering 1,015 sq. m., should be declared void and cancelled
and, in its place, two (2) new ones should be issued: (1) in the name of the
spouses Magdalino and Cleofe Badilla, covering the 152 sq. m. that they are
occupying, and (2) in the name of Fe Bragat, covering [the remaining 863 sq. m.
The metes and bounds of these two lots are to be based on the survey plans
already submitted by appointed commissioners to the lower court during trial,
which are: the Commissioner's Relocation Survey Report (Exhibit "N") [45] signed by
Engr. Benigno B. Manlangiti et al., as well as the accompanying Relocation Sketch
Plan (Exhibit "N-2")[46] prepared by the same commissioner.

This ruling is compelled by the involvement in this case of not just one instance of
double sales but a series of such sales made by two different vendors. First, it is
admitted that Pastrano sold the property to Ledesma in 1968; then, Pastrano sold it
again to Bragat in 1984 and 1987. But Ledesma, too, sold part of the property to
the Spouses Badilla in 1970 and then the entire lot to the Spouses; Bragat in 1978.
In such a situation of multiple sales, Article 1544 of the Civil Code relates that
ownership shall belong to the person acquiring the property who, in good faith, first
recorded such acquisition.[47] Presently, however, it cannot be said that Bragat's
recording of her 1987 purchase was in good faith because that sale was simulated
and Bragat was aware of other persons who have an interest on the property. That
the 1987 sale is void is further revealed by evidence to show that one of its
signatories, Profitiza Pastrano was already dead when it was executed. [48] Bragat
herself also admitted that she knew of the Spouses Badillas' occupation prior to her
purchase.[49] In that case, the same Article 1544 of the Civil Code provides that
when neither buyer registered, in good faith, the sale of the properties with the
register of deeds, the one who took prior possession of the properties shall be the
lawful owner thereof.[50] Such prior possessors, at least with respect to the 152-sq.-
m. portion, are indisputably the Spouses Badilla.

WHEREFORE, premises considered, the petition is GRANTED. The assailed

Decision dated October 9, 2008 and Resolution dated February 12, 2009 of the
Court of Appeals in CA-G.R. CV No. 70423 -MM are hereby REVERSED and SET
ASIDE. Transfer Certificate of Title No. T-47759 is DECLARED VOID, and, in its
place, two (2) new transfer certificates of titles are ORDERED ISSUED, namely:
(1) in the name of the Spouses Magdalino and Cleofe Badilla, covering the 152 sq.
m. that they are occupying, and (2) in the name of Fe Bragat, covering the
remaining 863 sq. m. of the property, of which measurements are to be based on
Exhibits "N"[51] and Exhibit "N-2".[52]

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 214587, February 26, 2018 ]
JOSEPHINE P. DELOS REYES AND JULIUS C. PERALTA,
REPRESENTED BY THEIR ATTORNEY-IN-FACT, J.F. JAVIER D.
PERALTA, PETITIONERS, V. MUNICIPALITY OF KALIBO,
AKLAN, ITS SANGGUNIANG BAYAN AND MAYOR RAYMAR A.
REBALDO, RESPONDENTS.

DECISION

PERALTA, J.:

This is a petition for review seeking to annul and set aside the Decision [1] of the
Court of Appeals (CA) Cebu, Nineteenth (19th) Division, dated September 28, 2012,
and its Resolution[2] dated August 28, 2014 in CA-G.R. CEB-CV No. 00700 which
reversed and set aside the Decision[3] of the Regional Trial Court (RTC), Branch 6 of
Kalibo, Aklan on February 22, 2005 in Civil Case No. 5440, thereby declaring the
subject properties as part of public land.

The factual and procedural antecedents, as evidenced by the records of the case,
are the following:

Lot No. 2076 of the Kalibo Cadastre, with a total area of 101,897 square meters
(sq.m.), was covered by Original Certificate of Title (OCT) No. 24435 RO-831, and
registered in the name of Ana O. Peralta. Upon her demise, her property passed on
to her brother, Jose Peralta, who caused registration of the same in his name under
Transfer Certificate of Title (TCT) No. T-5547, issued on January 13, 1975. Jose
later had the property divided into Lots 2076-A and 2076-B, and sold the latter
portion. Lot 2076-A, on the other hand, remained in Jose's name and was
registered under TCT No. 6166 on November 17, 1975.

In the meantime, allegedly through accretion, land was added to Lot No. 2076. Said
area was first occupied by and declared for taxation purposes (Tax Declaration No.
6466) in the name of Ambrocio Ignacio in 1945. He was the Peraltas' tenant, but he
later executed a Quitclaim of Real Property in Jose's favor for the amount of P70.44
on March 14, 1955. When Jose died, Lot 2076-A, together with the supposed area
of accretion, was transferred to his son, Juanito Peralta. While TCT T-13140 was
issued for Lot 2076-A on September 1, 1983, the area of accretion was apportioned
and registered under Tax Declaration Nos. 21162-A, 21163-A, 21164-A, and
21165-A in the names of siblings Juanito, Javier Peralta, Josephine delos Reyes,
and Julius Peralta. Subsequently, Juanito likewise died.

On the other hand, the Municipality of Kalibo, through its then Mayor Diego Luces
and the members of its Sangguniang Bayan, sought to convert more or less four
(4) hectares of said area of accretion into a garbage dumpsite. On November 10,
1992, Juanito, in his capacity as his siblings' representative, opposed said project in
a letter. For failure to get a favorable response from the mayor's office, he wrote a
formal protest to the Secretary of the Department of Environment and Natural
Resources (DENR) on October 2, 1997.

Despite the Peraltas' opposition, the Municipality of Kalibo continued the project
under the justification that the contested property is actually part of the public
domain. Moreover, the DENR's Environmental Compliance Certificate (ECC) showed
that the project would not harm the dumpsite's neighboring areas, including the
water systems. Thus, the municipality built a retaining wall on the property facing
the Aklan river in 1996. More of the structures were built on the area from 1997 to
1998. Later, the area was enclosed with a perimeter fence.

On January 26, 1998, the Peraltas filed a Complaint[4] for quieting of title over the
two (2) portions of accretion declared in their names for taxation purposes.

The Peraltas' prayer for an injunctive writ against the construction of the dumpsite
was denied, but on February 22, 2005, the RTC of Kalibo, ruled in their favor, thus:

WHEREFORE, in view of the foregoing considerations, judgment is hereby

rendered in favor of the plaintiffs and against the defendants declaring the
aforedescribed parcels of land as an accretion and not a public land. Defendants are
also ordered to cease and desist from occupying that portion of the garbage
dumpsite with an area of 31,320 square meters, indicated in Parcels I, II and III of
Annex A of the Commissioner's Report (Exh. "13") which are within Lots 3 and 4 of
plaintiffs' property.

No award for damages and attorney's fees for want of evidence to support the
same.

Costs against the defendants.

SO ORDERED.[5]

Undaunted, the Municipality of Kalibo brought the matter to the CA Cebu. On

September 28, 2012, the CA granted its appeal and reversed the assailed RTC
ruling, hence:

IN LIGHT OF THE FOREGOING, the appeal is GRANTED. The assailed February 22,
2005 Decision of the Regional Trial Court, Branch 6 of Kalibo, Aklan in Civil Case
No. 5440 is hereby REVERSED and SET ASIDE.
SO ORDERED.[6]

The Peraltas then filed a Motion for Reconsideration, but the same was denied in a
Resolution dated August 28, 2014. Hence, the instant petition.

The main issue in this case is whether or not the CA committed an error when it
reversed the RTC, which declared the subject parcels of land as accretion and not
part of the public domain.

The Court rules in the negative.

In order that an action for quieting of title may prosper, the plaintiff must have
legal or equitable title to, or interest in, the property which is the subject matter of
the action. While legal title denotes registered ownership, equitable title means
beneficial ownership. In the absence of such legal or equitable title, or interest,
there is no cloud to be prevented or removed.[7] Likewise, the plaintiff must show
that the deed, claim, encumbrance, or proceeding that purportedly casts a cloud on
their title is in fact invalid or inoperative despite its prima facie appearance of
validity or legal efficacy.[8]

It must be noted that the Peraltas, the petitioners in the instant case, are not even
registered owners of the area adjacent to the increment claimed, much less of the
subject parcels of land. Only the late Juanito became the registered owner of Lot
2076-A, the lot next to the supposed accretion. Assuming that the petitioners are
Juanito's rightful successors, they still did not register the subject increment under
their names. It is settled that an accretion does not automatically become
registered land just because the lot that receives such accretion is covered by a
Torrens Title. Ownership of a piece of land is one thing; registration under the
Torrens system of that ownership is another. Ownership over the accretion received
by the land adjoining a river is governed by the Civil Code; imprescriptibility of
registered land is provided in the registration law. Registration under the Land
Registration and Cadastral Act does not vest or give title to the land, but merely
confirms and, thereafter, protects the title already possessed by the owner, making
it imprescriptible by occupation of third parties. But to obtain this protection, the
land must be placed under the operation of the registration laws, wherein certain
judicial procedures have been provided.[9]

If at all, whatever rights the Peraltas derived from their predecessors-in-interest

respecting the area in question came only from the quitclaim of real property
executed by Ignacio in Jose's favor in 1955. There is no concrete evidence showing
any right of title on Ignacio's part for him to be able to legally and validly cede the
property to Jose. What the quitclaim merely proves is that Ignacio had forfeited any
claim or interest over the accretion in Jose's favor. It is settled that equitable title is
defined as a title derived through a valid contract or relation, and based on
recognized equitable principles, or the right in the party, to whom it belongs, to
have the legal title transferred to him. In order that a plaintiff may draw to himself
an equitable title, he must show that the one from whom he derives his right had
himself a right to transfer.[10] Considering the aforementioned facts, the plaintiffs
have neither legal nor equitable title over the contested property.

Moreover, even the character of the land subject of the quitclaim is highly
questionable. Ignacio, who was purportedly the first occupant of the area in 1945
and who was also in the best position to describe the lot, stated that "the said
parcel of swampy land is an integral expansion or continuity of the said Cadastral
Lot No. 2076, formed by a change of the shoreline of the Visayan Sea, which
shoreline has receded towards the North, thus, leaving the swampy or parcel of
land described in the immediately preceding paragraph which accrues to the owner
of said right of said Cadastral Lot No. 2076 (Torrens Title No. 24435), Jose O.
Peralta by right of lawful accretion or accession." [11]

Article 457 of the Civil Code of the Philippines, under which the Peraltas claim
ownership over the disputed parcels of land, provides:

Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion
which they gradually receive from the effects of the current of the waters.

Accretion is the process whereby the soil is deposited along the banks of rivers. The
deposit of soil, to be considered accretion, must be: (a) gradual and imperceptible;
(b) made through the effects of the current of the water; and (c) taking place on
land adjacent to the banks of rivers.[12]

Here, Ignacio characterized the land in question as swampy and its increase in size
as the effect of the change of the shoreline of the Visayan Sea, and not through the
gradual deposits of soil coming from the river or the sea. Also, Baltazar Gerardo,
the Officer-in-Charge of the Community Environment and Natural Resources Office
of the Bureau of Lands, found upon inspection in 1987 that the subject area was
predominantly composed of sand rather than soil.[13] One of the plaintiffs, Javier,
also testified that in 1974 or 1976, the Visayan Sea was around one (1) kilometer
from the land in question, and in 2003, the distance already became around three
(3) kilometers, giving the impression that the increment was actually the result of
additional area of sand deposits left by the sea when it had receded, and not by
gradual deposits of soil or sediment caused by the action of water. In addition, the
DENR has remained firm and consistent in classifying the area as land of the public
domain for being part of either the Visayan Sea of the Sooc Riverbed and is reached
by tide water. Further, the Sheriffs Report dated July 13, 1998 shows that when he
conducted an ocular inspection of the area, part of it was reached by the tide. At
around 11:30 a.m., he was able to measure the deepest portion of the high tide at
around nineteen (19) inches, and its wideness at five (5) meters near the concrete
wall.[14]

Indeed, by reason of their special knowledge and expertise over matters falling
under their jurisdiction, administrative agencies, like the DENR, are in a better
position to pass judgment on the same, and their findings of fact are generally
accorded great respect, if not finality, by the courts. Such findings must be
respected as long as they are supported by substantial evidence, even if such
evidence is not overwhelming or even preponderant. [15] Hence, the questionable
character of the land, which could most probably be part of the public domain,
indeed bars Jose from validly transferring the increment to any of his successors.

Indubitably, the plaintiffs are merely successors who derived their alleged right of
ownership from tax declarations. But neither can they validly rely on said tax
declarations and the supposed actual, open, continuous, exclusive, and notorious
possession of the property by their predecessors-in-interest. Any person who claims
ownership by virtue of tax declarations must also prove that he has been in actual
possession of the property. Thus, proof that the property involved had been
declared for taxation purposes for a certain period of time, does not constitute
proof of possession, nor is it proof of ownership, in the absence of the claimant's
actual possession of said property.[16] In the case at bar, the Peraltas failed to
adequately prove their possession and that of their predecessors-in-interest.

Verily, in civil cases, the party having the burden of proof must do so with a
preponderance of evidence, with plaintiff having to rely on the strength of his own
evidence and not upon the defendant's weakness. Preponderance of evidence is the
weight, credit, and value of the aggregate evidence on either side and is usually
considered to be synonymous with the term "greater weight of evidence" or
"greater weight of credible evidence." Succinctly put, it only requires that evidence
be greater or more convincing than the opposing evidence. [17] Since the Peraltas
must first establish their legal or equitable title to or interest in the property in
order for their action for quieting of title may prosper, failure to do so would mean
lack of cause of action on their part to pursue said remedy.

WHEREFORE, PREMISES CONSIDERED, the Court DENIES the petition,

and AFFIRMS the Decision of the Court of Appeals Cebu, Nineteenth (19 th)
Division, dated September 28, 2012, and Resolution dated August 28, 2014 in CA-
G.R. CEB-CV No. 00700.

SO ORDERED

FIRST DIVISION
[ G.R. No. 129018, November 15, 2001 ]
CARMELITA LEAÑO, ASSISTED BY HER HUSBAND GREGORIO
CUACHON, PETITIONER, VS. COURT OF APPEALS AND
HERMOGENES FERNANDO, RESPONDENTS.
 DECISION

PARDO, J.:

The Case

The case is a petition for review on certiorari of the decision[1] of the Court of
Appeals affirming that of the Regional Trial Court, Malolos, Branch 7 [2] ordering
petitioner Leaño to pay respondent Hermogenes Fernando the sum of P183,687.70
corresponding to her outstanding obligations under the contract to sell, with
interest and surcharges due thereon, attorney's fees and costs.

The Facts

On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leaño, as

vendee executed a contract to sell involving a piece of land, Lot No. 876-B, with an
area of 431 square meters, located at Sto. Cristo, Baliuag, Bulacan.[3]

In the contract, Carmelita Leaño bound herself to pay Hermogenes Fernando the
sum of one hundred seven thousand and seven hundred and fifty pesos
(P107,750.00) as the total purchase price of the lot. The manner of paying the total
purchase price was as follows:

"The sum of TEN THOUSAND SEVEN HUNDRED SEVENTY FIVE (P10,775.00) PESOS,
shall be paid at the signing of this contract as DOWN PAYMENT, the balance of
NINETY SIX THOUSAND NINE HUNDRED SEVENTY FIVE PESOS (P96,975.00) shall
be paid within a period of TEN (10) years at a monthly amortization of P1,747.30 to
begin from December 7, 1985 with interest at eighteen per cent (18%) per annum
based on balances."[4]

The contract also provided for a grace period of one month within which to make
payments, together with the one corresponding to the month of grace. Should the
month of grace expire without the installments for both months having been
satisfied, an interest of 18% per annum will be charged on the unpaid installments.
[5]

Should a period of ninety (90) days elapse from the expiration of the grace period
without the overdue and unpaid installments having been paid with the
corresponding interests up to that date, respondent Fernando, as vendor, was
authorized to declare the contract cancelled and to dispose of the parcel of land, as
if the contract had not been entered into. The payments made, together with all the
improvements made on the premises, shall be considered as rents paid for the use
and occupation of the premises and as liquidated damages.[6]

After the execution of the contract, Carmelita Leaño made several payments in
lump sum.[7] Thereafter, she constructed a house on the lot valued at P800,000.00.
[8]
 The last payment that she made was on April 1, 1989.

On September 16, 1991, the trial court rendered a decision in an ejectment

case[9] earlier filed by respondent Fernando ordering petitioner Leaño to vacate the
premises and to pay P250.00 per month by way of compensation for the use and
occupation of the property from May 27, 1991 until she vacated the premises,
attorney's fees and costs of the suit.[10] On August 24, 1993, the trial court issued a
writ of execution which was duly served on petitioner Leaño.

On September 27, 1993, petitioner Leaño filed with the Regional Trial Court of
Malolos, Bulacan a complaint for specific performance with preliminary injunction.
[11]
 Petitioner Leaño assailed the validity of the judgment of the municipal trial
court[12] for being violative of her right to due process and for being contrary to the
avowed intentions of Republic Act No. 6552 regarding protection to buyers of lots
on installments. Petitioner Leaño deposited P18,000.00 with the clerk of court,
Regional Trial Court, Bulacan, to cover the balance of the total cost of Lot 876-B. [13]

On November 4, 1993, after petitioner Leaño posted a cash bond of P50,000.00,

[14]
 the trial court issued a writ of preliminary injunction [15] to stay the enforcement
of the decision of the municipal trial court.[16]

On February 6, 1995, the trial court rendered a decision, the dispositive portion of
which reads:

"WHEREFORE, judgment is hereby rendered as follows:

"1. The preliminary injunction issued by this court per its order dated November 4,
1993 is hereby made permanent;

"2. Ordering the plaintiff to pay to the defendant the sum of P103,090.70
corresponding to her outstanding obligations under the contract to sell (Exhibit "A"
- Exhibit "B") consisting of the principal of said obligation together with the interest
and surcharges due thereon as of February 28, 1994, plus interest thereon at the
rate of 18% per annum in accordance with the provision of said contract to be
computed from March 1, 1994, until the same becomes fully paid;
"3. Ordering the defendant to pay to plaintiff the amount of P10,000 as and by way
of attorney's fees;

"4. Ordering the defendant to pay to plaintiff the costs of the suit in Civil Case No.
1680 aforementioned.

"SO ORDERED.

"Malolos, Bulacan, February 6, 1995.

"(sgd.) DANILO A. MANALASTAS

Judge"[17]
On February 21, 1995, respondent Fernando filed a motion for
reconsideration[18] and the supplement[19] thereto. The trial court increased the
amount of P103,090.70 to P183,687.00 and ordered petitioner Leaño ordered to
pay attorney's fees.[20]

According to the trial court, the transaction between the parties was an absolute
sale, making petitioner Leaño the owner of the lot upon actual and constructive
delivery thereof. Respondent Fernando, the seller, was divested of ownership and
cannot recover the same unless the contract is rescinded pursuant to Article 1592
of the Civil Code which requires a judicial or notarial demand. Since there had been
no rescission, petitioner Leaño, as the owner in possession of the property, cannot
be evicted.

On the issue of delay, the trial court held:

"While the said contract provides that the whole purchase price is payable within a
ten-year period, yet the same contract clearly specifies that the purchase price shall
be payable in monthly installments for which the corresponding penalty shall be
imposed in case of default. The plaintiff certainly cannot ignore the binding effect of
such stipulation by merely asserting that the ten-year period for payment of the
whole purchase price has not yet lapsed. In other words, the plaintiff has clearly
defaulted in the payment of the amortizations due under the contract as recited in
the statement of account (Exhibit "2") and she should be liable for the payment of
interest and penalties in accordance with the stipulations in the contract pertaining
thereto."[21]

The trial court disregarded petitioner Leaño's claim that she made a downpayment
of P10,000.00, at the time of the execution of the contract.

The trial court relied on the statement of account[22] and the summary[23] prepared

by respondent Fernando to determine petitioner Leaño's liability for the payment of
interests and penalties.

The trial court held that the consignation made by petitioner Leaño in the amount of
P18,000.00 did not produce any legal effect as the same was not done in
accordance with Articles 1176, 1177 and 1178 of the Civil Code.

In time, petitioner Leaño appealed the decision to the Court of Appeals. [24] On
January 22, 1997, Court of Appeals promulgated a decision affirming that of the
Regional Trial Court in toto.[25] On February 11, 1997, petitioner Leaño filed a
motion for reconsideration.[26] On April 17, 1997, the Court of Appeals denied the
motion.[27]

Hence, this petition.[28]

The Issues

The issues to be resolved in this petition for review are (1) whether the transaction
between the parties is an absolute sale or a conditional sale; (2) whether there was
a proper cancellation of the contract to sell; and (3) whether petitioner was in delay
in the payment of the monthly amortizations.

The Court's Ruling

Contrary to the findings of the trial court, the transaction between the parties was a
conditional sale not an absolute sale. The intention of the parties was to reserve the
ownership of the land in the seller until the buyer has paid the total purchase price.

Consider the following:

First, the contract to sell makes the sale, cession and conveyance "subject to
conditions" set forth in the contract to sell.[29]

Second, what was transferred was the possession of the property, not ownership.
The possession is even limited by the following: (1) that the vendee may continue
therewith "as long as the VENDEE complies with all the terms and conditions
mentioned," and (2) that the buyer may not sell, cede, assign, transfer or mortgage
or in any way encumber any right, interest or equity that she may have or acquire
in and to the said parcel of land nor to lease or to sublease it or give possession to
another person without the written consent of the seller.[30]

Finally, the ownership of the lot was not transferred to Carmelita Leaño. As the land
is covered by a torrens title, the act of registration of the deed of sale was the
operative act that could transfer ownership over the lot.[31] There is not even a deed
that could be registered since the contract provides that the seller will execute such
a deed "upon complete payment by the VENDEE of the total purchase price of the
property" with the stipulated interest.[32]

In a contract to sell real property on installments, the full payment of the purchase
price is a positive suspensive condition, the failure of which is not considered a
breach, casual or serious, but simply an event that prevented the obligation of the
vendor to convey title from acquiring any obligatory force.[33] The transfer of
ownership and title would occur after full payment of the price.[34]

In the case at bar, petitioner Leaño's non-payment of the installments after April 1,
1989, prevented the obligation of respondent Fernando to convey the property from
arising. In fact, it brought into effect the provision of the contract on cancellation.

Contrary to the findings of the trial court, Article 1592 of the Civil Code is
inapplicable to the case at bar.[35] However, any attempt to cancel the contract to
sell would have to comply with the provisions of Republic Act No. 6552, the "Realty
Installment Buyer Protection Act."

R. A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial,
commercial, residential) the right of the seller to cancel the contract upon non-
payment of an installment by the buyer, which is simply an event that prevents the
obligation of the vendor to convey title from acquiring binding force.[36] The law also
provides for the rights of the buyer in case of cancellation. Thus, Sec. 3 (b) of the
law provides that:

"If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty percent of the total
payments made and, after five years of installments, an additional five percent
every year but not to exceed ninety percent of the total payments
made: Provided,  That the actual cancellation of the contract shall take place after
thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer." [Emphasis supplied]

The decision in the ejectment case[37] operated as the notice of cancellation required

by Sec. 3(b). As petitioner Leaño was not given the cash surrender value of the
payments that she made, there was still no actual cancellation of the contract.
Consequently, petitioner Leaño may still reinstate the contract by updating the
account during the grace period and before actual cancellation. [38]
Should petitioner Leaño wish to reinstate the contract, she would have to update
her accounts with respondent Fernando in accordance with the statement of
account[39] which amount was P183,687.00.[40]

On the issue of whether petitioner Leaño was in delay in paying the amortizations,
we rule that while the contract provided that the total purchase price was payable
within a ten-year period, the same contract specified that the purchase price shall
be paid in monthly installments for which the corresponding penalty shall be
imposed in case of default. Petitioner Leaño cannot ignore the provision on the
payment of monthly installments by claiming that the ten-year period within which
to pay has not elapsed.

Article 1169 of the Civil Code provides that in reciprocal obligations, neither party
incurs in delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins.

In the case at bar, respondent Fernando performed his part of the obligation by
allowing petitioner Leaño to continue in possession and use of the property. Clearly,
when petitioner Leaño did not pay the monthly amortizations in accordance with the
terms of the contract, she was in delay and liable for damages. [41] However, we
agree with the trial court that the default committed by petitioner Leaño in respect
of the obligation could be compensated by the interest and surcharges imposed
upon her under the contract in question.[42]

It is a cardinal rule in the interpretation of contracts that if the terms of a contract

are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulation shall control.[43] Thus, as there is no ambiguity in
the language of the contract, there is no room for construction, only compliance.

The Fallo

IN VIEW WHEREOF, we DENY the petition and AFFIRM the decision of the Court

of Appeals[44] in toto.

No costs.

SO ORDERED.

SECOND DIVISION
 [ G.R. No. 127695, December 03, 2001 ]
HEIRS OF LUIS BACUS, NAMELY: CLARA RESMA BACUS,
ROQUE R. BACUS, SR., SATURNINO R. BACUS, PRISCILA VDA.
DE CABANERO, CARMELITA B. SUQUIB, BERNARDITA B.
CARDENAS, RAUL R. BACUS, MEDARDO R. BACUS, ANSELMA
B. ALBAN, RICARDO R. BACUS, FELICISIMA B. JUDICO, AND
DOMINICIANA B. TANGAL, PETITIONERS, VS. HON. COURT
OF APPEALS AND SPOUSES FAUSTINO DURAY AND
VICTORIANA DURAY, RESPONDENTS.

DECISION

QUISUMBING, J.:

This petition assails the decision dated November 29, 1996, of the Court of Appeals
in CA-G.R. CV No. 37566, affirming the decision dated August 3, 1991, of the
Regional Trial Court of Cebu City, Branch 6, in Civil Case No. CEB-8935.

The facts, as culled from the records, are as follows:

On June 1, 1984, Luis Bacus leased to private respondent Faustino Duray a parcel
of agricultural land in Bulacao, Talisay, Cebu. Designated as Lot No. 3661-A-3-B-2,
it had an area of 3,002 square meters, covered by Transfer Certificate of Title No.
48866. The lease was for six years, ending May 31, 1990. The contract contained
an option to buy clause. Under said option, the lessee had the exclusive and
irrevocable right to buy 2,000 square meters of the property within five years from
a year after the effectivity of the contract, at P200 per square meter. That rate shall
be proportionately adjusted depending on the peso rate against the US dollar,
which at the time of the execution of the contract was fourteen pesos.[1]

Close to the expiration of the contract, Luis Bacus died on October 10, 1989.
Thereafter, on March 15, 1990, the Duray spouses informed Roque Bacus, one of
the heirs of Luis Bacus, that they were willing and ready to purchase the property
under the option to buy clause. They requested Roque Bacus to prepare the
necessary documents, such as a Special Power of Attorney authorizing him to enter
into a contract of sale,[2] on behalf of his sisters who were then abroad.

On March 30, 1990, due to the refusal of petitioners to sell the property, Faustino
Duray's adverse claim was annotated by the Register of Deeds of Cebu, at the back
of TCT No. 63269, covering the segregated 2,000 square meter portion of Lot No.
3661-A-3-B-2-A.[3]

Subsequently, on April 5, 1990, Duray filed a complaint for specific performance

against the heirs of Luis Bacus with the Lupon Tagapamayapa of Barangay Bulacao,
asking that he be allowed to purchase the lot specifically referred to in the lease
contract with option to buy. At the hearing, Duray presented a certification [4] from
the manager of Standard Chartered Bank, Cebu City, addressed to Luis Bacus,
stating that at the request of Mr. Lawrence Glauber, a bank client, arrangements
were being made to allow Faustino Duray to borrow funds of approximately
P700,000 to enable him to meet his obligations under the contract with Luis Bacus.
[5]

Having failed to reach an agreement before the Lupon, on April 27, 1990, private
respondents filed a complaint for specific performance with damages against
petitioners before the Regional Trial Court, praying that the latter, (a) execute a
deed of sale over the subject property in favor of private respondents; (b) receive
the payment of the purchase price; and (c) pay the damages.

On the other hand, petitioners alleged that before Luis Bacus' death, private
respondents conveyed to them the former's lack of interest to exercise their option
because of insufficiency of funds, but they were surprised to learn of private
respondents' demand. In turn, they requested private respondents to pay the
purchase price in full but the latter refused. They further alleged that private
respondents did not deposit the money as required by the Lupon  and instead
presented a bank certification which cannot be deemed legal tender.

On October 30, 1990, private respondents manifested in court that they caused the
issuance of a cashier's check in the amount of P650,000 [6] payable to petitioners at
anytime upon demand.

On August 3, 1991, the Regional Trial Court ruled in favor of private respondents,
the dispositive portion of which reads:
Premises considered, the court finds for the plaintiffs and orders the defendants to
specifically perform their obligation in the option to buy and to execute a document
of sale over the property covered by Transfer Certificate of Title # T-63269 upon
payment by the plaintiffs to them in the amount of Six Hundred Seventy-Five
Thousand Six Hundred Seventy-Five (P675,675.00) Pesos within a period of thirty
(30) days from the date this decision becomes final.

SO ORDERED.[7]
Unsatisfied, petitioners appealed to the respondent Court of Appeals which denied
the appeal on November 29, 1996, on the ground that the private respondents
exercised their option to buy the leased property before the expiration of the
contract of lease. It held:
... After a careful review of the entire records of this case, we are convinced that
the plaintiffs-appellees validly and effectively exercised their option to buy the
subject property. As opined by the lower court, "the readiness and preparedness of
the plaintiff on his part, is manifested by his cautionary letters, the prepared bank
certification long before the date of May 31, 1990, the final day of the option, and
his filing of this suit before said date. If the plaintiff-appellee Francisco Duray had
no intention to purchase the property, he would not have bothered to write those
letters to the defendant-appellants (which were all received by them) and neither
would he be interested in having his adverse claim annotated at the back of the
T.C.T. of the subject property, two (2) months before the expiration of the lease.
Moreover, he even went to the extent of seeking the help of the Lupon
Tagapamayapa to compel the defendants-appellants to recognize his right to
purchase the property and for them to perform their corresponding obligation. [8]

xxx

We therefore find no merit in this appeal.

WHEREFORE, the decision appealed from is hereby AFFIRMED. [9]

Hence, this petition where petitioners aver that the Court of Appeals gravely erred
and abused its discretion in:

I. ...UPHOLDING THE TRIAL COURT'S RULING IN THE SPECIFIC PERFORMANCE

CASE BY ORDERING PETITIONERS (DEFENDANTS THEREIN) TO EXECUTE A
DOCUMENT OF SALE OVER THE PROPERTY IN QUESTION (WITH TCT NO. T-
63269) TO THEM IN THE AMOUNT OF P675,675.00 WITHIN THIRTY (30)
DAYS FROM THE DATE THE DECISION BECOMES FINAL;

II. ...DISREGARDING LEGAL PRINCIPLES, SPECIFIC PROVISIONS OF LAW AND

JURISPRUDENCE IN UPHOLDING THE DECISION OF THE TRIAL COURT TO
THE EFFECT THAT PRIVATE RESPONDENTS HAD EXERCISED THEIR RIGHT
OF OPTION TO BUY ON TIME; THUS THE PRESENTATION OF THE
CERTIFICATION OF THE BANK MANAGER OF A BANK DEPOSIT IN THE NAME
OF ANOTHER PERSON FOR LOAN TO RESPONDENTS WAS EQUIVALENT TO A
VALID TENDER OF PAYMENT AND A SUFFICIENT COMPLAINCE (SIC) OF A
CONDITION FOR THE EXERCISE OF THE OPTION TO BUY; AND

III. ... UPHOLDING THE TRIAL COURT'S RULING THAT THE PRESENTATION OF A
CASHER'S (SIC) CHECK BY THE RESPONDENTS IN THE AMOUNT OF
P625,000.00 EVEN AFTER THE TERMINATION OF THE TRIAL ON THE MERITS
WITH BOTH PARTIES ALREADY HAVING RESTED THEIR CASE, WAS STILL
VALID COMPLIANCE OF THE CONDITION FOR THE PRIVATE RESPONDENTS'
(PLAINTIFFS THEREIN) EXERCISE OF RIGHT OF OPTION TO BUY AND HAD A
FORCE OF VALID AND FULL TENDER OF PAYMENT WITHIN THE AGREED
PERIOD.[10]

Petitioners insist that they cannot be compelled to sell the disputed property by
virtue of the nonfulfillment of the obligation under the option contract of the private
respondents.

Private respondents first aver that petitioners are unclear if Rule 65 or Rule 45 of
the Rules of Court govern their petition, and that petitioners only raised questions
of facts which this Court cannot properly entertain in a petition for review. They
claim that even assuming that the instant petition is one under Rule 45, the same
must be denied for the Court of Appeals has correctly determined that they had
validly exercised their option to buy the leased property before the contract
expired.

In response, petitioners state that private respondents erred in initially classifying

the instant petition as one under Rule 65 of the Rules of Court. They argue that the
petition is one under Rule 45 where errors of the Court of Appeals, whether
evidentiary or legal in nature, may be reviewed.

We agree with private respondents that in a petition for review under Rule 45, only
questions of law may be raised.[11] However, a close reading of petitioners'
arguments reveal the following legal issues which may properly be entertained in
the instant petition:
a) When private respondents opted to buy the property covered by the lease contract with
option to buy, were they already required to deliver the money or consign it in court before
petitioner executes a deed of transfer?
b) Did private respondents incur in delay when they did not deliver the purchase price or
consign it in court on or before the expiration of the contract?
On the first issue, petitioners contend that private respondents failed to comply
with their obligation because there was neither actual delivery to them nor
consignation in court or with the Municipal, City or Provincial Treasurer of the
purchase price before the contract expired. Private respondents' bank certificate
stating that arrangements were being made by the bank to release P700,000 as a
loan to private respondents cannot be considered as legal tender that may
substitute for delivery of payment to petitioners nor was it a consignation.

Obligations under an option to buy are reciprocal obligations. [12] The performance of

one obligation is conditioned on the simultaneous fulfillment of the other obligation.
[13]
 In other words, in an option to buy, the payment of the purchase price by the
creditor is contingent upon the execution and delivery of a deed of sale by the
debtor. In this case, when private respondents opted to buy the property, their
obligation was to advise petitioners of their decision and their readiness to pay the
price. They were not yet obliged to make actual payment. Only upon petitioners'
actual execution and delivery of the deed of sale were they required to pay. As
earlier stated, the latter was contingent upon the former. In Nietes vs. Court of
Appeals,  46 SCRA 654 (1972), we held that notice of the creditor's decision to
exercise his option to buy need not be coupled with actual payment of the price, so
long as this is delivered to the owner of the property upon performance of his part
of the agreement. Consequently, since the obligation was not yet due, consignation
in court of the purchase price was not yet required.

Consignation is the act of depositing the thing due with the court or judicial
authorities whenever the creditor cannot accept or refuses to accept payment and it
generally requires a prior tender of payment. In instances, where no debt is due
and owing, consignation is not proper.[14] Therefore, petitioners' contention that
private respondents failed to comply with their obligation under the option to buy
because they failed to actually deliver the purchase price or consign it in court
before the contract expired and before they execute a deed, has no leg to stand on.
Corollary, private respondents did not incur in delay when they did not yet deliver
payment nor make a consignation before the expiration of the contract. In
reciprocal obligations, neither party incurs in delay if the other does not comply or
is not ready to comply in a proper manner with what is incumbent upon him. Only
from the moment one of the parties fulfills his obligation, does delay by the other
begin.[15]

In this case, private respondents, as early as March 15, 1990, communicated to

petitioners their intention to buy the property and they were at that time
undertaking to meet their obligation before the expiration of the contract on May
31, 1990. However, petitioners refused to execute the deed of sale and it was their
demand to private respondents to first deliver the money before they would
execute the same which prompted private respondents to institute a case for
specific performance in the Lupong Tagapamayapa  and then in the RTC. On
October 30, 1990, after the case had been submitted for decision but before the
trial court rendered its decision, private respondents issued a cashier's check in
petitioners' favor purportedly to bolster their claim that they were ready to pay the
purchase price. The trial court considered this in private respondents' favor and we
believe that it rightly did so, because at the time the check was issued, petitioners
had not yet executed a deed of sale nor expressed readiness to do so. Accordingly,
as there was no compliance yet with what was incumbent upon petitioners under
the option to buy, private respondents had not incurred in delay when the cashier's
check was issued even after the contract expired.

WHEREFORE, the instant petition is DENIED. The decision dated November 29,

1996 of the Court of Appeals is hereby AFFIRMED.

Costs against petitioners.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.

Buena, J., on official leave.

[ G.R. No. 181206, October 09, 2009 ]

MEGAWORLD GLOBUS ASIA, INC., PETITIONER, VS. MILA S.
TANSECO, RESPONDENT.

DECISION
CARPIO MORALES, J.:

On July 7, 1995, petitioner Megaworld Globus Asia, Inc. (Megaworld) and

respondent Mila S. Tanseco (Tanseco) entered into a Contract to Buy and Sell[1] a
224 square-meter (more or less) condominium unit at a pre-selling project, "The
Salcedo Park," located along Senator Gil Puyat Avenue, Makati City.

The purchase price was P16,802,037.32, to be paid as follows: (1) 30% less the
reservation fee of P100,000, or P4,940,611.19, by postdated check payable on July
14, 1995; (2) P9,241,120.50 through 30 equal monthly installments of
P308,037.35 from August 14, 1995 to January 14, 1998; and (3) the balance of
P2,520,305.63 on October 31, 1998, the stipulated delivery date of the
unit; provided that if the construction is completed earlier, Tanseco would pay the
balance within seven days from receipt of a notice of turnover.

Section 4 of the Contract to Buy and Sell provided for the construction schedule as
follows:

4. CONSTRUCTION SCHEDULE - The construction of the Project and the unit/s

herein purchased shall be completed and delivered not later than October 31, 1998
with additional grace period of six (6) months within which to complete the Project
and the unit/s, barring delays due to fire, earthquakes, the elements, acts of God,
war, civil disturbances, strikes or other labor disturbances, government and
economic controls making it, among others, impossible or difficult to obtain the
necessary materials, acts of third person, or any other cause or conditions beyond
the control of the SELLER. In this event, the completion and delivery of the unit are
deemed extended accordingly without liability on the part of the SELLER. The
foregoing notwithstanding, the SELLER reserves the right to withdraw from this
transaction and refund to the BUYER without interest the amounts received from
him under this contract if for any reason not attributable to SELLER, such as but not
limited to fire, storms, floods, earthquakes, rebellion, insurrection, wars, coup de
etat, civil disturbances or for other reasons beyond its control, the Project may not
be completed or it can only be completed at a financial loss to the SELLER. In any
event, all construction on or of the Project shall remain the property of the SELLER.
(Underscoring supplied)

Tanseco paid all installments due up to January, 1998, leaving unpaid the balance
of P2,520,305.63 pending delivery of the unit. [2] Megaworld, however, failed to
deliver the unit within the stipulated period on October 31, 1998 or April 30, 1999,
the last day of the six-month grace period.
A few days shy of three years later, Megaworld, by notice dated April 23, 2002
(notice of turnover), informed Tanseco that the unit was ready for inspection
preparatory to delivery.[3] Tanseco replied through counsel, by letter of May 6,
2002, that in view of Megaworld's failure to deliver the unit on time, she was
demanding the return of P14,281,731.70 representing the total installment
payment she had made, with interest at 12% per annum from April 30, 1999, the
expiration of the six-month grace period. Tanseco pointed out that none of the
excepted causes of delay existed.[4]

Her demand having been unheeded, Tanseco filed on June 5, 2002 with the
Housing and Land Use Regulatory Board's (HLURB) Expanded National Capital
Region Field Office a complaint against Megaworld for rescission of contract, refund
of payment, and damages.[5]

In its Answer, Megaworld attributed the delay to the 1997 Asian financial crisis
which was beyond its control; and argued that default had not set in, Tanseco not
having made any judicial or extrajudicial demand for delivery before receipt of the
notice of turnover.[6]

By Decision of May 28, 2003,[7] the HLURB Arbiter dismissed Tanseco's complaint

for lack of cause of action, finding that Megaworld had effected delivery by the
notice of turnover before Tanseco made a demand. Tanseco was thereupon ordered
to pay Megaworld the balance of the purchase price, plus P25,000 as moral
damages, P25,000 as exemplary damages, and P25,000 as attorney's fees.

On appeal by Tanseco, the HLURB Board of Commissioners, by Decision of

November 28, 2003,[8] sustained the HLURB Arbiter's Decision on the ground of
laches for failure to demand rescission when the right thereto accrued. It deleted
the award of damages, however. Tanseco's Motion for Reconsideration having been
denied,[9] she appealed to the Office of the President which dismissed the appeal by
Decision of April 28, 2006[10] for failure to show that the findings of the HLURB were
tainted with grave abuse of discretion. Her Motion for Reconsideration having been
denied by Resolution dated August 30, 2006,[11] Tanseco filed a Petition for Review
under Rule 43 with the Court of Appeals.[12]

By Decision of September 28, 2007,[13] the appellate court granted Tanseco's

petition, disposing thus:

WHEREFORE, premises considered, petition is hereby GRANTED and the assailed

May 28, 2003 decision of the HLURB Field Office, the November 28, 2003 decision
of the HLURB Board of Commissioners in HLURB Case No. REM-A-030711-0162, the
April 28, 2006 Decision and August 30, 2006 Resolution of the Office of the
President in O.P. Case No. 05-I-318, are hereby REVERSED and SET ASIDE and a
new one entered: (1) RESCINDING, as prayed for by TANSECO, the aggrieved
party, the contract to buy and sell; (2) DIRECTING MEGAWORLD TO
PAY TANSECO the amount she had paid totaling P14,281,731.70 with Twelve
(12%) Percent interest per annum from October 31, 1998;
(3) ORDERING MEGAWORLD TO PAY TANSECO P200,000.00 by way of exemplary
damages; (4) ORDERING MEGAWORLD TO PAY TANSECO P200,000.00 as
attorney's fees; and (5) ORDERING MEGAWORLD TO PAY TANSECO the cost of
suit. (Emphasis in the original; underscoring supplied)

The appellate court held that under Article 1169 of the Civil Code, no judicial or
extrajudicial demand is needed to put the obligor in default if the contract, as in the
herein parties' contract, states the date when the obligation should be performed;
that time was of the essence because Tanseco relied on Megaworld's promise of
timely delivery when she agreed to part with her money; that the delay should
be reckoned from October 31, 1998, there being no force majeure to warrant the
application of the April 30, 1999 alternative date; and that specific performance
could not be ordered in lieu of rescission as the right to choose the remedy belongs
to the aggrieved party.

The appellate court awarded Tanseco exemplary damages on a finding of bad faith
on the part of Megaworld in forcing her to accept its long-delayed delivery; and
attorney's fees, she having been compelled to sue to protect her rights.

Its Motion for Reconsideration having been denied by Resolution of January 8,

2008,[14] Megaworld filed the present Petition for Review on Certiorari, echoing its
position before the HLURB, adding that Tanseco had not shown any basis for the
award of damages and attorney's fees.[15]

Tanseco, on the other hand, maintained her position too, and citing Megaworld's
bad faith which became evident when it insisted on making the delivery despite the
long delay,[16] insisted that she deserved the award of damages and attorney's fees.

Article 1169 of the Civil Code provides:

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

However, the demand by the creditor shall not be necessary in order that delay
may exist:
(1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears that
the designation of the time when the thing is to be delivered or the service is to be
rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his
power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply
or is not ready to comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfills his obligation, delay by the other
begins. (Underscoring supplied)

The Contract to Buy and Sell of the parties contains reciprocal obligations, i.e., to
complete and deliver the condominium unit on October 31, 1998 or six months
thereafter on the part of Megaworld, and to pay the balance of the purchase price
at or about the time of delivery on the part of Tanseco. Compliance by Megaworld
with its obligation is determinative of compliance by Tanseco with her obligation to
pay the balance of the purchase price. Megaworld having failed to comply with its
obligation under the contract, it is liable therefor.[17]

That Megaworld's sending of a notice of turnover preceded Tanseco's demand for

refund does not abate her cause. For demand would have been useless, Megaworld
admittedly having failed in its obligation to deliver the unit on the agreed date.

Article 1174 of the Civil Code provides:

Art. 1174. Except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events which could not
be foreseen, or which, though foreseen, were inevitable.[18]

The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and
beyond the control of a business corporation. A real estate enterprise engaged in
the pre-selling of condominium units is concededly a master in projections on
commodities and currency movements, as well as business risks. The fluctuating
movement of the Philippine peso in the foreign exchange market is an everyday
occurrence, hence, not an instance of caso fortuito.[19] Megaworld's excuse for its
delay does not thus lie.
As for Megaworld's argument that Tanseco's claim is considered barred by laches on
account of her belated demand, it does not lie too. Laches is a creation of equity
and its application is controlled by equitable considerations.[20] It bears noting that
Tanseco religiously paid all the installments due up to January, 1998, whereas
Megaworld reneged on its obligation to deliver within the stipulated period. A
circumspect weighing of equitable considerations thus tilts the scale of justice in
favor of Tanseco.

Pursuant to Section 23 of Presidential Decree No. 957 [21] which reads:

Sec. 23. Non-Forfeiture of Payments. - No installment payment made by a buyer in

a subdivision or condominium project for the lot or unit he contracted to buy shall
be forfeited in favor of the owner or developer when the buyer, after due notice to
the owner or developer, desists from further payment due to the failure of the
owner or developer to develop the subdivision or condominium project according to
the approved plans and within the time limit for complying with the same.
Such buyer may, at his option, be reimbursed the total amount paid includi
ng amortization interests> but excluding delinquency
interests, with interest thereon at the legal rate. (Emphasis and underscoring
supplied),

Tanseco is, as thus prayed for, entitled to be reimbursed the total amount she paid
Megaworld.

While the appellate court correctly awarded P14,281,731.70 then, the interest rate
should, however, be 6% per annum accruing from the date of demand on May 6,
2002, and then 12% per annum from the time this judgment becomes final and
executory, conformably with Eastern Shipping Lines, Inc. v. Court of Appeals.[22]

The award of P200,000 attorney's fees and of costs of suit is in order too, the
parties having stipulated in the Contract to Buy and Sell that these shall be borne
by the losing party in a suit based thereon,[23] not to mention that Tanseco was
compelled to retain the services of counsel to protect her interest. And so is the
award of exemplary damages. With pre-selling ventures mushrooming in the
metropolis, there is an increasing need to correct the insidious practice of real
estate companies of proffering all sorts of empty promises to entice innocent buyers
and ensure the profitability of their projects.

The Court finds the appellate court's award of P200,000 as exemplary damages
excessive, however. Exemplary damages are imposed not to enrich one party or
impoverish another but to serve as a deterrent against or as a negative incentive to
curb socially deleterious actions.[24] The Court finds that P100,000 is reasonable in
this case.

Finally, since Article 1191[25] of the Civil Code does not apply to a contract to buy
and sell, the suspensive condition of full payment of the purchase price not having
occurred to trigger the obligation to convey title, cancellation, not rescission, of the
contract is thus the correct remedy in the premises. [26]

WHEREFORE, the challenged Decision of the Court of Appeals is, in light of the
foregoing, AFFIRMED with MODIFICATION.

As modified, the dispositive portion of the Decision reads:

The July 7, 1995 Contract to Buy and Sell between the parties is cancelled.
Petitioner, Megaworld Globus Asia, Inc., is directed to pay respondent, Mila S.
Tanseco, the amount of P14,281,731.70, to bear 6% interest per annum starting
May 6, 2002 and 12% interest per annum from the time the judgment becomes
final and executory; and to pay P200,000 attorney's fees, P100,000 exemplary
damages, and costs of suit.

Costs against petitioner.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 193723, July 20, 2011 ]
GENERAL MILLING CORPORATION, PETITIONER, VS. SPS.
LIBRADO RAMOS AND REMEDIOS RAMOS, RESPONDENTS.

DECISION

VELASCO JR., J.:

The Case

This is a petition for review of the April 15, 2010 Decision of the Court of Appeals
(CA) in CA-G.R. CR-H.C. No. 85400 entitled Spouses Librado Ramos & Remedios
Ramos v. General Milling Corporation, et al.,  which affirmed the May 31, 2005
Decision of the Regional Trial Court (RTC), Branch 12 in Lipa City, in Civil Case No.
00-0129 for Annulment and/or Declaration of Nullity of Extrajudicial Foreclosure
Sale with Damages.

The Facts

On August 24, 1989, General Milling Corporation (GMC) entered into a Growers
Contract with spouses Librado and Remedios Ramos (Spouses Ramos). Under the
contract, GMC was to supply broiler chickens for the spouses to raise on their land
in Barangay Banaybanay, Lipa City, Batangas. [1] To guarantee full compliance, the
Growers Contract was accompanied by a Deed of Real Estate Mortgage over a piece
of real property upon which their conjugal home was built. The spouses further
agreed to put up a surety bond at the rate of PhP 20,000 per 1,000 chicks delivered
by GMC. The Deed of Real Estate Mortgage extended to Spouses Ramos a
maximum credit line of PhP 215,000 payable within an indefinite period with an
interest of twelve percent (12%) per annum. [2]

The Deed of Real Estate Mortgage contained the following provision:

WHEREAS, the MORTGAGOR/S has/have agreed to guarantee and secure the full
and faithful compliance of [MORTGAGORS'] obligation/s with the MORTGAGEE by a
First Real Estate Mortgage in favor of the MORTGAGEE, over a 1 parcel of land and
the improvements existing thereon, situated in the Barrio/s of Banaybanay,
Municipality of Lipa City, Province of Batangas, Philippines, his/her/their title/s
thereto being evidenced by Transfer Certificate/s No./s T-9214 of the Registry of
Deeds for the Province of Batangas in the amount of TWO HUNDRED FIFTEEN
THOUSAND (P 215,000.00), Philippine Currency, which the maximum credit line
payable within a x x x day term and to secure the payment of the same plus
interest of twelve percent (12%) per annum.

Spouses Ramos eventually were unable to settle their account with GMC. They
alleged that they suffered business losses because of the negligence of GMC and its
violation of the Growers Contract. [3]

On March 31, 1997, the counsel for GMC notified Spouses Ramos that GMC would
institute foreclosure proceedings on their mortgaged property. [4]

On May 7, 1997, GMC filed a Petition for Extrajudicial Foreclosure of Mortgage. On

June 10, 1997, the property subject of the foreclosure was subsequently sold by
public auction to GMC after the required posting and publication. [5] It was
foreclosed for PhP 935,882,075, an amount representing the losses on chicks and
feeds exclusive of interest at 12% per annum and attorney's fees. [6]  To complicate
matters, on October 27, 1997, GMC informed the spouses that its Agribusiness
Division had closed its business and poultry operations. [7]

On March 3, 2000, Spouses Ramos filed a Complaint for Annulment and/or

Declaration of Nullity of the Extrajudicial Foreclosure Sale with Damages. They
contended that the extrajudicial foreclosure sale on June 10, 1997 was null and
void, since there was no compliance with the requirements of posting and
publication of notices under Act No. 3135, as amended, or An Act to Regulate the
Sale of Property under Special Powers Inserted in or Annexed to Real Estate
Mortgages. They likewise claimed that there was no sheriff's affidavit to prove
compliance with the requirements on posting and publication of notices.  It was
further alleged that the Deed of Real Estate Mortgage had no fixed term.  A prayer
for moral and exemplary damages and attorney's fees was also included in the
complaint. [8]  Librado Ramos alleged that, when the property was foreclosed, GMC
did not notify him at all of the foreclosure. [9]

During the trial, the parties agreed to limit the issues to the following: (1) the
validity of the Deed of Real Estate Mortgage; (2) the validity of the extrajudicial
foreclosure; and (3) the party liable for damages. [10]

In its Answer, GMC argued that it repeatedly reminded Spouses Ramos of their
liabilities under the Growers Contract. It argued that it was compelled to foreclose
the mortgage because of Spouses Ramos' failure to pay their obligation. GMC
insisted that it had observed all the requirements of posting and publication of
notices under Act No. 3135. [11]

The Ruling of the Trial Court

Holding in favor of Spouses Ramos, the trial court ruled that the Deed of Real
Estate Mortgage was valid even if its term was not fixed. Since the duration of the
term was made to depend exclusively upon the will of the debtors-spouses, the trial
court cited jurisprudence and said that "the obligation is not due and payable until
an action is commenced by the mortgagee against the mortgagor for the purpose of
having the court fix the date on and after which the instrument is payable and the
date of maturity is fixed in pursuance thereto." [12]

The trial court held that the action of GMC in moving for the foreclosure of the
spouses' properties was premature, because the latter's obligation under their
contract was not yet due.

The trial court awarded attorney's fees because of the premature action taken by
GMC in filing extrajudicial foreclosure proceedings before the obligation of the
spouses became due.

The RTC ruled, thus:

WHEREFORE, premises considered, judgment is rendered as follows:

1. The Extra-Judicial Foreclosure Proceedings under docket no. 0107-97 is hereby

declared null and void;

2. The Deed of Real Estate Mortgage is hereby declared valid and legal for all
intents and puposes;

3. Defendant-corporation General Milling Corporation is ordered to pay Spouses

Librado and Remedios Ramos attorney's fees in the total amount of P 57,000.00
representing acceptance fee of P30,000.00 and P3,000.00 appearance fee for nine
(9) trial dates or a total appearance fee of P 27,000.00;

4. The claims for moral and exemplary damages are denied for lack of merit.

IT IS SO ORDERED. [13]

The Ruling of the Appellate Court

On appeal, GMC argued that the trial court erred in: (1) declaring the extrajudicial
foreclosure proceedings null and void; (2) ordering GMC to pay Spouses Ramos
attorney's fees; and (3) not awarding damages in favor of GMC.

The CA sustained the decision of the trial court but anchored its ruling on a different
ground. Contrary to the findings of the trial court, the CA ruled that the
requirements of posting and publication of notices under Act No. 3135 were
complied with. The CA, however, still found that GMC's action against Spouses
Ramos was premature, as they were not in default when the action was filed on
May 7, 1997. [14]

The CA ruled:

In this case, a careful scrutiny of the evidence on record shows that defendant-
appellant GMC made no demand to spouses Ramos for the full payment of their
obligation. While it was alleged in the Answer as well as in the Affidavit constituting
the direct testimony of Joseph Dominise, the principal witness of defendant-
appellant GMC, that demands were sent to spouses Ramos, the documentary
evidence proves otherwise. A perusal of the letters presented and offered as
evidence by defendant-appellant GMC did not "demand" but only request spouses
Ramos to go to the office of GMC to "discuss" the settlement of their account. [15]

According to the CA, however, the RTC erroneously awarded attorney's fees to
Spouses Ramos, since the presumption of good faith on the part of GMC was not
overturned.

The CA disposed of the case as follows:

WHEREFORE, and in view of the foregoing considerations, the Decision of the

Regional Trial Court of Lipa City, Branch 12, dated May 21, 2005 is hereby
AFFIRMED with MODIFICATION by deleting the award of attorney's fees to
plaintiffs-appellees spouses Librado Ramos and Remedios Ramos. [16]

Hence, We have this appeal.

The Issues
 A. WHETHER [THE CA] MAY CONSIDER ISSUES NOT ALLEGED AND
DISCUSSED IN THE LOWER COURT AND LIKEWISE NOT RAISED BY
THE PARTIES ON APPEAL, THEREFORE HAD DECIDED THE CASE NOT
IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE
SUPREME COURT.

B. WHETHER [THE CA] ERRED IN RULING THAT PETITIONER GMC MADE

NO DEMAND TO RESPONDENT SPOUSES FOR THE FULL PAYMENT OF
THEIR OBLIGATION CONSIDERING THAT THE LETTER DATED MARCH
31, 1997 OF PETITIONER GMC TO RESPONDENT SPOUSES IS
TANTAMOUNT TO A FINAL DEMAND TO PAY, THEREFORE IT DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS. [17]

The Ruling of this Court

Can the CA consider matters not alleged?

GMC asserts that since the issue on the existence of the demand letter was not
raised in the trial court, the CA, by considering such issue, violated the basic
requirements of fair play, justice, and due process. [18]

In their Comment, [19]  respondents-spouses aver that the CA has ample authority

to rule on matters not assigned as errors on appeal if these are indispensable or
necessary to the just resolution of the pleaded issues.

In Diamonon v. Department of Labor and Employment, [20] We explained that an

appellate court has a broad discretionary power in waiving the lack of assignment of
errors in the following instances:

(a) Grounds not assigned as errors but affecting the jurisdiction of the court over
the subject matter;

(b) Matters not assigned as errors on appeal but are evidently plain or clerical
errors within contemplation of law;

(c) Matters not assigned as errors on appeal but consideration of which is necessary
in arriving at a just decision and complete resolution of the case or to serve the
interests of a justice or to avoid dispensing piecemeal justice;

(d) Matters not specifically assigned as errors on appeal but raised in the trial court
and are matters of record having some bearing on the issue submitted which the
parties failed to raise or which the lower court ignored;

(e) Matters not assigned as errors on appeal but closely related to an error
assigned;
(f) Matters not assigned as errors on appeal but upon which the determination of a
question properly assigned, is dependent.

Paragraph (c) above applies to the instant case, for there would be a just and
complete resolution of the appeal if there is a ruling on whether the Spouses Ramos
were actually in default of their obligation to GMC.

Was there sufficient demand?

We now go to the second issue raised by GMC.  GMC asserts error on the part of
the CA in finding that no demand was made on Spouses Ramos to pay their
obligation. On the contrary, it claims that its March 31, 1997 letter is akin to a
demand.

We disagree.

There are three requisites necessary for a finding of default. First, the obligation is
demandable and liquidated; second, the debtor delays performance; and third, the
creditor judicially or extrajudicially requires the debtor's performance. [21]

According to the CA, GMC did not make a demand on Spouses Ramos but merely
requested them to go to GMC's office to discuss the settlement of their account. In
spite of the lack of demand made on the spouses, however, GMC proceeded with
the foreclosure proceedings. Neither was there any provision in the Deed of Real
Estate Mortgage allowing GMC to extrajudicially foreclose the mortgage without
need of demand.

Indeed, Article 1169 of the Civil Code on delay requires the following:

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

However, the demand by the creditor shall not be necessary in order that delay
may exist:

(1) When the obligation or the law expressly so declares; x x x

As the contract in the instant case carries no such provision on demand not being
necessary for delay to exist, We  agree with the appellate court that GMC should
have first made a demand on the spouses before proceeding to foreclose the real
estate mortgage.

  Development Bank of the Philippines v. Licuanan finds application to the instant

case:

The issue of whether demand was made before the foreclosure was effected is
essential. If demand was made and duly received by the respondents and the latter
still did not pay, then they were already in default and foreclosure was proper. 
However, if demand was not made, then the loans had not yet become due and
demandable. This meant that respondents had not defaulted in their payments and
the foreclosure by petitioner was premature. Foreclosure is valid only when the
debtor is in default in the payment of his obligation. [22]

In turn, whether or not demand was made is a question of fact. [23] This petition

filed under Rule 45 of the Rules of Court shall raise only questions of law. For a
question to be one of law, it must not involve an examination of the probative value
of the evidence presented by the litigants or any of them. The resolution of the
issue must rest solely on what the law provides on the given set of circumstances.
Once it is clear that the issue invites a review of the evidence presented, the
question posed is one of fact. [24] It need not be reiterated that this Court is not a
trier of facts. [25] We will defer to the factual findings of the trial court, because
petitioner GMC has not shown any circumstances making this case an exception to
the rule.

WHEREFORE, the petition is DENIED. The CA Decision in CA-G.R. CR-H.C. No.

85400 is AFFIRMED.

SO ORDERED.

Carpio,*  Leonardo-De Castro,**  Abad, and Mendoza, JJ., concur.

SECOND DIVISION
[ G.R. No. 191431, March 13, 2013 ]
RODOLFO G. CRUZ AND ESPERANZA IBIAS, PETITIONERS,
VS. ATTY. DELFIN GRUSPE, RESPONDENT.

DECISION

BRION, J.:

Before the Court is the petition for review on certiorari[1] filed under Rule 45 of the
Rules of Court, assailing the decision[2] dated July 30, 2009 and the
resolution[3] dated February 19, 2010 of the Court of Appeals (CA) in CA-G.R. CV
No. 86083.  The CA rulings affirmed with modification the decision dated
September 27, 2004 of the Regional Trial Court (RTC) of Bacoor, Cavite, Branch 19,
in Civil Case No. BCV-99-146 which granted respondent Atty. Delfin Gruspe’s claim
for payment of sum of money against petitioners Rodolfo G. Cruz and Esperanza
Ibias.[4]

THE FACTUAL BACKGROUND

The claim arose from an accident that occurred on October 24, 1999, when the mini
bus owned and operated by Cruz and driven by one Arturo Davin collided with the
Toyota Corolla car of Gruspe; Gruspe’s car was a total wreck.  The next day, on
October 25, 1999, Cruz, along with Leonardo Q. Ibias went to Gruspe’s office,
apologized for the incident, and executed a Joint Affidavit of
Undertaking promising jointly and severally to replace the Gruspe’s damaged car
in 20 days, or until November 15, 1999, of the same model and of at least the
same quality; or, alternatively, they would pay the cost of Gruspe’s car amounting
to  P350,000.00, with interest at 12% per month for any delayed payment after
November 15, 1999, until fully paid.[5] When Cruz and Leonardo failed to comply
with their undertaking, Gruspe filed a complaint for collection of sum of money
against them on November 19, 1999 before the RTC.

In their answer, Cruz and Leonardo denied Gruspe’s allegation, claiming that
Gruspe, a lawyer, prepared the Joint Affidavit of Undertaking and forced them to
affix their signatures thereon, without explaining and informing them of its
contents; Cruz affixed his signature so that his mini bus could be released as it was
his only means of income;  Leonardo, a barangay official, accompanied Cruz to
Gruspe’s office for the release of the mini bus, but was also deceived into signing
the Joint Affidavit of Undertaking.

Leonardo died during the pendency of the case and was substituted by his widow,
Esperanza.  Meanwhile, Gruspe sold the wrecked car for P130,000.00.

In a decision dated September 27, 2004, the RTC ruled in favor of Gruspe and

ordered Cruz and Leonardo to pay P220,000.00,[6] plus 15% per annum from
November 15, 1999 until fully paid, and the cost of suit.

On appeal, the CA affirmed the RTC decision, but reduced the interest rate
to 12% per annum pursuant to the Joint Affidavit of Undertaking.[7] It
declared that despite its title, the Joint Affidavit of Undertaking is a contract, as
it has all the essential elements of consent, object certain, and consideration
required under Article 1318 of the Civil Code.  The CA further said that Cruz and
Leonardo failed to present evidence to support their contention of vitiated
consent.  By signing the Joint Affidavit of Undertaking, they voluntarily assumed
the obligation for the damage they caused to Gruspe’s car; Leonardo, who was not
a party to the incident, could have refused to sign the affidavit, but he did not.
 THE PETITION

In their appeal by certiorari with the Court, Cruz and Esperanza assail the CA
ruling, contending that the Joint Affidavit of Undertaking is not a contract that can
be the basis of an obligation to pay a sum of money in favor of Gruspe.  They
consider an affidavit as different from a contract: an affidavit’s purpose is simply to
attest to facts that are within his knowledge, while a contract requires that there be
a meeting of the minds between the two contracting parties.

Even if the Joint Affidavit of Undertaking was considered as a contract, Cruz and
Esperanza claim that it is invalid because Cruz and Leonardo’s consent thereto was
vitiated; the contract was prepared by Gruspe who is a lawyer, and its contents
were never explained to them.  Moreover, Cruz and Leonardo were simply forced to
affix their signatures, otherwise, the mini van would not be released.

Also, they claim that prior to the filing of the complaint for sum of money, Gruspe
did not make any demand upon them.  Hence, pursuant to Article 1169 of the Civil
Code, they could not be considered in default. Without this demand, Cruz and
Esperanza contend that Gruspe could not yet take any action.

THE COURT’S RULING

The Court finds the petition partly meritorious and accordingly modifies the

judgment of the CA.

Contracts are obligatory no matter what their forms may be, whenever the
essential requisites for their validity are present. In determining whether a
document is an affidavit or a contract, the Court looks beyond the title of the
document, since the denomination or title given by the parties in their document is
not conclusive of the nature of its contents.[8] In the construction or interpretation
of an instrument, the intention of the parties is primordial and is to be pursued.  If
the terms of the document are clear and leave no doubt on the intention of the
contracting parties, the literal meaning of its stipulations shall control.  If the words
appear to be contrary to the parties’ evident intention, the latter shall prevail over
the former.[9]

A simple reading of the terms of the Joint Affidavit of Undertaking readily

discloses that it contains stipulations characteristic of a contract.  As quoted
in the CA decision,[10] the Joint Affidavit of Undertaking contained a stipulation
where Cruz and Leonardo promised to replace the damaged car of Gruspe, 20 days
from October 25, 1999 or up to November 15, 1999, of the same model and of at
least the same quality.  In the event that they cannot replace the car within the
same period, they would pay the cost of Gruspe’s car in the total amount of
P350,000.00, with interest at 12% per month for any delayed payment after
November 15, 1999, until fully paid.  These, as read by the CA, are very simple
terms that both Cruz and Leonardo could easily understand.

There is also no merit to the argument of vitiated consent. An allegation of

vitiated consent must be proven by preponderance of evidence; Cruz and
Leonardo failed to support their allegation.  Although the undertaking in the
affidavit appears to be onerous and lopsided, this does not necessarily prove the
alleged vitiation of consent. They, in fact, admitted the genuineness and due
execution of the Joint Affidavit and Undertaking when they said that they signed the
same to secure possession of their vehicle.  If they truly believed that the vehicle
had been illegally impounded, they could have refused to sign the Joint Affidavit of
Undertaking and filed a complaint, but they did not.  That the release of their mini
bus was conditioned on their signing the Joint Affidavit of Undertaking does not, by
itself, indicate that their consent was forced – they may have given it grudgingly,
but it is not indicative of a vitiated consent that is a ground for the annulment of a
contract.

Thus, on the issue of the validity and enforceability of the Joint Affidavit of
Undertaking, the CA did not commit any legal error that merits the reversal of the
assailed decision.

Nevertheless, the CA glossed over the issue of demand which is material in the
computation of interest on the amount due.  The RTC ordered Cruz and Leonardo to
pay Gruspe “P350,000.00 as cost of the car xxx plus fifteen percent (15%) per
annum from November 15, 1999 until fully paid[.]”[11]  The 15% interest (later
modified by the CA to be 12%) was computed from November 15, 1999 – the date
stipulated in the Joint Affidavit of Undertaking for the payment of the value of
Gruspe’s car.  In the absence of a finding by the lower courts that Gruspe made a
demand prior to the filing of the complaint, the interest cannot be computed from
November 15, 1999 because until a demand has been made, Cruz and Leonardo
could not be said to be in default.[12]  “In order that the debtor may be in default[,]
it is necessary that the following requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that the debtor delays performance; and
(3) that the creditor requires the performance judicially and
extrajudicially.”[13] Default generally begins from the moment the creditor demands
the performance of the obligation.  In this case, demand could be considered to
have been made upon the filing of the complaint on November 19, 1999, and it is
only from this date that the interest should be computed.

Although the CA upheld the Joint Affidavit of Undertaking, we note that it imposed
interest rate on a per annum basis, instead of the per month basis that was stated
in the Joint Affidavit of Undertaking without explaining its reason for doing so. [14] 
Neither party, however, questioned the change.  Nonetheless, the Court affirms the
change in the interest rate from 12% per month to 12% per annum, as we find the
interest rate agreed upon in the Joint Affidavit of Undertaking excessive.[15]

WHEREFORE, we AFFIRM the decision dated July 30, 2009 and the resolution

dated February 19, 2010 of the Court of Appeals in CA-G.R. CV No. 86083, subject
to the MODIFICATION that the twelve percent (12%) per annum interest imposed
on the amount due shall accrue only from November 19, 1999, when judicial
demand was made.

SO ORDERED.

Carpio, (Chairperson), Del Castillo, Villarama, Jr.,* and  Perlas-Bernabe, JJ., concur.