1.

)
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-4089 January 12, 1909

ARTURO PELAYO, plaintiff-appellant,

vs.
MARCELO LAURON, ET AL., defendants-appellees.

J.H. Junquera, for appellant.

Filemon Sotto, for appellee.

TORRES, J.:

On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a
complaint against Marcelo Lauron and Juana Abella setting forth that on or about the 13th
of October of said year, at night, the plaintiff was called to the house of the defendants,
situated in San Nicolas, and that upon arrival he was requested by them to render medical
assistance to their daughter-in-law who was about to give birth to a child; that therefore,
and after consultation with the attending physician, Dr. Escaño, it was found necessary, on
account of the difficult birth, to remove the fetus by means of forceps which operation was
performed by the plaintiff, who also had to remove the afterbirth, in which services he was
occupied until the following morning, and that afterwards, on the same day, he visited the
patient several times; that the just and equitable value of the services rendered by him was
P500, which the defendants refuse to pay without alleging any good reason therefor; that
for said reason he prayed that the judgment be entered in his favor as against the
defendants, or any of them, for the sum of P500 and costs, together with any other relief
that might be deemed proper.

In answer to the complaint counsel for the defendants denied all of the allegation therein
contained and alleged as a special defense, that their daughter-in-law had died in
consequence of the said childbirth, and that when she was alive she lived with her husband
independently and in a separate house without any relation whatever with them, and that,
if on the day when she gave birth she was in the house of the defendants, her stay their was
accidental and due to fortuitous circumstances; therefore, he prayed that the defendants be
absolved of the complaint with costs against the plaintiff.
The plaintiff demurred to the above answer, and the court below sustained the demurrer,
directing the defendants, on the 23rd of January, 1907, to amend their answer. In
compliance with this order the defendants presented, on the same date, their amended
answer, denying each and every one of the allegations contained in the complaint, and
requesting that the same be dismissed with costs.

As a result of the evidence adduced by both parties, judgment was entered by the court
below on the 5th of April, 1907, whereby the defendants were absolved from the former
complaint, on account of the lack of sufficient evidence to establish a right of action against
the defendants, with costs against the plaintiff, who excepted to the said judgment and in
addition moved for a new trial on the ground that the judgment was contrary to law; the
motion was overruled and the plaintiff excepted and in due course presented the
corresponding bill of exceptions. The motion of the defendants requesting that the
declaration contained in the judgment that the defendants had demanded therefrom, for
the reason that, according to the evidence, no such request had been made, was also
denied, and to the decision the defendants excepted.

Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of
having been sent for by the former, attended a physician and rendered professional services
to a daughter-in-law of the said defendants during a difficult and laborious childbirth, in
order to decide the claim of the said physician regarding the recovery of his fees, it becomes
necessary to decide who is bound to pay the bill, whether the father and mother-in-law of
the patient, or the husband of the latter.

According to article 1089 of the Civil Code, obligations are created by law, by contracts, by
quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault or
negligence occurs.

Obligations arising from law are not presumed. Those expressly determined in the code or
in special laws, etc., are the only demandable ones. Obligations arising from contracts have
legal force between the contracting parties and must be fulfilled in accordance with their
stipulations. (Arts. 1090 and 1091.)

The rendering of medical assistance in case of illness is comprised among the mutual
obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.)

If every obligation consists in giving, doing or not doing something (art. 1088), and spouses
are mutually bound to support each other, there can be no question but that, when either
of them by reason of illness should be in need of medical assistance, the other is under the
unavoidable obligation to furnish the necessary services of a physician in order that health
may be restored, and he or she may be freed from the sickness by which life is jeopardized;
the party bound to furnish such support is therefore liable for all expenses, including the
fees of the medical expert for his professional services. This liability originates from the
above-cited mutual obligation which the law has expressly established between the married
couple.

In the face of the above legal precepts it is unquestionable that the person bound to pay the
fees due to the plaintiff for the professional services that he rendered to the daughter-in-
law of the defendants during her childbirth, is the husband of the patient and not her father
and mother- in-law, the defendants herein. The fact that it was not the husband who called
the plaintiff and requested his assistance for his wife is no bar to the fulfillment of the said
obligation, as the defendants, in view of the imminent danger, to which the life of the
patient was at that moment exposed, considered that medical assistance was urgently
needed, and the obligation of the husband to furnish his wife in the indispensable services
of a physician at such critical moments is specially established by the law, as has been seen,
and compliance therewith is unavoidable; therefore, the plaintiff, who believes that he is
entitled to recover his fees, must direct his action against the husband who is under
obligation to furnish medical assistance to his lawful wife in such an emergency.

From the foregoing it may readily be understood that it was improper to have brought an
action against the defendants simply because they were the parties who called the plaintiff
and requested him to assist the patient during her difficult confinement, and also, possibly,
because they were her father and mother-in-law and the sickness occurred in their house.
The defendants were not, nor are they now, under any obligation by virtue of any legal
provision, to pay the fees claimed, nor in consequence of any contract entered into between
them and the plaintiff from which such obligation might have arisen.

In applying the provisions of the Civil Code in an action for support, the supreme court of
Spain, while recognizing the validity and efficiency of a contract to furnish support wherein a
person bound himself to support another who was not his relative, established the rule that
the law does impose the obligation to pay for the support of a stranger, but as the liability
arose out of a contract, the stipulations of the agreement must be held. (Decision of May
11, 1897.)

Within the meaning of the law, the father and mother-in-law are strangers with respect to
the obligation that devolves upon the husband to provide support, among which is the
furnishing of medical assistance to his wife at the time of her confinement; and, on the
other hand, it does not appear that a contract existed between the defendants and the
plaintiff physician, for which reason it is obvious that the former can not be compelled to
pay fees which they are under no liability to pay because it does not appear that they
consented to bind themselves.
The foregoing suffices to demonstrate that the first and second errors assigned to the
judgment below are unfounded, because, if the plaintiff has no right of action against the
defendants, it is needless to declare whether or not the use of forceps is a surgical
operation.

Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the
judgment appealed from should be affirmed with the costs against the appellant. So
ordered.

2.)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-13602 April 6, 1918

LEUNG BEN, plaintiff,

vs.
P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city of
Manila, defendants.

Thos. D. Aitken and W. A. Armstrong for plaintiff.

Kincaid & Perkins for defendants.

STREET, J.:

This is an application for a writ of certiorari, the purpose of which is to quash an attachment
issued from the Court of First Instance of the City of Manila under circumstances
hereinbelow stated.

Upon December 12, 1917, an action was instituted in the Court of First Instance of the city
of Manila by P. J. O'Brien to recover of Leung Ben the sum of P15,000 alleged to have been
lost by the plaintiff to the defendant in a series of gambling, banking and percentage games
conducted ruing the two or three months prior to the institution of the suit. In his verified
complaint the plaintiff asked for an attachment, under section 424, and 412 (1) of the Code
of Civil Procedure, against the property of the defendant, on the ground that the latter was
about to depart from the Philippine islands with intent to defraud his creditors. This
attachment was issued; and acting under the authority thereof, the sheriff attached the sum
of P15,000 which had been deposited by the defendant with the International Banking
Corporation.

The defendant thereupon appeared by his attorney and moved the court to quash the
attachment. Said motion having dismissed in the Court of First Instance, the petitioner,
Leung Ben, the defendant in that action, presented to this court, upon January 8, 1918 his
petition for the writ of certiorari directed against P. J. O'Brien and the judges of the Court of
First Instance of the city of Manila whose names are mentioned in the caption hereof. The
prayer is that the Honorable James A. Ostrand, as the judge having cognizance of the action
in said court be required to certify the record to this court for review and that the order of
attachment which had been issued should be revoked and discharged. with costs. Upon the
filing of said petition in this court the usual order was entered requiring the defendants to
show cause why the writ should not issue. The response of the defendants, in the nature of
a demurrer, was filed upon January 21, 1918; and the matter is now heard upon the
pleadings thus presented.

The provision of law under which this attachment was issued requires that there should be
accuse of action arising upon contract, express or implied. The contention of the petitioner
is that the statutory action to recover money lost at gaming is that the statutory action to
recover money lost at gaming is no such an action as is contemplated in this provision, and
he therefore insists that the original complaint shows on its face that the remedy of
attachment is not available in aid thereof; that the Court of First Instance acted in excess of
its jurisdiction in granting the writ of attachment; that the petitioner has no plain, speedy,
and adequate remedy by appeal or otherwise; and that consequently the writ of certiorari
supplies the appropriate remedy for his relief.

The case presents the two following questions of law, either of which, if decided
unfavorably to the petitioner, will be fatal to his application:

(1) Supposing that the Court of First Instance has granted an attachment for which there
is no statutory authority, can this court entertain the present petition and grant the desired
relief?

(2) Is the statutory obligation to restore money won at gaming an obligation arising
from "contract, express or implied?"

We are of the opinion that the answer to the first question should be in the affirmative.
Under section 514 of the Code of Civil Procedure the Supreme Court has original jurisdiction
by the writ of certiorari over the proceedings of Courts of First Instance, wherever said
courts have exceeded their jurisdiction and there is no plaint, speedy, and adequate
remedy. In the same section, it is further declared that the proceedings in the Supreme
Court in such cases hall be as prescribed for Courts of First Instance in section 217-221,
inclusive, of said Code. This Supreme Court, so far as applicable, the provisions contained in
those section to the same extent as if they had been reproduced verbatim immediately
after section 514. Turning to section 217, we find that, in defining the conditions under
which certiorari can be maintained in a Court of First Instance substantially the same
language is used as is the same remedy can be maintained in the Supreme Court of First
Instance, substantially the same language is used as is found in section 514 relative to the
conditions under which the same remedy can be maintained in the Supreme Court, namely,
when the inferior tribunal has exceeded its jurisdiction and there is no appeal, nor any plain,
speedy and adequate remedy. In using these expressions the author of the Code of Civil
Procedure merely adopted the language which, in American jurisdictions at least, had long
ago reached the stage of stereotyped formula.

In section 220 of the same Code, we have a provision relative to the final proceedings in
certiorari, and herein it is stated that the court shall determine whether the inferior tribunal
has regularly pursued its authority it shall give judgment either affirming annulling, or
modifying the proceedings below, as the law requires. The expression, has not regularly
pursued its authority as here used, is suggestive, and we think it should be construed in
connection with the other expressions have exceeded their jurisdiction, as used in section
514, and has exceeded their jurisdiction as used in section 217. Taking the three together, it
results in our opinion that any irregular exercise of juridical power by a Court of First
Instance, in excess of its lawful jurisdiction, is remediable by the writ of certiorari, provided
there is no other plain, speedy, and adequate remedy; and in order to make out a case for
the granting of the writ it is not necessary that the court should have acted in the matter
without any jurisdiction whatever. Indeed the repeated use of expression excess of
jurisdiction shows that the lawmaker contemplated the situation where a court, having
jurisdiction should irregularly transcend its authority as well as the situation where the court
is totally devoid of lawful power.

It may be observed in this connection that the word jurisdiction as used in attachment
cases, has reference not only to the authority of the court to entertain the principal action
but also to its authority to issue the attachment, as dependent upon the existence of the
statutory ground. (6 C. J., 89.) This distinction between jurisdiction to issue the attachment
as an ancillary remedy incident to the principal litigation is of importance; as a court's
jurisdiction over the main action may be complete, and yet it may lack authority to grant an
attachment as ancillary to such action. This distinction between jurisdiction over the
ancillary has been recognized by this court in connection with actions involving the
appointment of a receiver. Thus in Rocha & Co. vs. Crossfield and Figueras (6 Phil. Rep.,
355), a receiver had been appointed without legal justification. It was held that the order
making the appointment was beyond the jurisdiction of the court; and though the court
admittedly had jurisdiction of the main cause, the order was vacated by this court upon
application a writ of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler
and McMicking 3 Phil. Rep., 735, Yangco vs. Rohde, 1 Phil. Rep., 404.)

By parity of reasoning it must follow that when a court issues a writ of attachment for which
there is no statutory authority, it is acting irregularly and in excess of its jurisdiction, in the
sense necessary to justify the Supreme Court in granting relief by the writ of certiorari. In
applying this proposition it is of course necessary to take account of the difference between
a ground of attachment based on the nature of the action and a ground of attachment
based on the acts or the conditions of the defendant. Every complaint must show a cause of
action some sort; and when the statue declares that the attachment may issue in an action
arising upon contract, the express or implied, it announces a criterion which may be
determined from an inspection of the language of the complaint. The determination of this
question is purely a matter of law. On the other hand, when the stature declares that an
attachment may be issued when the defendant is about to depart from the Islands, a
criterion is announced which is wholly foreign to the cause of action; and the determination
of it may involve a disputed question of fact which must be decided by the court. In making
this determination, the court obviously acts within its powers; and it would be idle to
suppose that the writ of certiorari would be available to reverse the action of a Court of First
Instance in determining the sufficiency of the proof on such a disputed point, and in
granting or refusing the attachment accordingly.

We should not be understood, in anything that has been said, as intending to infringe the
doctrine enunciated by this court in Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245),
when properly applied. It was there held that we would not, upon application for a writ of
certiorari, dissolve an interlocutory mandatory injunction that had been issued in a Court of
First Instance as an incident in an action of mandamus. The issuance of an interlocutory
injunction depends upon conditions essentially different from those involved in the issuance
of an attachment. The injunction is designed primarily for the prevention of irreparable
injury and the use of the remedy is in a great measure dependent upon the exercise of
discretion. Generally, it may be said that the exercise of the injunctive powers is inherent in
judicial authority; and ordinarily it would be impossible to distinguish between the
jurisdiction of the court in the main litigation and its jurisdiction to grant an interlocutory
injunction, for the latter is involved in the former. That the writ of certiorari can not be used
to reverse an order denying a motion for a preliminary injunction is of course not to cavil.
(Somes vs. Crossfield and Molina, 8 Phil. Rep., 284.)

But it will be said that the writ of certiorari is not available in this cae, because the petitioner
is protected by the attachment bond, and that he has a plain, speedy, and adequate remedy
appeal. This suggestion seems to be sufficiently answered in the case of Rocha & Co vs.
Crossfield and Figueras (6 Phil. Rep., 355), already referred to, and the earlier case there
cited. The remedy by appeal is not sufficiently speedy to meet the exigencies of the case. An
attachment is extremely violent, and its abuse may often result in infliction of damage
which could never be repaired by any pecuniary award at the final hearing. To postpone the
granting of the writ in such a case until the final hearing and to compel the petitioner to
bring the case here upon appeal merely in order to correct the action of the trial court in the
matter of allowing the attachment would seem both unjust and unnecessary.

Passing to the problem propounded in the second question it may be observed that, upon
general principles,. recognize both the civil and common law, money lost in gaming and
voluntarily paid by the loser to the winner can not in the absence of statue, be recovered in
a civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes
several forms of gambling, contains numerous provisions recognizing the right to recover
money lost in gambling or in the playing of certain games (secs. 6, 7, 8, 9, 11). The original
complaint in the action in the Court of First Instance is not clear as to the particular section
of Act No. 1757 under which the action is brought, but it is alleged that the money was lost
at gambling, banking, and percentage game in which the defendant was banker. It must
therefore be assumed that the action is based upon the right of recovery given in Section 7
of said Act, which declares that an action may be brought against the banker by any person
losing money at a banking or percentage game.

Is this a cause arising upon contract, express or implied, as this term is used in section 412 of
the Code of Civil Procedure? To begin the discussion, the English version of the Code of Civil
Procedure is controlling (sec. 15, Admin. Code, ed. of 1917). Furthermore it is universally
admitted to be proper in the interpretation of any statute, to consider its historical
antecedents and its juris prudential sources. The Code of Civil Procedure, as is well known, is
an American contribution to Philippine legislation. It therefore speaks the language of the
common-law and for the most part reflects its ideas. When the draftsman of this Code used
the expression contract, express or implied, he used a phrase that has been long current
among writers on American and English law; and it is therefore appropriate to resort to that
system of law to discover the appropriate to resort to that system of law to discover the
meaning which the legislator intended to convey by those meaning which the legislator
intended to convey by those terms. We remark in passing that the expression contrato
tracito, used in the official translation of the Code of Civil Procedure as the Spanish
equivalent of implied contract, does not appear to render the full sense of the English
expression.

The English contract law, so far as relates to simple contracts is planted upon two
foundations, which are supplied by two very different conceptions of legal liability. These
two conceptions are revealed in the ideas respectively underlying (1) the common- law debt
and (2) the assumptual promise. In the early and formative stages of the common-law the
only simple contract of which the courts took account was the real contract or contract re,
in which the contractual duty imposed by law arises upon the delivery of a chattle, as in the
mutuum, commodatum, depositum, and the like; and the purely consensual agreements of
the Roman Law found no congenial place in the early common law system.

In course of time the idea underlying the contract re was extended so as to include from one
person to another under such circumstances as to constitute a justa cuas debendi. The
obligation thereby created was a debt. The constitutive element in this litigation is found in
the fact that the debtor has received something from the creditor, which he is bound by the
obligation of law to return or pay for. From an early day this element was denominated the
quid pro quo, an ungainly phrase coined by Mediaeval Latinity. The quid pro quo was
primarily a materials or physical object, and its constituted the recompense or equivalent
acquired by the debtor. Upon the passage of the quid pro quo from one party to the other,
the law imposed that real contractual duty peculiar to the debt. No one conversant with the
early history of English law would ever conceive of the debt as an obligation created by
promise. It is the legal duty to pay or deliver a sum certain of money or an ascertainable
quantity of ponderable or measurable chattles.

The ordinary debt, as already stated, originates in a contract in which a quid pro quo passes
to the debtor at the time of the creation of the debt, but the term is equally applicable to
duties imposed by custom or statute, or by judgment of a court.

The existence of a debt supposes one person to have possession of thing (res) which he
owes and hence ought to turn over the owner. This obligation is the oldest conception of
contract with which the common law is familiar; and notwithstanding the centuries that
have rolled over Westminster Hall that conception remains as one of the fundamental bases
of the common-law contract.

Near the end of the fifteenth century there was evolved in England a new conception of
contractual liability, which embodied the idea of obligation resulting from promise and
which found expression in the common law assumpsit, or parol promise supported by a
consideration. The application of this novel conception had the effect of greatly extending
the filed of contractual liability and by this means rights of action came to be recognized
which had been unknown before. The action of assumpsit which was the instrument for
giving effect to this obligation was found to be a useful remedy; and presently this action
came to be used for the enforcement of common-law debts. The result was to give to our
contract law the superficial appearance of being based more or less exclusively upon the
notion of the obligation of promise.

An idea is widely entertained to the effect that all simple contracts recognized in the
common-law system are referable to a singly category. They all have their roots, so many of
us imagine, in one general notion of obligation; and of course the obligation of promise is
supposed to supply this general notion, being considered a sort of menstruum in which all
other forms of contractual obligation have been dissolved. This a mistake. The idea of
contractual duty embodied in the debt which was the first conception of contract liability
revealed in the common law, has remained, although it was detained to be in a measure
obscured by the more modern conception of obligation resulting from promise.

What has been said is intended to exhibit the fact that the duty to pay or deliver a sum
certain of money or an ascertainable quantity of ponderable or measurable chattles —
which is indicated by them debt — has ever been recognized, in the common-law system, as
a true contract, regardless, of the source of the duty or the manner in which it is create —
whether derived from custom, statue or some consensual transaction depending upon the
voluntary acts of the parties. the form of contract known as the debt is of the most ancient
lineage; and when reference is had to historical antecedents, the right of the debt to be
classed as a contract cannot be questioned. Indeed when the new form of engagement
consisting of the parol promise supported by a consideration first appeared, it was looked
upon as an upstart and its right to be considered a true contract was questioned. It was long
customary to refer to it exclusively as an assumpsit, agreement, undertaking, or parol
promise, in fact anything but a contract. Only in time did the new form of engagement
attain the dignity of being classed among true contract.

The term implied takers us into shadowy domain of those obligations the theoretical
classification of which has engaged the attention of scholars from the time of Gaius until our
own day and has been a source of as much difficulty to the civilian as to the common-law
jurist. There we are concerned with those acts which make one person debtor to another
without there having intervened between them any true agreement tending to produce a
legal bond (vinculum juris). Of late years some American and English writers have adopted
the term quasi-contract as descriptive of these obligations or some of them; but the
expression more commonly used is implied contract.

Upon examination of these obligations, from the view point of the common-law
jurisprudence, it will be found that they fall readily into two divisions according as they bear
an analogy to the common-law debt or to the common law assumpsit. To exhibit the scope
of these different classes of obligations is here impracticable. It is only necessary in this
connection to observe that the most conspicuous division is that which comprises duties in
the nature of debt. The characteristic feature of these obligations is that upon certain states
of fact the law imposes an obligation to pay a sum certain of money; and it is characteristic
of this obligation that the money in respect to which the duty is raised is conceived as being
equivalent of something taken or detained under circumstances giving rise to the duty to
return or compensate therefore. The proposition that no one shall be allowed to enrich
himself unduly at the expense of another embodies the general principle here lying at the
basis of obligation. The right to recover money improperly paid (repeticion de lo indebido) is
also recognized as belong to this class of duties.

It will observed that according to the Civil Code obligations are supposed to be derived
either from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4)
acts in which some sort ob lame or negligence is present. This enumeration of sources of
obligations and the obligation imposed by law are different types. The learned Italian jurist,
Jorge Giorgi, criticises this assumption and says that the classification embodied in the code
is theoretically erroneous. His conclusion is that one or the other of these categories should
have been suppressed and merged in the other. (Giorgi, Teoria de las Obligaciones, Spanish
ed., vol. 5 arts. 5, 7, 9.) The validity of this criticism is, we thin, self-evident; and it is of
interest to note that the common law makes no distinction between the two sources of
liability. The obligations which in the Code are indicated as quasi-contracts, as well as those
arising ex lege, are in the common la system, merged into the category of obligations
imposed by law, and all are denominated implied contracts.

Many refinements, more or less illusory, have been attempted by various writers in
distinguishing different sorts of implied contracts, as for example, the contract implied as of
fact and the contract implied as of law. No explanation of these distinctions will be here
attempted. Suffice it to say that the term contract, express or implied, is used to by
common-law jurists to include all purely personal obligations other than those which have
their source in delict, or tort. As to these it may be said that, generally speaking, the law
does not impose a contractual duty upon a wrongdoer to compensate for injury done. It is
true that in certain situations where a wrongdoer unjustly acquired something at the
expense of another, the law imposes on him a duty to surrender his unjust acquisitions, and
the injured party may here elect to sue upon this contractual duty instead of suing upon the
tort; but even here the distinction between the two liabilities, in contract and in tort, is
never lost to sight; and it is always recognized that the liability arising out of the tort is
delictual and not of a contractual or quasi-contractual nature.

In the case now under consideration the duty of the defendant to refund the money which
he won from the plaintiff at gaming is a duty imposed by statute. It therefore arises ex lege.
Furthermore, it is a duty to return a certain sum which had passed from the plaintiff to the
defendant. By all the criteria which the common law supplies, this a duty in the nature of
debt and is properly classified as an implied contract. It is well- settled by the English
authorities that money lost in gambling or by lottery, if recoverable at all, can be recovered
by the loser in an action of indebitatus assumpsit for money had and received. (Clarke vs.
Johnson. Lofft, 759; Mason vs. Waite, 17 Mass., 560; Burnham vs. Fisher, 25 Vt., 514.) This
means that in the common law the duty to return money won in this way is an implied
contract, or quasi-contract.
It is no argument to say in reply to this that the obligation here recognized is called an
implied contract merely because the remedy commonly used in suing upon ordinary
contract can be here used, or that the law adopted the fiction of promise in order to bring
the obligation within the scope of the action of assumpsit. Such statements fail to express
the true import of the phenomenon. Before the remedy was the idea; and the use of the
remedy could not have been approved if it had not been for historical antecedents which
made the recognition of this remedy at one logical and proper. Furthermore, it should not
be forgotten that the question is not how this duty but what sort of obligation did the
author of the Code of Civil Procedure intend to describe when he sued the term implied
contract in section 412.

In what has been said we have assumed that the obligation which is at the foundation of the
original action in the court below is not a quasi-contract, when judge by the principles of the
civil law. A few observations will show that this assumption is not by any means free from
doubt. The obligation in question certainly does not fall under the definition of either of the
two-quasi- contracts which are made the subject of special treatment in the Civil Code, for
its does not arise from a licit act as contemplated in article 1895. The obligation is clearly a
creation of the positive law — a circumstance which brings it within the purview of article
1090, in relation with article, 1089; and it is also derived from an illicit act, namely, the
playing of a prohibited game. It is thus seen that the provisions of the Civil Code which
might be consulted with a view to the correct theoretical classification of this obligation are
unsatisfactory and confusing.

The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code are
(1) the obligation incident to the officious management of the affairs of other person
(gestion de negocios ajenos) and (2) the recovery of what has been improperly paid (cabro
de lo indebido). That the authors of the Civil Code selected these two obligations for special
treatment does not signify an intention to deny the possibility of the existence of other
quasi-contractual obligations. As is well said by the commentator Manresa.

The number of the quasi-contracts may be indefinite as may be the number of lawful facts,
the generations of the said obligations; but the Code, just as we shall see further on, in the
impracticableness of enumerating or including them all in a methodical and orderly
classification, has concerned itself with two only — namely, the management of the affairs
of other person and the recovery of things improperly paid — without attempting by this to
exclude the others. (Manresa, 2d ed., vol. 12, p. 549.)

It would indeed have been surprising if the authors of the Code, in the light of the
jurisprudence of more than a thousand years, should have arbitrarily assumed to limit the
quasi-contract to two obligations. The author from whom we have just quoted further
observes that the two obligations in question were selected for special treatment in the
Code not only because they were the most conspicuous of the quasi-contracts, but because
they had not been the subject of consideration in other parts of the Code. (Opus citat., 550.)

It is well recognized among civilian jurists that the quasi- contractual obligations cover a
wide range. The Italian jurist, Jorge Giorgi, to whom we have already referred, considers
under this head, among other obligations, the following: payments made upon a future
consideration which is not realized or upon an existing consideration which fails; payments
wrongfully made upon a consideration which is contrary to law, or opposed to public policy;
and payments made upon a vicious consideration or obtained by illicit means (Giorgi, Teoria
de las Obligaciones, vol. 5, art. 130.)

Im permitting the recovery of money lost at play, Act No. 1757 has introduced modifications
in the application of articles 1798, 180`, and 1305 of the Civil Code. The first two of these
articles relate to gambling contracts, while article 1305 treats of the nullity of contracts
proceeding from a vicious or illicit consideration. Taking all these provisions together, it
must be apparent that the obligation to return money lost at play has a decided affinity to
contractual obligations; and we believe that it could, without violence to the doctrines of
the civil law, be held that such obligations is an innominate quasi-contract. It is, however,
unnecessary to place the decision on this ground.

From what has been said it follows that in our opinion the cause of action stated in the
complaints in the court below is based on a contract, express or implied and is therefore of
such nature that the court had authority to issue writ of attachment. The application for the
writ of certiorari must therefore be denied and the proceedings dismissed. So ordered.

Arellano, C.J., Torres, Johnson and Carson, JJ., concur.

Separate Opinions

MALCOLM, J., concurring:

As I finished reading the learned and interesting decision of the majority, the impression
which remained was that the court was enticed by the nice and unusual points presented to
make a hard case out of an easy one and unfortunately t do violence to the principles of
certiorari. The simple questions are : Di the Court of First Instance of city of Manila exceed
its jurisdiction in granting an attachments against the property of the defendant, now
plaintiff? Has this defendant, now become the plaintiff, any other plain, speedy and
adequate remedy? The answer are found in the decision of thinks court, in Herrera vs.
Barretto and Joaquin ([1913], 25 Phil., 245), from which I quote the following:
It has been repeatedly held by this court that a writ of certiorari will not be issued unless it
clearly appears that the court to which it is to be directed acted without or in excess of
jurisdiction. It will not be issued to cure errors in the proceedings or to correct erroneous
conclusions of law or of fact. If the court has jurisdiction. It will not be issued to cure errors
in the proceedings to correct jurisdiction of the subject matter and f the person, decisions
upon all question pertaining to the cause are decisions within its jurisdiction and, however
irregular or erroneous they may be, cannot be corrected by certiorari. The Code of Civil
Procedure giving Courts of First Instance general jurisdiction in actions for mandamus, it
goes without saying that the Court of First Instance had jurisdiction in the present case to
resolve every question arising in such an action and t decide every question presented to it
which pertained to the cause. It has already been held by this court, that while it is a power
to be exercised only in extreme case, a Court of First Instance has power to issue a
mandatory injunction t stand until the final determination of the action in which it is issued.
While the issuance of the mandatory injunction in this particular case may have been
irregular and erroneous, a question concerning which we express no opinion, nevertheless
its issuance was within the jurisdiction of the court and its action is not reveiwable on
certiorari. It is not sufficient to say that it was issued wrongfully and without sufficient
grounds and in the absence of the other party. The question is, Did the court act with
jurisdiction?

It has been urged that the court exceeded its jurisdiction in requiring the municipal
president t issue the license, for the reason that he was not the proper person to issue it
and that, if he was the proper person, he had the right to exercise a discretion as to whom
the license should be issued. We do not believe that either of these questions goes to the
jurisdiction of the court to act. One of the fundamental question in a mandamus against a
public officer is whether or not that officer has the right to exercise discretion in the
performance of the act which the plaintiff asks him to perform. It is one of the essential
determinations of the cause. To claim that the resolution of that question may deprive the
court of jurisdiction is to assert a novel proposition. It is equivalent to the contention that a
court has jurisdiction if he decides right but no jurisdiction if he decides wrong. It may be
stated generally that it is never necessary to decide the fundamental questions of a cause to
determine whether the court has jurisdiction. The question of jurisdiction is preliminary and
never touches the merits of the case. The determination of the fundamental questions of a
cause are merely the exercise of a jurisdiction already conceded. In the case at bar no one
denies the power, authority or jurisdiction of the Court of First Instance to take cognizance
of an action for mandamus and to decide very question which arises in that cause and
pertains thereto. The contention that the decision of one of those question, if wrong,
destroys jurisdiction involves an evident contradiction.

Jurisdiction is the authority to hear and determine a cause — the right to act in a case. Since
it is the power to hear and determine, it does not depend either upon the regularity of the
exercise of that power or upon the rightfulness of the decision made. Jurisdiction should
therefore be distinguished from the exercise of jurisdiction. The authority to decide a case
at all, and not the decision rendered therein, is what makes up jurisdiction. Where there is
jurisdiction of the person and subject matter, as we have said before, the decision of all
other questions arising in the case an exercise of that jurisdiction.

Then follows an elaborate citation and discussion of American authorities, including a

decision of the United States Supreme Court and of the applicable Philippine cases. The
decision continues"

The reasons givens in these cases last cited for the allowance of the writ of prohibition are
applicable only to the class of cases with which the decision deal and do not in any way
militate against the general proposition herein asserted. Those which relate to election
contest are based upon the principle that those proceedings, are special in their nature and
must be strictly followed, a material departure from the statute resulting a loss, or in an
excess of jurisdiction. The cases relating to receivers are based, in a measure, upon the
principle the appointment of a receiver being governed by the statute; and in part upon the
theory that the appointment of a receiver in an improper case is in substance a bankruptcy
proceeding, the taking of which is expressly prohibited by law. The case relative to the
allowance of alimony pendente lite when the answer denies the marriage is more difficult to
distinguish. The reasons in support of the doctrine laid down in that case are given the
opinion in full and they seem to place the particular case to which they refer in a class by
itself.

It is not alight things that the lawmakers have abolished writs of error and with them
certiorari and prohibition, in so far as they were methods by which the mere errors of an
inferior curt could be corrected. As instruments to that end they no longer exist. Their place
is no taken by the appeal. So long as the inferior court retains jurisdiction its errors can be
corrected only by that method. The office of the writ of certiorari has been reduced to the
correction of defects of jurisdiction solely and cannot legally be used for any other purpose.
It is truly an extra ordinary remedy and in this jurisdiction, its use is restricted to truly
extraordinary cases — cases in which the action of the inferior court is wholly void, where
any further steps in the case would result in a waste of time and money and would produce
no result whatever; where the parties, or their privies, would be utterly deceived; where a
final judgment or decree would be nought but a snare and a delusion, deciding nothing,
protecting nobody, a juridical pretension, a recorded falsehood, a standing menace. It is
only to avoid such result as these that a writ of certiorari is issuable; and even here an
appeal will lie if the aggrieved party prefers to prosecute it.

A full and thorough examination of all the decided cases in this court touching the question
of certiorari and prohibition fully supports the proposition already stated that, where a
Court of First Instance has jurisdiction of the subject matter and of the person, its decision
of any question pertaining to the cause, however, erroneous, cannot be reviewed by
certiorari, but must be corrected by appeal.

I see no reason to override the decision in Herrera vs. Barretto and Joaquin (supra).
Accordingly, I can do no better than to make the language of Justice Moreland my own.
applying these principles, it is self-evident that this court should no entertain the present
petition and should not grant the desired relief.

FISHER, J., dissenting:

I am in full accord with the view that the remedy of certiorari may be invoked in such cases
as this, but I am constrained to dissent from the opinion of the majority as regards the
meaning of the term implied contract.

Section 412 of the code of Civil Procedure in connection with section 424, authorizes the
preliminary attachment of the property of the defendant: "(1) In an action for the recovery
of money or damages on a cause of action arising upon contract, express or implied, when
the defendant is about to depart from the Philippine Islands, with intent to defraud his
creditors; (2) . . .; (3) . . .; (4) . . .; (5) When the defendant has removed or disposed of his
property, or is about to do so, with intent to defraud his creditors."

It is evident that the terms of paragraph five of the article cited are much broader than
those of the first paragraph. The fifth paragraph is not limited to action arising from
contract, but is by its terms applicable to actions brought for the purpose of enforcing extra-
contractual rights as well as contract rights. The limitation upon cases falling under
paragraph five is to be found, not in the character of the obligation for the enforcement for
which the action is brought, but in the terms of article 4265, which requires that the
affidavit show that the amount due the plaintiff . . . is as much as the sum for which the
order is granted.

That is to say, when application is made for a preliminary attachment upon the ground that
the plaintiff is about to dispose of his property with intent to defraud his creditors — thus
bringing the case within the terms of paragraph five of the section — it is not necessary to
show that the obligation in suit is contractual in its origin, but is sufficient to show that the
breach of the obligation, as shown by the facts stated in the complaint and affidavit,
imposes upon the defendant the obligation to pay a specific and definite sum. For example,
if it is alleged in the complaint that the defendant by negligence, has caused the destruction
by fire of a building belonging to plaintiff, and that such building was worth a certain sum of
money, these facts would show a definite basis upon which to authorize the granting of the
writ. But if it were averred that the defendant has published a libel concerning the plaintiff,
to the injury of his feeling and reputation, there is no definite basis upon which to grant an
attachment, because the amount of the damage suffered, being necessarily uncertain and
indeterminate, cannot be ascertained definitely until the trail has been completed.

But it appears that the legislature although it has seen fit to authorize a preliminary
attachment in aid of action of all kinds when the defendant is concealing his property with
intent to defraud his creditors, has provided is about to depart from the country with intent
to defraud his creditos, the writ will issue only when the action in aid of which it is sought
arises from a contract express or implied. If an attachment were permitted upon facts
bringing the application with the first paragraph of the section in support of action of any
kind, whether the obligation sued upon is contractual or not, then paragraph five would by
construction be made absolutely identical with paragraph one, and this would be in effect
equivalent to the complete eliminated of the last two lines of the first paragraph. It is a rule
of statutory construction that effect should be given to all parts of the statue, if possible. I
can see no reason why the legislature should have limited cases falling within the firs
paragraph to action arising from contract and have refrained from imposing this limitation
with respect to cases falling within the terms of the fifth paragraph, but this should have no
effect upon us in applying the law. Whether there be a good reason for it or not the
distinction exists.

Had the phrase express or implied not been used to qualify contract, there would be no
doubt whatever with regard to the meaning of the word. In the Spanish Civil law contract
are always consensual, and it would be impossible to define as a contract the judicial
relation existing between a person who has lost money at gaming and the winner of such
money, simple because the law imposes upon the winner the obligation of making
restitution. An obligation of this kind, far from being consensual in its origin, arises against
the will of the debtor. To call such a relation a contract is, from the standpoint of the civil
law, a contradiction in terms.

But is said that as the phase express or implied has been used to qualify the word contract
and these words are found in statue which speaks the language of the common law, this
implies the introduction into our law of the concept of the implied contract of the English
common-law, a concept which embraces a certain class of obligation originating ex lege,
which have been arbitrarily classified as contracts, so that they might be enforced by one of
the formal actions of the common law which legal tradition and practice has reserved for
the enforcement of contract. I cannot concur in this reasoning. I believe that when a
technical juridical term of substantive law is used in the adjective law of these islands, we
should seek its meaning in our own substantive law rather than in the law of America or of
England. The code of Civil Procedure was not enacted to establish rules of substantive law,
but upon the assumption of the existence of these rules.
In the case of Cayce vs. Curtis (Dallam's Decisions Texas Reports, 403), it appears that the
legislature, at a time when that State still retained to a large extent the Spanish substantive
civil law, enacted a statue in which the word bonds is used. In litigation involving the
construction of that statute, one of the parties contended that the work bond should be
given the technical meaning which it had in the English Common Law. The court rejected
this contention saying —

On the first point it is urged by counsel for the appellant that the word bond used in the
statute being a common law term, we must refer to the common law for its legal
signification; and that by that law no instrument is a bond which is not under seal. The truth
of the proposition that sealing is an absolute requisite to the validity of a bond at common
law is readily admitted; but the applicability of that rule of the case under consideration is
not perceived. This bond was taken at a time when the common law afforded no rule of
decision or practice in this country, and consequently that law cannot be legitimately
resorted to, even for the purpose for which it is invoked by the counsel for the appellant,
unless it be shown that the civil law had not term of similar import for we regard it as a
correct rule of construction, that where technical terms are used in a statute they are to be
referred for their signification to terms f similar import in the system of laws which prevails
in the country where the statues is passed, and not to another system which is entirely
foreign t the whole system of municipal regulations by which that country is governed.
(Martin's Reports, vol. 3, 185; 7 Martin [N. S.], 162.)"

Consequently, I believe that in the interpretation of phase "contract, express or implied,"

we should apply the rules of our own substantive law. The phrase in itself offers no
difficulty. The concept of the contract, under the Civil Code, as a legal relation of exclusively
consensual origin, offers no difficulty. Nor is any difficulty encountered in the gramatical
sense of the words express and "implied". Express according to the New International
Dictionary is that which is directly and distinctly stated; expressed, not merely implied or left
to interference. Therefore, a contract entered into by means of letters, in which the offer
and the acceptance have been manifested by appropriate words, would be an "express
contract." The word "imply" according to the same dictionary, is to involve in substance or
essence, or by fair inference, or by construction of law, when not expressly stated in words
or signs; to contain by implication to include virtually.

Therefore, if I enter a tailor shop and order a suit of clothes, although nothing is said
regarding payment, it is an inference, both logical and legal, from my act that is my intention
to pay the reasonable value of the garments. The contract is implied, therefore, is that in
which the consent of the parties is implied.

Manresa, commenting upon article 1262 of the Civil Code, says:

The essence of consent is the agreement of the parties concerning that which is to
constitute the contract . . . . The forms of this agreement may vary according to whether it is
expressed verbally or in writing, by words or by acts. Leaving the other differences for
consideration hereafter, we will only refer now to those which exist between express
consent and implied consent . . . . It is unquestionable that implied consent manifested by
act or conduct, produces a contract. . . .

If it were necessary to have recourse to the English common law for the purpose of
ascertaining the meaning of the phrase under consideration, we could find many decisions
which gave it the same meaning as that for which I contend.

An implied contract is where one party receives benefits from another party, under such
circumstances that the law presume a promise on the part of the party benefited to pay a
reasonable price for the same. (Jones vs. Tucker [Del.], 84 Atlantic, 1012.)

It is true that English courts have extended the concept of the term contract to include
certain obligations arising ex lege without consent, express or implied. True contracts
created by implied consent are designated in the English common law as contracts implied
in the fact, while the so-called contracts in which the consent is a fiction of law are called
contracts implied by law. But is evident that the latter are not real contracts. They have
been called contract arbitrarily by the courts of England, and those of the Untied States in
which the English common law is in force, in order that certain actions arising ex lege may
be enforced by the action of assumpsit. In the rigid formulism of the English common law
the substantive right had to be accommodated to the form of action. As is stated in the
monograph on the action of assumpsit in Ruling Case Law. (volume 2, 743) —

In theory it wan action to recover for the nonperformance f simple contracts, and the
formula and proceedings were constructed and carried on accordingly. . . . From the reign of
Elizabeth this action has been extended to almost every case where an obligation arises
from natural reason, . . . and it is now maintained in many cases which its principles do not
comprehend and where fictions and intendments are resorted to, to fit the actual cause of
action to the theory of the remedy. It is thus sanctioned where there has been no . . . real
contract, but where some duty is deemed sufficient to justify the court in imputing the
promise to perform its, and hence in bending the transaction to the form of action.

In the ancient English common law procedure the form of the action was regarded as being
much more important than the substantive right to be enforced. If no form of action was
found in which the facts would fit, so much the worse for the facts! to avoid the injustices to
which this condition of affairs gave rise, the judges invented those fictions which permitted
them to preserve the appearance of conservatism and change the law without expressly
admitting that they were doing so. The indispensable averment, that they were doing so.
The indispensable avernment without which the action of assumpsit would not lie, was that
the defendant promised to pay plaintiff the amount demanded. (Sector vs. Holmes, 17 Vs.,
566.) In true contracts, whether express or implied, this promise in fact exists. In obligations
arising ex lege there is no such promise, and therefore the action of assumpsit could not be
maintained, and therefore the action of assumpsit could not be maintained, although by
reason of its relative simplicity it was one of the most favored forms of action. In order to
permit the litigant to make use of this form of action for the enforcement of ascertain
classes of obligations arising ex lege, the judges invented the fiction of the promise of the
defendant to pay the amount of the obligation, and as this fictitious promise give the
appearance of consensuality to the legal relations of the parties, the name of implied
contract is given to that class of extra-contractual obligations enforcible by the action of
assumpsit.

Now, it is not be supposed that it was the intention of the Legislature in making use in the
first paragraph of article 412 of the phrase contract, express or implied to corrupt the logical
simplicity of our concept of obligations by importing into our law the antiquated fictions of
the mediaeval English common law. If one of the concepts of the term "implied contract" in
the English common law, namely, that in which consent is presume from the conduct of the
debtor, harmonizes with the concept of the contract in our law, why should we reject that
meaning and hold that the Legislature intended to use this phrase in the foreign and illogical
sense of a contract arising without consent? This is a civil law country. why should we be
compelled to study the fictions of the ancient English common law, in order to be informed
as to the meaning of the word contract in the law of the Philippine Islands? Much more
reasonable to my mind was the conclusion of the Texas court, under similar circumstances,
to the effect to be referred for their signification to terms of similar import in the system of
laws which prevails in the country where the statue is passed." (Cayce vs. Curtis, supra.)

My conclusion is that the phase contract, express or implied should be interpreted in the
grammatical sense of the words and limited to true contracts, consensual obligations arising
from consent, whether expressed in words, writing or signs, or presumed from conduct. As
it is evident that the defendant in the present case never promised, him in the gambling
game in question, his obligation to restor the amounts won, imposed by the law, is no
contractual, but purely extra-contractual and therefore the action brought not being one
arising upon contract express or implied, the plaintiff is not entitled to a preliminary
attachment upon the averment that the defendant is about to depart from the Philippine
Islands with with intent t defraud his creditors, no averment being made in the compliant or
in the affidavit that the defendant has removed or disposed of his property, or is about to
depart with intent to defraud his creditors, so as to bring the case within the terms of the
fifth paragraph of section 412.
I am unable to agree with the contention of the application (Brief, p. 39) here that the phase
in question should be interpreted in such a way as to include all obligations, whether arising
from consent or ex lege, because that is equivalent to eliminating all distinction between
the first and the fifth paragraphs by practically striking out the first two lines of paragraph
one. The Legislature has deliberately established this distinction, and while we may be
unable to see any reason why it should have been made, it is our duty to apply and interpret
the law, and we are not authorized under the guise of interpretation to virtually repeal part
of the statute.

Nor can it be said that the relations between the parties litigant constitute a quasi-contract.
In the first place, quasi- contracts are "lawful and purely voluntary acts by which the authors
thereof become obligated in favor of a third person. . . ." The act which gave rise to the
obligation ex lege relied upon by the plaintiff in the court below is illicit — an unlawful
gambling game. In the second place, the first paragraph of section 412 of the Code of Civil
Procedure does not authorize an attachment in actions arising out of quasi contracts, but
only in actions arising out of contract, express or implied.

I am therefore of the opinion that the court below was without jurisdiction to issue that writ
of attachment and that the writ should be declared null and void.

Avanceña, J., concurs.

3.)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 13228 September 13, 1918

WILLIAM OLLENDORFF, plaintiff-appellee,

vs.
IRA ABRAHAMSON, defendant-appellant.

Lawrence & Ross for appellant.

Wolfson & Wolfson for appellee.

FISHER, J.:
This is an appeal by defendant from a judgment of the Court of First Instance of Manila by
which he was enjoined for a term of five years, from September 10, 1915, from engaging in
the Philippine Islands in any business similar to or competitive with that of plaintiff.

The record discloses that plaintiff is and for a long time past has been engaged in the city of
Manila and elsewhere in the Philippine Islands in the business of manufacturing ladies
embroidered underwear for export. Plaintiff imports the material from which this
underwear is made and adopts decorative designs which are embroidered upon it by
Filipino needle workers from patterns selected and supplied by him. Most of the embroidery
work is done in the homes of the workers. The embroidered material is then returned to
plaintiff's factory in Manila where it is made into finished garments and prepared for export.
The embroiderers employed by plaintiff are under contract to work for plaintiff exclusively.
Some fifteen thousand home workers and eight hundred factory workers are engaged in
this work for plaintiff, and some two and a half million pesos are invested in his business.

On September 10, 1915, plaintiff and defendant entered into a contract in the following
terms:

Contract of agreement made and entered into this date by and between William Ollendorff,
of Manila, Philippine Islands, party of the first part, and Ira Abrahamson, of Manila,
Philippine Islands, party of the second part:

The party of first part hereby agrees to employ the party of the second part, and the party
of the second part hereby obligates and binds himself to work for the party of the first part
for a term of two years from date commencing from the sixth of September, one thousand
nine hundred and fifteen and ending on the fifth day of September, one thousand nine
hundred seventeen, at a salary of fifty peso (50) per week payable at the end of each week.

The party of the second part hereby obligates and binds himself to devote his entire time,
attention, energies and industry to the promotion of the furtherance of the business and
interest of the party of the first part and to perform during the term of this contract such
duties as may be assigned to him by the party of the first part, and failure by the said party
of the second part to comply with these conditions to the satisfaction of the party of the
first shall entitle the party of the first part to discharge and dismiss the said party of the
second part from the employ of the party of the first part.

It is mutually understood and agreed by the parties hereto that this contract, upon its
termination, may be extended for a like for a longer or a shorter period by the mutual
consent of both contracting parties.
The said party of the second part hereby further binds and obligates himself, his heirs,
successors and assigns, that he will not enter into or engage himself directly or indirectly,
nor permit any other person under his control to enter in or engage in a similar or
competitive business to that of the said party of the first part anywhere within the
Philippine Islands for a period of five years from this date.

Under the terms of this agreement defendant entered the employ of plaintiff and worked
for him until April, 1916, when defendant, on account of ill health, left plaintiff's employ and
went to the United States. While in plaintiff's establishment, and had full opportunity to
acquaint himself with plaintiff's business method and business connection. The duties
performed by him were such as to make it necessary that he should have this knowledge of
plaintiff's business. Defendant had a general knowledge of the Philippine embroidery
business before his employment by plaintiff, having been engaged in similar work for
several years.

Some months after his departure for the United States, defendant returned to Manila as the
manager of the Philippine Underwear Company, a corporation. This corporation does not
maintain a factory in the Philippine Islands, but send material and embroidery designs from
New York to its local representative here who employs Filipino needle workers to embroider
the designs and make up the garments in their homes. The only difference between
plaintiff's business and that of the firm by which the defendant is employed, is the method
of doing the finishing work -- the manufacture of the embroidered material into finished
garments. Defendant admits that both firms turn out the same class of goods and that they
are exported to the same market. It also clearly appears from the evidence that defendant
has employed to work his form some of the same workers employed by the plaintiff.

Shortly after defendant's return to Manila and the commencement by him of the discharge
of the duties of his position as local manager of the Philippine Embroidery Company, as local
manager of the Philippine Embroidery Company, plaintiff commenced this action, the
principal purpose of which is to prevent by injunction, any further breach of that part of
defendant's contract of employment by plaintiff, by which he agreed that he would not
"enter into or engage himself directly or indirectly . . . in a similar or competitive business to
that of (plaintiff) anywhere within the Philippine Islands for a period of five years . . ." from
the date of the agreement. The lower court granted a preliminary injunction, and upon trial
the injunction was made perpetual.

Defendant, as appellant, argues that plaintiff failed to substantiate the averments of his
complaints to the effect that the business in which the defendant is employed is
competitive with that of plaintiff. The court below found from the evidence that the
business was "very similar." We have examined the evidence and rare of the opinion that
the business in which defendant is engaged is not only very similar to that of plaintiff, but
that it is conducted in open competition with that business within the meaning of the
contract in question. Defendant himself expressly admitted, on cross-examination, that the
firm by which he is now employed puts out the same class of foods as that which plaintiff is
engaged in producing. When two concerns operate in the same field, produce the same
class of goods and dispose them in the same market, their businesses are of necessity
competitive. Defendant having engaged in the Philippine Islands in a business directly
competitive with that of plaintiff, within five years from the date of his contract of
employment by plaintiff, under the terms of which he expressly agreed that he would
refrain form doing that very thing, his conduct constitutes a breach of that agreement.

Defendant argues that even assuming that there has been a breach of the agreement, the
judgment of the court below is nevertheless erroneous, contending that (1) the contract is
void for lack of mutuality; (2) that the contract is void as constituting an unreasonable
restraint of trade; (3) that plaintiff has failed to show that he has suffered any estimable
pecuniary damage; and (4) that even assuming that such damage as to warrant the court in
restraining by injunction its continuance.

The contention that the contract is void for lack of mutuality is based upon that part of the
agreement which authorizes plaintiff to discharge the defendant before the expiration of
the stipulated term, should defendant fail to comply with its conditions to plaintiff's
satisfaction. It is argued that by this contracts it was sought to impose upon defendant the
absolute obligation of rendering service, while reserving to plaintiff the right to rescind it at
will. We are of the opinion that this question is largely academic. It is admitted that
defendant left plaintiff's employ at his own request before the expiration of the stipulated
terms of the contract. Had plaintiff sought to discharge defendant without just cause,
before the expiration of the term of the employment, it might have been a serious question
whether he could lawfully do so, notwithstanding the terms in which the contract was
drawn. (Civil Code, art. 1256.) But even assuming this particular clause of the contract to be
invalid, this would not necessarily affect the rest of the agreement. The inclusion is an
agreement of one or more pacts which are invalid does not of necessity invalidate the whole
contract.

We are of the opinion that the contract was not void as constituting an unreasonable
restraint of trade. We have been cited to no statutory expression of the legislative will to
which such an agreement is directly obnoxious. The rule in this jurisdiction is that the
obligations created by contracts have the force of law between the contracting parties and
must be enforce in accordance with their tenor. (Civil Code, art 1091.) The only limitation
upon the freedom of contractual agreement is that the pacts established shall not be
contrary to "law, morals or public order." (Civil Code, Art. 1255.) The industry of counsel has
failed to discover any direct expression of the legislative will which prohibits such a contract
as that before us. It certainly is not contrary to any recognized moral precept, and it
therefore only remains to consider whether it is contrary to "public order." This term, as
correctly stated by Manresa (Commentaries, vol. 8, p. 606) "does not mean, as here used,
the actual keeping of the public peace, but signifies the public weal . . . that which is
permanent, and essential in institutions . . . ." It is the equivalent, as here used and as
defined by Manresa, of the term "public policy" as used in the law of the United States.
Public policy has been defined as being that principle under which freedom of contract or
private dealing is restricted for the freedom of contract or private dealing is restricted for
the good of the community. (People's Bank vs. Dalton, 2 Okla., 476.) It is upon this theory
that contracts between private individuals which result in an unreasonable restraint of trade
have frequently being recognized by article 1255 of our Civil Code, the court of these Islands
are vested with like authority.

In the nature of things, it is impossible to frame a general rule by which to determine in

advance the precise point at which the right of freedom of contract must yield to the
superior interest of community in keeping trade and commerce free from unreasonable
restrictions. Originally the English courts adopted the view that any agreement which
imposed restrictions upon a man's right to exercise his trade or calling was void as against
public policy. (Cyc. vol. 9, p. 525.) In the course of time this opinion was abandoned and the
American and English courts adopted the doctrine that where the restraint was unlimited as
to space but unlimited as to time were valid. In recent years there has been a tendency on
the part of the courts of England and America to discard these fixed rules and to decide
each case according to its peculiar circumstances, and make the validity of the restraint
depend upon its reasonableness. If the restraint is no greater than is reasonably necessary
for the protection of the party in whose favor it is imposed it is upheld, but if it goes beyond
this is declared void. This is the principle followed in such cases by the Supreme Court of the
United States. In the case of Gibbs vs. Consolidated Gas Co. of Baltimore (130 U.S., 396) the
court said:

The decision in Mitchel vs. Reynolds (1P. Wms. 181 [Smith's Leading Cases, Vol. 1, Pt. II,
508]), is the foundation of rule in relation to the invalidity of contracts in restraint of trade;
but as it was made under a condition of things, and a state of society, different from those
which now prevail, the rule laid down is not regarded as inflexible, and has been
considerably modified. Public welfare is first considered, and if it be not involved, and the
restraint upon one party is not greater than protection to the other party requires, the
contract may be sustained. The question is, whether, under the particular circumstances of
the case and the nature of the particular contract involved in it, the contract is, or is not,
unreasonable. (Rousillon vs. Rousillon, L. R. 14 Ch. Div., 351; Leather Cloth Co. vs. Lorsont, L.
R. 9 Eq., 345.)

Following this opinion, we adopt the modern rule that the validity of restraints upon trade
or employment is to be determined by the intrinsinc reasonableness of restriction in each
case, rather than by any fixed rule, and that such restrictions may be upheld when not
contrary to afford a fair and reasonable protection to the party in whose favor it is imposed.

Examining the contract here in question from this stand point, it does not seem so with
respect to an employee whose duties are such as of necessity to give him an insight into the
general scope and details of his employers business. A business enterprise may and often
does depend for its success upon the owner's relations with other dealers, his skill in
establishing favorable connections, his methods of buying and selling -- a multitude of
details, none vital if considered alone, but which in the aggregate constitute the sum total of
the advantages which the result of the experience or individual aptitude and ability of the
man or men by whom the business has been built up. Failure or success may depend upon
the possession of these intangible but all important assets, and it is natural that their
possessor should seek to keep them from falling into the hands of his competitors. It is with
this object in view that such restrictions as that now under consideration are written into
contracts of employment. Their purpose is the protection of the employer, and if they do
not go beyond what is reasonably necessary to effectuate this purpose they should be
upheld. We are of the opinion, and so hold, that in the light of the established facts the
restraint imposed upon defendant by his contract is not unreasonable. As was well said in
the case of Underwood vs. Barker (68 Law J. Ch., 201). "If there is one thing more than
another which is essential to the trade and commerce of this country, it is the inviolability of
contract deliberately entered into; and to allow a person of mature age, and not imposed
upon, to enter into a contract, to obtain the benefit of it, and then to repudiate it and the
obligation which he has undertaken, is prima facie, at all events, contrary to the interest of
any and every country . . . . The public policy which allows a person to obtain employment
on certain terms understood by and agreed to by him, and to repudiate his contract,
conflicts with, and must, to avail the defendant, for some sufficient reason, prevail over, the
manifest public policy, which, as a rule holds him to his bond . . . .

Having held that the contract is valid, we pass to a consideration of defendant's objections
to its enforcement by injunction.

It is contended that plaintiff has not proved that he has suffered any estimable pecuniary
damage by reason of defendant's breach of the contract, and that for that reason his action
must fail. It is further contended that in no event is it proper to enforce such a contract as
this by injunction, because it has not been alleged and proved that the continuance of the
acts complained of will cause plaintiff "irreparable damage." These objections can
conveniently be considered together.

The obligation imposed upon defendant by the particular clause of his contract now under
consideration is negative in character. Unless defendant voluntarily complies with his
undertaking there is no way by which the contract can be enforced except by the injunctive
power of judicial process. Such negative obligations have long been enforced by the courts
in this manner. As stated by High in his well-known work on Injunctions (vol. 2, pp. 877-878):

The remedy by injunction to prevent the violation of negative agreements, or contracts not
to do a particular thing, is closely akin to the remedy by way of specific performance of
agreements of an affirmative nature. In both cases the object sought is substantially one
and the same, and by enjoining the violation of a negative agreement the court of equity in
effect decrees its specific performance. (Lumley vs. Wagner, 1 DeGex, M. & G., 604.)

Where by the terms of a contract imposing a positive obligation the obligor is entitled to a
specific performance, it will not avail the defendant to show that plaintiff will suffer no
pecuniary damage if the contract is not performed. Upon like reasons, when the
undertaking is negative in character and defendant is violating the obligation imposed upon
him the court may interfere without requiring proof of actual damage. (High on Injunctions,
par. 1135, citing Dickenson vs. Grand Junction Canal Co., 15 Beav., 270.)

The admitted fact that plaintiff has failed to establish proof of pecuniary damage by reason
of the breach of the contract by defendant by the acts committed prior to the issuance of
the preliminary injunction is, of course, a bar or nay money judgment for damages for the
breach of the contract, but will not justify us in permitting defendant to continue to break
his contract over plaintiff's objection. The injury is a continuous one. The fact that the court
may not be able to give damages for that part of the breach of the contract which had
already taken place when its aid was invoked is no reason why it should countenance a
continuance of such disregard of plaintiff's rights.

With respect to the contention that an injunction may only be granted to prevent
irreparable injury, the answer is that any continuing breach of a valid negative covenant is
irreparable by the ordinary process of courts of law. As stated by High, (vol. 2, p. 906)
injunctive relief is granted in cases like this "upon the ground that the parties cannot be
placed in statu quo, and that damages at law can afford no adequate compensation, the
injury being a continuous one irreparable by the ordinary process of courts of law."

In the case of Gilchrist vs. Cuddy (29 Phil. rep., 542), at page 552, this court said, citing with
approval the case of Wahle vs. Reinbach (76 Ill., 322):

By "irreparable injury" is not meant such injury as is beyond the possibility of repair, or
beyond possible compensation in damages, nor necessarily great injury or great damage,
but that species of injury, whether great or small, that ought not be submitted to on the one
hand or inflicted on the other; and, because it is so large on the one hand, or so small on the
other, is of such constant and frequent recurrence that no fair or reasonable redress can be
had therefor in a court of law.
This definition was quoted with approval by the Supreme Court of the United States in the
case of Donovan vs. Pennsylvania Co., (199 U.S., 279), in which the injury complained of was
continuous in its nature.

It is true, as held in the case of Liongson vs. Martinez (36 Phil. Rep., 948) that "an injunction
should never issue when an action for damages would adequately compensate the injuries
caused" But it frequently happens that the acts of the defendant, while constituting a very
substantial invasion of plaintiff's rights are of such a character that the damages which
result therefrom "cannot be measured by any certain pecuniary standard." (Eau Claire
Water Co. vs. City of Eau Claire, 127 Wis., 154.) The Civil Code (art. 1908) casts upon real
estate owners liability in damages for the emission, upon their premises, of excessive
smoke, which may be noxious to person or property. The injury caused by such a nuisance
might bring about a depreciation in the value of adjoining properties, but there is no
"certain pecuniary standard" by which such damages can be measured, and in that sense
the threatened injury is "irreparable" and may appropriately be restrained by injunction.

. . . If the nuisance is a continuing one, invading substantial rights of the complainant in such
a manner that he would thereby lose such rights entirely but for the assistance of a court of
equity he will entitled but for the assistance of a court of equity he will be entitled to an
injunction upon a proper showing, notwithstanding the fact the he might recover some
damages in an action at law. (Tise vs. Whitaker-Harvey Co., 144 N. C., 507.)

The injury done the business of a merchant by illegal or unfair competition is exceedingly
difficult to measure. A diminution of the volume of a business may be due to so many
different causes that it is often impossible to demonstrate that it has in fact been caused by
the illegal competition of the defendant. This is frequently the case in suit for the
infringement of trademark rights, in which the courts may enjoin the continued use of the
infringing mark, although unable to assess damages for the past injury.

The judgment of the trial court is affirmed with costs. So ordered.

4.)

FIRST DIVISION
[G.R. No. 142971. May 7, 2002]

THE CITY OF CEBU, petitioner, vs. SPOUSES APOLONIO and BLASA DEDAMO, respondents.
DECISION
DAVIDE, JR., C.J.:
In its petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
petitioner City of Cebu assails the decision of 11 October 1999 of the Court of Appeals in CA-
G.R. CV No. 59204[1] affirming the judgment of 7 May 1996 of the Regional Trial Court,
Branch 13, Cebu City, in Civil Case No. CEB-14632, a case for eminent domain, which fixed
the valuation of the land subject thereof on the basis of the recommendation of the
commissioners appointed by it.

The material operative facts are not disputed.

On 17 September 1993, petitioner City of Cebu filed in Civil Case No. CEB-14632 a complaint
for eminent domain against respondents spouses Apolonio and Blasa Dedamo. The
petitioner alleged therein that it needed the following parcels of land of respondents, to wit:

Lot No. 1527

Area----------------------------1,146 square meters

Tax Declaration---------------03472
Title No.-----------------------31833
Market value------------------P240,660.00
Assessed Value---------------P72,200.00

Lot No. 1528

Area--------------------------------------------------------793 square meters

Area sought to be-----------------------------------------478 square meters expropriated
Tax Declaration-------------------------------------------03450
Title No. ---------------------------------------------------31832
Market value for the whole lot--------------------------P1,666,530.00
Market value of the Area to be expropriated----------P100,380.00
Assessed Value--------------------------------------------P49,960.00

for a public purpose, i.e., for the construction of a public road which shall serve as an
access/relief road of Gorordo Avenue to extend to the General Maxilum Avenue and the
back of Magellan International Hotel Roads in Cebu City. The lots are the most suitable site
for the purpose. The total area sought to be expropriated is 1,624 square meters with an
assessed value of P1,786,400. Petitioner deposited with the Philippine National Bank the
amount of P51,156 representing 15% of the fair market value of the property to enable the
petitioner to take immediate possession of the property pursuant to Section 19 of R.A. No.
7160.[2]
Respondents, filed a motion to dismiss the complaint because the purpose for which their
property was to be expropriated was not for a public purpose but for benefit of a single
private entity, the Cebu Holdings, Inc. Petitioner could simply buy directly from them the
property at its fair market value if it wanted to, just like what it did with the neighboring
lots. Besides, the price offered was very low in light of the consideration of P20,000 per
square meter, more or less, which petitioner paid to the neighboring lots. Finally,
respondents alleged that they have no other land in Cebu City.

A pre-trial was thereafter had.

On 23 August 1994, petitioner filed a motion for the issuance of a writ of possession
pursuant to Section 19 of R.A. No. 7160. The motion was granted by the trial court on 21
September 1994.[3]

On 14 December 1994, the parties executed and submitted to the trial court an
Agreement[4] wherein they declared that they have partially settled the case and in
consideration thereof they agreed:

1. That the SECOND PARTY hereby conforms to the intention to [sic] the FIRST PARTY in
expropriating their parcels of land in the above-cited case as for public purpose and for the
benefit of the general public;

2. That the SECOND PARTY agrees to part with the ownership of the subject parcels of land
in favor of the FIRST PARTY provided the latter will pay just compensation for the same in
the amount determined by the court after due notice and hearing;

3. That in the meantime the SECOND PARTY agrees to receive the amount of ONE MILLION
SEVEN HUNDRED EIGHTY SIX THOUSAND FOUR HUNDRED PESOS (1,786,400.00) as
provisional payment for the subject parcels of land, without prejudice to the final valuation
as maybe determined by the court;

4. That the FIRST PARTY in the light of the issuance of the Writ of Possession Order dated
September 21, 1994 issued by the Honorable Court, agreed to take possession over that
portion of the lot sought to be expropriated where the house of the SECOND PARTY was
located only after fifteen (15) days upon the receipt of the SECOND PARTY of the amount of
P1,786,400.00;

5. That the SECOND PARTY upon receipt of the aforesaid provisional amount, shall turn over
to the FIRST PARTY the title of the lot and within the lapse of the fifteen (15) days grace
period will voluntarily demolish their house and the other structure that may be located
thereon at their own expense;
6. That the FIRST PARTY and the SECOND PARTY jointly petition the Honorable Court to
render judgment in said Civil Case No. CEB-14632 in accordance with this AGREEMENT;

7. That the judgment sought to be rendered under this agreement shall be followed by a
supplemental judgment fixing the just compensation for the property of the SECOND PARTY
after the Commissioners appointed by this Honorable Court to determine the same shall
have rendered their report and approved by the court.

Pursuant to said agreement, the trial court appointed three commissioners to determine
the just compensation of the lots sought to be expropriated. The commissioners were
Palermo M. Lugo, who was nominated by petitioner and who was designated as Chairman;
Alfredo Cisneros, who was nominated by respondents; and Herbert E. Buot, who was
designated by the trial court. The parties agreed to their appointment.

Thereafter, the commissioners submitted their report, which contained their respective
assessments of and recommendation as to the valuation of the property.

On the basis of the commissioners report and after due deliberation thereon, the trial court
rendered its decision on 7 May 1996,[5] the decretal portion of which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in accordance with the
report of the commissioners.

Plaintiff is directed to pay Spouses Apolonio S. Dedamo and Blasa Dedamo the sum of pesos:
TWENTY FOUR MILLION EIGHT HUNDRED SIXTY-FIVE THOUSAND AND NINE HUNDRED
THIRTY (P24,865.930.00) representing the compensation mentioned in the Complaint.

Plaintiff and defendants are directed to pay the following commissioners fee;

1. To Palermo Lugo - P21,000.00

2. To Herbert Buot - P19,000.00
3. To Alfredo Cisneros - P19,000.00

Without pronouncement as to cost.

SO ORDERED.

Petitioner filed a motion for reconsideration on the ground that the commissioners report
was inaccurate since it included an area which was not subject to expropriation. More
specifically, it contended that Lot No. 1528 contains 793 square meters but the actual area
to be expropriated is only 478 square meters. The remaining 315 square meters is the
subject of a separate expropriation proceeding in Civil Case No. CEB-8348, then pending
before Branch 9 of the Regional Trial Court of Cebu City.

On 16 August 1996, the commissioners submitted an amended assessment for the 478
square meters of Lot No. 1528 and fixed it at P12,824.10 per square meter, or in the amount
of P20,826,339.50. The assessment was approved as the just compensation thereof by the
trial court in its Order of 27 December 1996.[6] Accordingly, the dispositive portion of the
decision was amended to reflect the new valuation.

Petitioner elevated the case to the Court of Appeals, which docketed the case as CA-G.R. CV
No. 59204. Petitioner alleged that the lower court erred in fixing the amount of just
compensation at P20,826,339.50. The just compensation should be based on the prevailing
market price of the property at the commencement of the expropriation proceedings.

The petitioner did not convince the Court of Appeals. In its decision of 11 October 1999,[7]
the Court of Appeals affirmed in toto the decision of the trial court.

Still unsatisfied, petitioner filed with us the petition for review in the case at bar. It raises
the sole issue of whether just compensation should be determined as of the date of the
filing of the complaint. It asserts that it should be, which in this case should be 17
September 1993 and not at the time the property was actually taken in 1994, pursuant to
the decision in National Power Corporation vs. Court of Appeals.[8]

In their Comment, respondents maintain that the Court of Appeals did not err in affirming
the decision of the trial court because (1) the trial court decided the case on the basis of the
agreement of the parties that just compensation shall be fixed by commissioners appointed
by the court; (2) petitioner did not interpose any serious objection to the commissioners
report of 12 August 1996 fixing the just compensation of the 1,624-square meter lot at
P20,826,339.50; hence, it was estopped from attacking the report on which the decision
was based; and (3) the determined just compensation fixed is even lower than the actual
value of the property at the time of the actual taking in 1994.

Eminent domain is a fundamental State power that is inseparable from sovereignty. It is the
Governments right to appropriate, in the nature of a compulsory sale to the State, private
property for public use or purpose.[9] However, the Government must pay the owner
thereof just compensation as consideration therefor.

In the case at bar, the applicable law as to the point of reckoning for the determination of
just compensation is Section 19 of R.A. No. 7160, which expressly provides that just
compensation shall be determined as of the time of actual taking. The Section reads as
follows:

SECTION 19. Eminent Domain. -- A local government unit may, through its chief executive
and acting pursuant to an ordinance, exercise the power of eminent domain for public use,
or purpose or welfare for the benefit of the poor and the landless, upon payment of just
compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided,
however, That the power of eminent domain may not be exercised unless a valid and
definite offer has been previously made to the owner, and such offer was not accepted:
Provided, further, That the local government unit may immediately take possession of the
property upon the filing of the expropriation proceedings and upon making a deposit with
the proper court of at least fifteen percent (15%) of the fair market value of the property
based on the current tax declaration of the property to be expropriated: Provided finally,
That, the amount to be paid for the expropriated property shall be determined by the
proper court, based on the fair market value at the time of the taking of the property.

The petitioner has misread our ruling in The National Power Corp. vs. Court of Appeals.[10]
We did not categorically rule in that case that just compensation should be determined as of
the filing of the complaint. We explicitly stated therein that although the general rule in
determining just compensation in eminent domain is the value of the property as of the
date of the filing of the complaint, the rule admits of an exception: where this Court fixed
the value of the property as of the date it was taken and not at the date of the
commencement of the expropriation proceedings.

Also, the trial court followed the then governing procedural law on the matter, which was
Section 5 of Rule 67 of the Rules of Court, which provided as follows:

SEC. 5. Ascertainment of compensation. -- Upon the entry of the order of condemnation,

the court shall appoint not more than three (3) competent and disinterested persons as
commissioners to ascertain and report to the court the just compensation for the property
sought to be taken. The order of appointment shall designate the time and place of the first
session of the hearing to be held by the commissioners and specify the time within which
their report is to be filed with the court.

More than anything else, the parties, by a solemn document freely and voluntarily agreed
upon by them, agreed to be bound by the report of the commission and approved by the
trial court. The agreement is a contract between the parties. It has the force of law between
them and should be complied with in good faith. Article 1159 and 1315 of the Civil Code
explicitly provides:
Art. 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage
and law.

Furthermore, during the hearing on 22 November 1996, petitioner did not interpose a
serious objection.[11] It is therefore too late for petitioner to question the valuation now
without violating the principle of equitable estoppel. Estoppel in pais arises when one, by his
acts, representations or admissions, or by his own silence when he ought to speak out,
intentionally or through culpable negligence, induces another to believe certain facts to
exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if
the former is permitted to deny the existence of such facts.[12] Records show that
petitioner consented to conform with the valuation recommended by the commissioners. It
cannot detract from its agreement now and assail correctness of the commissioners
assessment.

Finally, while Section 4, Rule 67 of the Rules of Court provides that just compensation shall
be determined at the time of the filing of the complaint for expropriation,[13]such law
cannot prevail over R.A. 7160, which is a substantive law.[14]

WHEREFORE, finding no reversible error in the assailed judgment of the Court of Appeals in
CA-G.R. CV No. 59204, the petition in this case is hereby DENIED.

No pronouncement as to costs.

SO ORDERED.

5.)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 187930 February 23, 2015

NEW WORLD DEVELOPERS AND MANAGEMENT, INC., Petitioner,

 vs.
AMA COMPUTER LEARNING CENTER, INC., Respondent.

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

G.R. No. 188250

AMA COMPUTER LEARNING CENTER, INC., Petitioner.

vs.
NEW WORLD DEVELOPERS AND MANAGEMENT, INC., Respondent,

DECISION

SERENO, CJ:

Before us are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of
Court assailing the Court of Appeals (CA) Decision1 dated 22 January 2009 and Resolution2
dated 18 May 2009 in CA-G.R. CV No. 89483.

The CA Decision ordered AMA Computer Learning Center, Inc. (AMA) to pay New World
Developers and Management, Inc. (New World) unpaid rentals for 2 months, as well
asliquidated damages equivalent to 4 months’ rent. The CA Resolution denied the separate
motions for reconsideration filed by the parties.

FACTS

New World is the owner of a commercial building located at No. 1104-1118 España corner
Paredes Streets, Sampaloc, Manila.3 In 1998, AMA agreed to lease the entire second floor of
the building for its computer learning center, and the parties entered into a Contract of
Lease4 covering the eight-year period from 15 June 1998 to 14 March 2006.

The monthly rental for the first year was set at P181,500, with an annual escalation rate
equivalent to 15% for the succeeding years.5 It was also provided that AMA may
preterminate the contract by sending notice in writing to New World at least six months
before the intended date.6 In case of pretermination, AMA shall be liable for liquidated
damages in an amount equivalent to six months of the prevailing rent.

In compliance with the contract, AMA paid New World the amount of P450,000 as advance
rental and another P450,000 as security deposit.7
For the first three years, AMA paid the monthly rent as stipulated in the contract, with the
required adjustment in accordance with the escalation rate for the second and the third
years.8

In a letter dated 18 March 2002, AMA requested the deferment of the annual increase in
the monthly rent by citing financial constraints brought about by a decrease in its
enrollment. New World agreed to reduce the escalation rate by 50% for the next six
months. The following year, AMA again requested the adjustment of the monthly rent and
New World obliged by granting a 45% reduction of the monthly rent and a 5% reduction of
the escalation rate for the remaining term of the lease. For this purpose, the parties entered
into an Addendum to the Contract of Lease.9

On the evening of 6 July 2004, AMA removed all its office equipment and furniture from the
leased premises. The following day, New World received a letter from AMA dated 6 July
200410 stating that the former had decided to preterminate the contract effective
immediately on the ground of business losses due to a drastic decline in enrollment. AMA
also demanded the refund of its advance rental and security deposit.

New World replied in a letter dated 12 July 2004,11 to which was attached a Statement of
Account12 indicating the following amounts to be paid by AMA: 1) unpaid two months’ rent
in the amount of P466,620; 2) 3% monthly interest for the unpaid rent in the amount of
P67,426.59; 3) liquidated damages equivalent to six months of the prevailing rent in the
amount of P1,399,860; and 4) damage to the leased premises amounting to P15,580. The
deduction of the advance rental and security deposit paid by AMA still left an unpaid
balance in the amount of P1,049,486.59.

Despite the meetings between the parties, they failed to arrive at a settlement regarding
the payment of the foregoing amounts.13

On 27 October 2004, New World filed a complaint for a sum of money and damages against
AMA before the Regional Trial Court of Marikina City, Branch 156 (RTC).14

RULING OF THE RTC

In a Decision15 dated 31 January 2007, the RTC ordered AMA to pay New World P466,620
as unpaid rentals plus 3% monthly penalty interest until payment; P1,399,860 as liquidated
damages equivalent to six months’ rent, with the advance rental and security deposit paid
by AMA to be deducted therefrom; P15,580 for the damage to the leased premises;
P100,000 as attorney’s fees; and costs of the suit.
According to the RTC, AMA never denied that it had arrearages equivalent to two months’
rent. Other than its allegation that it did not participate in the preparation of the Statement
of Account, AMA did not proffer any evidence disputing the unpaid rent. For its part, New
World clearly explained the existence of the arrears.

While sympathizing with AMA in view of its business losses, the RTC ruled that AMA could
not shirk from its contractual obligations, which provided that it had to pay liquidated
damages equivalent to six months’ rent in case of a pretermination of the lease.

The RTC provided no bases for awarding P15,580 for the damage to the leased premises and
P100,000 for attorney’s fees, while denying the prayer for exemplary and moral damages.

Upon the denial of its motion for reconsideration, AMA filed an appeal before the CA.16

RULING OF THE CA

In the assailed Decision dated 22 January 2009, the CA ordered AMA to pay New World
P466,620 for unpaid rentals and P933,240 for liquidated damages equivalent to four
months’ rent, with the advance rental and security deposit paid by AMA to be deducted
therefrom.17

The appellate court ruled that the RTC erred in imposing a 3% monthly penalty interest on
the unpaid rent, because there was no stipulation either in the Contract of Lease or in the
Addendum to the Contract of Lease concerning the imposition of interest in the event of a
delay in the payment of the rent.18 Thus, the CA ruled that the rent in arrears should earn
interest at the rate of 6% per annum only, reckoned from the date of the extrajudicial
demand on 12 July 2004 until the finality of the Decision. Thereafter, interest at the rate
of12% per annum shall be imposed until full payment.

The CA also ruled that the RTC’s imposition of liquidated damages equivalent to six months’
rent was iniquitous.19 While conceding that AMA was liable for liquidated damages for
preterminating the lease, the CA also recognized that stipulated penalties may be equitably
reduced by the courts based on its sound discretion. Considering that the unexpired portion
of the term of lease was already less than two years, and that AMA had suffered business
losses rendering it incapable of paying for its expenses, the CA deemed that liquidated
damages equivalent to four months’ rent was reasonable.20

The appellate court deleted the award for the damage to the leased premises, because no
proof other than the Statement of Account was presented by New World.21 Furthermore,
noting that the latter was already entitled to liquidated damages, and that the trial court did
not give any justification for attorney’s fees, the CA disallowed the award thereof.22
Both parties filed their respective motions for reconsideration, which were denied in the
assailed Resolution dated 10 May 2009.

Hence, the present petitions for review on certiorari. On 3 August 2009, the Court resolved
to consolidate the petitions, considering that they involve the same parties and assail the
same CA Decision and Resolution.23

PARTIES’ POSITIONS

According to New World, when parties freely stipulate on the manner by which one may
preterminate the lease, that stipulation has the force of law between them and should be
complied with in good faith.24 Since AMA preterminated the lease, it became liable to
liquidated damages equivalent to six months’ rent. Furthermore, its failure to give notice to
New World six months prior to the intended pretermination of the contract and its leaving
the leased premises in the middle of the night, with all its office equipment and furniture,
smacked of gross bad faith that renders it undeserving of sympathy from the courts.25 Thus,
the CA erred in reducing the liquidated damages from an amount equivalent to six months’
rent to only four months.

New World also challenges the CA Decision and Resolution for disallowing the imposition of
the 3% monthly interest on the unpaid rentals. It is argued that AMA never disputed the
imposition of the 3% monthly interest; rather, it only requested that the interest rate be
reduced.26

On the other hand, AMA assails the CA ruling for not recognizing the fact that compensation
took place between the unpaid rentals and the advance rental paid by AMA.27 Considering
that the obligation of AMA as to the arrears has been extinguished by operation of law,
there would be no occasion for the imposition of interest.28

AMA also prays for the further reduction of the liquidated damages to an amount
equivalent to one month’s rent up to one and a half months, arguing that four months’
worth of rent is still iniquitous on account of the severe financial losses it suffered.29

ISSUES

1. Whether AMA is liable to pay six months’ worth of rent as liquidated damages.

2. Whether AMA remained liable for the rental arrears.

OUR RULING
I.

AMA is liable for six months’ worth of rent as liquidated damages.

Item No. 14 of the Contract of Lease states:

That [AMA] may pre-terminate this Contract of Lease by notice in writing to [New World] at
least six (6) months before the intended date of pretermination, provided, however, that in
such case, [AMA] shall be liable to [New World] for an amount equivalent to six (6) months
current rental as liquidated damages;30

Quite notable is the fact that AMA never denied its liability for the payment of liquidated
damages in view of its pretermination of the lease contract with New World. What it claims,
however, is that it is entitled to the reduction of the amount due to the serious business
losses it suffered as a result of a drastic decrease in its enrollment.

This Court is, first and foremost, one of law. While we are also a court of equity, we do not
employ equitable principles when well-established doctrines and positive provisions of the
law clearly apply.31

The law does not relieve a party from the consequences of a contract it entered into with all
the required formalities.32 Courts have no power to ease the burden of obligations
voluntarily assumed by parties, just because things did not turn out as expected at the
inception of the contract.33 It must also be emphasized that AMA is an entity that has had
significant business experience, and is not a mere babe in the woods.

Articles 1159 and 1306 of the Civil Code state:

Art. 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.

xxxx

Art. 1306. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.

The fundamental rule is that a contract is the law between the parties. Unless it has been
shown that its provisions are wholly or in part contrary to law, morals, good customs, public
order, or public policy, the contract will be strictly enforced by the courts.34
In rebuttal, AMA invokes Article 2227 of the Civil Code, to wit:

Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be

equitably reduced if they are iniquitous or unconscionable.

In Ligutan v. CA, we held that the resolution of the question of whether a penalty is
reasonable, or iniquitous or unconscionable would depend on factors including but not
limited to the type, extent and purpose of the penalty; the nature of the obligation; the
mode of the breach and its consequences; the supervening realities; and the standing and
relationship of the parties.35 The appreciation of these factors is essentially addressed to
the sound discretion of the court.36

It is quite easy to understand the reason why a lessor would impose liquidated damages in
the event of the pretermination of a lease contract. Pretermination is effectively the breach
of a contract, that was originally intended to cover an agreed upon period of time. A definite
period assures the lessor a steady income for the duration. A pretermination would
suddenly cut short what would otherwise have been a longer profitable relationship. Along
the way, the lessor is bound to incur losses until it is able to find a new lessee, and it is this
loss of income that is sought to be compensated by the payment of liquidated damages.

There might have been other ways to work around its difficult financial situation and lessen
the impact of the pretermination to both parties. However, AMA opted to do the following:

1. It preterminated the lease without notifying New World at least six months before the
intended date.

2. It removed all its office equipment and left the premises in the middle of the night.

3. Only after it had cleared the premises did it send New World a notice of pretermination
effective immediately.

4. It had the gall to demand a full refund of the advance rental and security deposit, albeit
without prejudice to their removal of the improvements introduced in the premises.

We cannot understand the inability of AMA to be forthright with New World, considering
that the former had been transparent about its business losses in its previous requests for
the reduction of the monthly rental. The drastic decrease in AMA’s enrollment had been
unfolding since 2002. Thus, it cannot be said that the business losses had taken it by
surprise. It is also highly unlikely that the decision to preterminate the lease contract was
made at the last minute. The cancellation of classes, the transfer of students, and
administrative preparations for the closure of the computer learning center and the removal
of office equipment therefrom should take at least weeks, if not months, of logistic
planning. Had AMA come clean about the impending pretermination, measures beneficial to
both parties could have been arrived at, and the instant cases would not have reached this
Court. Instead, AMA forced New World to share in the former’s losses, causing the latter to
scramble for new lessees while the premises remained untenanted and unproductive.

In the sphere of personal and contractual relations governed by laws, rules and regulations
created to promote justice and fairness, equity is deserved, not demanded. The application
of equity necessitates a balancing of the equities involved in a case,37 for "[h]e who seeks
equity must do equity, and he who comes into equity must come with clean hands."38
Persons in dire straits are never justified in trampling on other persons’ rights. Litigants shall
be denied relief if their conduct has been inequitable, unfair and dishonest as to the
controversy in issue.39 The actions of AMA smack of bad faith.

We cannot abide by the prayer for the further reduction of the liquidated damages. We find
that, in view of the surrounding circumstances, the CA even erred in reducing the liquidated
damages to four month’s worth of rent. Under the terms of the contract, and in light of the
failure of AMA to show that it is deserving of this Court’s indulgence, the payment of
liquidated damages in an amount equivalent to six months’ rent is proper.

Also proper is an award of exemplary damages. Article 2234 of the Civil Code provides:

Art. 2234. While the amount of the exemplary damages need not be proved, the plaintiff
must show that he is entitled to moral, temperate or compensatory damages before the
court may consider the question of whether or not exemplary damages should be awarded.
In case liquidated damages have been agreed upon, although no proof of loss is necessary in
order that such liquidated damages may be recovered, nevertheless, before the court may
consider the question of granting exemplary in addition to the liquidated damages, the
plaintiff must show that he would be entitled to moral, temperate or compensatory
damages were it not for the stipulation for liquidated damages. (Emphasis supplied)

In this case, it is quite clear that New World sustained losses as a result of the unwarranted
acts of AMA. Further, were it not for the stipulation in the contract regarding the payment
of liquidated damages, we would be awarding compensatory damages to New World.

"Exemplary damages are designed by our civil law to permit the courts to reshape behaviour
that is socially deleterious in its consequence by creating negative incentives or deterrents
against such behaviour."40 As such, they may be awarded even when not pleaded or prayed
for.41 In order to prevent the commission of a similar act in the future, AMA shall pay New
World exemplary damages in the amount of P100,000.
II.

AMA’s liability for the rental arrears has already been extinguished.

AMA assails the CA ruling mainly for the imposition of legal interest on the rent in arrears.
AMA argues that the advance rental has extinguished its obligation as to the arrears. Thus, it
says, there is no more basis for the imposition of interest at the rate of 6% per annum from
the date of extrajudicial demand on 12 July 2004 until the finality of the Decision, plus
interest at the rate of 12% per annum from finality until full payment.

At this juncture, it is necessary to look into the contract to determine the purpose of the
advance rental and security deposit.

Item Nos. 2, 3 and 4 of the Contract of Lease provide:

xxxx

2. That [AMA] shall pay to [New World] in advance within the first 5 days of each calendar
month a monthly rental in accordance with the following schedule for the entire term of this
Contract of Lease;

PERIOD MONTHLY RENTAL RATES

Year 1 June 15, 1998 – Mar 14, 1999 181,500.00
Year 2 Mar 15, 1999 – Mar 14, 2000 P208,725.00
Year 3 Mar 15, 2000 – Mar 14, 2001 P240,033.75
Year 4 Mar 15, 2001 – Mar 14, 2002 P276,038.81
Year 5 Mar 15, 2002 – Mar 14, 2003 P317,444.63
Year 6 Mar 15, 2003 – Mar 14, 2004 P365,061.33
Year 7 Mar 15, 2004 – Mar 14, 2005 P419,820.53
Year 8 Mar 15, 2005 – Mar 14, 2006 P482,793.61
(P482,793.61 – 37,500 =
P445,293.61)
The monthly rentals referred to above were computed at an escalation rate of Fifteen
Percent (15%) every year for the entire duration of this lease contract.

3. Upon signing of this Contract, [AMA] shall pay advance rental in the amount of FOUR
HUNDRED FIFTY THOUSAND PESOS (P450,000.00); Said advance rental shall be applied as
part of the rental for the last year of the Contract with a remaining balance of Four Hundred
Forty Five Thousand Two Hundred Ninety Three and 61/100 Pesos (P445,293.61) as monthly
rental for the tenth [sic] and last year of the lease term;
4. Upon signing of the Contract, [AMA] shall pay [New World] a Security Deposit in the
amount of FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00) which shall be applied
for any unpaid rental balance and damages on the leased premises, and the balance of
which shall be refunded by [New World] to [AMA] within sixty (60) days after the
termination of the Contract, it being understood that such balance is being held by [New
World] in trust for [AMA].42

Based on Item No. 4, the security deposit was paid precisely to answer for unpaid rentals
that may be incurred by AMA while the contract was in force. The security deposit was held
in trust by New World, and whatever may have been left of it after the termination of the
lease shall be refunded to AMA.

Based on Item No. 3 in relation to Item No. 2, the parties divided the advance rental of
P450,000 by 12 months. They came up with P37,500, which they intended to deduct from
the monthly rental to be paid by AMA for the last year of the lease term. Thus, unlike the
security deposit, no part of the advance rental was ever meant to be refunded to AMA.
Instead, the parties intended to apply the advance rental, on a staggered basis, to a portion
of the monthly rental in the last year of the lease term.

Considering the pretermination of the lease contract in the present case, this intent of the
parties as regards the advance rental failed to take effect. The advance rental, however,
retains its purpose of answering for the outstanding amounts that AMA may owe New
World.

We now delve into the actual application of the security deposit and the advance rental.

At the time of the pretermination of the contract of lease, the monthly rent stood at
P233,310, inclusive of taxes;43 hence, the two-month rental arrears in the amount of
P466,620.

Applying the security deposit of P450,000 to the arrears will leave a balance of P16,620 in
New World’s favor.1âwphi1 Given that we have found AMA liable for liquidated damages
equivalent to six months’ rent in the amount of P1,399,860 (monthly rent of P233,310
multiplied by 6 months), its total liability to New World is P1,416,480.

We then apply the advance rental of P450,000 to this amount to arrive at a total
extinguishment of the liability for the unpaid rentals and a partial extinguishment of the
liability for liquidated damages. This shall leave AMA still liable to New World in the amount
of P966,480 (P1,416,480 total liability less P450,000 advance rental).
Not constituting a forbearance of money,44 this amount shall earn interest pursuant to Item
II(2)45 of our pronouncement in Eastern Shipping Lines v. CA.46 This item remained
unchanged by the modification made in Nacar v. Gallery Frames.47 Interest at the rate of
6% per annum is hereby imposed on the amount of 966,480 from the time of extrajudicial
demand on 12 July 2004 until the finality of this Decision.

Thereafter – this time pursuant to the modification in Nacar– the amount due shall earn
interest at the rate of 6% per annum until satisfaction, this interim period being deemed to
be by then equivalent to a forbearance of credit.48

Considering the foregoing, there was no occasion for the unpaid two months’ rental to earn
interest. Besides, we cannot sanction the imposition of 3% monthly penalty interest
thereon. We quote with approval the ruling of the CA on this issue:

If the obligation consists in the payment of a sum of money, and the debtor incurs in delay,
the indemnity for damages, there being no stipulation to the contrary, shall be the payment
of the interest agreed upon and in the absence of stipulation, the legal interest, which is six
per cent per annum.

In the instant case, the Contract of Lease and the Addendum to the Contract of Lease do not
specify any interest in the event of delay of payment of rentals. Accordingly, there being no
stipulation concerning interest, the trial court erred in imposing 3% interest per month on
the two-month unpaid rentals.

[New World] argues that the said3% interest per month on the unpaid rentals was agreed
upon by the parties as allegedly shown in Exhibits "A-4", "A-5", "A-6", "B-4", and "B-5".

We are not persuaded.

[New World’s] letter dated 12 July 2004 to [AMA], Statement of Account dated 07 July 2004;
and another Statement of Account dated 27 October 2004 were all prepared by [New
World], with no participation or any indication of agreement on [AMA’s] part. The alleged
proposal of [AMA] as contained in the Schedule of Receivable/Payable is just a computer
print-out and does not contain any signature showing [AMA’s] conformity to the same.49

Having relied on the Contract of Lease for its demand for payment of liquidated damages,
New World should have also referred to the contract to determine the proper application of
the advance rental and security deposit. Had it done so in the first instance, it would have
known that there is no occasion for the imposition of interest, 3% or otherwise, on the
unpaid rentals. WHEREFORE, the Court of Appeals Decision dated 22 January 2009 and
Resolution dated 10 May 2009 in CA-G.R. CV No. 89483 is AFFIRMED with MODIFICATION.
AMA Computer Learning Center, Inc. is ordered to pay New World Developers and
Management, Inc. the amount of P966,480, with interest at the rate of 6% per annum from
12 July 2004 until full payment.

In addition, AMA shall pay New World exemplary damages in the amount of P100,000,
which shall earn interest at the rate of 6% per annum from the finality of this Decision until
full payment.

SO ORDERED.

6.)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. NO. 192105 December 9, 2013

ANTONIO LOCSIN, II, Petitioner,

vs.
MEKENI FOOD CORPORATION, Respondent.

DECISION

DEL CASTILLO, J.:

In the absence of specific terms and conditions governing a car plan agreement between the
employer and employe former may not retain the installment payments made by the latter
on the car plan and treat them as rents for the use of the service vehicle, in the event that
the employee ceases his employment and is unable to complete the installment payments
on the vehicle. The underlying reason is that the service vehicle was precisely used in the
former' s business; any personal benefit obtained by the employee from its use is merely
incidental. This Petition for Review on Certiorari1 assails the January 27, 2010 Decision2 of
the Court of Appeals (CA) in CA-G.R. SP No. 109550, as well as its April 23, 2010 Resolution3
denying petitioner’s Motion for Partial Reconsideration.4

Factual Antecedents
In February 2004, respondent Mekeni Food Corporation(Mekeni)–a Philippine company
engaged in food manufacturing and meat processing –offered petitioner Antonio Locsin II
the position of Regional Sales Manager to over see Mekeni’s National Capital Region
Supermarket/Food Service and South Luzon operations. In addition to a compensation and
benefit package, Mekeni offered petitioner a car plan, under which one-half of the cost of
the vehicle is to be paid by the company and the other half to be deducted from petitioner’s
salary. Mekeni’s offer was contained in an Offer Sheet5 which was presented to petitioner.

Petitioner began his stint as Mekeni Regional Sales Manager on March 17, 2004. To be able
to effectively cover his appointed sales territory, Mekeni furnished petitioner with a used
Honda Civic car valued at P280,000.00, which used to be the service vehicle of petitioner’s
immediate supervisor. Petitioner paid for his 50% share through salary deductions of
P5,000.00 each month.

Subsequently, Locsin resigned effective February 25, 2006. By then, a total of P112,500.00
had been deducted from his monthly salary and applied as part of the employee’s share in
the car plan. Mekeni supposedly put in an equivalent amount as its share under the car
plan. In his resignation letter, petitioner made an offer to purchase his service vehicle by
paying the outstanding balance thereon. The parties negotiated, but could not agree on the
terms of the proposed purchase. Petitioner thus returned the vehicle to Mekeni on May 2,
2006.

Petitioner made personal and written follow-ups regarding his unpaid salaries, commissions,
benefits, and offer to purchase his service vehicle. Mekeni replied that the company car plan
benefit applied only to employees who have been with the company for five years; for this
reason, the balance that petitioner should pay on his service vehicle stood at P116,380.00 if
he opts to purchase the same.

On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S. Garcia, a
Complaint6for the recovery of monetary claims consisting of unpaid salaries, commissions,
sick/vacation leave benefits, and recovery of monthly salary deductions which were
earmarked for his cost-sharing in the car plan. The case was docketed in the National Labor
Relations Commission(NLRC), National Capital Region(NCR), Quezon City as NLRC NCR CASE
NO. 00-05-04139-07.

On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a Decision,7 decreeing as
follows: WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered
directing respondents to turn-over to complainant x x x the subject vehicle upon the said
complainant’s payment to them of the sum of P100,435.84.SO ORDERED.8 Ruling of the
National Labor Relations Commission On appeal,9 the Labor Arbiter’s Decision was reversed
in a February 27, 2009 Decision10 of the NLRC, thus: WHEREFORE, premises considered, the
appeal is hereby Granted. The assailed Decision dated October 30, 2007 is hereby REVERSED
and SET ASIDE and a new one entered ordering respondent-appellee Mekeni Food
Corporation to pay complainant-appellee the following:

1.Unpaid Salary in the amount of P12,511.45;

2.Unpaid sick leave/vacation leave pay in the amount of P14,789.15;

3.Unpaid commission in the amount of P9,780.00; and

4.Reimbursement of complainant’s payment under the car plan agreement in the amount of
P112,500.00; and

5.The equivalent share of the company as part of the complainant’s benefit under the car
plan 50/50 sharing amounting to P112,500.00.

Respondent-Appellee Mekeni Food Corporation is hereby authorized to deduct the sum of

P4,736.50 representing complainant-appellant’s cash advance from his total monetary
award.

All other claims are dismissed for lack of merit.

SO ORDERED.11 The NLRC held that petitioner’s amortization payments on his service
vehicle amounting to P112,500.00 should be reimbursed; if not, unjust enrichment would
result, as the vehicle remained in the possession and ownership of Mekeni.

On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a Decision,7 decreeing as
follows:

WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered directing
respondents to turn-over to complainant x x xthe subject vehicle upon the said
complainant’s payment to them of the sum of P100,435.84.

SO ORDERED.8

Ruling of the National Labor Relations Commission

On appeal,9 the Labor Arbiter’s Decision was reversedin a February 27, 2009 Decision10of
the NLRC, thus:
WHEREFORE, premises considered, the appeal is hereby Granted. The assailed Decision
dated October 30, 2007 is hereby REVERSED and SET ASIDE and a new one entered ordering
respondent-appellee Mekeni Food Corporation to pay complainant-appellee the following:

1.Unpaid Salary in the amount of P12,511.45;

2.Unpaid sick leave/vacation leave pay in the amount of P14,789.15;

3.Unpaid commission in the amount of P9,780.00; and

4.Reimbursement of complainant’s payment under the car plan agreement in the amount of
P112,500.00; and

5.The equivalent share of the company as part of the complainant’s benefit under the car
plan 50/50 sharing amounting to P112,500.00.

Respondent-Appellee Mekeni Food Corporation is hereby authorized to deduct the sum of

P4,736.50 representing complainant-appellant’s cash advance from his total monetary
award.

All other claims are dismissed for lack of merit.

SO ORDERED.11

The NLRC held that petitioner’s amortization payments on his service vehicle amounting to
P112,500.00 should be reimbursed; if not, unjust enrichment would result, as the vehicle
remained in the possession and ownership of Mekeni.

In addition, the employer’s share in the monthly car plan payments should likewise be
awarded to petitioner because it forms part of the latter’s benefits under the car plan. It
held further that Mekeni’s claim that the company car plan benefit applied only to
employees who have been with the company for five years has not been substantiated by
its evidence, in which case the car plan agreement should be construed in petitioner’s favor.
Mekeni moved to reconsider, but in an April 30, 2009 Resolution,12 the NLRC sustained its
original findings.

Ruling of the Court of Appeals

Mekeni filed a Petition for Certiorari13 with the CA assailing the NLRC’s February 27, 2009
Decision, saying that the NLRC committed grave abuse of discretion in holding it liable to
petitioner as it had no jurisdiction to resolve petitioner’s claims, which are civil in nature.
On January 27, 2010, the CA issued the assailed Decision, decreeing as follows:

WHEREFORE, the petition for certiorari is GRANTED. The Decision of the National Labor
Relations Commission dated 27 February 2009, in NLRC NCR Case No. 00-05-04139-07, and
its Resolution dated 30 April 2009 denying reconsideration thereof, are MODIFIED in that
the reimbursement of Locsin’s payment under the car plan in the amount of P112,500.00,
and the payment to him of Mekeni’s 50% share in the amount of P112,500.00 are DELETED.
The rest of the decision is AFFIRMED.

SO ORDERED.14

In arriving at the above conclusion, the CA held that the NLRC possessed jurisdiction over
petitioner’s claims, including the amounts he paid under the car plan, since his Complaint
against Mekeni is one for the payment of salaries and employee benefits. With regard to the
car plan arrangement, the CA applied the ruling in Elisco Tool Manufacturing Corporation v.
Court of Appeals,15 where it was held that –

First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle
in question under a car plan for executives of the Elizalde group of companies. Under a
typical car plan, the company advances the purchase price of a car to be paid back by the
employee through monthly deductions from his salary. The company retains ownership of
the motor vehicle until it shall have been fully paid for. However, retention of registration of
the car in the company’s name is only a form of a lien on the vehicle in the event that the
employee would abscond before he has fully paid for it. There are also stipulations in car
plan agreements to the effect that should the employment of the employee concerned be
terminated before all installments are fully paid, the vehicle will be taken by the employer
and all installments paid shall be considered rentals per agreement.16

In the absence of evidence as to the stipulations of the car plan arrangement between
Mekeni and petitioner, the CA treated petitioner’s monthly contributions in the total
amount of P112,500.00 as rentals for the use of his service vehicle for the duration of his
employment with Mekeni. The appellate court applied Articles 1484-1486 of the Civil
Code,17 and added that the installments paid by petitioner should not be returned to him
inasmuch as the amounts are not unconscionable. It made the following pronouncement:

Having used the car in question for the duration of his employment, it is but fair that all of
Locsin’s payments be considered as rentals therefor which may be forfeited by Mekeni.
Therefore, Mekeni has no obligation to return these payments to Locsin. Conversely,
Mekeni has no right to demand the payment of the balance of the purchase price from
Locsin since the latter has already surrendered possession of the vehicle.18
Moreover, the CA held that petitioner cannot recover Mekeni’s corresponding share in the
purchase price of the service vehicle, as this would constitute unjust enrichment on the part
of petitioner at Mekeni’s expense.

The CA affirmed the NLRC judgment in all other respects. Petitioner filed his Motion for
Partial Reconsideration,19 but the CA denied the same in its April 23, 2010 Resolution.

Thus, petitioner filed the instant Petition; Mekeni, on the other hand, took no further
action.

Issue

Petitioner raises the following solitary issue:

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED IN NOT CONSIDERING
THE CAR PLAN PRIVILEGE AS PART OF THE COMPENSATION PACKAGE OFFERED TO
PETITIONER AT THE INCEPTION OF HIS EMPLOYMENT AND INSTEAD LIKENED IT TO A CAR
LOAN ON INSTALLMENT, IN SPITE OF THE ABSENCE OF EVIDENCE ONRECORD.20

Petitioner’s Arguments

In his Petition and Reply,21 petitioner mainly argues that the CA erred in treating his
monthly contributions to the car plan, totaling P112,500.00, as rentals for the use of his
service vehicle during his employment; the car plan which he availed ofwasa benefit and it
formed part of the package of economic benefits granted to him when he was hired as
Regional Sales Manager. Petitioner submits that this is shown by the Offer Sheet which was
shown to him and which became the basis for his decision to accept the offer and work for
Mekeni.

Petitioner adds that the absence of documentary or other evidence showing the terms and
conditions of the Mekeni company car plan cannot justify a reliance on Mekeni’s self-serving
claimsthat the full terms thereof applied only to employees who have been with the
company for at least five years; in the absence of evidence, doubts should be resolved in his
favor pursuant to the policy of the law that affords protection to labor, as well asthe
principle that all doubts shouldbe construed to its benefit.

Finally, petitioner submits that the ruling in the Elisco Tool casecannot apply to his case
because the car plan subject of the said case involved a car loan, which his car plan benefit
was not; it was part of his compensation package, and the vehicle was an important
component of his work which required constant and uninterrupted mobility. Petitioner
claims that the car plan was in fact more beneficial to Mekeni than to him; besides, he did
not choose to avail of it, as it was simply imposed upon him. He concludes that it is only just
that his payments should be refunded and returned to him.

Petitioner thus prays for the reversal of the assailed CA Decision and Resolution, and that
the Court reinstate the NLRC’s February 27, 2009 Decision.

Respondent’s Arguments

In its Comment,22 Mekeni argues that the Petition does not raise questions of law, but
merely of fact, which thus requires the Court to review anew issues already passed upon by
the CA – an unauthorized exercise given that the Supreme Court is not a trier of facts, nor is
it its function to analyze or weigh the evidence of the parties all over again.23 It adds that
the issue regarding the car plan and the conclusions of the CA drawn from the evidence on
record are questions of fact.

Mekeni asserts further that the service vehicle was merely a loan which had to be paid
through the monthly salary deductions.If it is not allowed to recover on the loan, this would
constitute unjust enrichment on the part of petitioner.

Our Ruling

The Petition is partially granted.

To begin with, the Court notes that Mekeni did not file a similar petition questioning the CA
Decision; thus, it is deemed to have accepted what was decreed. The only issue that must
be resolved in this Petition, then, is whether petitioner is entitled to a refund of all the
amounts applied to the cost of the service vehicle under the car plan.

When the conclusions of the CA are grounded entirely on speculation, surmises and
conjectures, or when the inferences made by it are manifestly mistaken or absurd, its
findings are subject to review by this Court.24

From the evidence on record, it is seen that the Mekeni car plan offered to petitioner was
subject to no other term or condition than that Mekeni shall cover one-half of its value, and
petitioner shall in turn pay the other half through deductions from his monthly
salary.Mekeni has not shown, by documentary evidence or otherwise, that there are other
terms and conditions governing its car plan agreement with petitioner. There is no evidence
to suggest that if petitioner failed to completely cover one-half of the cost of the vehicle,
then all the deductions from his salary going to the cost of the vehicle will be treated as
rentals for his use thereof while working with Mekeni, and shall not be refunded. Indeed,
there is no such stipulation or arrangement between them. Thus, the CA’s reliance on Elisco
Tool is without basis, and its conclusions arrived at in the questioned decision are manifestly
mistaken. To repeat what was said in Elisco Tool –

First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle
in question under a car plan for executives of the Elizalde group of companies. Under a
typical car plan, the company advances the purchase price of a car to be paid back by the
employee through monthly deductions from his salary. The company retains ownership of
the motor vehicle until it shall have been fully paid for. However, retention of registration of
the car in the company’s name is only a form of a lien on the vehicle in the event that the
employee would abscond before he has fully paid for it. There are also stipulations in car
plan agreements to the effect that should the employment of the employee concerned be
terminated before all installments are fully paid, the vehicle will be taken by the employer
and all installments paid shall be considered rentals per agreement.25 (Emphasis supplied)

It was made clear in the above pronouncement that installments made on the car plan may
be treated as rentals only when there is an express stipulation in the car plan agreement to
such effect. It was therefore patent error for the appellate court to assume that, even in the
absence of express stipulation, petitioner’s payments on the car plan may be considered as
rentals which need not be returned.

Indeed, the Court cannot allow that payments made on the car plan should be forfeited by
Mekeni and treated simply as rentals for petitioner’s use of the company service vehicle.
Nor may they be retained by it as purported loan payments, as it would have this Court
believe. In the first place, there is precisely no stipulation to such effect in their agreement.
Secondly, it may not be said that the car plan arrangement between the parties was a
benefit that the petitioner enjoyed; on the contrary, it wasan absolute necessity in Mekeni’s
business operations, which benefit edit to the fullest extent: without the service vehicle,
petitioner would have been unable to rapidly cover the vast sales territory assigned to him,
and sales or marketing of Mekeni’s products could not have been booked or made fast
enough to move Mekeni’s inventory. Poor sales, inability to market Mekeni’s products, a
high rate of product spoil age resulting from stagnant inventory, and poor monitoring of the
sales territory are the necessary consequences of lack of mobility. Without a service vehicle,
petitioner would have been placed at the mercy of inefficient and unreliable public
transportation; his official schedule would have been dependent on the arrival and
departure times of buses or jeeps, not to mention the availability of seats in them. Clearly,
without a service vehicle, Mekeni’s business could only prosper at a snail’s pace, if not
completely paralyzed. Its cost of doing business would be higher as well. The Court
expressed just such a view in the past. Thus –
In the case at bar, the disallowance of the subject car plan benefits would hamper the
officials in the performance of their functions to promote and develop trade which requires
mobility in the performance of official business. Indeed, the car plan benefits are supportive
of the implementation of the objectives and mission of the agency relative to the nature of
its operation and responsive to the exigencies of the service.26 (Emphasis supplied) Any
benefit or privilege enjoyed by petitioner from using the service vehicle was merely
incidental and insignificant, because for the most part the vehicle was under Mekeni’s
control and supervision. Free and complete disposal is given to the petitioner only after the
vehicle’s cost is covered or paid in full. Until then, the vehicle remains at the beck and call of
Mekeni. Given the vast territory petitioner had to cover to be able to perform his work
effectively and generate business for his employer, the service vehicle was an absolute
necessity, or else Mekeni’s business would suffer adversely. Thus, it is clear that while
petitioner was paying for half of the vehicle’s value, Mekeni was reaping the full benefits
from the use thereof.

In light of the foregoing, it is unfair to deny petitioner a refund of all his contributions to the
car plan. Under Article 22 of the Civil Code, "[e]very person who through an act of
performance by another, or any other means, acquires or comes into possession of
something at the expense of the latter without just or legal ground, shall return the same to
him." Article 214227of the same Code likewise clarifies that there are certain lawful,
voluntary and unilateral acts which give rise to the juridical relation of quasi-contract, to the
end that no one shall be unjustly enriched or benefited at the expense of another. In the
absence of specific terms and conditions governing the car plan arrangement between the
petitioner and Mekeni, a quasi-contractual relation was created between them.
Consequently, Mekeni may not enrich itself by charging petitioner for the use of its vehicle
which is otherwise absolutely necessaryto the full and effective promotion of its business. It
may not, under the claim that petitioner’s payments constitute rents for the use of the
company vehicle, refuse to refund what petitioner had paid, for the reasons that the car
plan did not carry such a condition; the subject vehicle is an old car that is substantially, if
not fully, depreciated; the car plan arrangement benefited Mekeni for the most part; and
any personal benefit obtained by petitioner from using the vehicle was merely incidental.

Conversely, petitioner cannot recover the monetary value of Mekeni’s counterpart

contribution to the cost of the vehicle; that is not property or money that belongs to him,
nor was it intended to be given to him in lieu of the car plan. In other words, Mekeni’s share
of the vehicle’s cost was not part of petitioner’s compensation package. To start with, the
vehicle is an asset that belonged to Mekeni. Just as Mekeni is unjustly enriched by failing to
refund petitioner’s payments, so should petitioner not be awarded the value of Mekeni’s
counter part contribution to the car plan, as this would unjustly enrich him at Mekeni’s
expense.
There is unjust enrichment ''when a person unjustly retains a benefit to the loss of another,
or when a person retains money or property of another against the fundamental principles
of justice, equity and good conscience." The principle of unjust enrichment requires two
conditions: (1) that a person is benefited without a valid basis or justification, and (2) that
such benefit is derived at the expense of another. The main objective of the principle
against unjust enrichment is to prevent one from enriching himself at the expense of
another without just cause or consideration. x x x28

WHEREFORE, the Petition is GRANTED IN PART. The assailed January 27, 2010 Decision and
April 23, 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 109550 are MODIFIED, in
that respondent Mekeni Food Corporation is hereby ordered to REFUND petitioner Antonio
Locsin II's payments under the car plan agreement in the total amount ofP112,500.00.

Thus, except for the counterpart or equivalent share of Mekeni Food Corporation in the car
plan agreement amounting to P112,500.00, which is DELETED, the February 27, 2009
Decision of the National Labor Relations Commission is affirmed in all respects.

SO ORDERED.

7.)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 178031 August 28, 2013

VIRGINIA M. VENZON, Petitioner,

vs.
RURAL BANK OF BUENAVISTA (AGUSAN DEL NORTE), INC., represented by LOURDESITA E.
PARAJES, Respondent.

DECISION

DEL CASTILLO, J.:

Before us is a Petition for Review on Certiorari1 questioning the December 14, 2006
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 01341-MIN which dismissed the
Petition in said case, as well as its May 7, 2007 Resolution3 denying reconsideration thereof.

Factual Antecedents

On January 28, 2005, petitioner Virginia M. Venzon filed a Petition4 to nullify foreclosure
proceedings and Tax Declaration Nos. 96-GR-06-003-7002-R and 96-GR-06-7003-R issued in
the name of respondent Rural Bank of Buenavista (Agusan del Norte), Inc. The case5 was
docketed as Civil Case No. 5535 and raffled to Branch 5 of the Regional Trial Court (RTC) of
Butuan City. Petitioner alleged that in 1983 she and her late spouse, George F. Venzon, Sr.,
obtained a P5,000.00 loan from respondent against a mortgage on their house and lot in
Libertad, Butuan City, covered by Tax Declaration Nos. 28289 and 42710 issued in their
names, which were later on replaced with Tax Declaration Nos. 96 GR-06-003-2884-R and 96
GR-06-003-2885-R; that she was able to pay P2,300.00, thus leaving an outstanding balance
of only P2,370.00; that sometime in March 1987, she offered to pay the said balance in full,
but the latter refused to accept payment, and instead shoved petitioner away from the bank
premises; that in March 1987, respondent foreclosed on the mortgage, and the property
was sold at auction for P6,472.76 to respondent, being the highest bidder; that the
foreclosure proceedings are null and void for lack of notice and publication of the sale, lack
of sheriff’s final deed of sale and notice of redemption period; and that she paid respondent
P6,000.00 on October 9, 1995, as evidenced by respondent’s Official Receipt No. 4108486
issued on October 9, 1995.

In its Answer with Counterclaims,7 respondent claimed that petitioner did not make any
payment on the loan; that petitioner never went to the bank in March 1987 to settle her
obligations in full; that petitioner was not shoved and driven away from its premises; that
the foreclosure proceedings were regularly done and all requirements were complied with;
that a certificate of sale was issued by the sheriff and duly recorded in the Registry of Deeds;
that petitioner’s claim that she paid P6,000.00 on October 9, 1995 is utterly false; that
petitioner’s cause of action has long prescribed as the case was filed only in 2005 or 18
years after the foreclosure sale; and that petitioner is guilty of laches. Respondent
interposed its counterclaim for damages and attorney’s fees as well.

In her Reply,8 petitioner insisted that the foreclosure proceedings were irregular and that
prescription and laches do not apply as the foreclosure proceedings are null and void to
begin with.

Ruling of the Regional Trial Court

On July 13, 2006, the trial court issued a Resolution9 dismissing Civil Case No. 5535. It held
that –

The plaintiff, however, may have erroneously relied the [sic] mandatorily [sic] requirement
of the aforestated provision of law upon failure to consider that the other party is a Rural
Bank. Under the R.A. No. 720 as amended, (Rural Bank Act) property worth exceeding
P100,000.00 [sic] is exempt from the requirement of publication. This may have been the
reason why the foreclosure prosper [sic] without the observance of the required
publication. Moreover, neither in the said applicable laws provide [sic] for the impairment of
the extrajudicial foreclosure and the subsequent sale to the public. The Court ruled in
Bonnevie, et al. vs. CA, et al. that Act No. 3135 as amended does not require personal notice
to the mortgagor. In the same view, lack of final demand or notice of redemption are [sic]
not considered indispensable requirements and failure to observe the same does not render
the extrajudicial foreclosure sale a nullity.10

In other words, the trial court meant that under the Rural Banks Act, the foreclosure of
mortgages covering loans granted by rural banks and executions of judgments thereon
involving real properties levied upon by a sheriff shall be exempt from publication where
the total amount of the loan, including interests due and unpaid, does not exceed
P10,000.00.11 Since petitioner’s outstanding obligation amounted to just over P6,000.00
publication was not necessary.

Petitioner moved for reconsideration,12 but in the September 6, 2006 Resolution,13 the
trial court denied the same.

Ruling of the Court of Appeals

Petitioner went up to the CA via an original Petition for Certiorari.14 On December 14, 2006,
the CA issued the first assailed Resolution15 dismissing the Petition. It held that petitioner’s
remedy should have been an appeal under Rule 41 of the Rules of Court since the July 13,
2006 Resolution is a final order of dismissal. Petitioner received the Resolution denying her
Motion for Reconsideration on September 18, 2006;16 but she filed the Petition for
Certiorari on October 25, 2006 when she should have interposed an appeal on or before
October 3, 2006. Having done so, her Petition may not even be treated as an appeal for the
same was belatedly filed.

The CA added that the Petition does not provide a sufficient factual background of the case
as it merely alleges a chronology of the legal remedies she took before the trial court which
does not comply with the requirement under Section 3 of Rule 46.17
Petitioner moved for reconsideration18 by submitting a rewritten Petition. However, in a
Resolution dated May 7, 2007, the CA denied the same, hence the present Petition.

Issues

Petitioner submits the following assignment of errors:

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN

DISMISSING THE PETITION FOR CERTIORARI THEREBY PREVENTING THE COURT FROM
FINDING OUT THAT ACTUALLY NO EXTRAJUDICIAL FORECLOSURE WAS CONDUCTED BY THE
OFFICE OF THE PROVINCIAL SHERIFF ON PETITIONER’S PROPERTY AT THE INSTANCE OF THE
PRIVATE RESPONDENT.

II

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN NOT
DISREGARDING TECHNICALITIES IN ORDER TO ADMINISTER SUBSTANTIAL JUSTICE TO THE
PETITIONER.19

Petitioner’s Arguments

Petitioner claims that no extrajudicial foreclosure proceedings ever took place, citing a
February 2, 2005 Certification issued by the Office of the Clerk of Court of Butuan City
stating that the record pertaining to the foreclosure proceedings covering her property
"could not be found in spite of diligent efforts to find the same."20 And because no
foreclosure proceedings took place, there could not have been notice and publication of the
sale, and no sheriff’s certificate of sale. For this reason, she claims that the CA erred in
dismissing her case.

Petitioner adds that, technicalities aside, a Petition for Certiorari is available to her in order
to prevent the denial of her substantial rights. She also argues that her payment to
respondent of the amount of P6,000.00 in 1995 should be considered as a valid redemption
of her property.

Respondent’s Arguments

For its part, respondent merely validates the pronouncements of the CA by citing and
echoing the same, and holding petitioner to a strict observance of the rules for perfecting an
appeal within the reglementary period, as it claims they are necessary for the orderly
administration of justice,21 as well as that which requires that only questions of law may be
raised in a Petition for Review on Certiorari.

Our Ruling

The Court denies the Petition.

The Court finds no error in the CA’s treatment of the Petition for Certiorari. The trial court’s
July 13, 2006 Resolution dismissing the case was indeed to be treated as a final order,
disposing of the issue of publication and notice of the foreclosure sale – which is the very
core of petitioner’s cause of action in Civil Case No. 5535 – and declaring the same to be
unnecessary pursuant to the Rural Banks Act, as petitioner’s outstanding obligation did not
exceed P10,000.00, and thus leaving petitioner without basis to maintain her case. This
constitutes a dismissal with the character of finality. As such, petitioner should have availed
of the remedy under Rule 41, and not Rule 65.

The Court is not prepared to be lenient in petitioner’s case, either. Civil Case No. 5535 was
instituted only in 2005, while the questioned foreclosure proceedings took place way back
in 1987. Petitioner’s long inaction and commission of a procedural faux pas certainly cannot
earn the sympathy of the Court.

Nor can the Court grant the Petition on the mere allegation that no foreclosure proceedings
ever took place. The February 2, 2005 Certification issued by the Office of the Clerk of Court
of Butuan City to the effect that the record of the foreclosure proceedings could not be
found is not sufficient ground to invalidate the proceedings taken. Petitioner herself
attached the Sheriff’s Certificate of Sale22 as Annex "A" of her Petition in Civil Case No.
5535; this should belie the claim that no record exists covering the foreclosure proceedings.
Besides, if petitioner insists that no foreclosure proceedings took place, then she should not
have filed an action to annul the same since there was no foreclosure to begin with. She
should have filed a different action.

However, petitioner is entitled to a return of the P6,000.00 she paid to respondent in 1995.
While this may not be validly considered as a redemption of her property as the payment
was made long after the redemption period expired, respondent had no right to receive the
amount. In its Answer with Counterclaims in Civil Case No. 5535, respondent simply alleged
therein that –

10. Defendant DENIES the allegations under paragraph 10 of the petition for being utterly
false, highly self-serving and patently speculative, the truth being ---
• Assumption cannot be had that there was an alleged foreclosure of the then property of
the petitioner for the truth of the matter is that a foreclosure proceeding was duly
conducted, which fact remains undisputable for so many years now.

• Without necessarily admitting that payment of P6,000.00 was made, the same however
could hardly and could never be considered as redemption price for the following reasons --
-

was allegedly
made. Thus, there is no point talking about redemption price when the redemption period
had long been gone at the time the alleged payment was made.

without conceding, that the amount of P6,000.00 was a redemption

price, said amount, however, could not constitute as a legal redemption price since the
same was not enough to cover the entire redemption price as mandated by the rules and
laws.23 (Emphases supplied)

Interestingly, respondent did not deny being the issuer of Official Receipt No. 410848.
Instead, it averred that petitioner’s payment to it of P6,000.00 was false and self-serving,
but in the same breath argued that, without necessarily admitting that payment of
P6,000.00 was made, the same cannot be considered as redemption price.

By making such an ambiguous allegation in its Answer with Counterclaims, respondent is

deemed to have admitted receiving the amount of P6,000.00 from petitioner as evidenced
by Official Receipt No. 410848, which amount under the circumstances it had no right to
receive. "If an allegation is not specifically denied or the denial is a negative pregnant, the
allegation is deemed admitted."24 "Where a fact is alleged with some qualifying or
modifying language, and the denial is conjunctive, a ‘negative pregnant’ exists, and only the
qualification or modification is denied, while the fact itself is admitted."25 "A denial in the
form of a negative pregnant is an ambiguous pleading, since it cannot be ascertained
whether it is the fact or only the qualification that is intended to be denied."26 "Profession
of ignorance about a fact which is patently and necessarily within the pleader's knowledge,
or means of knowing as ineffectual, is no denial at all."27 In fine, respondent failed to refute
petitioner’s claim of having paid the amount of P6,000.00.

Since respondent was not entitled to receive the said amount, as it is deemed fully paid
from the foreclosure of petitioner’s property since its bid price at the auction sale covered
all that petitioner owed it by way of principal, interest, attorney’s fees and charges,28 it
must return the same to petitioner. "If something is received when there is no right to
demand it, and it was unduly delivered through mistake, the obligation to return it
arises."29 Moreover, pursuant to Circular No. 799, series of 2013 of the Bangko Sentral ng
Pilipinas which took effect July 1, 2013, the amount of P6,000.00 shall earn interest at the
rate of 6% per annum computed from the filing of the Petition in Civil Case No. 5535 up to
its full satisfaction.

WHEREFORE, premises considered, the Petition is DENIED. The December 14, 2006 and May
7, 2007 Resolutions of the Court of Appeals in CA-G.R. SP No. 01341-MIN are AFFIRMED.

However, respondent Rural Bank of Buenavista (Agusan del Norte), Inc. is ORDERED to
return to petitioner Virginia M. Venzon or her assigns the amount of P6,000.00, with
interest at the rate of 6% per annum computed from the filing of the Petition in Civil Case
No. 5535 up to its full satisfaction.

SO ORDERED.

8.)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 102007 September 2, 1994

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
ROGELIO BAYOTAS y CORDOVA, accused-appellant.

The Solicitor General for plaintiff-appellee.

Public Attorney's Office for accused-appellant.

ROMERO, J.:

In Criminal Case No. C-3217 filed before Branch 16, RTC Roxas City, Rogelio Bayotas y
Cordova was charged with Rape and eventually convicted thereof on June 19, 1991 in a
decision penned by Judge Manuel E. Autajay. Pending appeal of his conviction, Bayotas died
on February 4, 1992 at
the National Bilibid Hospital due to cardio respiratory arrest secondary to hepatic
encephalopathy secondary to hipato carcinoma gastric malingering. Consequently, the
Supreme Court in its Resolution of May 20, 1992 dismissed the criminal aspect of the
appeal. However, it required the Solicitor General to file its comment with regard to
Bayotas' civil liability arising from his commission of the offense charged.

In his comment, the Solicitor General expressed his view that the death of accused-
appellant did not extinguish his civil liability as a result of his commission of the offense
charged. The Solicitor General, relying on the case of People v. Sendaydiego 1 insists that
the appeal should still be resolved for the purpose of reviewing his conviction by the lower
court on which the civil liability is based.

Counsel for the accused-appellant, on the other hand, opposed the view of the Solicitor
General arguing that the death of the accused while judgment of conviction is pending
appeal extinguishes both his criminal and civil penalties. In support of his position, said
counsel invoked the ruling of the Court of Appeals in People v. Castillo and Ocfemia 2 which
held that the civil obligation in a criminal case takes root in the criminal liability and,
therefore, civil liability is extinguished if accused should die before final judgment is
rendered.

We are thus confronted with a single issue: Does death of the accused pending appeal of his
conviction extinguish his civil liability?

In the aforementioned case of People v. Castillo, this issue was settled in the affirmative.
This same issue posed therein was phrased thus: Does the death of Alfredo Castillo affect
both his criminal responsibility and his civil liability as a consequence of the alleged crime?

It resolved this issue thru the following disquisition:

Article 89 of the Revised Penal Code is the controlling statute. It reads, in part:

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 the pecuniary
penalties liability therefor is extinguished only when the death of the offender occurs before
final judgment;
With reference to Castillo's criminal liability, there is no question. The law is plain. Statutory
construction is unnecessary. Said liability is extinguished.

The civil liability, however, poses a problem. Such liability is extinguished only when the
death of the offender occurs before final judgment. Saddled upon us is the task of
ascertaining the legal import of the term "final judgment." Is it final judgment as
contradistinguished from an interlocutory order? Or, is it a judgment which is final and
executory?

We go to the genesis of the law. The legal precept contained in Article 89 of the Revised
Penal Code heretofore transcribed is lifted from Article 132 of the Spanish El Codigo Penal
de 1870 which, in part, recites:

La responsabilidad penal se extingue.

1. Por la muerte del reo en cuanto a las penas personales siempre, y respecto a las
pecuniarias, solo cuando a su fallecimiento no hubiere recaido sentencia firme.

xxx xxx xxx

The code of 1870 . . . it will be observed employs the term "sentencia firme." What is
"sentencia firme" under the old statute?

XXVIII Enciclopedia Juridica Española, p. 473, furnishes the ready answer: It says:

SENTENCIA FIRME. La sentencia que adquiere la fuerza de las definitivas por no haberse
utilizado por las partes litigantes recurso alguno contra ella dentro de los terminos y plazos
legales concedidos al efecto.

"Sentencia firme" really should be understood as one which is definite. Because, it is only
when judgment is such that, as Medina y Maranon puts it, the crime is confirmed — "en
condena determinada;" or, in the words of Groizard, the guilt of the accused becomes —
"una verdad legal." Prior thereto, should the accused die, according to Viada, "no hay
legalmente, en tal caso, ni reo, ni delito, ni responsabilidad criminal de ninguna clase." And,
as Judge Kapunan well explained, when a defendant dies before judgment becomes
executory, "there cannot be any determination by final judgment whether or not the felony
upon which the civil action might arise exists," for the simple reason that "there is no party
defendant." (I Kapunan, Revised Penal Code, Annotated, p. 421. Senator Francisco holds the
same view. Francisco, Revised Penal Code, Book One, 2nd ed., pp. 859-860)
The legal import of the term "final judgment" is similarly reflected in the Revised Penal
Code. Articles 72 and 78 of that legal body mention the term "final judgment" in the sense
that it is already enforceable. This also brings to mind Section 7, Rule 116 of the Rules of
Court which states that a judgment in a criminal case becomes final "after the lapse of the
period for perfecting an appeal or when the sentence has been partially or totally satisfied
or served, or the defendant has expressly waived in writing his right to appeal."

By fair intendment, the legal precepts and opinions here collected funnel down to one
positive conclusion: The term final judgment employed in the Revised Penal Code means
judgment beyond recall. Really, as long as a judgment has not become executory, it cannot
be truthfully said that defendant is definitely guilty of the felony charged against him.

Not that the meaning thus given to final judgment is without reason. For where, as in this
case, the right to institute a separate civil action is not reserved, the decision to be rendered
must, of necessity, cover "both the criminal and the civil aspects of the case." People vs.
Yusico (November 9, 1942), 2 O.G., No. 100, p. 964. See also: People vs. Moll, 68 Phil., 626,
634; Francisco, Criminal Procedure, 1958 ed., Vol. I, pp. 234, 236. Correctly, Judge Kapunan
observed that as "the civil action is based solely on the felony committed and of which the
offender might be found guilty, the death of the offender extinguishes the civil liability." I
Kapunan, Revised Penal Code, Annotated, supra.

Here is the situation obtaining in the present case: Castillo's criminal liability is out. His civil
liability is sought to be enforced by reason of that criminal liability. But then, if we dismiss,
as we must, the criminal action and let the civil aspect remain, we will be faced with the
anomalous situation whereby we will be called upon to clamp civil liability in a case where
the source thereof — criminal liability — does not exist. And, as was well stated in Bautista,
et al. vs. Estrella, et al., CA-G.R.
No. 19226-R, September 1, 1958, "no party can be found and held criminally liable in a civil
suit," which solely would remain if we are to divorce it from the criminal proceeding."

This ruling of the Court of Appeals in the Castillo case 3 was adopted by the Supreme Court
in the cases of People of the Philippines v. Bonifacio Alison, et al., 4 People of the Philippines
v. Jaime Jose, et al. 5 and People of the Philippines v. Satorre 6 by dismissing the appeal in
view of the death of the accused pending appeal of said cases.

As held by then Supreme Court Justice Fernando in the Alison case:

The death of accused-appellant Bonifacio Alison having been established, and considering
that there is as yet no final judgment in view of the pendency of the appeal, the criminal and
civil liability of the said accused-appellant Alison was extinguished by his death (Art. 89,
Revised Penal Code; Reyes' Criminal Law, 1971 Rev. Ed., p. 717, citing People v. Castillo and
Ofemia C.A., 56 O.G. 4045); consequently, the case against him should be dismissed.

On the other hand, this Court in the subsequent cases of Buenaventura Belamala v.
Marcelino Polinar 7 and Lamberto Torrijos v. The Honorable Court of Appeals 8 ruled
differently. In the former, the issue decided by this court was: Whether the civil liability of
one accused of physical injuries who died before final judgment is extinguished by his
demise to the extent of barring any claim therefore against his estate. It was the contention
of the administrator-appellant therein that the death of the accused prior to final judgment
extinguished all criminal and civil liabilities resulting from the offense, in view of Article 89,
paragraph 1 of the Revised Penal Code. However, this court ruled therein:

We see no merit in the plea that the civil liability has been extinguished, in view of the
provisions of the Civil Code of the Philippines of 1950 (Rep. Act No. 386) that became
operative eighteen years after the revised Penal Code. As pointed out by the Court below,
Article 33 of the Civil Code establishes a civil action for damages on account of physical
injuries, entirely separate and distinct from the criminal action.

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.

Assuming that for lack of express reservation, Belamala's civil action for damages was to be
considered instituted together with the criminal action still, since both proceedings were
terminated without final adjudication, the civil action of the offended party under Article 33
may yet be enforced separately.

In Torrijos, the Supreme Court held that:

xxx xxx xxx

It should be stressed that the extinction of civil liability follows the extinction of the criminal
liability under Article 89, only when the civil liability arises from the criminal act as its only
basis. Stated differently, where the civil liability does not exist independently of the criminal
responsibility, the extinction of the latter by death, ipso facto extinguishes the former,
provided, of course, that death supervenes before final judgment. The said principle does
not apply in instant case wherein the civil liability springs neither solely nor originally from
the crime itself but from a civil contract of purchase and sale. (Emphasis ours)

xxx xxx xxx

In the above case, the court was convinced that the civil liability of the accused who was
charged with estafa could likewise trace its genesis to Articles 19, 20 and 21 of the Civil Code
since said accused had swindled the first and second vendees of the property subject matter
of the contract of sale. It therefore concluded: "Consequently, while the death of the
accused herein extinguished his criminal liability including fine, his civil liability based on the
laws of human relations remains."

Thus it allowed the appeal to proceed with respect to the civil liability of the accused,
notwithstanding the extinction of his criminal liability due to his death pending appeal of his
conviction.

To further justify its decision to allow the civil liability to survive, the court relied on the
following ratiocination: Since Section 21, Rule 3 of the Rules of Court 9 requires the
dismissal of all money claims against the defendant whose death occurred prior to the final
judgment of the Court of First Instance (CFI), then it can be inferred that actions for recovery
of money may continue to be heard on appeal, when the death of the defendant
supervenes after the CFI had rendered its judgment. In such case, explained this tribunal,
"the name of the offended party shall be included in the title of the case as plaintiff-
appellee and the legal representative or the heirs of the deceased-accused should be
substituted as defendants-appellants."

It is, thus, evident that as jurisprudence evolved from Castillo to Torrijos, the rule
established was that the survival of the civil liability depends on whether the same can be
predicated on sources of obligations other than delict. Stated differently, the claim for civil
liability is also extinguished together with the criminal action if it were solely based thereon,
i.e., civil liability ex delicto.

However, the Supreme Court in People v. Sendaydiego, et al. 10 departed from this long-
established principle of law. In this case, accused Sendaydiego was charged with and
convicted by the lower court of malversation thru falsification of public documents.
Sendaydiego's death supervened during the pendency of the appeal of his conviction.

This court in an unprecedented move resolved to dismiss Sendaydiego's appeal but only to
the extent of his criminal liability. His civil liability was allowed to survive although it was
clear that such claim thereon was exclusively dependent on the criminal action already
extinguished. The legal import of such decision was for the court to continue exercising
appellate jurisdiction over the entire appeal, passing upon the correctness of Sendaydiego's
conviction despite dismissal of the criminal action, for the purpose of determining if he is
civilly liable. In doing so, this Court issued a Resolution of July 8, 1977 stating thus:
The claim of complainant Province of Pangasinan for the civil liability survived Sendaydiego
because his death occurred after final judgment was rendered by the Court of First Instance
of Pangasinan, which convicted him of three complex crimes of malversation through
falsification and ordered him to indemnify the Province in the total sum of P61,048.23
(should be P57,048.23).

The civil action for the civil liability is deemed impliedly instituted with the criminal action in
the absence of express waiver or its reservation in a separate action (Sec. 1, Rule 111 of the
Rules of Court). The civil action for the civil liability is separate and distinct from the criminal
action (People and Manuel vs. Coloma, 105 Phil. 1287; Roa vs. De la Cruz, 107 Phil. 8).

When the action is for the recovery of money and the defendant dies before final judgment
in the Court of First Instance, it shall be dismissed to be prosecuted in the manner especially
provided in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the Rules of Court).

The implication is that, if the defendant dies after a money judgment had been rendered
against him by the Court of First Instance, the action survives him. It may be continued on
appeal (Torrijos vs. Court of Appeals, L-40336, October 24, 1975; 67 SCRA 394).

The accountable public officer may still be civilly liable for the funds improperly disbursed
although he has no criminal liability (U.S. vs. Elvina, 24 Phil. 230; Philippine National Bank vs.
Tugab, 66 Phil. 583).

In view of the foregoing, notwithstanding the dismissal of the appeal of the deceased
Sendaydiego insofar as his criminal liability is concerned, the Court Resolved to continue
exercising appellate jurisdiction over his possible civil liability for the money claims of the
Province of Pangasinan arising from the alleged criminal acts complained of, as if no criminal
case had been instituted against him, thus making applicable, in determining his civil
liability, Article 30 of the Civil Code . . . and, for that purpose, his counsel is directed to
inform this Court within ten (10) days of the names and addresses of the decedent's heirs or
whether or not his estate is under administration and has a duly appointed judicial
administrator. Said heirs or administrator will be substituted for the deceased insofar as the
civil action for the civil liability is concerned (Secs. 16 and 17, Rule 3, Rules of Court).

Succeeding cases 11 raising the identical issue have maintained adherence to our ruling in
Sendaydiego; in other words, they were a reaffirmance of our abandonment of the settled
rule that a civil liability solely anchored on the criminal (civil liability ex delicto) is
extinguished upon dismissal of the entire appeal due to the demise of the accused.

But was it judicious to have abandoned this old ruling? A re-examination of our decision in
Sendaydiego impels us to revert to the old ruling.
To restate our resolution of July 8, 1977 in Sendaydiego: The resolution of the civil action
impliedly instituted in the criminal action can proceed irrespective of the latter's extinction
due to death of the accused pending appeal of his conviction, pursuant to Article 30 of the
Civil Code and Section 21, Rule 3 of the Revised Rules of Court.

Article 30 of the Civil Code provides:

When a separate civil action is brought to demand civil liability arising from a criminal
offense, and no criminal proceedings are instituted during the pendency of the civil case, a
preponderance of evidence shall likewise be sufficient to prove the act complained of.

Clearly, the text of Article 30 could not possibly lend support to the ruling in Sendaydiego.
Nowhere in its text is there a grant of authority to continue exercising appellate jurisdiction
over the accused's civil liability ex delicto when his death supervenes during appeal. What
Article 30 recognizes is an alternative and separate civil action which may be brought to
demand civil liability arising from a criminal offense independently of any criminal action. In
the event that no criminal proceedings are instituted during the pendency of said civil case,
the quantum of evidence needed to prove the criminal act will have to be that which is
compatible with civil liability and that is, preponderance of evidence and not proof of guilt
beyond reasonable doubt. Citing or invoking Article 30 to justify the survival of the civil
action despite extinction of the criminal would in effect merely beg the question of whether
civil liability ex delicto survives upon extinction of the criminal action due to death of the
accused during appeal of his conviction. This is because whether asserted in
the criminal action or in a separate civil action, civil liability ex delicto is extinguished by the
death of the accused while his conviction is on appeal. Article 89 of the Revised Penal Code
is clear on this matter:

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;

xxx xxx xxx

However, the ruling in Sendaydiego deviated from the expressed intent of Article 89. It
allowed claims for civil liability ex delicto to survive by ipso facto treating the civil action
impliedly instituted with the criminal, as one filed under Article 30, as though no criminal
proceedings had been filed but merely a separate civil action. This had the effect of
converting such claims from one which is dependent on the outcome of the criminal action
to an entirely new and separate one, the prosecution of which does not even necessitate
the filing of criminal proceedings. 12 One would be hard put to pinpoint the statutory
authority for such a transformation. It is to be borne in mind that in recovering civil liability
ex delicto, the same has perforce to be determined in the criminal action, rooted as it is in
the court's pronouncement of the guilt or innocence of the accused. This is but to render
fealty to the intendment of Article 100 of the Revised Penal Code which provides that "every
person criminally liable for a felony is also civilly liable." In such cases, extinction of the
criminal action due to death of the accused pending appeal inevitably signifies the
concomitant extinction of the civil liability. Mors Omnia Solvi. Death dissolves all things.

In sum, in pursuing recovery of civil liability arising from crime, the final determination of
the criminal liability is a condition precedent to the prosecution of the civil action, such that
when the criminal action is extinguished by the demise of accused-appellant pending appeal
thereof, said civil action cannot survive. The claim for civil liability springs out of and is
dependent upon facts which, if true, would constitute a crime. Such civil liability is an
inevitable consequence of the criminal liability and is to be declared and enforced in the
criminal proceeding. This is to be distinguished from that which is contemplated under
Article 30 of the Civil Code which refers to the institution of a separate civil action that does
not draw its life from a criminal proceeding. The Sendaydiego resolution of July 8, 1977,
however, failed to take note of this fundamental distinction when it allowed the survival of
the civil action for the recovery of civil liability ex delicto by treating the same as a separate
civil action referred to under Article 30. Surely, it will take more than just a summary judicial
pronouncement to authorize the conversion of said civil action to an independent one such
as that contemplated under Article 30.

Ironically however, the main decision in Sendaydiego did not apply Article 30, the resolution
of July 8, 1977 notwithstanding. Thus, it was held in the main decision:

Sendaydiego's appeal will be resolved only for the purpose of showing his criminal liability
which is the basis of the civil liability for which his estate would be liable. 13

In other words, the Court, in resolving the issue of his civil liability, concomitantly made a
determination on whether Sendaydiego, on the basis of evidenced adduced, was indeed
guilty beyond reasonable doubt of committing the offense charged. Thus, it upheld
Sendaydiego's conviction and pronounced the same as the source of his civil liability.
Consequently, although Article 30 was not applied in the final determination of
Sendaydiego's civil liability, there was a reopening of the criminal action already
extinguished which served as basis for Sendaydiego's civil liability. We reiterate: Upon death
of the accused pending appeal of his conviction, the criminal action is extinguished
inasmuch as there is no longer a defendant to stand as the accused; the civil action
instituted therein for recovery of civil liability ex delicto is ipso facto extinguished, grounded
as it is on the criminal.

Section 21, Rule 3 of the Rules of Court was also invoked to serve as another basis for the
Sendaydiego resolution of July 8, 1977. In citing Sec. 21, Rule 3 of the Rules of Court, the
Court made the inference that civil actions of the type involved in Sendaydiego consist of
money claims, the recovery of which may be continued on appeal if defendant dies pending
appeal of his conviction by holding his estate liable therefor. Hence, the Court's conclusion:

"When the action is for the recovery of money" "and the defendant dies before final
judgment in the court of First Instance, it shall be dismissed to be prosecuted in the manner
especially provided" in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the Rules of Court).

The implication is that, if the defendant dies after a money judgment had been rendered
against him by the Court of First Instance, the action survives him. It may be continued on
appeal.

Sadly, reliance on this provision of law is misplaced. From the standpoint of procedural law,
this course taken in Sendaydiego cannot be sanctioned. As correctly observed by Justice
Regalado:

xxx xxx xxx

I do not, however, agree with the justification advanced in both Torrijos and Sendaydiego
which, relying on the provisions of Section 21, Rule 3 of the Rules of Court, drew the
strained implication therefrom that where the civil liability instituted together with the
criminal liabilities had already passed beyond the judgment of the then Court of First
Instance (now the Regional Trial Court), the Court of Appeals can continue to exercise
appellate jurisdiction thereover despite the extinguishment of the component criminal
liability of the deceased. This pronouncement, which has been followed in the Court's
judgments subsequent and consonant to Torrijos and Sendaydiego, should be set aside and
abandoned as being clearly erroneous and unjustifiable.

Said Section 21 of Rule 3 is a rule of civil procedure in ordinary civil actions. There is neither
authority nor justification for its application in criminal procedure to civil actions instituted
together with and as part of criminal actions. Nor is there any authority in law for the
summary conversion from the latter category of an ordinary civil action upon the death of
the offender. . . .
Moreover, the civil action impliedly instituted in a criminal proceeding for recovery of civil
liability ex delicto can hardly be categorized as an ordinary money claim such as that
referred to in Sec. 21, Rule 3 enforceable before the estate of the deceased accused.

Ordinary money claims referred to in Section 21, Rule 3 must be viewed in light of the
provisions of Section 5, Rule 86 involving claims against the estate, which in Sendaydiego
was held liable for Sendaydiego's civil liability. "What are contemplated in Section 21 of Rule
3, in relation to Section 5 of Rule 86, 14 are contractual money claims while the claims
involved in civil liability ex delicto may include even the restitution of personal or real
property." 15 Section 5, Rule 86 provides an exclusive enumeration of what claims may be
filed against the estate. These are: funeral expenses, expenses for the last illness, judgments
for money and claim arising from contracts, expressed or implied. It is clear that money
claims arising from delict do not form part of this exclusive enumeration. Hence, there could
be no legal basis in (1) treating a civil action ex delicto as an ordinary contractual money
claim referred to in Section 21, Rule 3 of the Rules of Court and (2) allowing it to survive by
filing a claim therefor before the estate of the deceased accused. Rather, it should be
extinguished upon extinction of the criminal action engendered by the death of the accused
pending finality of his conviction.

Accordingly, we rule: if the private offended party, upon extinction of the civil liability ex
delicto desires to recover damages from the same act or omission complained of, he must
subject to Section 1, Rule 111 16 (1985 Rules on Criminal Procedure as amended) file a
separate civil action, this time predicated not on the felony previously charged but on other
sources of obligation. The source of obligation upon which the separate civil action is
premised determines against whom the same shall be enforced.

If the same act or omission complained of also arises from quasi-delict or may, by provision
of law, result in an injury to person or property (real or personal), the separate civil action
must be filed against the executor or administrator 17 of the estate of the accused pursuant
to Sec. 1, Rule 87 of the Rules of Court:

Sec. 1. Actions which may and which may not be brought against executor or administrator.
— No action upon a claim for the recovery of money or debt or interest thereon shall be
commenced against the executor or administrator; but actions to recover real or personal
property, or an interest therein, from the estate, or to enforce a lien thereon, and actions to
recover damages for an injury to person or property, real or personal, may be commenced
against him.

This is in consonance with our ruling in Belamala 18 where we held that, in recovering
damages for injury to persons thru an independent civil action based on Article 33 of the
Civil Code, the same must be filed against the executor or administrator of the estate of
deceased accused and not against the estate under Sec. 5, Rule 86 because this rule
explicitly limits the claim to those for funeral expenses, expenses for the last sickness of the
decedent, judgment for money and claims arising from contract, express or implied.
Contractual money claims, we stressed, refers only to purely personal obligations other than
those which have their source in delict or tort.

Conversely, if the same act or omission complained of also arises from contract, the
separate civil action must be filed against the estate of the accused, pursuant to Sec. 5, Rule
86 of the Rules of Court.

From this lengthy disquisition, we summarize our ruling herein:

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. 19 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 20

b) Contracts

c) Quasi-contracts

d) ...

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 1, 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.
4. Finally, the private offended party need not fear a forfeiture of his right to file this
separate civil action by prescription, in cases where during the prosecution of the criminal
action and prior to its extinction, the private-offended party instituted together therewith
the civil action. In such case, the statute of limitations on the civil liability is deemed
interrupted during the pendency of the criminal case, conformably with provisions of Article
1155 21 of the Civil Code, that should thereby avoid any apprehension on a possible
privation of right by prescription. 22

Applying this set of rules to the case at bench, we hold that the death of appellant Bayotas
extinguished his criminal liability and the civil liability based solely on the act complained of,
i.e., rape. Consequently, the appeal is hereby dismissed without qualification.

WHEREFORE, the appeal of the late Rogelio Bayotas is DISMISSED with costs de oficio.

SO ORDERED.

9.)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 183204 January 13, 2014

THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner,

vs.
ANA GRACE ROSALES AND YO YUK TO, Respondents.

DECISION

DEL CASTILLO, J.:

Bank deposits, which are in the nature of a simple loan or mutuum,1 must be paid upon
demand by the depositor.2

This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the April 2,
2008 Decision4 and the May 30, 2008 Resolution5 of he Court of Appeals CA) in CA-G.R. CV
No. 89086.
Factual Antecedents

Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly
organized and existing under the laws of the Philippines.6 Respondent Ana Grace Rosales
(Rosales) is the owner of China Golden Bridge Travel Services,7 a travel agency.8
Respondent Yo Yuk To is the mother of respondent Rosales.9

In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-Tondo

Branch.11 As of August 4, 2004, respondents’ Joint Peso Account showed a balance of
P2,515,693.52.12

In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese
National applying for a retiree’s visa from the Philippine Leisure and Retirement Authority
(PLRA), to petitioner’s branch in Escolta to open a savings account, as required by the
PLRA.13 Since Liu Chiu Fang could speak only in Mandarin, respondent Rosales acted as an
interpreter for her.14

On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint Dollar
Account15 with an initial deposit of US$14,000.00.16

On July 31, 2003, petitioner issued a "Hold Out" order against respondents’ accounts.17

On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan
Aguirre, filed before the Office of the Prosecutor of Manila a criminal case for Estafa
through False Pretences, Misrepresentation, Deceit, and Use of Falsified Documents,
docketed as I.S. No. 03I-25014,18 against respondent Rosales.19 Petitioner accused
respondent Rosales and an unidentified woman as the ones responsible for the
unauthorized and fraudulent withdrawal of US$75,000.00 from Liu Chiu Fang’s dollar
account with petitioner’s Escolta Branch.20 Petitioner alleged that on February 5, 2003, its
branch in Escolta received from the PLRA a Withdrawal Clearance for the dollar account of
Liu Chiu Fang;21 that in the afternoon of the same day, respondent Rosales went to
petitioner’s Escolta Branch to inform its Branch Head, Celia A. Gutierrez (Gutierrez), that Liu
Chiu Fang was going to withdraw her dollar deposits in cash;22 that Gutierrez told
respondent Rosales to come back the following day because the bank did not have enough
dollars;23 that on February 6, 2003, respondent Rosales accompanied an unidentified
impostor of Liu Chiu Fang to the bank;24 that the impostor was able to withdraw Liu Chiu
Fang’s dollar deposit in the amount of US$75,000.00;25 that on March 3, 2003, respondents
opened a dollar account with petitioner; and that the bank later discovered that the serial
numbers of the dollar notes deposited by respondents in the amount of US$11,800.00 were
the same as those withdrawn by the impostor.26
Respondent Rosales, however, denied taking part in the fraudulent and unauthorized
withdrawal from the dollar account of Liu Chiu Fang.27 Respondent Rosales claimed that
she did not go to the bank on February 5, 2003.28 Neither did she inform Gutierrez that Liu
Chiu Fang was going to close her account.29 Respondent Rosales further claimed that after
Liu Chiu Fang opened an account with petitioner, she lost track of her.30 Respondent
Rosales’ version of the events that transpired thereafter is as follows:

On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang was
at the bank to close her account.31 At noon of the same day, respondent Rosales went to
the bank to make a transaction.32 While she was transacting with the teller, she caught a
glimpse of a woman seated at the desk of the Branch Operating Officer, Melinda Perez
(Perez).33 After completing her transaction, respondent Rosales approached Perez who
informed her that Liu Chiu Fang had closed her account and had already left.34 Perez then
gave a copy of the Withdrawal Clearance issued by the PLRA to respondent Rosales.35 On
June 16, 2003, respondent Rosales received a call from Liu Chiu Fang inquiring about the
extension of her PLRA Visa and her dollar account.36 It was only then that Liu Chiu Fang
found out that her account had been closed without her knowledge.37 Respondent Rosales
then went to the bank to inform Gutierrez and Perez of the unauthorized withdrawal.38 On
June 23, 2003, respondent Rosales and Liu Chiu Fang went to the PLRA Office, where they
were informed that the Withdrawal Clearance was issued on the basis of a Special Power of
Attorney (SPA) executed by Liu Chiu Fang in favor of a certain Richard So.39 Liu Chiu Fang,
however, denied executing the SPA.40 The following day, respondent Rosales, Liu Chiu Fang,
Gutierrez, and Perez met at the PLRA Office to discuss the unauthorized withdrawal.41
During the conference, the bank officers assured Liu Chiu Fang that the money would be
returned to her.42

On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution
dismissing the criminal case for lack of probable cause.43 Unfazed, petitioner moved for
reconsideration.

On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila a
Complaint44 for Breach of Obligation and Contract with Damages, docketed as Civil Case
No. 04110895 and raffled to Branch 21, against petitioner. Respondents alleged that they
attempted several times to withdraw their deposits but were unable to because petitioner
had placed their accounts under "Hold Out" status.45 No explanation, however, was given
by petitioner as to why it issued the "Hold Out" order.46 Thus, they prayed that the "Hold
Out" order be lifted and that they be allowed to withdraw their deposits.47 They likewise
prayed for actual, moral, and exemplary damages, as well as attorney’s fees.48
Petitioner alleged that respondents have no cause of action because it has a valid reason for
issuing the "Hold Out" order.49 It averred that due to the fraudulent scheme of respondent
Rosales, it was compelled to reimburse Liu Chiu Fang the amount of US$75,000.0050 and to
file a criminal complaint for Estafa against respondent Rosales.51

While the case for breach of contract was being tried, the City Prosecutor of Manila issued a
Resolution dated February 18, 2005, reversing the dismissal of the criminal complaint.52 An
Information, docketed as Criminal Case No. 05-236103,53 was then filed charging
respondent Rosales with Estafa before Branch 14 of the RTC of Manila.54

Ruling of the Regional Trial Court

On January 15, 2007, the RTC rendered a Decision55 finding petitioner liable for damages
for breach of contract.56 The RTC ruled that it is the duty of petitioner to release the
deposit to respondents as the act of withdrawal of a bank deposit is an act of demand by
the creditor.57 The RTC also said that the recourse of petitioner is against its negligent
employees and not against respondents.58 The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner]

METROPOLITAN BANK & TRUST COMPANY to allow [respondents] ANA GRACE ROSALES and
YO YUK TO to withdraw their Savings and Time Deposits with the agreed interest, actual
damages of P50,000.00, moral damages of P50,000.00, exemplary damages of P30,000.00
and 10% of the amount due [respondents] as and for attorney’s fees plus the cost of suit.

The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.

SO ORDERED.59

Ruling of the Court of Appeals

Aggrieved, petitioner appealed to the CA.

On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual
damages because "the basis for [respondents’] claim for such damages is the professional
fee that they paid to their legal counsel for [respondent] Rosales’ defense against the
criminal complaint of [petitioner] for estafa before the Office of the City Prosecutor of
Manila and not this case."60 Thus, the CA disposed of the case in this wise:

WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, Branch
21, Manila in Civil Case No. 04-110895 is AFFIRMED with MODIFICATION that the award of
actual damages to [respondents] Rosales and Yo Yuk To is hereby DELETED.
SO ORDERED.61

Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008
Resolution.62

Issues

Hence, this recourse by petitioner raising the following issues:

A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE APPLICATION AND
AGREEMENT FOR DEPOSIT ACCOUNT DOES NOT APPLY IN THIS CASE.

B. THE [CA] ERRED WHEN IT RULED THAT PETITIONER’S EMPLOYEES WERE NEGLIGENT IN
RELEASING LIU CHIU FANG’S FUNDS.

C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY

DAMAGES, AND ATTORNEY’S FEES.63

Petitioner’s Arguments

Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in the
Application and Agreement for Deposit Account.64 It posits that the said clause applies to
any and all kinds of obligation as it does not distinguish between obligations arising ex
contractu or ex delictu.65 Petitioner also contends that the fraud committed by respondent
Rosales was clearly established by evidence;66 thus, it was justified in issuing the "Hold-
Out" order.67 Petitioner likewise denies that its employees were negligent in releasing the
dollars.68 It claims that it was the deception employed by respondent Rosales that caused
petitioner’s employees to release Liu Chiu Fang’s funds to the impostor.69

Lastly, petitioner puts in issue the award of moral and exemplary damages and attorney’s
fees. It insists that respondents failed to prove that it acted in bad faith or in a wanton,
fraudulent, oppressive or malevolent manner.70

Respondents’ Arguments

Respondents, on the other hand, argue that there is no legal basis for petitioner to withhold
their deposits because they have no monetary obligation to petitioner.71 They insist that
petitioner miserably failed to prove its accusations against respondent Rosales.72 In fact, no
documentary evidence was presented to show that respondent Rosales participated in the
unauthorized withdrawal.73 They also question the fact that the list of the serial numbers of
the dollar notes fraudulently withdrawn on February 6, 2003, was not signed or
acknowledged by the alleged impostor.74 Respondents likewise maintain that what was
established during the trial was the negligence of petitioner’s employees as they allowed
the withdrawal of the funds without properly verifying the identity of the depositor.75
Furthermore, respondents contend that their deposits are in the nature of a loan; thus,
petitioner had the obligation to return the deposits to them upon demand.76 Failing to do
so makes petitioner liable to pay respondents moral and exemplary damages, as well as
attorney’s fees.77

Our Ruling

The Petition is bereft of merit.

At the outset, the relevant issues in this case are (1) whether petitioner breached its
contract with respondents, and (2) if so, whether it is liable for damages. The issue of
whether petitioner’s employees were negligent in allowing the withdrawal of Liu Chiu Fang’s
dollar deposits has no bearing in the resolution of this case. Thus, we find no need to discuss
the same.

The "Hold Out" clause does not apply

to the instant case.

Petitioner claims that it did not breach its contract with respondents because it has a valid
reason for issuing the "Hold Out" order. Petitioner anchors its right to withhold
respondents’ deposits on the Application and Agreement for Deposit Account, which reads:

Authority to Withhold, Sell and/or Set Off:

The Bank is hereby authorized to withhold as security for any and all obligations with the
Bank, all monies, properties or securities of the Depositor now in or which may hereafter
come into the possession or under the control of the Bank, whether left with the Bank for
safekeeping or otherwise, or coming into the hands of the Bank in any way, for so much
thereof as will be sufficient to pay any or all obligations incurred by Depositor under the
Account or by reason of any other transactions between the same parties now existing or
hereafter contracted, to sell in any public or private sale any of such properties or securities
of Depositor, and to apply the proceeds to the payment of any Depositor’s obligations
heretofore mentioned.

xxxx
JOINT ACCOUNT

xxxx

The Bank may, at any time in its discretion and with or without notice to all of the
Depositors, assert a lien on any balance of the Account and apply all or any part thereof
against any indebtedness, matured or unmatured, that may then be owing to the Bank by
any or all of the Depositors. It is understood that if said indebtedness is only owing from any
of the Depositors, then this provision constitutes the consent by all of the depositors to
have the Account answer for the said indebtedness to the extent of the equal share of the
debtor in the amount credited to the Account.78

Petitioner’s reliance on the "Hold Out" clause in the Application and Agreement for Deposit
Account is misplaced.

The "Hold Out" clause applies only if there is a valid and existing obligation arising from any
of the sources of obligation enumerated in Article 115779 of the Civil Code, to wit: law,
contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that
respondents have an obligation to it under any law, contract, quasi-contract, delict, or
quasi-delict. And although a criminal case was filed by petitioner against respondent
Rosales, this is not enough reason for petitioner to issue a "Hold Out" order as the case is
still pending and no final judgment of conviction has been rendered against respondent
Rosales. In fact, it is significant to note that at the time petitioner issued the "Hold Out"
order, the criminal complaint had not yet been filed. Thus, considering that respondent
Rosales is not liable under any of the five sources of obligation, there was no legal basis for
petitioner to issue the "Hold Out" order. Accordingly, we agree with the findings of the RTC
and the CA that the "Hold Out" clause does not apply in the instant case.

In view of the foregoing, we find that petitioner is guilty of breach of contract when it
unjustifiably refused to release respondents’ deposit despite demand. Having breached its
contract with respondents, petitioner is liable for damages.

Respondents are entitled to moral and

exemplary damages and attorney’s fees.1âwphi1

In cases of breach of contract, moral damages may be recovered only if the defendant acted
fraudulently or in bad faith,80 or is "guilty of gross negligence amounting to bad faith, or in
wanton disregard of his contractual obligations."81

In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order
reveals that petitioner issued the "Hold Out" order in bad faith. First of all, the order was
issued without any legal basis. Second, petitioner did not inform respondents of the reason
for the "Hold Out."82 Third, the order was issued prior to the filing of the criminal
complaint. Records show that the "Hold Out" order was issued on July 31, 2003,83 while the
criminal complaint was filed only on September 3, 2003.84 All these taken together lead us
to conclude that petitioner acted in bad faith when it breached its contract with
respondents. As we see it then, respondents are entitled to moral damages.

As to the award of exemplary damages, Article 222985 of the Civil Code provides that
exemplary damages may be imposed "by way of example or correction for the public good,
in addition to the moral, temperate, liquidated or compensatory damages." They are
awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.86

In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner when it refused to release the deposits of respondents
without any legal basis. We need not belabor the fact that the banking industry is impressed
with public interest.87 As such, "the highest degree of diligence is expected, and high
standards of integrity and performance are even required of it."88 It must therefore "treat
the accounts of its depositors with meticulous care and always to have in mind the fiduciary
nature of its relationship with them."89 For failing to do this, an award of exemplary
damages is justified to set an example.

The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 220890 of
the Civil Code.

In closing, it must be stressed that while we recognize that petitioner has the right to
protect itself from fraud or suspicions of fraud, the exercise of his right should be done
within the bounds of the law and in accordance with due process, and not in bad faith or in
a wanton disregard of its contractual obligation to respondents.

WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May
30, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED.
SO ORDERED.

10.)

Republic of the Philippines

SUPREME COURT
Manila
 SECOND DIVISION

G.R. No. 182356 December 4, 2013

DRA, LEILA A DELA LLANO, Petitioner,

vs.
REBECCA BIONG, doing business under the name and style of Pongkay Trading,
Respondent.

DECISION

BRION, J.:

Very case essentially turns on two basic questions: questions of fact and questions of law.
Questions of fact are the parties and their counsel to respond to, based on what supporting
facts the legal questions require; the court can only draw conclusion from the facts or
evidence adduced. When the facts are lacking because of the deficiency of presented
evidence, then the court can only draw one conclusion: that the cause must fail for lack of
evidentiary support.

The present case is one such case as Dra. Leila A dela Llana’s(petitioner) petition for review
on certorari1 challenging the February 11, 2008 Decision2 and the March 31, 2008
resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 89163.

The Factual Antecedents

On March 30, 2000, at around 11:00 p.m., Juan dela Llana was driving a 1997 Toyota Corolla
car along North Avenue, Quezon City.4

His sister, Dra. dela Llana, was seated at the front passenger seat while a certain Calimlim
was at the backseat.5

Juan stopped the car across the Veterans Memorial Hospital when the signal light turned
red. A few seconds after the car halted, a dump truck containing gravel and sand suddenly
rammed the car’s rear end, violently pushing the car forward. Due to the impact, the car’s
rear end collapsed and its rear windshield was shattered. Glass splinters flew, puncturing
Dra. dela Llana. Apart from these minor wounds, Dra. dela Llana did not appear to have
suffered from any other visible physical injuries.6

The traffic investigation report dated March 30, 2000 identified the truck driver as Joel
Primero. It stated that Joel was recklessly imprudent in driving the truck.7
Joel later revealed that his employer was respondent Rebecca Biong, doing business under
the name and style of "Pongkay Trading" and was engaged in a gravel and sand business.8

In the first week of May 2000, Dra. dela Llana began to feel mild to moderate pain on the
left side of her neck and shoulder. The pain became more intense as days passed by. Her
injury became more severe. Her health deteriorated to the extent that she could no longer
move her left arm. On June 9, 2000, she consulted with Dr. Rosalinda Milla, a rehabilitation
medicine specialist, to examine her condition. Dr. Milla told her that she suffered from a
whiplash injury, an injury caused by the compression of the nerve running to her left arm
and hand. Dr. Milla required her to undergo physical therapy to alleviate her condition. Dra.
dela Llana’s condition did not improve despite three months of extensive physical therapy.9

She then consulted other doctors, namely, Drs. Willie Lopez, Leonor Cabral-Lim and Eric
Flores, in search for a cure. Dr. Flores, a neuro-surgeon, finally suggested that she undergo a
cervical spine surgery to release the compression of her nerve. On October 19, 2000, Dr.
Flores operated on her spine and neck, between the C5 and the C6 vertebrae.10

The operation released the impingement of the nerve, but incapacitated Dra. dela Llana
from the practice of her profession since June 2000 despite the surgery.11

Dra. dela Llana, on October 16, 2000, demanded from Rebecca compensation for her
injuries, but Rebecca refused to pay.12

Thus, on May 8, 2001, Dra. dela Llana sued Rebecca for damages before the Regional Trial
Court of Quezon City (RTC). She alleged that she lost the mobility of her arm as a result of
the vehicular accident and claimed P150,000.00 for her medical expenses (as of the filing of
the complaint) and an average monthly income of P30,000.00 since June 2000. She further
prayed for actual, moral, and exemplary damages as well as attorney’s fees.13

In defense, Rebecca maintained that Dra. dela Llana had no cause of action against her as no
reasonable relation existed between the vehicular accident and Dra. dela Llana’s injury. She
pointed out that Dra. dela Llana’s illness became manifest one month and one week from
the date of the vehicular accident. As a counterclaim, she demanded the payment of
attorney’s fees and costs of the suit.14

At the trial, Dra. dela Llana presented herself as an ordinary witness15 and Joel as a hostile
witness.16

Dra. dela Llana reiterated that she lost the mobility of her arm because of the vehicular
accident. To prove her claim, she identified and authenticated a medical certificate dated
November 20, 2000 issued by Dr. Milla. The medical certificate stated that Dra. dela Llana
suffered from a whiplash injury. It also chronicled her clinical history and physical
examinations.17

Meanwhile, Joel testified that his truck hit the car because the truck’s brakes got stuck.18

In defense, Rebecca testified that Dra. dela Llana was physically fit and strong when they
met several days after the vehicular accident. She also asserted that she observed the
diligence of a good father of a family in the selection and supervision of Joel. She pointed
out that she required Joel to submit a certification of good moral character as well as
barangay, police, and NBI clearances prior to his employment. She also stressed that she
only hired Primero after he successfully passed the driving skills test conducted by Alberto
Marcelo, a licensed driver-mechanic.19

Alberto also took the witness stand. He testified that he checked the truck in the morning of
March 30, 2000. He affirmed that the truck was in good condition prior to the vehicular
accident. He opined that the cause of the vehicular accident was a damaged compressor.
According to him, the absence of air inside the tank damaged the compressor.20

RTC Ruling

The RTC ruled in favor of Dra. dela Llana and held that the proximate cause of Dra. dela
Llana’s whiplash injury to be Joel’s reckless driving.21

It found that a whiplash injury is an injury caused by the sudden jerking of the spine in the
neck area. It pointed out that the massive damage the car suffered only meant that the
truck was over-speeding. It maintained that Joel should have driven at a slower pace
because road visibility diminishes at night. He should have blown his horn and warned the
car that his brake was stuck and could have prevented the collision by swerving the truck off
the road. It also concluded that Joel was probably sleeping when the collision occurred as
Joel had been driving for fifteen hours on that fateful day. The RTC further declared that
Joel’s negligence gave rise to the presumption that Rebecca did not exercise the diligence of
a good father of a family in Joel's selection and supervision of Joel. Rebecca was vicariously
liable because she was the employer and she personally chose him to drive the truck. On the
day of the collision, she ordered him to deliver gravel and sand to Muñoz Market, Quezon
City. The Court concluded that the three elements necessary to establish Rebecca’s liability
were present: (1) that the employee was chosen by the employer, personally or through
another; (2) that the services were to be rendered in accordance with orders which the
employer had the authority to give at all times; and (3) that the illicit act of the employee
was on the occasion or by reason of the functions entrusted to him. The RTC thus awarded
Dra. dela Llana the amounts of P570,000.00 as actual damages, P250,000.00 as moral
damages, and the cost of the suit.22

CA Ruling

In a decision dated February 11, 2008, the CA reversed the RTC ruling. It held that Dra. dela
Llana failed to establish a reasonable connection between the vehicular accident and her
whiplash injury by preponderance of evidence. Citing Nutrimix Feeds Corp. v. Court of
Appeals,23 it declared that courts will not hesitate to rule in favor of the other party if there
is no evidence or the evidence is too slight to warrant an inference establishing the fact in
issue. It noted that the interval between the date of the collision and the date when Dra.
dela Llana began to suffer the symptoms of her illness was lengthy. It concluded that this
interval raised doubts on whether Joel’s reckless driving and the resulting collision in fact
caused Dra. dela Llana’s injury. It also declared that courts cannot take judicial notice that
vehicular accidents cause whiplash injuries. It observed that Dra. dela Llana did not
immediately visit a hospital to check if she sustained internal injuries after the accident.
Moreover, her failure to present expert witnesses was fatal to her claim. It also gave no
weight to the medical certificate. The medical certificate did not explain how and why the
vehicular accident caused the injury.24

The Petition

Dra. dela Llana points out in her petition before this Court that Nutrimix is inapplicable in
the present case. She stresses that Nutrimix involved the application of Article 1561 and
1566 of the Civil Code, provisions governing hidden defects. Furthermore, there was
absolutely no evidence in Nutrimix that showed that poisonous animal feeds were sold to
the respondents in that case. As opposed to the respondents in Nutrimix, Dra. dela Llana
asserts that she has established by preponderance of evidence that Joel’s egligent act was
the proximate cause of her whiplash injury. First, pictures of her damaged car show that the
collision was strong. She posits that it can be reasonably inferred from these pictures that
the massive impact resulted in her whiplash injury. Second, Dr. Milla categorically stated in
the medical certificate that Dra. dela Llana suffered from whiplash injury. Third, her
testimony that the vehicular accident caused the injury is credible because she was a
surgeon.

Dra. dela Llana further asserts that the medical certificate has probative value. Citing several
cases, she posits that an uncorroborated medical certificate is credible if uncontroverted.25

She points out that expert opinion is unnecessary if the opinion merely relates to matters of
common knowledge. She maintains that a judge is qualified as an expert to determine the
causation between Joel’s reckless driving and her whiplash injury. Trial judges are aware of
the fact that whiplash injuries are common in vehicular collisions.

The Respondent’s Position

In her Comment,26 Rebecca points out that Dra. dela Llana raises a factual issue which is
beyond the scope of a petition for review on certiorari under Rule 45 of the Rules of Court.
She maintains that the CA’s findings of fact are final and conclusive. Moreover, she stresses
that Dra. dela Llana’s arguments are not substantial to merit this Court’s consideration.

The Issue

The sole issue for our consideration in this case is whether Joel’s reckless driving is the
proximate cause of Dra. dela Llana’s whiplash injury.

Our Ruling We find the petition unmeritorious.

The Supreme Court may review questions of fact in a petition for review on certiorari when
the findings of fact by the lower courts are conflicting

The issue before us involves a question of fact and this Court is not a trier of facts. As a
general rule, the CA’s findings of fact are final and conclusive and this Court will not review
them on appeal. It is not the function of this Court to examine, review or evaluate the
evidence in a petition for review on certiorari under Rule 45 of the Rules of Court. We can
only review the presented evidence, by way of exception, when the conflict exists in findings
of the RTC and the CA.27

We see this exceptional situation here and thus accordingly examine the relevant evidence
presented before the trial court.

Dra. dela Llana failed to establish her case by preponderance of evidence

Article 2176 of the Civil Code provides that "[w]hoever 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 a quasi-
delict." Under this provision, the elements necessary to establish a quasi-delict case are:

(1) damages to the plaintiff;

(2) negligence, by act or omission, of the defendant or by some person for whose acts the
defendant must respond, was guilty; and
(3) the connection of cause and effect between such negligence and the damages.28

These elements show that the source of obligation in a quasi-delict case is the breach or
omission of mutual duties that civilized society imposes upon its members, or which arise
from non-contractual relations of certain members of society to others.29

Based on these requisites, Dra. dela Llana must first establish by preponderance of evidence
the three elements of quasi-delict before we determine Rebecca’s liability as Joel’s
employer.

She should show the chain of causation between Joel’s reckless driving and her whiplash
injury.

Only after she has laid this foundation can the presumption - that Rebecca did not exercise
the diligence of a good father of a family in the selection and supervision of Joel - arise.30

Once negligence, the damages and the proximate causation are established, this Court can
then proceed with the application and the interpretation of the fifth paragraph of Article
2180 of the Civil Code.31

Under Article 2176 of the Civil Code, in relation with the fifth paragraph of Article 2180, "an
action predicated on an employee’s act or omission may be instituted against the employer
who is held liable for the negligent act or omission committed by his employee."32

The rationale for these graduated levels of analyses is that it is essentially the wrongful or
negligent act or omission itself which creates the vinculum juris in extra-contractual
obligations.33

In civil cases, a party who alleges a fact has the burden of proving it.

He who alleges has the burden of proving his allegation by preponderance of evidence or
greater weight of credible evidence.34

The reason for this rule is that bare allegations, unsubstantiated by evidence, are not
equivalent to proof.

In short, mere allegations are not evidence.35

In the present case, the burden of proving the proximate causation between Joel’s
negligence and Dra. dela Llana’s whiplash injury rests on Dra. dela Llana. She must establish
by preponderance of evidence that Joel’s negligence, in its natural and continuous
sequence, unbroken by any efficient intervening cause, produced her whiplash injury, and
without which her whiplash injury would not have occurred.36

Notably, Dra. dela Llana anchors her claim mainly on three pieces of evidence:

(1) the pictures of her damaged car,

(2) the medical certificate dated November 20, 2000, and

(3) her testimonial evidence. However, none of these pieces of evidence show the causal
relation between the vehicular accident and the whiplash injury. In other words,

Dra. dela Llana, during trial, did not adduce the factum probans or the evidentiary facts by
which the factum probandum or the ultimate fact can be established, as fully discussed
below.37

A.

The pictures of the damaged

car only demonstrate the
impact of the collision

Dra. dela Llana contends that the pictures of the damaged car show that the massive impact
of the collision caused her whiplash injury. We are not persuaded by this bare claim. Her
insistence that these pictures show the causation grossly belies common logic. These
pictures indeed demonstrate the impact of the collision. However, it is a far-fetched
assumption that the whiplash injury can also be inferred from these pictures.

B.

The medical certificate cannot be

considered because it was
not admitted in evidence

Furthermore, the medical certificate, marked as Exhibit "H" during trial, should not be
considered in resolving this case for the reason that it was not admitted in evidence by the
RTC in an order dated September 23, 2004.38
Thus, the CA erred in even considering this documentary evidence in its resolution of the
case. It is a basic rule that evidence which has not been admitted cannot be validly
considered by the courts in arriving at their judgments.

However, even if we consider the medical certificate in the disposition of this case, the
medical certificate has no probative value for being hearsay. It is a basic rule that evidence,
whether oral or documentary, is hearsay if its probative value is not based on the personal
knowledge of the witness but on the knowledge of another person who is not on the
witness stand.39

Hearsay evidence, whether objected to or not, cannot be given credence40 except in very
unusual circumstance that is not found in the present case. Furthermore, admissibility of
evidence should not be equated with weight of evidence. The admissibility of evidence
depends on its relevance and competence, while the weight of evidence pertains to
evidence already admitted and its tendency to convince and persuade. Thus, a particular
item of evidence may be admissible, but its evidentiary weight depends on judicial
evaluation within the guidelines provided by the Rules of Court.41

During trial, Dra. dela Llana testified:

"Q: Did your physician tell you, more or less, what was the reason why you were feeling that
pain in your left arm?

A: Well, I got a certificate from her and in that certificate, she stated that my condition was
due to a compression of the nerve, which supplied my left arm and my left hand.

Court: By the way, what is the name of this physician, Dra.?

Witness: Her name is Dra. Rosalinda Milla. She is a Rehabilitation Medicine Specialist. Atty.
Yusingco: You mentioned that this Dra. Rosalinda Milla made or issued a medical certificate.
What relation does this medical certificate, marked as Exhibit H have to do with that
certificate, you said was made by Dra. Milla?

Witness: This is the medical certificate that Dra. Milla made out for me.

Atty. Yusingco: Your Honor, this has been marked as Exhibit H.

Atty. Yusingco: What other medical services were done on you, Dra. dela Llana, as a result of
that feeling, that pain that you felt in your left arm?
Witness: Well, aside from the medications and physical therapy, a re-evaluation of my
condition after three months indicated that I needed surgery.

Atty. Yusingco: Did you undergo this surgery?

Witness: So, on October 19, I underwent surgery on my neck, on my spine.

Atty. Yusingco: And, what was the result of that surgical operation?

Witness: Well, the operation was to relieve the compression on my nerve, which did not
resolve by the extensive and prolonged physical therapy that I underwent for more than
three months."42(emphasis ours)

Evidently, it was Dr. Milla who had personal knowledge of the contents of the medical
certificate. However, she was not presented to testify in court and was not even able to
identify and affirm the contents of the medical certificate. Furthermore, Rebecca was
deprived of the opportunity to cross-examine Dr. Milla on the accuracy and veracity of her
findings. We also point out in this respect that the medical certificate nonetheless did not
explain the chain of causation in fact between Joel’s reckless driving and Dra. dela Llana’s
whiplash injury. It did not categorically state that the whiplash injury was a result of the
vehicular accident. A perusal of the medical certificate shows that it only attested to her
medical condition, i.e., that she was suffering from whiplash injury. However, the medical
certificate failed to substantially relate the vehicular accident to Dra. dela Llana’s whiplash
injury. Rather, the medical certificate only chronicled

her medical history and physical examinations.

C.

Dra. dela Llana’s opinion that

Joel’s negligence caused her
whiplash injury has no probative value

Interestingly, the present case is peculiar in the sense that Dra. dela Llana, as the plaintiff in
this quasi-delict case, was the lone physician-witness during trial. Significantly, she merely
testified as an ordinary witness before the trial court. Dra. dela Llana essentially claimed in
her testimony that Joel’s reckless driving caused her whiplash injury. Despite the fact that
Dra. dela Llana is a physician and even assuming that she is an expert in neurology, we
cannot give weight to her opinion that Joel’s reckless driving caused her whiplash injury
without violating the rules on evidence. Under the Rules of Court, there is a substantial
difference between an ordinary witness and an expert witness. The opinion of an ordinary
witness may be received in evidence regarding:

(a) the identity of a person about whom he has adequate knowledge;

(b) a handwriting with which he has sufficient familiarity; and

(c) the mental sanity of a person with whom he is sufficiently acquainted. Furthermore, the
witness may also testify on his impressions of the emotion, behavior, condition or
appearance of a person.43

On the other hand, the opinion of an expert witness may be received in evidence on a
matter requiring special knowledge, skill, experience or training which he shown to
possess.44

However, courts do not immediately accord probative value to an admitted expert

testimony, much less to an unobjected ordinary testimony respecting special knowledge.
The reason is that the probative value of an expert testimony does not lie in a simple
exposition of the expert's opinion. Rather, its weight lies in the assistance that the expert
witness may afford the courts by demonstrating the facts which serve as a basis for his
opinion and the reasons on which the logic of his conclusions is founded.45

In the present case, Dra. dela Llana’s medical opinion cannot be given probative value for
the reason that she was not presented as an expert witness. As an ordinary witness, she was
not competent to testify on the nature, and the cause and effects of whiplash injury.
Furthermore, we emphasize that Dra. dela Llana, during trial, nonetheless did not provide a
medical explanation on the nature as well as the cause and effects of whiplash injury in her
testimony.

The Supreme Court cannot take

judicial notice that vehicular
accidents cause whiplash injuries.

Indeed, a perusal of the pieces of evidence presented by the parties before the trial court
shows that Dra. Dela Llana did not present any testimonial or documentary evidence that
directly shows the causal relation between the vehicular accident and Dra. Dela Llana’s
injury. Her claim that Joel’s negligence causes her whiplash injury was not established
because of the deficiency of the presented evidence during trial. We point out in this
respect that courts cannot take judicial notice that vehicular ccidents cause whiplash
injuries. This proportion is not public knowledge, or is capable of unquestionable
demonstration, or ought to be known to judges because of their judicial functions.46 We
have no expertise in the field of medicine. Justices and judges are only tasked to apply and
interpret the law on the basis of the parties’ pieces of evidence and their corresponding
legal arguments.

In sum, Dra. dela Llana miserably failed to establish her cause by preponderance of
evidence. While we commiserate with her, our solemn duty to independently and
impartially assess the merits of the case binds us to rule against Dra. dela Llana’s favor. Her
claim, unsupported by prepondernace of evidence, is merely a bare assertion and has no leg
to stand on.

WHEREFORE, presmises considered, the assailed Decision dated February 11, 2008 and
Resolution dated March 31, 2008 of the Court of Appeals are hereby AFFIRMED and the
petition is hereby DENIED for lack of merit.
SO ORDERED.

11.)

Republic of the Philippines

SUPREME COURT
Baguio City

SECOND DIVISION

G.R. No. 82562 April 11, 1997

LYDIA VILLEGAS, MA TERESITA VILLEGAS, ANTONIO VILLEGAS, JR., and ANTONIETTE

VILLEGAS, petitioners,
vs.
THE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES and ANTONIO V. RAQUIZA,
respondents.

G.R. No. 82592 April 11, 1997

ANTONIO V. RAQUIZA, petitioner,

vs.
COURT OF APPEALS, LYDIA A. VILLEGAS, ANTONIO VILLEGAS, JR., MA. ANTONETTE
VILLEGAS, MA. LYDIA VILLEGAS and ESTATE OF ANTONIO J. VILLEGAS, respondents.
ROMERO, J.:

This case originated from a libel suit filed by then Assemblyman Antonio V. Raquiza against
then Manila Mayor Antonio J. Villegas, who allegedly publicly imputed to him acts
constituting violations of the Anti-Graft and Corrupt Practices Act. He did this on several
occasions in August 1968 through (a) a speech before the Lion's Club of Malasiqui,
Pangasinan on August 10; (b) public statements in Manila on August 13 and in Davao on
August 17, which was coupled with a radio-TV interview; and (c) a public statement shortly
prior to his appearance before the Senate Committee on Public Works (the Committee) on
August 20 to formally submit a letter-complaint implicating Raquiza, among other
government officials.

The Committee, however, observed that all the allegations in the complaint were based
mainly on the uncorroborated testimony of a certain Pedro U. Fernandez, whose credibility
turned out to be highly questionable. Villegas also failed to submit the original copies of his
documentary evidence. Thus, after thorough investigation, Raquiza was cleared of all
charges by the Committee. 1 All these acts of political grandstanding received extensive
media coverage.

On July 25, 1969, an information for libel was filed by the Office of the City Fiscal of Manila
with the then Court of First Instance of Manila against Villegas who denied the charge. After
losing in the 1971 elections, Villegas left for the United States where he stayed until his
death on November 16, 1984. Nevertheless, trial proceeded on absentia by the time of his
death the in 1984, the prosecution had already rested its case Two months after notice of
his death, the court issued an order dismissing the crimal aspect of the case but reserving
the right to resolve its civil aspect. No memorandum was ever filed in his behalf.

Judge Marcelo R. Obien 2 rendered judgment on March 7, 1985, the dispositive portion of
which was amended on March 26 to read as follows:

WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered as

follows:

1. The dismissal of the criminal case against Antonio J. Vlllegas, on account of his death
on November 16, 1984. is hereby reiterated.

2. Ordenng the estate of Antonio J. Villegas, represented herein by his legal heirs,
namely: Lydia A Villegas, Ma. Teresita Villegas, Antonio Villegas, Jr., Ma. Anton(i)ette
Villegas, and Ma. Lydia Villegas (sic), to pay plaintiff Antonio V. Raquiza Two Hundred Million
Pesos (P200,000,000.00), itemized as follows:

a) One Hundred Fifty Million Pesos (P150.000.000.00) as moral damages:

b) Two Hundred Thousand Pesos (P200.000.00) as actual damages:

c) Forty-nine Million Eight Hundred Thousand Pesos (P49,800,000.00) as exemplary

damages; and

d) The cost of suit.

SO ORDERED. 3 (Amendments underscored)

The heirs of Villegas (the Heirs), through their father's counsel, Atty. Norberto, Quisumbing
appealed the decision on these three main grounds:

1. Whether the trial court, three months after notice of the death of the accused and
before his counsel could file a memorandum in his behalf, could velidly render judgment in
the case?

2. Whether in the absence of formal substitution of parties, the trial court could validly
render judgment against the heirs and estate of a deceased accused?

3 Whether, under the facts of the instant case, deceased Villegas was liable for libel,
and assuming he was, whether the damages awarded by the trial court were just and
reasonable?

On March 15, 1988, the Court of Appeals rendered a decision affirming the trial court's
judgment modified only with respect to the award of damages which was reduced to P2
million representing P1.5 million, P300,000.00, and P200,000.00 in moral exemplary and
actual damages, respectively. Both parties elevated said decision to this Court for review

In their petition (G.R. No. 82562), the Heirs once again raise the very same issues brought
before the Court of Appeals, albeit reworded. On the other hand, petitioner Requiza (G.R.
No. 82592) questions the extensions of time to file appellant's brief granted by the appellate
court to the Heirs, as well as the drastic reduction in the award of damages.

It is immediately apparent that the focal issue in these petitions is the effect of the death of
Villegas before the case was decided by the trial court. Stated otherwise, did the death of
the accused before final judgment extinguish his civil liability?
Fortunately, this Court has already settled this issue with the promulgation of the case of
People v. Bayotas (G.R. No. 102007) on September 2, 1994, 4 viz.:

It is thus evident that as jurisprudence evolved from Castillo 5 to Torrijos, 6 the rule
established was that the survival of the civil liability depends on whether the same can be
predicated on sources of obligations other than delict. Stated differently, the claim for civil
liability is also extinguished together with the criminal action if it were solely based thereon,
i.e., civil liability ex delicto.

xxx xxx xxx

(I)n recovering damages for injury to persons thru an independent civil action based on
Article 33 of the Civil Code, the same must be filed against the executor or administrator of
the estate of deceased accused (undet Sec. 1, Rule 87, infra.) and not against the estate
under Sec. 5, Rule 86 because this rule explicitly limits the claim to those for funeral
expenses, expenses for the last sickness of the decedent, judgment for money and claims
arising from contract, express or implied. 7

xxx xxx xxx

From this lengthy dlsquisition, we summarize our ruling herein:

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 (the)
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) xxx xxx xxx

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 1, Rule 111 of the 1985 Rules on Criminal Procedure as amended. 8 This
separate civil action may be enforced either against the executor/administrator o(f) the
estate of the accused, depending on the source of obligation upon which the same is based
as explained above.

4. Finally, the private offended party need not fear a forfeiture of his right to file this
separate civil action by prescription, in cases where during the prosecution of the criminal
action and prior to its extinction, the private offended party instituted together therewith
the civil action. In such case, the statute of limitations on the civil liability is deemed
interrupted during the pendency of the criminal case, conformably with (the) provisions of
Article 1155 of the Civil Code, that should thereby avoid any apprehension on a possible
privation of right by prescription. (Emphasis supplied).

The source of Villegas' civil liability in the present case is the felonious act of libel he
allegedly committed. Yet, this act could also be deemed a quasi-delict within the purview of
Article 33 9 in relation to Article 1157 of the Civil Code. If the Court ruled in Bayotas that the
death of an accused during the pendency of his appeal extinguishes not only his criminal but
also his civil liability unless the latter can be predicated on a source of obligation other than
the act or omission complained of, with more reason should it apply to the case at bar
where the accused died shortly after the prosecution had rested its case and before he was
able to submit his memorandum and all this before any decision could even be reached by
the trial court.

The Bayotas ruling, however, makes the enforcement of a deceased accused's civil liability
dependent on two factors, namely, that it be pursued by filing a separate civil action and
that it be made subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure, as
amended. Obviously, in the case at bar, the civil action was deemed instituted with the
criminal. There was no waiver of the civil action and no reservation of the right to institute
the same, nor was it instituted prior to the criminal action. What then is the recourse of the
private offended party in a criminal case such as this which must be dismissed in accordance
with the Bayotas doctrine, where the civil action was impliedly instituted with it?

The answer is likewise provided in Bayatas, thus:

Assuming that for lack of express reservation, Belamala's civil civil for damages was to be
considered instituted together with the crinimal action still, since both proceedings were
terminated without finals adjudication the civil action of the offended party under Article 33
may yet be enforced separately 10 (Emphasis supplied)

Hence, logically, the court a quo should have dismissed both actions against Vilegas which
dismissal will not, however, bar Raquiza as the private offended party from pursuing his
claim for damages against the executor or administrator of the former's estate,
notwitnstanding the fact that he did not reserve the right to institute a civil separate civil
action based on Article 33 of the Civil Code.

It cannot be argued either that to follow Bayotas would result in further delay in this
protracted litigation. This is because the resolution of the civil aspect of the case after the
dismissal of the main criminal action by the trial court was technically defective There was
no proper substitution of parties, as correctly pointed out by the Heirs and repeatedly put in
issue by Atty. Quisumbing. What should have been followed by the court a quo was the
procedure laid down in the Rules of Court, specifically, Section 17, Rule 3, in connection with
Section 1, Rule 87. The pertinent provisions state as follws:

Rule 3

Sec.17. Death of party. — After a party dies and the claim is not there extinguished, the
court shall order upon proper notice the legal representative of the deceased to appear and
to be substituted for the deceased, within a period of thirty (30) days, or within such time as
may be·granted. . . . The heirs of the deceased may be allowed to be for the deceased,
without requiring the appointment of an executor or administrator and the court may
appoint guardian ad litem for the minor heirs.

Rule 87

Sec. 1. Actions which may and which may not be brought against or executor or
administrator. — No action upon a claim for the recovery of money or debt or interest
thereon shall be commenced against the executor or administrator; but actions to recover
real or personal property, or an interest therein, from the estate, or to enforce a lien
thereon, and actions to recover damages for an injury to person or property, real or
personal may be commenced against him.

Accordingly, the Court sees no more necessity in resolving the other issues used by both
parties in these petitions.

WHEREFORE, the petition in G.R. No. 82562 is GRANTED and the petition in G.R. No. 82592
is DENIED. The decisions of the Court of Appeals in CA-G.R. CR No. 82186 dated March 15,
1988, and of the Manila Regional Trial Court, Branch 44, dated March 7, 1985, as amended,
are hereby REVERSED and SET ASIDE, without prejudice to the right of the private offended
party Antonio V. Raquiza, to file the appropriate civil action for damages against the
executor or administrator of the estate or the heirs of the late Antonto J. Villegas in
accordance with the foregoing procedure.

SO ORDERED.